Economic activity fell for a fourth consecutive month, reflecting dire conditions in the SA economy as rolling blackouts take their toll on all spheres of the economy, businesses and households, a survey showed on Wednesday.
The BankservAfrica economic transactions index (Beti) declined further in September, contracting 0.4% compared with 2% in August, as the local economy buckled under the pressure of severe load-shedding and global challenges.
The Beti weakened to an index level of 131.1, notably lower than the record high of 143.2 in May and the lowest since the 130.6 reached in December 2021.
BankservAfrica’s Shergeran Naidoo said companies were unable to produce at capacity because of load-shedding. They had to deal with “the cost of lost production, reduced productivity, cost of providing alternatives, reduced margins and more”, Naidoo said.
Households had also been hit particularly hard, he said.
“On top of the negative impact of load-shedding, the economy is also buckling under the rising cost of living given a significant rise in fuel and food prices in recent months and further increases in interest rates,” Naidoo said.
“Cumulatively, all these factors have resulted in depressed confidence levels, fuelling emigration and discouraging potential investors, while keeping a ceiling on growth and job creation in SA.”
BankservAfrica is an automated clearing house that acts as a transactional link between large payment institutions.
In September, SA endured its worst month of load-shedding yet, according to Eskom data, which showed 572 of the month’s 720 hours were directly affected. Analysis by Eskom’s research, testing and development department shows that apart from 2021, more power cuts were experienced in September than in any other year since 2007.
“On top of our local challenges, global headwinds are also gaining momentum. Global economic output contracted for a second straight month in September, according to the JPMorgan composite PMI, adding to signs that businesses around the world are reporting the toughest conditions outside pandemic lockdowns since the global financial crisis,” he said.
The country’s manufacturing production has also been hit by rising prices, weakened demand and slumping trade, as well as a shift towards inventory reduction after the stock building seen at the height of the pandemic.
The lack of economic momentum, as reflected in the Beti, is mirrored by other local indicators, which also plummeted in September.
The Absa purchasing managers index (PMI) dropped from 52.1 in August to 48.2 in September, reflecting the effect of load-shedding on the energy-intensive manufacturing sector.
The S&P Global SA PMI, which reflects activity in the broader private sector, registered 49.2 in September, down from 51.7 in August. It was below the 50 mark that separates growth from contraction for the first time since December 2021.
Downturn
The S&P Global SA PMI said the downturn was linked to renewed contractions in both output and new orders, which, according to survey respondents, were greatly affected by an elongated and severe period of load-shedding.
Data showed that business capacity was reduced in many cases, while new work intake dropped both domestically and abroad.
Naidoo said that with the SA economy facing more challenges, the latest being the Transnet labour strike, the Beti signalled the probability of an economic contraction in the third quarter.
“The SA economy remains woefully unable to gain synchronised momentum across all sectors in light of all the challenges, and we will continue to experience a ‘muddle-along’ scenario,” Naidoo said.
“The economic reality for South Africans has been increasingly deteriorating and could result in labour protests and potential social unrest, which the country could ill afford,” he said.
Much-needed infrastructure upgrades, including road, rail, power and water, as well as broader structural reforms were urgently needed to tackle the declining trajectory of the SA economy.
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