Economic activity remained weak in September, indicating bleak prospects for growth in the third quarter as SA continues to face a multitude of challenges, according an index measuring interbank payments.
The BankservAfrica Economic Transactions Index released on Wednesday fell 2% a quarterly basis confirming a drop in economy activity amid persistent load-shedding and water supply issues, along with a steep deterioration in rail services and ongoing port inefficiencies.
On a monthly basis the index slipped to 133.6 points from a revised 133.9 in August.
“As a valuable early indicator of economic activity, the index data reflects the ongoing ‘muddle-along’ narrative playing out in the SA economy,” said Elize Kruger, an independent economist.
“It is increasingly clear that the cumulative impact of many challenges that have been playing out in the SA economy over the past 18 months is now at its harshest, at a time when confidence levels are still under severe pressure and with no clear end in sight for the ongoing challenges,” she added
A growing number of indicators confirm that the economy remains lacklustre, unable to gain much-needed momentum, Kruger said.
The S&P Global SA Purchasing Managers’ Index (PMI) — a composite gauge designed to give a single-figure snapshot of operating conditions in the private sector economy — slipped to 49.9 points in September after briefly breaching the neutral 50-point mark at 51 in August, indicating “broad stagnation” that has plagued SA.
The Absa PMI also fell in September to 45.4 points from 49.7 in August, remaining below the neutral 50-level for the eighth consecutive month, confirming ongoing strain in the manufacturing sector.
Kruger said the transport and freight sector has been in sharp focus over the past few months as the government has started to come to terms with the negative impact that this underperforming sector has had on the broader economy.
She said the government had indicated in an August update of its Operation Vulindlela that a new “Freight Logistics Roadmap” is being prepared for publication before the end of the year.
“While these developments are positive on the medium term, an exodus of management at Transnet in the last few weeks points to the severity of current troubles at the state-owned company,” Kruger said.
“Concurrently, the rand exchange rate remains under pressure with negative consequences for imported prices, while notable fuel price hikes over the past three months signal renewed upward pressure on consumer inflation in the near term,” she added.
As a result, Kruger said, interest rates are forecast to remain at current elevated levels for some months yet.
There are already clear signs of stress among households, with Reserve Bank data showing household credit continued to reflect the impact of weaker household finances, higher interest rates, fragile consumer confidence and cautiousness among lenders, Kruger said.
Household credit growth eased to 5.8% in August, the lowest since January 2022, as all the components, except credit card usage, slowed, she said.
But as the economy gradually migrates towards digital, instant payments, the average value of transactions measured in the BankservAfrica Economic Transactions Index continues to decline.
Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, said the standardised nominal value of transactions cleared through BankservAfrica in September was R1.248-trillion compared with R1.207-trillion in August, while the number of transactions subsided somewhat to 152.2-million from 152.6-million in samer period.
Moreover, the average value of transactions cleared through BankservAfrica, declined to R7,811 in September compared with R8,565 the same period a year ago, indicating the change to digital, instant payments in the economy, she added.
The inclusion of the PayShap service’s real-time, low-value transactions in the index, would see the average value of transactions decline further as more users start to adopt the payment stream, Naidoo said.
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