The BankservAfrica Economic Transaction Index (BETI) for June 2020 showed the biggest one-month bounce-back on record, providing the first strongest indication of an economic recovery since the start of the Covid-19 lockdown.
However, the organisation cautions that there is still a long road ahead for the South African economy.
“The BETI was 101.7 in June, which represents a strong change from the weakest point of 98.1 in May,” says Shergeran Naidoo, head of stakeholder engagement at BankservAfrica. “There has also been an improvement for the real price increase in the value of transactions, which moved from -4,3% in May to 3,7% in June. The upward changes in June, even after a seasonal adjustment, are positive for the South African economy.”
But he cautions against viewing these figures in isolation to the transaction movements in previous months.
“This data remains volatile under the current circumstances. The headline BETI for June remained in negative territory at -17.1 lower on a year-on-year basis. On a quarter-on-quarter basis, the BETI was -14.6%. These reflect the depth of the overall economy’s decline since 2020,” says Naidoo.
This is also an early indication that South Africa’s GDP in the second quarter of 2020 could reveal a very large contraction.
The BankservAfrica Economic Transaction Index (BETI) is the broadest actual economic reading and a proven leading indicator of South Africa’s GDP, with a close alignment to the SARB’s Co-Incident indicator. As such, it is one of the very few monthly indicators in South Africa that gives insights into the economy two weeks after 30 days of transactions having been processed by BankservAfrica.
The BETI indicated that the fourth quarter of 2019 and the first quarter of 2020 were to show declines – and this duly transpired in the published GDP data.
Meanwhile, the number of transactions in June were 6,5% higher than a year ago but about 5% lower than the average. The average value of transactions declined by -10,7% in nominal terms – the first time double digit decline over three consecutive months on the BETI’s records. This suggests less spending on big ticket items such as property.
Mike Schüssler, Chief Economist at economists.co.za, explains: “While the economy will take time to recover, the latest data from June suggests a recovery from the Covid-19 crisis is underway and that the stimulus from government sector via the UIF Covid-19 Temporary Employee Relief Scheme (TERS) pay-outs, extra social grant spending and tax relief, as well as the banking sector’s payment holidays and a host of other measures, have helped to stabilise the economy.”
But he says there is a long and winding road ahead as large parts of the economy will still need to absorb the lagging shocks from the lockdown period – and face those still to come.
“Like other countries, there may be further regional lockdowns or outbreaks which can impact future numbers. We also need to remember that South Africa’s economy was already frail before Covid-19, therefore a comeback will not be a straight path.
“There will also be challenges such as the return of power outages,” says Schüssler. “But for now, it appears the recovery from the Covid-19 lockdown has started with data faring better than May, and April and on par with March’s. More organisations and individuals are partaking in economic activity again.”
Schüssler says this appears to be the first step towards a V-shaped recovery for the South African economy. “The third quarter of 2020 is going to need to have a swift start off the low base in the second quarter and its strong ending. This will put the economy in a better place than where it was three months ago.”