BankservAfrica Economic Transaction Index (BETI) shows a depressed economy but the year-on-year number is still positive, growing by 1.6% in May.
The impact of disruptive electricity supplies and slower world economic growth is evident in the numbers, which show the sharpest decline on a quarterly basis since October 2014, and the biggest monthly drop since August 2014.
With electricity interruptions an almost daily occurrence in April and May this year, the number of electronic transactions declined (taking into consideration seasonal adjustments and smoothing.)
“At present the actual monthly decline of 1% is worrisome as it is rather sharp and sudden. One can only hope that most of the load shedding is now something of the past, or at the very least that the frequency is not going to be repeated, as it is clear that load shedding has a dire impact on economic transactions,” says Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.
The 5.9% decline in transaction volumes is the biggest in more than a decade, and the first time that – for two months in a row –the actual number of transactions declined while the average values increased to greater than inflation. This is probably indicative of businesses combining transactions and ensuring that these are completed during periods of stable electricity supply.
“The quarter-on-quarter decline of 0.6% is less severe than the monthly decline, however the strong April numbers serve to highlight how weak the South African economy was in March and May this year,” explains Belrose.
“With consumer inflation likely to move higher, large increases in the BETI will be unlikely – but it does seem that load shedding is playing a much bigger role at present. If load shedding can be kept to a minimum it is likely that the BETI will at least continue to rise marginally,” says Mike Schüssler, Chief Economist at Economists dotcoza.
Another interesting aspect from this month’s BETI is that it appears that many consumers are no longer signing debit orders, as the household debt-to-income ratio continues to decline.
“With both consumer and business confidence down, the decline in economic transactions, as represented by the BETI, indicates the economy is under duress rather than expanding. Perhaps winter has also arrived for the economy,” concludes Schüssler.