Finance

Good news for South Africa’s economic growth

After months of sideways movements, the BankservAfrica Economic Transactions Index (BETI) recovered in June 2023, providing an encouraging outlook for South Africa’s economy in the second quarter.

“The BETI increased in June 2023 to an index level of 133.6 compared to 132.3 in May, reaching the highest level since June 2022,” said Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

Although the BETI remained in negative territory on an annual basis, this was less so compared to the preceding months.

The BETI declined by 2.0% in June 2023 compared to the 7.4% decline in May, with the low base calculation adding to the annual improvement.

“Although the index has been choppy in recent months, moving mostly sideways in the past year, the recovery in June is encouraging and reflects the positive impact of a few specific factors in the economy in June,” explained independent economist Elize Kruger.

The severity of load-shedding subsided in June as Eskom shed 712 GWh, substantially lower than the 2,042 GWh in May.

Some sectors have also implemented alternative energy sources, becoming more resilient in the face of load-shedding.

The notable moderation in consumer inflation has also positively impacted the index’s performance in real terms. 

Annual consumer inflation moderated from 7.1% in March to 5.4% in June, a return to the South African Reserve Bank’s 3% to 6% target range for the first time since April 2022.  

“The moderation in consumer inflation will go some way in reducing the extent of the erosion of purchasing power that households have had to deal with, especially in the past year,” said Kruger.

Elize Kruger
Independent economist Elize Kruger

However, not all indicators reflect this optimism. The Absa Purchasing Managers’ Index (PMI) slipped to 47.6 in June compared to 49.2 index points in May, signalling stagnation in the manufacturing sector. 

The S&P Global South Africa Purchasing Managers’ Index – a composite gauge of operating conditions in the private sector – edged up to 48.7 in June from 47.9 in May. 

Like the BETI’s findings, domestic new vehicle sales exceeded expectations in June, despite the rising interest rates, unemployment, and higher price challenges.

According to Naidoo, the standardised nominal value of transactions cleared through BankservAfrica in June 2023 was R1.21 trillion compared to May’s R1.18 trillion. 

The number of transactions moderated somewhat from 147.2 million in May to 145.2 million in June 2023.

Overall, the BETI is signalling a positive growth rate for Q2 2023, with June BETI at 2.6% higher than in the quarter ending March 2023.

“With many economic challenges remaining, and as the possibility of elevated load shedding levels for winter remains, the improvement in the BETI is not necessarily the start of a sustained synchronised economic recovery, but it indeed signals that the economy has probably fared better in Q2 than initially expected,” said Kruger.

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