‘Massive bounce back’ expected for SA – economist

A better performing second quarter can be expected when South Africa’s gross domestic product (GDP) figures are released in a few weeks’ time, according to the latest BankservAfrica Economic Transaction Index for June.

The BETI, released on Wednesday, showed an improved level of economic activity from the first quarter of the year.

However, the volume of transactions fell on a year-on-year (y/y) basis. According to the report, this reflects the persisting weakened economy.

The BETI increased on both an annual (2.1%) and quarterly (1.4%) basis.

“Economic transactions during this quarter indicate a massive bounce back for the SA economy after the disastrous first three months of 2019,” says Mike Schüssler, chief economist at Economist.co.za.

In his view, the recent rise in the BETI confirms that Eskom’s load shedding harmed economic growth and that the substantial improvement in electricity supply since then has allowed the economy to catch up on at least part of the losses.

“Still, the minor slowdown in economic activity in June 2019 indicates that the downward phase of the business cycle is not over yet and that the economy is still not on a major growth path. Looking at the length of the economic downward phase, South Africa has now underperformed for five and a half years, which is leaving some more structural impacts,” explains Schüssler.

“While the need for infrastructure spend is clearly evident, it is now less likely to happen as the slower economy leaves less money for infrastructure investment from reduced taxes collected. Smaller profits are also leading to corporates unable to set aside enough funds for improvements to their infrastructure.”