Economic activity slipped in August as business and consumer confidence levels continued to weigh on sentiment, reflecting the considerable pressures that have been put on the country’s growth prospects.
The volatility in economic activity is captured in the BankservAfrica economic transactions index (BETI), released on Wednesday, that showed a continued downward trajectory from July’s 135.6 points to 134 in August.
Independent economist Elize Kruger said the movement in the index reflects its inability to maintain momentum. “This is akin to the ‘muddle-along’ narrative in the SA economy. The July disruption to major transport corridors, the taxi strike in August and ever-present load-shedding have put considerable pressure on the economy.”
She said these conditions are compounded by the depreciating rand exchange rate and rising international oil prices that resulted in fuel price hikes at the beginning of September, signalling renewed upward pressure on consumer inflation in the near term.
SA’s interest rates also remain at elevated levels with no near-term reprieve expected and clear signs of stress among households captured in real household consumption expenditure, which declined 0.2% quarter-on-quarter in the second quarter.
“Confidence levels remain under pressure and are generally keeping expenditure and growth back,” Kruger said.
The index was able to signal the stronger-than-expected economic growth outcome in the second quarter.
The lower readings in July and August are already signalling a weaker economic performance in the third quarter.
The latest findings are in line with most recent confidence reports published by the Bureau for Economic Research (BER) in partnership with FNB, showing a rebound to -16 index points in the third quarter from -25 points in the second quarter.
However, at -16 index points, the third quarter reading remains well below the long-run average of zero since 1994, pointing to a low willingness to spend among consumers.
While the RMB/BER business confidence index regained some ground to 33 in the third quarter, it was noted in the report business sentiment is still weak and most respondents are dissatisfied with prevailing business conditions.
BankservAfrica data shows that the standardised nominal value of transactions cleared through their payment system in August was R1.207-trillion compared with July’s R1.21-trillion.
BankservAfrica’s head of stakeholder engagements Shergeran Naidoo said the average value of transactions measured in the index will decline over time, as the economy gradually migrates to digital payments.
“This can be seen by the 5.9% decline to R8,084 in August 2023 compared with R8,591 in August 2022,” Naidoo said.
He said the inclusion of the PayShap service’s real-time, low-value transactions in the index will, over time, adjust the average value of transactions lower as more users start to adopt this nascent payment stream.
“There has been a steady growth in the use of PayShap [an instant interbank digital payment service available through SA’s major banks], which recorded more than 1.5-million transactions since its market inception in March, and as more banks offer this service,” he said.
Kruger said it has become clear that the cumulative impact of many challenges that have been playing out in the economy during the past 18 months is now at its harshest.
“This at a time when confidence levels are still under severe pressure. The steep increase in interest rates, combined with the high cost of living have resulted in growing strain on consumers in an environment of real and nominal declines in take-home pay,” she said.
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