Economic activity deteriorates again in March

Johannesburg - South Africa’s economic activity, measured in the monthly BankservAfrica Economic Transactions Index (BETI), declined on a monthly and quarterly basis in March and reached its lowest point in almost two years.

“The BETI reached an index level of 130.2, the lowest since the 130.1 reflected in December 2021,” says Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements. “Reflecting the growing weakness in the economy on a monthly basis, the index was 0.5% lower than in February.”

However, the further moderation in the BETI during March was not unexpected as the dismal economic environment prevails.  Ongoing load shedding, a further 50bp hike in interest rates and inflation remaining sticky (especially food price inflation) are all factors that are holding the economy at ransom. Early indications suggest economic growth stagnated in Q1, with the BETI signalling the strong possibility of a negative quarterly growth rate in Q1 2023. The March BETI was 1.7% lower than in the quarter ending December 2022.

“It is becoming increasingly clear that the weakness in the economy has become quite broad-based, with most sectors under severe pressure,” says independent economist, Elize Kruger.

After having moved sideways in December 2022 and January 2023, the Absa Purchasing Managers’ Index (PMI), plummeted to 48.8 index points in February, and further to only 48.1 in March, the lowest since June 2021. The S&P Global South Africa PMI also signalled dismal economic activity in the private sector, slipping below the 50.0 neutral mark and into contraction territory in March as the report noted that South African companies saw a reduction in new business in March, as client demand continued to weaken in the face of steep inflationary pressures and amid further disruption from the Eskom load shedding programme. Even the resilient vehicle market faltered in March. The motor industry sold 50 157 cars and commercial vehicles last month — 0.6% fewer than the 50 465 recorded in March 2022.

However, there was some positive global news. The J.P. Morgan Global Composite Output Index – produced by J.P. Morgan and S&P Global in association with ISM and IFPSM – rose to 53.4 in March, remaining above the neutral 50.0 mark for the second successive month. The upturn remained heavily reliant on the service sector during March, which grew at its quickest pace since December 2021 with growth strengthening across the business, consumer and financial services categories. Though still tentative, an improvement on the global front could have positive spin-offs for the South African economy.

The standardised nominal value of transactions that cleared through BankservAfrica in March 2023 was R1.19 trillion vs. February’s R1.17 trillion, while the number of transactions increased notably from 133 million in February to an all-time high of 149 million in March 2023, a monthly increase of 12.1%, according to Naidoo. Compared to a year earlier the number of transactions (total of debits and credits) increased by a notable 13.6% in March 2023. This appears to be due to the strong growth trend in the Real-Time Clearing (+15.1% m/m) and EFT credits excluding salaries (+17.4% m/m) electronic payment streams. In both these categories, although the number of transactions increased notably, the average value of transactions declined. This confirms the growing trend in electronic payments as the economy migrates slowly to digital payments.

“The ongoing moderation in the BETI, after only two months of marginal improvement in December 2022 and January 2023, confirms that the environment remains challenging and that the economy remains in a ‘muddle-along-little-thriving’ narrative. While actions were recently taken and projects have been announced in the energy and transport sectors of the economy, South Africans should prepare themselves for ‘more of the same’ for longer than hoped for,” ends Kruger.