South Africa is ‘deeply in a recession’ – Purple Group CEO

Charles Savage

Purple Group CEO Charles Savage said their EasyEquities data shows South Africa is already “deeply in a recession”, which has depressed consumers’ spending power.

Savage’s comments followed the latest data from StatsSA, revealing that South Africa’s gross domestic product (GDP) decreased by 0.2% in the third quarter of 2023.

Many economists, including Old Mutual’s chief economist, Johann Els, said the country will likely slide into a technical recession at the end of 2023.

“South Africa may be heading into a technical recession with weak growth as the fourth quarter will also slip into negative growth,” Els said.

He is particularly concerned about the volatility of the mining, manufacturing, and agricultural sectors, which have an outsized impact on the country’s overall GDP.

Stanlib chief economist Kevin Lings said the country’s GDP was “hurt by a decline in agriculture, mining, manufacturing, construction and retail”.

“South Africa can experience a technical recession given the recent increase in electricity outages, high interest rates, and problems with port and rail capacity,” he said.

Savage went one step further, saying the country was already in a recession, as seen in their EasyEquities deposit behaviour.

Speaking to Biznews, Savage said while people are still debating the latest GDP numbers, he believes “South Africa is deeply in a recession”.

“We see it as a result of the impact of interest rates, which impacts the cost of debt and, therefore, the cost of living,” he said.

He said higher interest rates limited South Africans’ ability to invest at the same levels as previous years.

Higher-income groups, like LSM 5 to 7, were more resilient, and their deposit rates only decreased by 15% to 20% over the last year.

Lower-income groups, LSM 1 to 5, have seen deposits decline between 50% and 100%. Many of these people don’t have new capital to invest.

Savage said the decline in deposits was directly correlated to increased interest rates. As interest rates rose, people’s ability to invest declined.

He added that the South African Reserve Bank had pushed people to their breaking point, but not beyond that.

They have not seen EasyEquities clients dip into their investments to make ends meet. This means the central bank did not go too far to curb inflation.

“Had there been another interest rate hike, we would have seen outflows where people draw on their investments to fund their lifestyle,” he said.


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