SA’s economic activity is worsening, data show

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The sluggish economic environment is expected to further hinder employment recovery in 2023. Picture: iStock/Gallo Images
The sluggish economic environment is expected to further hinder employment recovery in 2023. Picture: iStock/Gallo Images


The BankservAfrica Economic Transactions Index (BETI) fell in February 2023, signalling the country’s deteriorating economic activity. After two consecutive months of growth, the index fell by 1.3% to 131 index points in the month. On a year-on-year basis, the BETI was down 1.9%.

Independent economist Elize Kruger said the moderation in the BETI “reflects the pressures that businesses in the country’s main economic sectors are experiencing from the prevailing dismal economic context, [including] continuing load shedding, interest rates and inflation remaining at elevated levels, in addition to the global economic slowdown”.

The economy remains in a ‘muddle-along-little-thriving’ narrative. While actions were recently taken and projects have been announced in the energy and transport sectors of the economy, little reprieve can be expected in the short term.

Retailers have also shared their predicted losses and costs stemming from the severe load shedding in February. Unfortunately, these cost increases are either likely to be passed on to the end product price, fuelling consumer inflation, or lead to lower margins, analysts have warned.

“During the month, the value of standardised nominal value of transactions was R1.17 trillion in February, a growth from the R1.04 trillion in January. However, the volume of transactions slowed to 133.0 million during the month, compared with the 135.7 million tracked in January,” according to Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements.

FNB senior economist Siphamandla Mkhwanazi added:

Another downside is the depletion of household financial buffers, including savings, which up until recently had allowed them to weather the economic downturn. This, combined with elevated inflation, suggests continued financial pressure on households.

READ: South Africa’s economy is going nowhere slowly

The latest retail sales data from Stats SA show that sales dropped for a second consecutive month in January, contracting by 0.8% year-on-year. The largest negative contributors to this decrease were retailers that specialise in food, beverages and tobacco, which declined by 7.3% and contributed 0.7 of a percentage point to the overall number; followed by hardware sales, which fell by 4.8%.

Investec economist Lara Hodes said:

Retailers are having to contend with the dire electricity supply situation, which continues to impede their ability to operate optimally, with persistent load shedding lowering footfall and raising costs, notably fuel costs related to powering generators. Additionally, consumers are cutting back on discretionary purchases in the current environment, with a number of them opting to pay down debt.

The Absa Purchasing Managers’ Index plummeted in February to 48.8 index points, while the sub-index that measures expected business conditions in six months fell to its lowest since May 2020.

The latest figures from Stats SA show that production in the manufacturing sector was down 3.7%, while mining also slipped by 1.9% in January, pointing to a likely contraction of the first quarter of this year.

“The sluggish economic environment will further hinder employment recovery in 2023. Wage growth will probably be subdued, in part due to the impact of load shedding on corporate margins. Growth in non-labour income, which has been driving the post-lockdown income recovery, is also expected to moderate, primarily due to base effects, weaker corporate earnings growth and subsequent dividend payouts.”

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