CAPE TOWN – Higher activity levels in South Africa’s economic transactions continued to reflect signs of a recovery with the country’s growth rate on track to reach record levels in Q3 2020 and achieve strong upturn in the following quarter, according to BankservAfrica’s newly released October 2020 data.
“The BankservAfrica Economic Transactions Index (BETI) climbed to 122 index points in October 2020. This is the highest level to be reached since February 2020 and suggests the BETI has regained most of what it has lost since the nationwide lockdown and subsequent economic crash in the first few months,” says Shergeran Naidoo, Head of Stakeholder Engagements at BankservAfrica.
On a quarterly basis, the BETI improved by 15% over the last quarter and by 2% compared to September 2020. “Although the monthly improvement is the smallest since June 2020, it still indicates a recovery – albeit at a slower pace than before,” explains Naidoo.
Over the last five months, there have been on average about 6.9 million more income transactions than in the same period last year, according to the BETI data. The number of transactions in October 2020 resulted in an all-time high of 110.5 million – an 8.8 increase on October 2019’s figures. As such, while the real value of the BETI increased by 2% on a year-on-year basis, the number of transactions increased by nearly 9% over the same period.
“This is certainly unusual; we believe this increase was largely driven by the COVID-19 Social Relief Distress special grant pay-outs and some COVID-19 UIF TERS payments,” says Mike Schüssler, Chief Economist at economists.co.za. “This additional money spilled over into the economy as affected and cash-strapped consumers were given some respite by government to cover their household expenditure and supplement lost incomes. These certainly helped to keep the economy flowing.”
The BETI shows in the quarter to October 2020, the number of transactions increased by 3.5% compared to the quarter to July 2020. The last two months reflect the strongest increases since July 2020. How these translate in value can be seen in our June 2020 to October 2020 data where the value of these extra payments processed through BankservAfrica was at least R66 billion – or about 12% of all income stream payments. With some of the TERS payments made via the normal EFT system, we believe the total could be closer to R80 billion for payments made through BankservAfrica.
“The total in extra payments is estimated to be around 5% of the cumulative transactions that make-up the BETI over the last five months. So, while the income stream share was 12%, the share of the overall BETI was much smaller at around 5% on average,” explains Schüssler.
As the extra relief payments slowly fade away, the BETI is expected to decline by between 4-5%. Schüssler adds: “This will not be as significant as the intense lockdown period but the elimination of these extra payments will have a small, yet significantly negative impact on the SA economy.”
“With some of these pay-outs still being made, we may see consumer spending pick up in the near-term for Black Friday and Cyber Monday where we’re already seeing some retailers offering in-store sales over a month or by week to entice consumers. Others may take the option of online shopping for retailers that offer big sales over the two days,” says Naidoo.
“Overall, October 2020 was a very strong month and provides a good indication that the economy is edging closer to the level it was before the lockdown. However, much of this recovery has been built on government’s support through relief payments. Therefore, this growth may not be sustainable into the long-term when these payments cease,” says Schüssler.
“Although we expect Q3 2020 GDP growth to be the best on record since 1960, we anticipate a small growth decline in the first part of 2021 due to the retraction of the TERS and SRD pay-outs.”