BankservAfrica head offices in Selby Johannesburg. Photo by Simphiwe Mbokazi.
THE decline of BankservAfrica Economic Transactions Index (BETI) declined for the second consecutive month in July 2022, signalled the strain in the broader South African economy, according to the payments clearing house.
Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements said that on a monthly basis, the BETI declined by 1.3 percent last month compared to the revised drop of 4.7 percent in June.
“On an index level, the BETI moderated further in July to reach 134.5, falling from the all-time high of 143 in May and the lowest since February’s 133.8,” Naidoo said.
On an annual basis, the BETI increased by 5.6 percent in July compared to 5 percent in June.
However, this annual comparison was off the low base created by the riots in KwaZulu-Natal and Gauteng in July last year also under the COVID-19 restrictions. These contributed to lowering the BETI, which recovered again in August last year.
Independent economist Elize Kruger said this moderation in the BETI was not unexpected in light of the many headwinds that have surfaced in the local economy over the past few months-from the recurring load shedding, which was intense in July, to the significant rise in fuel, food and general inflation increases.
“Although the index still suggests that the underlying momentum in the economy might have been stronger than generally perceived in Q2 2022, the moderation in July signals a weak start to the third quarter,” Kruger said.
The index noted that other nowcasting indicators continue to present a mixed picture of the economy. The Absa Purchasing Managers’ Index (PMI) plummeted to 47.6 in July, the lowest since July last year, and notably lower than June’s 52.2 (a far cry from the 60.0 recorded in March).
The index authors said this dramatic decline suggested the manufacturing sector was proportionately harder hit by the headwinds compared to the broader economy, as reflected in the BETI and other indicators. The S&P Global South Africa PMI, which reflected activity in the private sector, picked up for a third successive month in July, helped by improving new orders, output and employment numbers. All three metrics were said to signal the quickest rates of growth since mid-2021, amid reports of improving market demand despite rapid inflationary pressures.
Total new vehicle sales rose by a significant 31.8 percent year-on-year in July this year, partly influenced by a low base, but also reflecting ongoing pent-up post-COVID demand.
With the strong July outcome, year-to-date new vehicle sales are 13.9 percent higher than a year ago.
On the confidence side, the SA Chamber of Commerce and Industry’s (SACCI) Business Confidence Index (BCI) stood at 110.3 in July, 1.8 index points higher than in June and 6.1 points higher than in May.
The improved sentiment was reportedly a result of increased merchandise export and import volumes and more new vehicles sold.
The business confidence index for June and July 2022 indicated that the negative medium-term (year-on-year) business sentiment of May 2022 was replaced by positive developments compared to the same period last year.
Meanwhile, the standardised nominal value of transactions cleared through BankservAfrica last month were recorded at R1.127 trillion, while the number of transactions increased to 130.4 million, 6.4 percent higher than a year ago.
Kruger said many different and often conflicting signals from high frequency indicators were typical of an economy in a ‘stop-start mode’, unable to gain synchronised momentum across sectors, as the next round of load shedding or some or other headwind, is probably waiting around the next corner,” explains Kruger.
The BETI authors said that in light of the severity of load shedding and its ongoing negative impact on the economy, the comprehensive interventions announced by President Ramaphosa last month to address the country’s energy crisis could boost economic growth notably, if implemented with the needed urgency.
They said the notable moderation in international oil prices in recent weeks have resulted in sizable fuel price declines seen in August. They also added that further significant declines forecasted for September should trigger a much-needed moderation in inflation.
In the daily market commentary on Wednesday, Nedbank CIB research analyst Rezwaana Sumad said oil edged higher after tumbling to the lowest level in more than six months, with investors weighing the prospects for rising Iranian supply as the outlook for global economic growth weakened.
BUSINESS REPORT