The lower levels of load shedding as well as fuel price decreases in December helped lift transactions in South Africa slightly after a poor showing from the previous two months.
This was according to the BankservAfrica Economic Transactions Index (BETI) that was released on Wednesday.
“The monthly BETI increased by 1.9% to reach an index level of 133.0 in December. On a year-on-year basis, the BETI was only 0.6% above the recorded level,” Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements said.
Bankserv said while the increase was welcomed, it was still unlikely to signal the start of a significant economic turnaround in 2024.
The average BETI in 2023 was also 0.5% lower than the 2022 average, the index showed.
“During the first half of 2023, economic activity surprised to the upside, but disappointed in the final months when these gains reversed,” Elize Kruger, an Independent Economist said.
“Many headwinds plagued the economy during the year, not least the record levels of load shedding, elevated interest rates, a lacklustre job market and low confidence levels among households and businesses. The economic narrative has remained largely underwhelming and despite several industries having become more resilient against load shedding and other challenges, the economy struggled to gain sustainable momentum,” Kruger further added.
Investec chief economist Annable Bishop said, “The BankservAfrica Economic Transactions Index (BETI) measures the value of transactions in the economy (at seasonally adjusted real prices), and is seen as a good proxy of economic activity. We forecast that the economy stalled in the fourth quarter of 2023.”
The index stated that the BETI is expressed in real terms, the renewed upward trend in inflation indicators in September and October, had a negative impact on the BETI outcomes.
“However, the deflator used in the BETI started moderating again with the forecast at 5.4% in December vs 5.6% in November and 6.3% in October. On the assumption of further moderation in food prices, lower global inflation, a stable or even stronger rand exchange rate and sideways movement in the average international oil price, headline CPI is forecast to average 5.2% in 2024 compared to an estimate of 6.0% for 2023,” the BETI report stated.
The index further stated that other nowcast indicators remained mixed but generally signalled muted economic activity in December.
The S&P Global South Africa Purchasing Managers’ Index fell from 50.0 in November to 49.0 in December, as companies cited the negative impact of the backlog at the country’s ports.
The Absa Purchasing Managers’ Index increased to 50.9 in December, up from 48.2 in November.
The uptick was partly due to a further lengthening of supplier delivery times, which normally implies strong demand conditions and thus contributes positively to the composite gauge.
However, in December - similar to November, the Durban port crisis was the main driver of the sharp decline in supplier performance, with firms seeing lead times lengthening considerably, leading to higher costs.
Vehicle sales declined for the fifth month in December.
According to Naamsa, 40 328 new vehicles were sold last month, a 3.3% decline over the same month in 2022.
Full-year vehicle sales for 2023 came in only 0.5% higher than in 2022, remaining below pre-Covid levels.
The standardised nominal value of transactions cleared through BankservAfrica in December 2023 increased to R1.392 trillion vs R1.270 trillion in November, according to Naidoo.
The number of transactions increased to an all-time high of 163.1 million compared to the previous month’s 158.5 million.
As the economy gradually migrates towards low-value digital, instant payments, the average value of transactions measured in the BETI will continue to decline over time.
The average value of transactions in December was 4.8% lower compared to a year earlier.
Despite the recovery in the BETI for December, the index was 0.5% lower compared to September 2023, signalling that the economy remained strained in quarter four (Q4), according to Kruger.
“With a quarterly contraction in real GDP (gross domestic product) already recorded in Q3 (quarter three) – anticipated in previous BETI reports – there is a slight possibility that the economy could have dipped into a technical recession in Q4. A notable improvement in economic growth is unlikely in 2024, however, some positive developments could lead to a welcomed uptick, said Kruger.
“Specifically, the expectation of lower international interest rates could spur a better performance in the rand exchange rate, which will likely contribute to a moderation in consumer inflation,” the BETI report stated.
Further to the possible upside, it has been widely expected that interest rates could see at least 75 basis point cuts during the year.
Real GDP growth is forecast at 1.3% in 2024 versus an estimate of 0.6% in 2023.
“However, an acceleration in structural reform remains critical to lift South Africa’s potential growth rate, as the current levels remain woefully inadequate to address South Africa’s socio-economic challenges,” the index went on to stated.