June BETI improvement signals economic recovery in South Africa

The BankservAfrica Economic Transactions Index (BETI) improved for a second consecutive month in June, indicating a more optimistic outlook for economic performance in the second quarter.

The index, which measures the value of all electronic transactions cleared through BankservAfrica's automated clearinghouse on a monthly basis, increased in June to an index level of 139.1, representing a 0.4% monthly growth and a second month of recovery.

Shergeran Naidoo, BankservAfrica Head of Stakeholder Engagements, said the improved BETI signals a positive shift in overall economic activity in the second quarter, which could also be reflected in a favourable GDP outcome set to be published by Stats SA in early September.

“The uptick in the BETI in June is welcomed, especially given that the economy started 2023 on the back foot, with quarterly growth of only 0.1% in the first quarter on a seasonally adjusted basis, and confidence indicators declining across the board,” said Independent Economist Elize Kruger.

“While several sectors entered a technical recession in the first quarter, recent indicators suggest a rebound in mining and manufacturing, with both sectors likely returning to growth in the second quarter,” said Kruger.

Overall, second quarter GDP growth is forecast at 0.6% quarter-on-quarter, seasonally adjusted, compared to 0.1% in the first quarter. The upward trend is in line with the BETI indications for the second quarter.

Kruger said even though some sectors had remained resilient, others were still struggling amid ongoing challenges and notable risks.

“The renewed uncertainty about the impact of US import tariffs, not only in South Africa but across the globe, does not bode well for confidence and investments, and will increase the downside risk to growth forecasts in 2023 and beyond,” she said.

Looking ahead, she said that although South African exports were expected to come under pressure from higher US import tariffs, the elevated gold price and lower international oil prices could soften some of the impact.

“Furthermore, a considerable share of South African export commodities has been exempted from the announced US import tariffs, which could provide a buffer for the mining industry and subsequently provide some support for the economy,” she said

.The BETI’s recovery is also reflected in other economic indicators. National Association of Automobile Manufacturers of South Africa data revealed that total vehicle sales improved by 18.7% year-on-year in June, with year-to-date sales up 13.6% compared to a year earlier, while new car sales in June grew by a notable 21.7% y/y and year-to-date were 21.3% ahead.

The S&P Global South Africa Purchasing Managers’ Index has also remained in expansionary territory with an index level of 50.1, although it was down from 50.8 in May. On the other hand, the Absa Purchasing Managers’ Index, reflecting on prospects in the manufacturing sector, remained in contractionary territory for an 8th consecutive month at 48.5 index points, but up from 43.1 index points in May.

After reaching an all-time high of 176.3 million in May 2023, the number of transactions cleared through BankservAfrica moderated somewhat in June to reach 167.3 million, but it was still 13.5% up on a year ago, said Naidoo.

A tailwind that should continue to buffer the economy against global headwinds includes headline inflation that remains below the South African Reserve Bank's 3-6% target band at 2.8%, according to May’s print. The average 2023 forecast is expected to be around 3.5%. The favourable inflation environment has created scope for further interest rate cuts.

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