SA economic activity slightly declines
JOHANNESBURG – The February BankservAfrica Economic Transactions Index (BETI) declined slightly on a monthly basis and reached the same level as a year ago, showing the economy was unable to gain growth traction.
Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, said the BETI level in February was 132.2, 0.8 per cent down from January and a 1.2 per cent improvement on the quarter ending November 2023.
The payments clearing house said the latest BETI reflected the impact of multiple economic challenges facing South Africa: The constant load-shedding, crippling logistical challenges at local ports and rising fuel prices, among others.
Unemployment
Elize Kruger, an independent economist, said this inability of the economy to break out of its current growth profile did not bode well for the country’s unemployment crisis and socio-economic challenges.
The authors of the BETI said the recent 2024 Budget said: “Longterm growth is highly dependent on improving capacity in energy, freight rail and ports, and on continuing to reduce structural barriers to economic activity.”
According to the Budget Review, ‘government’s economic growth strategy prioritises macroeconomic stability, structural reforms and improvements in state capability to raise growth rates in a sustainable manner’.
While these plans sound good on paper and the involvement of the private sector had started to make a notable impact in some sectors, the government needed to act urgently to drive the structural reforms needed to move the economy out of stagnation.
They said inflation indicators ticked higher in January and were forecast to recur in February, driven by higher fuel prices, the weak rand exchange rate levels and the spike in medical aid premiums. The upward pressure on prices was also reflected in the BETI deflator, which had increased to 5.4 per cent in January compared to 5.1 per cent in December, weighing on the BETI.
Kruger said while inflation remained sticky above 5 per cent in the early part of the year, the headline consumer price index was still forecast to moderate towards the year-end and average 5.3 per cent this year compared to 6.0 per cent last year.
Lower average inflation could reduce the erosion of purchasing power somewhat in 2024, she said.
Other economic indicators performed slightly better in February but generally remained close to recent lows:
The S&P Global South Africa Purchasing Managers’ Index (PMI) rose to 50.8 in February, above the neutral 50.0 level for the first time since August 2023. The Absa PMI increased notably in February to 51.7, following an extraordinarily steep drop to 43.6 in January, marking a renewed expansion in the sector. The sector performed at its strongest since early 2023, but at just above the 50-neutral mark, suggesting demand for manufactured goods remained weak amid numerous supply-side constraints.
Total vehicle sales disappointed as the National Association of Automobile Manufacturers of South Africa (Naamsa) reported 44 749 new cars and commercial vehicles were sold in February, 0.9 per cent fewer than in February last year.
Year-to-date, 1.7 per cent fewer vehicles have been sold, which Naamsa attributed to the lingering effects of the cost-of-living increases, elevated interest rates and dampened consumer and business confidence, combined with the country’s port challenges and persistent load shedding. Passenger car sales dropped by 3.1 per cent year-on-year in February.
Meanwhile, the standardised nominal value of transactions cleared through BankservAfrica in February increased to R1.25 trillion, above the R1.1 trillion recorded in January. The number of transactions also improved to 155.5 million compared to the previous month’s 152.1 million.
Transactions
As the economy gradually migrated towards digital payments, the average value of transactions measured in the BETI continued to decline over time. The average value of transactions in February 2024 was 6.1 per cent lower compared to a year earlier. The inclusion of PayShap data would, over time, contribute to the downward trend in average transaction values in the economy, BankservAfrica said.
Kruger said while they were still firmly in the ‘more-of-the-same’ mode, a slight improvement was forecast towards the second half of the year.
Lower international interest rates in the latter part of the year could spur a better-performing rand exchange rate.
“This could contribute to an expected moderation in consumer inflation and lead to interest rate cuts later in the year. Additionally, assuming that the intensity of load shedding is less than last year, real GDP growth is forecast at 1.3 per cent in 2024 vs 0.6 per cent in 2023,” she said.