Economic transactions in South Africa plunged in March as Covid-19 took its toll on the economy and consumers, BankservAfrica’s Economic Transaction Index (Beti) has found.
This data, the financial organisation said, suggests that the economy is shrinking rapidly as the Beti declined by 3.31% in March.
On a seasonally adjusted basis, this is the sharpest drop since August 2008, BankservAfrica stakeholder engagement head Shergeran Naidoo says, noting that “it demonstrates the huge toll of coronavirus on the economy".
He adds that, “to get a full picture” the Beti declined by 0.4% on a year-on-year basis. However, on a quarterly basis, this was 3% − the biggest drop since January 2016.
"Monthly transaction movements are not unusual. However, when the drop is as steep as March's, we have good reason to take note of it as it suggests a potential sharp decline in the South African economy," economists.co.za chief economist Mike Schüssler comments.
However, he laments that, more concerning, is that other data indicates this is not the end; “we could see a much worse decline in April and very possibly in the months thereafter".
The volume of transactions increased but the average value per transaction fell by 1.1% in real terms.
"The number of transactions recorded in the Beti was 103.3-million for March. Although it was 3.3% up, the real value declined by 2.7%," Naidoo says. This could be owing to wholesalers, manufacturers and retailers, including pharmacies, making bulk stock purchases, he explains, adding that this was in addition to the stockpiling by households ahead of the lockdown.
However, the value declined as consumer spending for higher priced items, such as vehicles, slowed down.
According to Schüssler, the South African government’s nationwide lockdown from late March helped lift consumer spending, where transactions spiked as South Africans rushed to the shops just before it was implemented. But activity soon quietened down.
With the Beti down to January 2019 levels, the historic close correlation between the Beti and the country’s gross domestic product (GDP) performance suggests that South Africa's GDP annual growth for this year will be lower than originally anticipated pre-Covid-19 breakout in South Africa.
The South African Reserve Bank announced on April 14 its expectation of a GDP contraction of 6.1% for this year.
This compares to the 0.2% contraction expected just three weeks ago.