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Third quarter off to bad start for SA economy

Aug 12 2016 06:36
Carin Smith

Cape Town - South Africa's economic activity is slowing again dramatically, as reflected in the latest BankservAfrica Economic Transaction Index (Beti) released on Thursday.

The Beti measures all South African interbank transactions under R5m. The latest data reveals that the quarterly drop in economic transactions is the biggest decline in 18 months.

“This data shows there is a broader slowdown among all of the country’s main economic sectors at present,” said Mike Schüssler, chief economist at Economists dotcoza.

The third quarter of 2016 is, therefore, off to a bad start for the SA economy, Schüssler told Fin24 on Thursday.

"Right through the economy we are getting the impression the bounce back of April and June has disappeared. It looks like we have another bad month and not a courageous start to the third quarter," said Schüssler.

He said it is no wonder that the SA Reserve Bank (Sarb) has a latest growth forecast of 0% for the SA economy in 2016.

"I am very concerned. I do not think the SA economy has any direction. You can have business confidence up one month, but then, the next month it goes down again. Economic activity is not enough to give hope for job seekers," said Schüssler.

"Even the actual number of transactions fell. Of course it is not the alpha and omega, but it says people are no longer that active in the economic arena as before. I think the 0% growth forecast by Sarb is very apt."

READ: Glimmer of hope for SA economic growth

In his view, Sarb might have to help the economy a bit towards the end of the year by lowering the interest rate - although he thinks it is unlikely to happen.

He pointed out that the stronger rand could even dampen some of SA's export activity, which has just started to pick up.

Schüssler explained that, while gross domestic product (GDP) showed that the large drop in mining caused the economic decline in the first quarter, the Beti now indicates a broader economic slowdown in the third quarter after a more positive second quarter.

While the second quarter GDP growth is likely to be far more positive than the negative first quarter figures, the data suggests that the economy is off to a bad start with low levels of transactions likely to continue into the third quarter, said Schüssler.  
 
“July was certainly a very weak month. While the South African economy may have shown a glimmer of hope, there is still cause for concern.”  

READ: SA interbank transactions drop most in 8 years - index

Economic transactions declined significantly in July, recording a real value fall of -0.2% on a year-on-year basis. This was also the most significant fall on every measure and for all usual periods for the Beti.

Electronic credit transfers via electronic funds transfer (EFT) did not show any nominal growth at all, while normal debit orders were down, indicating a long-term decline in credit growth.
 
“The higher interest rates and slow economic growth is slowing consumer spending, which will in all likelihood continue in the short-term,” said Schüssler.
 
Only real time via electronic clearing showed a meaningful increase. However, this could be the result of the general shift away from cheque-based transactions.

“The quarterly and monthly levels also declined by -3% and -1.2% respectively. July seems to have been a particularly weak month with economic transactional activity closely aligned with January and May’s low figures,” according to Dr Caroline Belrose, head of fraud and data analytics at BankservAfrica.  
 
In line with July’s data, the volume of transactions going through the payment system via BankservAfrica declined by -1.2%, according to Belrose. The total nominal value before standardisation also showed a decline. The standardised value of the Beti was R749bn.

ALSO READ: Modest growth still supporting SA economy - index

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