The Struggle Continues for South African Consumers
Despite economists predicting a slight improvement in South Africa’s economic growth for 2024, the nation’s consumers are still facing significant struggles. The BankservAfrica Economic Transactions Index (BETI), an essential indicator of interbank electronic transactions, exhibited a modest recovery in March after a disheartening performance in February.
“The BETI reached an index level of 133.4, showing an improvement of 1.3% compared to a year earlier and 0.8% from the previous month,” discussed Shergeran Naidoo, from BankservAfrica. A recent easing of load shedding towards the end of March provided a positive outlook on the economy, driving a slight increase in economic activities.
However, the year-on-year index was only up by 0.7% from the six-month average, signifying a potentially stagnant economic momentum. Analysts, such as independent economist Elize Kruger, have noted that the economy has experienced a period of lateral movement, attributing this trend to consistent challenges like load shedding, logistical woes, and escalating fuel prices that reinforce the sluggish pace of growth.
Such conditions are adversely affecting unemployment rates and amplifying South Africa’s socio-economic challenges in a crucial election year, plagued with uncertainty and volatility. This has made the economic landscape fraught for consumers and businesses alike.
Adding to the consumer’s burden is the inflation rate, which saw a rise from 5.3% in January to 5.6% in February, fueled by increased fuel prices, a depreciating rand, and heightened medical aid premiums. Inflation in 2024 is pegged to average out at 5.3%, with the early months already showing a higher BETI deflator due to persistent price pressures.
In terms of broader economic indicators, recent reports have been less than optimistic. For instance, the S&P Global South Africa Purchasing Managers’ Index (PMI) and the ABSA PMI both pointed towards a contraction in business activity and new orders, with the automotive sector also witnessing a decline in new vehicle sales, attributed to a blend of higher interest rates, weakened consumer confidence, and continuous challenges with load shedding and port functions.
Yet, not all is doom and gloom. A slight uptick was observed in the nominal value of transactions processed through BankservAfrica, from R1.250 trillion in February to R1.305 trillion in March 2024. Likewise, the total number of transactions showed a marginal increase, hinting at a faint pulse in economic activities.
Looking ahead, the prognosis for the latter half of 2024 beams a sliver of hope. “Expectations of lowering international interest rates later in the year could improve the rand exchange rate and ease consumer inflation. Interest rates may drop by 50-75 basis points by the year-end,” Kruger projected. Assuming a reduction in load shedding intensity, real GDP growth is forecasted at 1.1% for 2024—a modest improvement from 2023’s 0.6% growth.
Albeit slow, this growth trajectory suggests a marginally better year for South Africa in 2024. However, consumers, businesses, and policymakers alike will have to navigate the persisting challenges with resilience and strategic foresight to ensure a sustainable recovery and improvement in the nation’s economic and social health.
