The strong recovery experienced during the April 2021 and May 2021 months are beginning to flatten with the first monthly decline since January 2021 recorded in June 2021, according to data from the BankservAfrica Economic Transactions Index (BETI). The months of record-breaking increases are over, as the current Covid-19 third wave and the stricter restrictions take a toll on the economy.
“The recovery in June 2021 remains strong with the headline BETI at 26%,” says Shergeran Naidoo, BankservAfrica’s Head of Stakeholder Engagements. “Although this is lower than the increases experienced in the two months prior, one must remember that recovery up until now has been on the rise due to the low base at the beginning of the hard lockdown in 2020. The economy has since began recovering from June 2020 when the level 4 and 5 lockdowns were lifted, with exception to January 2021. This, together with the current situation, will see less spectacular growth.”
Following the substantial increases in April 2021, the BETI has been levelling off with the recovery running in a more horizontal direction. Between June and May 2021, the BETI fell by -0.4% – the first monthly decline since January 2021. It is likely that the high BETI levels in the first two months of the second quarter of 2021 will not return in July 2021.
“This movement may have to do with the rising Covid-19 cases since May 2021 and the subsequent lockdown restrictions that will have some impact on the economy in June 2021 but not to the same degree as it did last year,” says Mike Schüssler, Chief Economist at Economists.co.za. “But, as we saw in the January 2021 restrictions, it will harm the economy in the short term.” However, this week’s news of the COVID-19 TERS payments’ extension to assist sectors affected by the adjusted level 4 restrictions should bring relief for many.
Economic transactions remained strong on a quarterly basis, tracking solid growth of 4%, according to Naidoo. On this basis, strong GDP growth is expected when the Q2 2021 numbers are released.
Meanwhile, the number of transactions that make up the BETI was 116 million and the standardised nominal value was just over a trillion rand. June 2021 was the fourth consecutive month that the nominal value exceeded a trillion rand in a month.
“As we have stated before, recoveries are rarely up to one long upward path – they usually have a small correction to them. With that being said, the third wave and Eskom power supply restrictions do have negative impacts; both of those are already evident in the June 2021 BETI data. Load shedding in the May and June 2021 months have probably turned on the brakes in the recovery. That is the likely cause of flattening the growth curve over the last two months,” says Schüssler.
Still, compared to a year ago, the recent BETI data indicate a strong rebound and an economy closer to a full recovery.
“We expect that the largest increases on record are now over although we still expect good increases, on a year-on-year basis, for a while,” ends Schüssler. The current riots, predominately in KwaZulu-Natal and Gauteng, will also have an impact on the economy and the vaccination roll-out.
Adjustments to the BETI with DebiCheck figures
As part of the South African Reserve Bank’s modernisation of the National Payments System, financial services have introduced a debit order system, ‘DebiCheck’ in their payment system. These will eventually replace the Non-Authenticated Early Debit Orders (AEDOs) and Authenticated Early Debit Orders (NAEDOs),” explains Naidoo.
This system, which has been trialled since July last year, officially began on 01 May 2021, resulting in many more transactions processed via this system in May 2021 and June 2021. To factor in this new development in our index, we have added last year’s data this month. “This has made minute changes to our numbers. But, from April onwards, it has impacted the margin. June 2021 showed the largest month of DebiCheck transaction values at just over R8 billion, or 0.8% of the total value,” says Naidoo.
The DebiCheck numbers are now included in the BETI.
The CPI inflation rate for all urban areas, which is used along with the PPI to deflate the nominal values to constant price values, has been replaced with the CPI for all urban areas excluding homeowners rent. “The reason for this is that homeowners rent is not a transaction but a concept that involves the value of the homes people live in as part of the inflation rate,” says Schüssler. The BETI, however, reflects real actual transactions and, as the CPI excluding owner rent is now over 1% higher, we believe this better reflects the deflator we should use for economic transactions.