Payment clearing and reconciliation services company BankservAfrica's Economic Transactions Index (BETI) for December 2022 improved despite the ongoing, dismal economic context, rising to 132.1 following six consecutive months of declines in the index.

“The BETI rose to an index level of 132.1 in December, which is almost on par with the January 2022 level of 132.8,” says BankservAfrica head of stakeholder engagements Shergeran Naidoo.

On an annual basis, the BETI increased by 1.7% against a revised decline of 0.9% in November. The monthly, quarterly and annual improvements all signal some improvement in the broader economy, he adds.

The standardised nominal value of transactions cleared through BankservAfrica was R1.3-trillion in December, up from R1.2-trillion in November.

“The welcome improvement to the BETI occurred against the broader economic context that has remained fairly grim during December, with loadshedding continuing, interest rates and inflation remaining at elevated levels and the global economic slowdown gaining momentum,” says BankservAfrica independent economist Elize Kruger.

The latest movement in the BETI is a reflection of the South African economy’s resilience, as well as the annual festive season spend that contributed to the number of electronic transactions pushing to an all-time high of 143.6-million - an 11.4% year-on-year increase and 2.7% up on a monthly basis from 139.8-million in November, she adds.

While the number of transactions in December still have to be seasonally adjusted, an interesting aspect is that the value of transactions has been dropping over the past year, which could indicate a trend of more digital payments being made, Kruger notes.

“The resilience of the South African economy remains surprising, with third-quarter data indicating that manufacturing managed to grow despite the intense loadshedding. However, there will come a time when the economic headwinds become too strong, particularly for small and medium-sized enterprises that may find it difficult to continue to make money owing to a lack of power to continue to operate and the constant high inflation underpinning higher wage demands,” she highlights.

The grim economic context theme is not expected to change moving into 2023, she adds.

However, the decline in inflation was one of the drivers for the increase in the BETI over December. Consumer price inflation could dip below 7% in January.

“Therefore, we will probably see a few more months of improvement in the BETI, although the economic context will detract from this,” Kruger notes.

The improvement in the BETI for December is a blip on an overall downward trend. South Africans and South African companies have endured a lot and, unless there is more support, particularly from government, in terms of changing the business environment, things will become more difficult, she adds.

“We are stuck in a 'muddle along, little thriving' scenario and South Africa continues to underperform other developing economies. Given the local headwinds and the loadshedding as the economy returns to productivity following the festive season, we are starting the year on the backfoot.

“South Africa is stuck in this scenario unless it sees structural reforms come into play. As such, we do not expect to see an improvement on the power front during this year nor necessarily in 2024. We are looking at 12 to 18 months in this scenario given that there is no clear indication of how the country's economy will get out of this, such as by improving the power supply, and reforms are too slow to be meaningful,” Kruger notes.

Additionally, the consensus among economists is that growth will be lower during this year than the past year and, given the global economic slowdown, South Africa will struggle to get momentum locally amid the expected global impact on export and commodity prices, she highlights.

The main challenges of loadshedding and households under pressure from elevated inflation and interest rates are likely to remain. Global body the International Monetary Fund also recently warned that a third of the global economy could be in a recession this year, adding to the risks for the South African economy from an export and commodity price perspective.

One silver lining is the expectation that consumer inflation should moderate and provide some relief for many South Africans, Kruger says.