Shergeran Naidoo, BankservAfrica’s head of stakeholder engagements, says it is the fourth consecutive decline in as many months.

“The ongoing contraction in the BankservAfrica Economic Transactions Index (BETI), on a monthly basis, reflects the dire conditions in the South African economy during September,” says independent economist Elize Kruger.

South Africa endured the worst-yet month of rolling blackouts in September. Eskom data indicates that 572 of September’s 720 hours were directly affected. Analysis by Eskom’s research, testing and development department shows that besides 2021, more power cuts were experienced in September 2022 than in any other year since load shedding began in 2007. 

“The negative impact of load shedding reaches all spheres of the economy, businesses and households. Companies buckle under the inability to produce at capacity, the cost of lost production, reduced productivity, the cost of providing alternatives, reduced margins and more. Households have also been hit particularly hard,” says Kruger. In addition, the economy is battling with the rising cost of living and interest rate increases.

The lack of economic momentum has surfaced in other indicators, which have also plummeted in September. The Absa Purchasing Managers’ Index (PMI) dropped to 48.2.

Investec economist Lara Hodes says advance indications provided by September’s Absa PMI survey results point to a notable decline in business activity, underpinned in part by persistent, heightened rolling blackouts reinstated during the month which would have weighed heavily on production.

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The S&P Global South Africa PMI, which reflects activity in the broader private sector, contracted for the first time since December 2021, falling to 49.2.

Additionally, global headwinds are gaining momentum with global economic output contracting for a second consecutive month in September, according to the JP Morgan Composite PMI. 

Manufacturing is also being hit by rising prices, weakening demand and slumping trade. In the services sector, consumer-focused firms are suffering from falling demand due to the cost-of-living crisis and resultant higher interest rates.

The number of transactions cleared through BankservAfrica stalled in September.

According to Naidoo, the standardised nominal value of transactions stood at R1.156-trillion, while the number of transactions increased slightly to 136.2 million from 136.1 million in August. Showing marginal monthly growth of 0.1% in September, the number of transactions was 11.3% higher than a year earlier.

“With the headwinds still rolling unabatedly on to the South African economy, the BETI signals the probability of an economic contraction in Q3 2022.

“The local economy remains woefully unable to gain synchronised momentum across all sectors in light of all the challenges, and we will continue to experience a ‘muddle-along’ scenario,” says Kruger. BM/DM