Flat growth expected for the rest of 2023

The BankservAfrica Economic Transactions Index (BETI) slipped marginally in May 2023 – the third decline in the past four months. This drop confirms the economy’s flat growth trend. 

The BETI is an early economic scorecard for South Africa, specifically regarding growth trends. 

It correlates highly with the South African Reserve Bank’s co-incident indicator and GDP figures while appearing a quarter earlier.

“The BETI slipped to an index level of 132.3 in May compared to 132.7 in the previous month,” says BankservAfrica’s head of stakeholder engagements Shergeran Naidoo. 

“On an annual basis, the BETI weakened by a notable 7.4% in May 2023 compared to the revised decline of 3.6% in April.”

The monthly decline in the BETI confirmed worries that the recovery in April would not be a sustainable upward trend, while the annual adjustment was off a high base. 

In May 2022, one year earlier, the BETI increased by a solid 3.9% month-on-month to reach an all-time high of 142.9 at the time, driven by a strong post-Covid recovery.

“In the past year, the BETI has moved sideways with some volatility from month to month,” said economist Elize Kruger.

“From June 2022 – May 2023, the BETI declined on a monthly basis in nine out of the twelve months, suggesting an economic scenario of stagnation.”

This confirms that the economy remains in a “muddle-along-little-thriving” narrative.

In May, the economic environment remained challenging. Recent statistics indicated South Africans have spent 27% of the year so far without power, compared to 9.5% in 2022. 

Interest rates have increased again to reach a 14-year high, and the rand exchange rate fell to new lows amid policy and political uncertainties. The cost of living remains elevated, and the global economic slowdown is still prevalent.

On the global front, May saw the rate of expansion in global economic activity accelerate to an 18-month high. This increase was largely driven by the continued vibrancy of the services sector. 

Companies reported a further upswing in new order intakes, leading to continued business optimism and solid job creation.

Meanwhile, the standardised nominal value of transactions cleared through BankservAfrica in May 2023 was R1.18 trillion compared to April’s R1.22 trillion, said Naidoo. The number of transactions increased from 135.9 million in April to 147.2 million in May 2023, partly due to more trading days in May.

In previous months, the BETI flagged the potential of a negative quarterly growth rate in Q1 2023, with the March BETI 1.9% lower than in the quarter ending December 2022. 

However, driven by resilience in the mining, manufacturing and finance sectors, the economy managed to grow marginally in Q1, averting a technical recession. 

According to Stats SA, real GDP growth increased by 0.4% q/q in Q1 2023 compared to a revised -1.1% q/q in Q4 2022, translating into only 0.2% growth on an annual basis. 

While eight of the ten economic sectors recorded positive growth in Q1, growth rates could at best be described as subdued, which ties into the observed trend in the BETI.  

“The economy remains in a muddle-along scenario and unable to meaningfully alleviate South Africa’s social and unemployment issues,” said Kruger.