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SA economy plunged in uncertainty - index

Cape Town - South Africa's already sluggish economy slowed down even more in March, according to the latest BankservAfrica Economic Transaction Index (Beti).

"SA's economy is still growing, but not fast," Mike Schussler of Economists dotcoza told Fin24 on Wednesday. "One month the economy is up, and then it's down. It shows a lot of uncertainty in the economy."

He sees load shedding and the petrol price hike as the big impacts on March numbers.

"Quite frankly, SA has not been growing quickly for a while and the slow growth is just continuing. Data shows people just don't have the confidence, for instance, to take an extra loan," he said.

"Like the world economy, the SA economy has clearly slowed at the end of the first quarter, but it is still growing, and the transactions - while changing in average value - are also still positive overall."

A better first quarter alone - given the decline of the first quarter of 2014 - should make 2015 better than 2014, in his view. 

READ: Why Eskom plunged SA into stage 3 load shedding

The decline in the March Beti against February’s report shows the volatile nature of South African economic activity.

The average nominal value per transaction via the South African banking system increased by 11.3% year-on-year, the highest percentage since August 2004. This could indicate underlying inflationary pressure on the economy.

“However, it should be noted that the index still increased, although at a slower rate on a year-on-year basis,” said Dr Caroline Belrose, head of fraud and data analytics at BankservAfrica.

The information indicates that larger transactions - rather than a greater number of transactions - are driving the South African economy. Some of this may be due to overall price increases, but it could also show a shift to business-to-business transactions, rather than consumer transactions.

The Beti has been known to predict an increasing inflation trend and this may be the case here, according to Schussler.

The monthly decline in real, seasonally-adjusted overall transactions is marginal. It undermines the more positive trend over the last few months and suggests that rising fuel prices have a large influence on overall economic activity, particularly in the landlocked areas.

READ: Zuma: It's time for economic freedom

Debit transactions

A sign that the economy is perhaps slightly healthier is the fact that debit transactions equate to only 10.2% of credit transactions - the smallest since the start of the Beti, Schussler pointed out. This dovetails closely with the small increase in private sector credit over the last few years.

This shows a reluctance to take on new payment commitments by both consumers and businesses. Fewer debit orders mean that more money becomes available for other spending, which may just help the economy at a later stage.

However, the average debit transaction has increased in size by 5.9%, again indicating possible underlying inflationary trends in the economy. It could also show business debits are increasing faster than consumer debit growth.

Economic growth

“The relationship between the Beti and economic growth is the primary one, and here the small decline in the Beti lessens the impact of the growth seen in the first-quarter gross domestic product," Schussler said.

"No monthly change on its own can be taken as a change in trend, but the slight decline does enough to sow a little doubt about the strength of the overall trend.”

While other figures are either nominally positive or slightly negative, the Beti indicates that for economic transactions slow growth  - while still positive on both a yearly and quarterly basis - remains the most likely outcome for the year.

“The Beti standardised transaction values for workdays reached its highest level ever, not including the festive season spending in December,” said Belrose. “The value of the standardised transactions going through the South African payment system was R689.6bn or about R23bn a day.”

The standardised nominal growth was 5.4%. This overall rate of change also declined, although it still remained above inflation.

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