The South African economy is seeing a massive bounceback according to data from BankservAfrica.
According to the BankservAfrica Economic Transaction Index (Beti), the country recorded its “highest and fastest growth level ever” in April when it grew 25.9% in real terms on a year-on-year basis.
Though impressive, this rise does not tell the whole story, as the Beti had fallen 15.3% in the corresponding period in 2020. Back then, SA was going through the hard lockdown, which resulted in large parts of the economy shutting down for weeks.
Beti measures monthly transactions paid into the South African National Payments System, and in April there were 109 million transactions valued at R1.03 trillion.
By comparison, in April 2020 there were 90 million transactions valued at R679 billion. The steepness of the drop-off can be seen in the number of transactions in March 2020 being 103 million valued at R819 billion.
BankservAfrica notes that the record rise is off a low base.
“These impressive figures do not reflect overall economic growth,” it says.
“Instead, it signals the massive economic recovery to a more normal, pre-Covid-19 state over the last year. We’re likely to see this recur in the May 2021 data.”
Mike Schüssler, chief economist at Economists.co.za, concurs.
“Although the Beti figure is welcomed, it does not reflect overall substantive growth,” he says. “Instead, it signals the massive economic recovery to a more normal, pre-Covid-19 state over the last year.”
Low rates helping
Even so, BankservAfrica says the bounceback will continue as long as low rates and government deficit spending keep money flowing through the economy.
Even though the economy still has long way to go, the rate of recovery has surprised BankservAfrica.
“The economy is indeed growing, but it is unlikely to surpass its previous high of 2019. More certain, however, is that the recovery is at a rate faster than one would have expected.”
Schüssler agrees: “All in all, the Beti simply indicates that the economic recovery is fast and vastly better than one would have hoped for.”
Some sectors still struggling
Even so, the impact of the Covid crisis has led to an uneven recovery.
“The overall economy is not fully back on track. Critical sectors such as travel and tourism, entertainment and leisure are not in full operation.”
BankservAfrica warns that the recovery, despite its strength, is also vulnerable.
“Even though the Beti indicates economic transactions are steaming ahead, power outages could put a drag on the economy. Some of the government financial assistance will fade in the next month or two, giving a clearer picture of the SA economy.”
It adds that the higher rate of inflation as a result of rising energy prices could also dampen economic activity.