Uptick in SA economic transactions gives a glimmer of hope but is the worst really over?
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CAPE TOWN – The latest BankservAfrica Economic Transaction Index (BETI) tracked a monthly improvement in May 2020, suggesting the worst of the economic impact from the Covid-19 lockdown levels may be easing up.
However, the overall impact over the three months to May points to a long road to recovery for the economy.
Investec chief economist Annabel Bishop said South Africa had seen a quick response to contain Covid-19, but the lockdown was rather lengthy and severe, causing negative consequences for the economy and livelihoods. “The likelihood of a strong recovery in Q3.20 has diminished given the extreme nature of the lockdown measures and their lengthening.”
Shergeran Naidoo, the head of stakeholder engagement at BankservAfrica, said the monthly BETI showed less of a decline of -4.3 percent in May compared to April’s -14.2 percent. “While this movement offers some relief, the data over the three months ending May 2020 reflects the biggest fall on our records with the actual total value of transactions in real terms lower than any period since April 2005.
“The BETI, which comprises of the value and number of transactions, saw both declining substantially in May 2020. Our data shows the economy recorded 20 percent less in transaction value than a year ago and that the number of transactions fell by 9.1 percent year on year,” said Naidoo.
He said the total value of transactions fell due to the average value per transaction falling faster than the number of transactions. “This has to do with the economic conditions surrounding Covid-19.”
The current global Covid-19 pandemic is creating major economic and financial distress for consumers across the globe, according to a study by TransUnion. Many jobs in the South African economy are already being impacted or at risk due to drastic demand shifts.
Over March to May 2020, economic activity crashed by 20.4 percent. Mike Schüssler, chief economist at economists.co.za, said the size and speed of this collapse in just three months could be likened to falling off a cliff.
“One thing that is positive is that the BETI decline for May is far lower than that which was experienced in April and is a hopeful sign that the worst is over,” he said.
Schüssler said, however, owing to the period of the Covid-19 lockdown, a better reflection of the economy lay in the difference between the quarter to May compared with the quarter to February.
“We believe that a bounce back, particularly in the third quarter, is highly likely off these lows. We remain hopeful that while lockdown level 3 may have a positive impact in June, at least a double-digit decline in gross domestic product (GDP) for the second quarter can still be expected,” he said.
Naidoo said: “We could also see the emergence of a new normal functioning economy post-Covid-19 where technology is vital in the day-to-day management of businesses … Eating out or watching a sports game live could resume, albeit via potentially different channels and done differently to how it was done pre-Covid-19, as individuals return to their old ways of consuming, socialising and, ultimately, spending.”
According to a study by Mastercard, about 75 percent of South Africans said they were now using contactless payments. Division President for Mastercard, Southern Africa Mark Elliott said the act of buying everyday supplies had changed dramatically, with shoppers having to adjust to social distancing measures and other new challenges.