SA needs to kick-start infrastructure upgrades and broader structural reforms to change the narrative from muddling along to thriving, an economist said following the latest economic transactions index (Beti) from the clearing house BankservAfrica.
This comes as the index fell for the sixth straight month in November amid a global economic downturn largely because of the war in Ukraine, and as domestic problems, such as load-shedding, continue.
“All of these factors, cumulatively, have placed a damper on confidence levels in the SA economy, while keeping a ceiling on growth and job creation in SA,” economist Elize Kruger said.
The index, which is an early scorecard for the economy, came in at 130.2 in November, 60 basis points lower than a month ago, and contracted 1% year on year. Beti recorded a record high of 143.3 in May.
According to its website, Beti correlates with the SA Reserve Bank’s (Sarb’s) coincident indicator and GDP figures to give insight into growth trends in the local economy.
Kruger’s comment echo what fellow economist Roelof Botha told Business Day on Tuesday following the release of the latest Afrimat construction index (ACI) when he said the government needs to spend the extra tax it collects on repairing and building roads, improving railways, getting ports back on track and expanding access to more energy.
Finance minister Enoch Godongwana said in the medium-term budget policy statement (MTBPS) in October that tax revenue collection exceeded projections, with a tax overrun of R83.5bn expected.
“So why is [Godongwana] not repairing roads? Why is he not building new roads?” Botha said, noting that the private sector was spending its own money to fix government infrastructure.
The war in Ukraine has triggered high inflation, which led to several central banks increasing interest rates, including the SA Reserve Bank. Meanwhile, the lingering effects of the devastating floods in KwaZulu-Natal in April 2022; high unemployment and weak economic growth added to local economic woes.
In November, the Sarb hiked interest rates another 75 basis points, and inflation came in at 7.6% for consumers and 16% for producers. Meanwhile, there was added political uncertainty around President Cyril Ramaphosa’s future, because of the forex that was stolen from his Phala Phala game farm before the independent panel released its report on December 1.
The effect of the global slowdown has reflected in SA’s trade balance as it swung from a R26.2bn surplus in September to a R4.3bn deficit in October, the first monthly trade deficit since April 2020.
Between January and October 2022, the cumulative trade surplus more than halved to R181.3bn vs a R366.2bn surplus during the same period the year before.
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