Economic activity fell slightly in July, reflecting the effect of the return of stage 6 load-shedding and troubles in the transport sector that brought the freight industry to a halt.
The dip in activity is captured in the monthly BankservAfrica Economic Transactions Index (Beti) showing a fall to 133.0 in July compared with 133.9 in June.
On an annual basis, the Beti remained in negative territory, but significantly less so compared with preceding months.
BankservAfrica data shows the index fell 0.9% year on year in July, compared with a 1.8% decline in June and a sharp 7.4% fall in May.
The index is a valuable early indicator of economic activity.
BankservAfrica’s head of stakeholder engagement, Shergeran Naidoo, said while they are encouraged by a strong June outcome, the improvement in the Beti in June is not necessarily the start of a sustained, synchronised economic recovery.
“New challenges appeared,” Naidoo said. “After a relative reprieve from adverse domestic developments, specifically the lower levels of load-shedding during most of June, the news flow deteriorated rapidly in the early weeks of July.”
Naidoo said the return of stage 6 load-shedding and the torching of many trucks on big transport corridors in the north of the country highlights renewed tension in the transport sector.
“Furthermore, an important longer-term consequence of this kind of violent interruption to normal business practices is that companies transporting goods into the rest of Africa may opt to bypass SA and look to other entry points, a trend that has already commenced,” he said. “The negative impact of such events on business confidence levels should not be overlooked.”
Similar to the BETI, the Absa Purchasing Managers’ Index (PMI) slipped to 47.3 in July, compared with 47.6 in June, again signalling stagnation in the manufacturing sector.
Activity in the sector also fell the most since July 2021 when the country experienced riots and looting in KwaZulu-Natal and parts of Gauteng.
Downward trends in economic activity were also captured by the S&P Global SA PMI, which reached its lowest level in two years, suggesting the private sector remains stuck in a downturn.
Independent economist Elize Kruger said the July number signals a weak start to the third quarter.
“Many challenges remain, among others elevated interest rates, policy and political uncertainties, low confidence levels — among households and businesses — and logistical constraints, while recent weaker economic data from China adds a further dampening layer on the economy,” Kruger said.
Kruger said given all these challenges, the commitment by 115 CEOs of top companies in SA pledging their support for a business-led initiative to assist the government in getting the economy back on track is welcomed.
“The unprecedented scale of this intervention and level of involvement in efforts previously regarded as the domain and responsibility of government underlines the urgency by businesses to reverse the current trajectory,” she said.
Kruger said another ray of light in this still challenging economic environment is the seemingly downward trending inflation.
Consumer inflation has moderated from 7.1% in March to 5.4% in June, the first print back in the Reserve Bank’s 3%-6% target band since April 2022, while producer inflation has moderated even more notably from 12.7% in January 2023, 18% in July 2022 at the cycle high, to 4.8% in June.
“The moderation in inflation will go some way in reducing the extent of the erosion of purchasing power that households and companies (more specifically margin pressure) have had to deal with, especially in the past year,” Kruger said.
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