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Load-shedding causes biggest transactions decline in over a decade

BETI index reveals 5.9% decline in transaction volume last month

May marked the first time that the number of banking transactions in South Africa had declined for two consecutive months, while the average values increased to greater than inflation. This was according to the BankservAfrica Economic Transaction Index (BETI) released on Wednesday.

May saw the biggest decline in transactions in more than a decade at 5.9%.

“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,” said Dr Caroline Belrose, Head of Fraud and Data Analytics at BankservAfrica.

BankservAfrica cited electricity disruptions as the main cause for the decline as load shedding was “an almost daily occurrence in April and May this year”, while slower world economic growth was also evident in the numbers.

Although the BETI was up year-on-year at 1.6%, Belrose said the quarter-on-quarter decline of 0.6% was less severe than the monthly decline, but that it was improved by strong April figures. Nevertheless it was still sharpest decline on a quarterly basis since October 2014, and the biggest monthly drop since August 2014.

Another interesting aspect from this month’s BETI was that many consumers appeared to no longer be signing debit orders because household debt-to-income ratios continued to decline.

“We do also look at debit order activity and we have seen some early debit order payment streams, where there has been a slowdown in growth. Some of that would correlate with a general reduction in consumer credit,” said Belrose.

Mike Schüssler, chief economist at Economists.Co.Za, said large increases in the BETI are unlikely in the near future because consumer inflation is likely to move higher, but that it will at least rise marginally if load-shedding can be kept to a minimum.

“Load-shedding is very much like a strike…Productivity could be coming along smoothly, and then all of a sudden there is nothing happening for extended periods of time. It’s like a rolling mass action, if you will.

 “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,” said Schüssler.

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