Economic activity in South Africa has improved to the highest level in eight months thanks to the suspension of load shedding and the upcoming elections adding to the somewhat positive mood.
The BankservAfrica Economic Transactions Index (BETI), which measures all interbank economic activity processed by BankservAfrica, recovered further in April.
Reaching an index level of 134.2 in April, the BETI almost reached last Augusts level and improved by 0.6% on a monthly basis, Shergeran Naidoo, BankservAfricas head of stakeholder engagements, says.
Load shedding was suspended towards the end of March, leaving South Africans free of power cuts since then. Naidoo says this could have had a positive impact on economic activity in April while spending in preparation for the upcoming elections might have also played a role.
According to the Electoral Commission of South Africa (IEC), a record number of about 27.7 million voters, the highest since the advent of democracy in South Africa, are eligible to participate in the 2024 national and provincial elections on 29 May.
Additional economic activity from electionsAdditional economic activity for political party campaigns and the IECs preparation activities are likely to be reflected in additional retail spending.
Naidoo says a detailed evaluation of the BETI around previous election dates in South Africa revealed that in six of the nine elections under review, economic activity picked up in the month before the election month, while in seven of the eight cases (2024 not included here) the BETI increased in the election month itself.
While other developments in the economy are also reflected in the performance of the BETI, election-related spending could have a meaningful effect on the BETI in the period around election dates, Elize Kruger, an independent economist, says.
In what seems to be a synchronised uptick, other indicators also increased in April. The S P Global South Africa Purchasing Managers Index (PMI), a composite gauge designed to give a single-figure snapshot of operating conditions in the private sector economy, increased to 50.3 in April, which, according to the report, was a month of stability.
Similarly, Kruger says, the Absa Purchasing Managers Index (PMI) rebounded to 54 index points, driven by improved business activity. After eight successive months of falling numbers, new vehicle sales picked up in April and improved by 2.2% on an annualised basis, the first time since July 2023 that monthly sales outperformed those of a year earlier.
Naidoo says the standardised nominal value of transactions cleared through BankservAfrica in April 2024 subsided to R1.290 trillion from R1.305 trillion in March, while the number of transactions increased to 157.0 million, growing from 156.1 million in March.
PayShap was a star performer, indicating need for this serviceAmong the different electronic payment streams captured in the BETI, in terms of the number of transactions, PayShap was the star performer during April, spiking to 6.6 million, almost double the number recorded in March.
However, Kruger says, while April is a welcomed blip of positivity, there are still multiple challenges facing the economy, such as uncertainty around the election outcome and what that would mean for the economy, combined with the wait-and-see approach by investors, particularly for capital expenditure plans.
Assuming the election outcome will not lead to a major disruption in macroeconomic policies, a slight improvement in the economic scenario is still forecast towards the end of the year, she says.
The headline inflation rate in December is forecast to be around 4.5% and at least 50 basis points in interest rate cuts by year-end, Kruger says.
Additionally, assuming that the intensity of load shedding continues to be less than experienced in 2023, real GDP growth is forecast at 1.1% in 2024 vs 0.6% in 2023. Although still too low to make a meaningful dent in the unemployment rate, this is somewhat better than the previous year.
