Author: Mike Schussler Source: Bankserv Africa
Widespread stagnation in the SA economy – BankservAfrica Index
While cash-strapped consumers are struggling to finance monthly expenses, and the longest-running strikes in 20 years are undermining the foundations of the South African economy, the BankservAfrica Economic Transaction Index (BETI) reveals that economic transactions have indeed increased by less than one percent over the past year.
According to Brad Gillis, CEO regulated products at BankservAfrica, the quarter-on-quarter growth in the BETI is the same as the year-on-year growth at 0.8%, while the month-on-month increase is only 0.1%.
The actual value of the BETI stood at R654.3 billion which, in nominal terms, was up 6.6% on last year.
Gillis says "This is the highest number obtained this year, but on balance it is mainly the result of higher inflation rather than actual growth”.
"The actual number of transactions in the BETI (83.1 million) is the highest since Christmas 2013. Although this was up by exactly 5% on last year, it shows that the value of consumers' transactions increased with less than inflation over the last year. South Africans were probably forced to cut back on some expenditure."
What the numbers mean
Mike Schüssler, chief economist at economists.co.za, says the BETI, like many other indicators, shows that the South African economy is stagnating. He sees a range of issues at play.
The South African economy appears to be “falling asleep at the wheel”. While car sales and the PMI are all indicating flat economic performance, the BETI confirms that the stagnation was widespread throughout the South African economy in March 2014. 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.
"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."
Factors impacting on the economic situation
South Africa is experiencing the biggest, most damaging, and longest strike action in 20 years. Consumer and producer prices have been rising faster than anticipated and, along with slightly higher interest rates, this is curbing consumers' enthusiasm to spend.
Many consumers are opting to take out loans, while retailers and wholesalers are reluctant to keep too much stock. Producers and providers to primary industries are also careful of stock levels, as major decisions look very risky in the current climate.
Platinum stocks in South Africa are no longer going to help the South African export figures, since two producers no longer have any stocks here. 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.
"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," says Schüssler.
"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."
Contact Wendy Fourie for more information: WendyF@bankservafrica.com or (011) 497 4119.
Notes to the Editor: The BETI stands for the BankservAfrica Economic Transaction Index. BankservAfrica is a payment enabling organisation operating between the various South African banks with a very secure messaging environment in place. economists.co.za is an economic consultancy that helped develop the BETI. The BETI is a very fast and broad overview of current economic trends over a broad range of sectors, making use of economic transactions as captured by BankservAfrica. Like the Swift Index, the BETI is considered a “now-cast” number as a result of its speedy ability to convey the overall economic conditions to the market. Where most economic indicators can take anything between 38 and 76 days to become public knowledge, now-cast indicators take less than a month after the facts are revealed to become available to the market. The BETI is also the broadest of the “now-cast” indicators to become available to the market, as it covers economic transactions across the whole economy. Very big distortive economic transactions do not form part of the BETI. This is also on its own a trend-strengthening indicative factor.