Johannesburg - South Africa has lost over 13 million workdays this year alone due to industrial action, warns Mike Schüssler, chief economist of economists.co.za.
This is causing further uncertainty as economic role players become more cautious in decision making.
While July had a total of 23 working days (the most since October 2013) it failed to perform positively.
In July, South Africa lost 4 million work days due to strike action – more than any other month in the year.
The effect this industrial action had a direct impact on the real value of transactions which fell from the previous month.
"It is important to note that the month after any major strike often shows the worst results as both returning workers and the companies they work for are doing so with no money," said Schüssler.
"Apart from the metal workers strike, the end of the five-month long platinum strike may have had a further negative effect in July."
With one major strike ending shortly after the other, the real relationship of economic activity and long major strike action most certainly showed up in the Beti data captured in recent months.
Along with other indicators, such as new car sales, the manufacturing and service PMIs, the Beti confirms the worsening business environment in July.
"The latest Beti seems to indicate that we are once again our own worst enemy as industrial action resulted in poor economic performance," he said.
Massive uncertainty
Massive uncertainty is causing the South African economy to oscillate between decline, stagnation and slow growth, making any chance of significant job creation unlikely, according to the latest BankservAfrica Economic Transaction Index (Beti).
The most noticeable factor in all the Beti figures this year has been the volatile nature in which the Beti figures have changed, said Michael Rubenstein, head of corporate reputation and marketing at BankservAfrica.
“Our numbers clearly indicate that the level of distress facing the economy is not just one of declining growth, but also of massive uncertainty," said Rubenstein.
"This uncertainty is reflected in the nature of economic transactions, which appear to show recovery for three months after a seven-month period of mainly decline, followed by another monthly decline in the latest figures."
July Beti data
The Beti data currently shows a decline of 1.4% year-on-year, once again raising concern of another negative change in gross domestic product (GDP) in the third quarter after a probable, but small, positive in the second quarter of 2014.
According to Rubenstein, this is the weakest Beti year-on-year since February 2010, when the South African economy was barely out of recession.
Currently, the month-on-month decline is the first since March 2014.
With the third quarter off to such a bad start, it could again result in a decline, and the very best South Africans can hope for is weak growth in the third quarter.
Although the quarter-on-quarter growth is still marginally positive, which reflects a stronger than expected June Beti, 0.4% growth is not something to get excited over.
The total value of transactions performed is R677bn, which is an increase of only 3.9% in nominal terms, far below the estimated inflation rate.
The average value of transactions increased 3.5% year-on-year to just over R8 000. This raw data once again indicates weaker economic conditions that currently exist in the economy.
Decision-making in an uncertain economic environment
According to Schüssler, the most difficult decisions to make are those in a directionless economic environment.
“An economy without direction is problematic since businesses remain out of touch with their decisions.
Business owners are faced with the question of whether to expand or close the hatchet and whether to spend more money on advertising or promotions.
Clearly the volatile nature of economic transactions is not ideal and shows that the economy may be closer to decline rather than stagnation.
“Added to this uncertainty is the fact that the total salary bill is increasing while other employees are facing retrenchment." said Schüssler.
"Forced liquidations also rose to the highest level in over five years. No country can afford the disruptions that South Africa is currently experiencing and the chances of further job creation are diminishing with every hit that the economy takes.”
Schüssler further added that the tough conditions are well reflected in the Beti data, which have consistently had a very close relationship with both GDP growth and the South African Reserve Bank co-incident indicator.
Pinpointing the causes of uncertainty
“The Beti, as a new generation ‘now-casting’ indicator, may not show where the actual difficulty in the economy lies, but when looking at the dismal manufacturing PMI data it can be deduced that much of the weakness lies in our productive manufacturing sector,” said Schüssler.
“Moreover, it now seems that a large part of the services sector is also being impacted by the decline."
The majority of respondents to the Service PMI by HSBC Bank indicated that times were difficult.
"The weakness may, once again, not be permanent, but the changing nature of the economy seems to be,” he said.
Above-inflation increases for the country’s biggest employer, the government, probably helped the economy avoid a decline in the second quarter, in his view.
However, this may not be the case in the third quarter.
“An economy bouncing between stagnation, slow growth and absolute decline is not great for tax collections, budget deficits and confidence," warned Schüssler.
"The results may just impact South Africa much longer and the welfare of the common man is certainly under threat.”
- Fin24