Consumers are struggling to pay monthly expenses and long-running strikes are undermining the foundations of the economy, BankservAfrica's Economic Transaction Index (BETI) has found.
“With strikes, floods, and power constraints being the order of the day it has to be expected that massive growth is not on the short-term economic agenda,” economists.co.za chief economist Mike Schussler said in a statement on Wednesday.
“Broadly speaking, the economy has been in a slow growth or stagnating mode for about 18 months and is at best continuing along this path.”
He said while car sales and the Purchasing Managers' Index (PMI) indicated flat economic performance, the BETI confirmed that the stagnation was widespread throughout the economy in March.
The country's economy appeared to be “falling asleep at the wheel”.
The BETI showed economic transactions had increased by less than one percent over the past year.
BankservAfrica regulated products CEO Brad Gillis said the quarter-on-quarter growth was the same as the year-on-year growth at 0.8 percent, while the month-on-month increase stood at only 0.1 percent.
The actual value of the BETI stood at R654.3 billion which was up 6.6 percent on last year.
“This is the highest number obtained this year, but on balance it is mainly the result of higher inflation rather than actual growth,” he said in a statement.
“The actual number of transactions in the BETI (83.1 million) is the highest since Christmas 2013. Although this was up by exactly five percent on last year, it shows that the value of consumers' transactions increased with less than inflation over the last year.”
He said South Africans were probably forced to cut back on expenditure.
Schussler said South Africa was experiencing the “biggest, most damaging, and longest strike” in 20 years.
He was referring to the strike by Association of Mineworkers and Construction Union (Amcu) members at Lonmin, Impala Platinum, and Anglo American Platinum.
Workers downed tools on January 23 demanding a minimum salary of R12 500 per month. They rejected a wage increase of nine percent.
Platinum stocks were no longer helping the South African export figures, since two producers no longer had any stocks in the country, he said.
“Other major export commodities, such as iron ore and coal, are also seeing lower prices. This directly affects these primary industries' ability to buy goods and services from the rest of the economy,” said Schussler.
South Africa was still fighting the possibility of a recession.
“One could be positive and say that the economy is growing despite the biggest strike action since the start of democracy in 1994 - at least that is a hopeful sign. The economy is, nevertheless, inching forward and the number of economic transactions is on the whole an indication that the South African economy is still fighting against any possibility of a recession, he said.
“Many are apprehensive that if current labour market outcomes remain divisive, one would have to pencil in further weaknesses in the actual BETI going forward.”
Schussler said consumer and producer prices had been rising faster than anticipated and with higher interest rates, this was curbing spending.
“Many consumers are opting to take out loans, while retailers and wholesalers are reluctant to keep too much stock,” he said.
“Producers and providers to primary industries are also careful of stock levels, as major decisions look very risky in the current climate.” - Sapa