World's economic woes start to hit SA where it hurts
The global economic slowdown has begun to affect the local economy and it is time South Africans thought twice about getting that new iPad or applying for more credit.
According to the first BankservAfrica Economic Transaction Index (BETI), released on Thursday, the economy is slowing down after experiencing a spurt of relatively strong growth towards the end of last year.
“Simply put, South African growth has in all likelihood reached its peak and is in a downward cycle,” said Brad Gillis, BankservAfrica’s regulated business head.
The index shows a year-on-year increase of 3.8% in February—down from 4.1% for the year ending January 2012.
The index indicates that while growth is continuing, the rate has slowed over the last five months.
“The point is that the worldwide slowdown is also being felt in the South African economy. However, unlike many developed countries, South Africa still has positive growth,” Gillis said.
The BETI claims to be the broadest and earliest business cycle indicator on the economic calendar. Each month, millions of electronic payment transactions are facilitated by BankservAfrica and over the last year the BETI processed 844-million transactions with a value of over R6.3-trillion.
The BETI has a very good correlation with gross domestic product (GDP) growth, the report said, but the BETI will never be exactly the same as economic growth.
“The methods that GDP use [which is a value-added system of accounting] will never give the same answer as the transaction based system of the BETI. However, overall the trends within a little lag period [or lead period] would be the same.”
Furthermore, the indicator leads the South African Reserve Bank co-incident indicator by about a month and is available up to three months earlier while having a very close relationship. It therefore gives analysts and policy-makers up to four months more notice on economic conditions in South Africa, the report said.
“Signs of a slowing economy are visible everywhere,” said Mike Schüssler, chief economist of economists.co.za. “In the next few months, expect more evidence of a slowdown as more and more data is going to point that the South African economic expansion is losing steam.”
This is certainly not the time to panic, Schüssler said, but consumers need to be very careful. The next two quarters are not going to be easy ... Consumers should handle their finances more carefully.
He offered consumers some advice:
- Your business will grow more slowly. Your investments will look like they are stuck at the traffic light.
- Think twice before getting credit.
- If you are an entrepreneur, you should take your chances now. Don’t wait for the big ship; rather be happy with a small one.
- You can buy your new TV now, but not the iPad. Rather save up for luxuries, just in case the savings need to plug a hole somewhere else.