Economic activity seems to be treading water since May as the underlying momentum in the economy continues to build.
The latest data on electronic transactions reveals that economic activity continues to move sideways but increasing levels of optimism remain.
The BankservAfrica Economic Transactions Index (BETI), which measures the value of all electronic transactions cleared through BankservAfrica at seasonally adjusted real prices, remained largely unchanged in November, continuing the sideways trend observed since May after the notable 4.7% increase from October 2023.
“The BETI moderated slightly in November to an index level of 136.2, which was 0.4% down from the revised level of 136.8 in October. At this level, the BETI remains up by 4.4% compared to last year,” Shergeran Naidoo, head of stakeholder engagements at BankservAfrica, says.
He points out that while the underlying momentum in the economy continues to build, the BETI has essentially been treading water since May but remained at an elevated level compared to recent history.
“While a number of structural reforms are in the pipeline, coinciding with a cyclical upswing unfolding, it will take time to reflect in improved economic activity from current levels,” Elize Kruger, an independent economist, says.
“The much-anticipated cyclical upswing will be driven by moderating consumer price inflation, lower interest rates and real increases in salaries and wages. Improved confidence levels will add to the upward momentum.”
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Other data indicating economic activity
Business confidence in the retail sector reached a three-year high in the fourth quarter of 2024, climbing nine percentage points to 54%, according to the Bureau for Economic Research (BER). Kruger says this marks a continuation of the positive trend observed over the past two quarters, driven by strong performance in several retail categories.
According to the BER, retailers of non-durable goods, including food, beverages, groceries, cosmetics and pharmaceuticals reflected the highest growth in sales volumes. Semi-durable goods retailers specialising in clothing, textiles and footwear were the most optimistic group in the fourth quarter, with confidence levels soaring to the highest level since the third quarter of 2007, buoyed by substantial improvements in sales volumes and profitability.
Kruger says an additional tailwind is the potential that some of the two-pot retirement system withdrawals will surface in retail spending. The latest information from the South African Revenue Service (Sars) on 19 November indicated that over 1.9-million individuals applied for about R35 billion worth of withdrawals.
“These factors would have contributed to the brisk retail spending during November and Black Friday and will likely carry over into the festive spending season in December,” she says.
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Other economic indicators show cyclical recovery
Other economic indicators confirm the unfolding cyclical economic recovery. The S&P Global South Africa Purchasing Managers’ Index (PMI) was above the 50 ‘no-change’ mark for the fourth consecutive month in November, signalling a solid improvement in private sector performance.
Despite registering a fraction below the 13-month high of 51.0 in September, it still suggests that the private sector remained in growth mode in the fourth quarter, with business activity levels rising from the higher sales and more favourable economic conditions.
Also worth noting, Kruger says, is that South African firms increased their employment levels for the first time in six months.
In addition, naamsa revealed a strong performance in November, with new vehicle sales emerging as the best in 20 months, increasing by 8.1%. New passenger car sales powered ahead with growth of 20%, recording the best month since October 2019 and registering higher than the 14.5% in October.
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Some loss of economic recovery in Absa PMI
However, the seasonally adjusted Absa Purchasing Managers’ Index slipped to 48.1 in November, suggesting near-term pressure in the manufacturing sector. According to the BER this points to some loss of momentum in the recovery seen over the past two months but the PMI has been volatile this year and therefore this is not unexpected.
After an all-time high in October, the number of transactions cleared through BankservAfrica in November moderated to 166.3 million, down from 167.8 million in October but still 5% up on a year ago, according to Naidoo.
The monthly increase was driven by PayShap with transaction volumes up by 14.7% after October’s increase of 21.7%. The standardised nominal value of transactions also increased to R1 358 trillion in November compared to R1 317 trillion in October, representing an increase of 3.2%.
“The first three quarters’ economic growth of only 0.4% is indeed disappointing, but optimism for improved growth in 2025 and into the medium term remains the base case expectation,” Kruger says.
