SA's monthly economic activity remains the same in January - BETI

The average value of transactions in January was 7.4% lower compared to a year earlier.

The average value of transactions in January was 7.4% lower compared to a year earlier.

Published Feb 15, 2024


South Africa's monthly economic activity stayed the same last month, after improving in December last year, according to the BankservAfrica Economic Transactions Index (BETI).

The sideways movement for economic activity amid the multiplicity of ongoing challenges BankservAfrica said, confirmed that the economy remained in a “muddle-along" mode.

Shergeran Naidoo, BankservAfrica’s head of Stakeholder Engagements, said yesterday that the BETI index for January remained unchanged at 133.3 and improved by only 0.4% on a year-on-year basis.

Amid the multiplicity of ongoing challenges, the economy has been unable to gain momentum despite the reprieve provided by the lower stages of load shedding and fuel price cut in January.

The higher levels of load shedding experienced in the past week, and under-recovery in fuel prices, furthermore, signalled a bleak start to the year for the economy, BankservAfrica said.

Elize Kruger, an independent economist, said under the current conditions of elevated interest rates, high food price inflation, a lacklustre job market, low wage growth and slumped confidence levels, the economic narrative remained underwhelming.

Inflation indicators surprised to the downside in December, and similarly, the deflator used in the BETI calculation also moderated to 5.1% in December versus the BETI authors forecast of 5.4%, resulting in a small upward revision to the December BETI (to 133.3 from originally published 133.0).

Headline inflation moderated to 5.1% year on year (y/y) in December compared to 5.5% in November, while the total producer price inflation moderated to 4.0% y/y vs 4.6% in November.

While the moderation in inflation had been encouraging, some near-term upward pressures resulting from the weaker rand exchange rate, surging fuel prices and notable medical aid premium increases would result in a short-term reversal of the downward trend in inflation indicators, the BETI noted.

Still, headline consumer price index was forecast to moderate towards year-end and to average 5.3% this year compared to 6.0% last year. Moderately lower inflation was likely to reduce the erosion of purchasing power somewhat this year.

The standardised nominal value of transactions cleared through BankservAfrica last month moderated to R1.099 trillion versus R1.392trl in December, while the number of transactions sagged to 152.1 million compared to 163.1 million in December last year.

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 January was 7.4% lower compared to a year earlier.

Kruger said while South Africa started the year with a good dose of ‘more-of-the-same’, a slight improvement to this scenario was still forecast towards the second half of the year.

“Specifically, the expectation of lower international interest rates later in the year could spur a better performance in the rand exchange rate, which will likely further feed the moderation expected in consumer inflation and subsequent interest rate cuts could be on the cards,” Kruger said.

Should the intensity of load shedding be less-than-experienced last year, real gross domestic product growth was forecast at 1.3% this year versus an estimate of 0.6% last year.

However, the authors of the report noted that to break out of this low growth profile, an acceleration in structural reform remained critical for South Africa, as the current growth levels were inadequate to address South Africa’s socio-economic challenges, of which the high unemployment rate was the most critical.

Standard Chartered South Africa's SA Outlook report for 2024, which has not yet been distributed locally, forecast current account deficit for 2024 at 2.5% of gross domestic product, reflecting increased investment and ongoing infrastructure constraints.

A revision of fiscal deficit was forecast for 2024 to 4.9% (from 4.2% prior) and 2025 forecast to 4.2% ( from 4.0%), with a focus on achieving a primary surplus despite the upcoming elections.

It also said there was anticipation of potential policy changes following the ANC's possible loss of majority, with implications for fiscal consolidation and government service delivery.