Press release: For immediate release
Date: 09 September 2020
SA economy takes on ‘swoosh’ recovery
The rapid changes experienced over the past few months and leading to the current relaxation of lockdown levels, has resulted in the South African economy’s recovery taking the shape of a ‘swoosh’ of a fast decline then a quick recovery that will take time to be fully realised. This is according to the latest published data in the BankservAfrica Economic Transaction Index (BETI) for August 2020.
“The BETI improved again in August 2020 with a reading of 116.9, the highest level since pre-COVID-19 restrictions in March 2020,” says Shergeran Naidoo, Head of Stakeholder Engagement: BankservAfrica. “But the improvements in August moved at a slower pace than in July 2020 and was 5% below the 123.1 level in January 2020.”
South Africa’s lockdown economic recovery, which many believed would be V-shaped, took off initially but then slowed down. “After the lockdown changes to the economy in the last recent months, this is to be expected. What we’re seeing also suggests a more subdued recovery for the economy in the months ahead,” explains
Mike Schüssler, Chief Economist at economists.co.za.
Elaborating further on this, Naidoo explains that the headline BETI for August was 4.4% lower than August 2019. The monthly improvement was 4.4% up on July. “Although this was positive, when compared to the 9.2% upward bounce between July and June, the slowing improvement becomes more evident,” says Naidoo.
The BETI provides South Africa with a fast indication of underlying economic trends across the economy. It showed that the economy was likely to have a large decline in the second quarter and that this fall would be in the region of 58% on an annualised basis, excluding agriculture. The decline, excluding agriculture, was 57% which again shows the value of the BankservAfrica BETI as an insightful now-casting instrument. It is generally in sync with the country’s broader Gross Domestic Product changes. Therefore, Stats SA’s announcement of South Africa’s GDP figures contracting by 51% in the second quarter of 2020 was predicted in the BETI index for June, where a steep downturn was forecasted owing to the poorly performing economic transactions over the COVID-19 lockdown period and the associated economic restrictions. However, the latest BETI data brings a different outlook.
“While the quarter for the measurement of GDP only ends in September, we are convinced that the depressing decline of the economy in the second quarter – the worst in South Africa’s economic history – is now behind us. The BETI indicates that the Q3 2020 GDP will be one of the strongest on record,” says Schüssler.
Although the BETI confirms that the economy’s recovery is underway, total recovery will take some time. “Even with all indications that South Africa is in one of its strongest growth quarters on record, all is not over yet. It’s not unusual, in circumstances such as these, for the worst and the best quarters on record to follow one another. That is, invariably, how the V-shaped recovery gains its distinctive shape, and, one might argue, would be the start of this particular recovery,” explains Schüssler.
It is likely that we will see a strong bounce back in the GDP in Q3 2020. However, the economy’s return to its previous levels will not be reached easily, especially as businesses now take on the extra pressure and costs brought by load shedding.
Added to these are the capacity and inflationary problems, as well as the potential reappearance of bureaucratic hurdles, the relaxation of repayment holidays and other temporary measures that were introduced as financial crutches during this period. Then there are the economic indicators, such as employment, which lag economic recovery by a few quarters. The full recovery for the SA economy is still likely to be at least 18 months away, with some economists predicting that it could take up to four years to make a full recovery.
“Economists refer to what we’re experiencing as the ‘swoosh recovery’ as in the Nike logo. The decline was quick and the first part of the recovery was too. But after these, the tail is long. The recovery, however, is likely to continue but at a steadier and slower pace in the quarters to come. The closer to full recovery the economy gets, the slower the recovery process will be,” says Schüssler. “It will take some time for the economy to return to the levels it was before lockdown.”
Ends
Contact Leigh-Anne Sa Joe for more information: Leigh-AnneS@Bankservafrica.com or (011) 497 4347.
Notes to the Editor:
The BETI stands for the BankservAfrica Economic Transaction Index. BankservAfrica is a payment enabling organisation operating between the various South African banks with a very secure messaging environment in place. Economists.co.za is an economic consultancy that helped develop the BETI.
The BETI is a very fast and broad overview of current economic trends over a broad range of sectors, making use of economic transactions as captured by BankservAfrica. Like the Swift Index, the BETI is considered a “now-cast” number as a result of its speedy ability to convey the overall economic conditions to the market. Where most economic indicators can take anything between 38 and 76 days to become public knowledge, now-cast indicators take less than a month after the facts were revealed to come to the market.
The BETI is also the broadest of the “now-cast” indicators to come to the market, as it covers economic transactions across the whole economy. Very big distortive economic transactions do not form part of the BETI. This is also on its own a trend-strengthening indicative factor.
About BankservAfrica
BankservAfrica is the trusted payments partner and Financial Markets Infrastructure (FMI) to the financial services industry. As the largest automated payments clearing house in Africa we clear and process billions of low value card, ATM and EFT transactions annually. Our role in the South African National Payments System (NPS) is to facilitate interoperability between the banks and ensure regulatory compliance with our regulators against international banking security best practice and standards and reduces risk and complexity in the industry.
We continue to strive to be a world class and pre-eminent payments operator, innovator and payments partner of choice in Africa, by simplifying our worlds through combining trusted transactions with sensitive information.
BankservAfrica’s national responsibility is to provide safe financial payment services for 56.7 million South Africans, irrespective of their location in partnership with our shareholders and partners.
With a 48-year history in South Africa, BankservAfrica operates 24/7, 365 days a year and delivers on very strong SLAs.
August 2020 BETI report to accompany press release
Date: 09 September 2020
The swoosh recovery surfaces in August 2020
SA economy continues to pick up but at a slower pace
The BankservAfrica Economic Transaction Index improved again in August 2020 but at a slower pace than that experienced in July 2020. The BETI reading stood at 116.9, which is the highest level since March 2020. However, the BETI is still 5% below the 123.1 level in January 2020.
The V-shaped recovery is slowing. This is to be expected – after the lockdown changes to the economy in the previous months – and points to a more subdued recovery in the months ahead. The headline BETI was 4.4% lower than August 2019. However, the monthly improvement was 4.4% up on July, which was down on the 9.2% upward bounce between July and June.
The BETI provides South Africa with a fast indication of underlying economic trends across the economy. It showed that the economy was likely to have a large decline in the second quarter and that this fall would be in the region of 58% on an annualised basis, excluding agriculture. The decline, excluding agriculture, was 57% down which shows the value of the BankservAfrica BETI as an insightful now casting instrument. It is generally in sync with the country’s broader Gross Domestic Product changes. Therefore, Stats SA’s announcement of South Africa’s GDP figures contracting by 51% in the second quarter of 2020 was predicted in the BETI index for June, where a steep downturn was forecasted owing to the poorly performing economic transactions over the COVID-19 lockdown period and the associated economic restrictions. However, the latest BETI data brings a different outlook.
While the quarter for the measurement of GDP only ends in September, we are convinced that the depressing decline of the economy in the second quarter – the worst in South Africa’s economic history – is now behind us. The BETI indicates that the Q3 2020 GDP recovery will be one of the strongest on record.
Although the BETI confirms that the economy’s recovery is underway, total recovery will take some time. Even with all indications that South Africa is in one of its strongest growth quarters on record, all is not over yet. It is not unusual, in circumstances such as these, for the worst and the best quarters on record to follow one another. That is, invariably, how the V-shaped recovery gains its distinctive shape, and, one might argue, would be the case at the start of this particular recovery.
Statistics, however, can be a confusing discipline, as this example will demonstrate: if one takes a loss from R100 to R50, that equates to a 50% decline. If one then improves by 50%, that only takes the value back to R75 – still R25 below the value it was before.
This exact situation is playing out in South Africa where the decline in our GDP was very large in the second quarter. We are likely to see a strong bounce back in the third quarter. In percentage terms, this could be as big as the dip was.
However, at the end of the third quarter, while the economy would have recovered at a very strong pace, the previous level – as seen at the end of 2019 – will not be reached easily.
The closer the economy gets to its previous level, the harder the catching up becomes as the capacity and inflationary issues as well as the potential reappearance of other bureaucratic hurdles, the relaxation of repayment holidays and other temporary measures that were introduced as financial crutches during this period. This is as the economic indicators, such as employment, lag economic recovery by a few quarters. The full recovery for the SA economy is still likely to be at least 18 months away, with some economists predicting that it could take up to four years to make a full recovery.
Economists refer to this as the ‘swoosh recovery’ as in the Nike logo. The decline was quick and the first part of the recovery is too. But after these, the tail is long. The recovery, however, is likely to continue but at a steadier and slower pace in the quarters to come. The closer to full recovery the economy gets, the slower the recovery process will be.
So, while the economy is getting back on its feet, the walking will take some time and the running will take even longer. But for now, the BETI indicates that the South African economy has jumped back on its feet. With that being said, it will take some time to get back to the level it was before lockdown.
Table 1: The BankservAfrica Economic Transaction Index
Table 2: The volume and average value of transactions and the Standardised BETI in nominal terms
