Economic activity slows in April as economy struggles
Economic activity has slowed in April as the economy struggles with downside risks, such as the United States' (US) punitive import tariffs, plummeting markets and sharply lower forecasts for global economic growth.
According to the BankservAfrica Economic Transactions Index (BETI), that measures the value of all electronic transactions cleared through BankservAfrica on a monthly basis at seasonally adjusted real prices, economic activity slipped in April.
'The BETI reached its lowest level of the year of 136.4 in April, down by 0.6% on the 137.2 recorded in March,' Shergeran Naidoo, BankservAfrica's head of stakeholder engagements, says.
Although the BETI is still 1.5% higher than a year ago, the slowdown reflects the impact of April's announcement of U.S. punitive import tariffs, which marked the beginning of a developing trade war leading to daily volatility, plummeting markets and slashed global growth forecasts.
Elize Kruger, an independent economist, says confidence levels across the globe and in South Africa have been knocked by the sheer uncertainty that these developments brought on. 'Low confidence and uncertainty are detrimental to economic activity, as investors and households hold back on spending decisions until there is more clarity.'
ALSO READ: Economic activity in SA struggling to gain momentum
Good news for local economy despite global setbacks
However, despite global setbacks, positive factors are expected to support economic activity in 2025, she says. 'While the overall effect of global developments is negative for the South African economy, prompting a downward revision of 2025 growth forecasts by around 0.5 percentage points, several offsetting factors are offering some relief.
'The global downturn is expected to dampen commodity demand and prices, but lower international oil prices are easing inflation pressures, and rising gold prices may help counter export losses. Many South African export commodities also remain exempt from US tariffs, providing potential support for the mining sector and broader economy.'
Kruger points out that other economic indicators were mixed in April, sending conflicting signals about the strength of the economy. The S&P Global South Africa Purchasing Managers' Index rose to 50.0 in April, increasing from 48.3 in March, after four months in negative territory.
ALSO READ: SA's economic growth outlook growing increasingly dim
Manufacturing is struggling, but car sales are recovering
Meanwhile, the seasonally adjusted Absa Purchasing Managers' Index (PMI) remained in contractionary territory for a sixth consecutive month. Data from Statistics SA also recently confirmed that the manufacturing sector has entered a technical recession with two consecutive quarterly contractions.
However, encouragingly, Naamsa figures revealed that the strong performance in the vehicle sales market continued in April 2025.
'All indicators point to the likelihood that, after several false starts, full-year vehicle sales in 2025 will finally return to pre-Covid levels, reflecting an improvement in household budgets due to lower inflation and interest rates,' Kruger says.
ALSO READ: Increased unemployment rate red flag for weak economic growth
Pockets of excellence in local economy will help economic activity
'With some pockets of excellence in the South African economy, such as in the renewable energy, automotive and financial sectors and positive developments relating to the de-escalation of the global trade war in recent days, such as the trade deals between the US and UK and China, the South African economy can regain momentum in the second half of the year.'
Kruger says the launch of the second phase of Operation Vulindlela is also a positive development, confirming government's commitment to push forward on much-needed structural reforms.
After reaching an all-time high in March, the number of transactions cleared through BankservAfrica in April 2025 subsided to 167.9 million compared to 172.4 million in March, but it was still 7% up on a year ago.
The standardised nominal value of transactions eased off to R1.320 trillion in April compared to R1.365 trillion in March 2025, with the average value per transaction tracked in the BETI continuing on its downward trend to R7 482.
ALSO READ: Trump tariffs created unprecedented uncertainty — trade expert
Structural tailwinds will push up economic activity
Kruger says some structural tailwinds should continue to push economic activity higher on the local front in 2025 despite global developments.
With inflation currently at 2.7%, below the South African Reserve Bank (Sarb) 3-6% target band, there is significant room to cut interest rates from the current repo rate level of 7.5% by at least 50 basis points.
'Real interest rates are simply unnecessarily punitive for an economy muddling along, unable to gain meaningful momentum,' she says.
At 4.3%, the average real repo rate remains highly restrictive, especially when compared to the neutral level of 2.7%. Meanwhile, the rand has regained nearly all its post-US Liberation Day losses, helped by some weakness in the US dollar and is trading at fairly strong levels, Kruger says.
'The low inflation rate will also play a key role in supporting the recovery of salary earners' purchasing power. With average salary increases expected to be between 5% and 6%, 2025 will be the second consecutive year of real salary increases, which should boost consumer spending.'
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Daily Maverick
2 hours ago
- Daily Maverick
Unlocking the Future of Payments in South Africa
Cryptocurrency is gaining ground in South Africa, but many still face a major hurdle: moving money between traditional bank accounts and crypto wallets. This challenge, known as the fiat on- and off-ramp, has slowed crypto adoption across the country. Binance, the world's largest crypto exchange, is working to change that. Partnering with local fintech firms like Stitch, Binance enables users to deposit and withdraw South African rands directly from their bank accounts in real time. Converting rands to crypto and back is essential for anyone wanting to use digital assets for investment or payments. Yet, slow bank transfers and expensive payment options often discourage users. EFTs can take days, while credit cards and third-party wallets add cost and complexity. Binance's integration of Stitch's Pay-by-Bank technology lets users authenticate instant payments through mobile banking apps. This direct connection to banks removes delays and makes fund transfers nearly instantaneous. This matters most for users starting with small amounts — over 60% of new Binance users in 2024 funded their accounts with less than R500. For them, easy access to fiat on- and off-ramps can mean the difference between trying crypto casually and adopting it as a regular financial tool. Making money movement easier builds trust, which is key to broadening crypto's reach beyond early adopters. Binance's efforts reflect a broader trend: integrating traditional banking with digital assets. Stitch's real-time authenticated payments help bridge the gap between fiat and crypto. This opens the door for greater financial inclusion, allowing more South Africans to participate in crypto markets without costly delays. It also lays the foundation for future innovations where traditional finance and digital currencies work hand in hand. Improving payment options is just one part of the puzzle. Binance also offers educational programs like Auto-Invest, Flexible Savings, and Learn & Earn. These help users approach crypto as a long-term financial option, not just speculation. Combining accessibility with education helps shift the narrative towards practical and responsible crypto use. South Africa's evolving payment systems highlight the role of local innovation in overcoming crypto adoption barriers. Binance's partnerships show how improving fiat on- and off-ramps can unlock broader participation. As crypto becomes more integrated into everyday life, the future of payments depends on secure, instant connections between banks and crypto platforms. The work happening now will shape a more inclusive, resilient financial future for South Africa. DM
IOL News
4 hours ago
- IOL News
Ramokgopa admits electricity tariffs are unsustainable
Household are no longer able to afford electricity. Image: File Picture: Matthews Baloyi Electricity Minister, Kgosientsho Ramokgopa, has conceded that the price of electricity is not sustainable and has ordered a review of the electricity tariffs. This comes as scores of electricity payers protested over soaring prices in Tembisa and elsewhere. Ahead of the ANC NEC meeting at various venues in Gauteng, Ramokgopa said South Africa is on the brink of "energy poverty" as the current cost of electricity is unsustainable, adding that South Africans can expect big changes to prices in the coming months. "Electricity is unaffordable. We cannot continue along this tariff path. We are getting into a situation here in the country with new dimensions of energy poverty. There are households there, as I speak to you, that will not be able to afford the cost of electricity. "Poor households are being forced to make choices between a loaf of bread and buying prepaid electricity units," he said. Energy expert, Professor Vally Padayachee, reflecting on the soaring prices of electricity, indicated that the rising cost of electricity is concerning as it impacts not only household budgets but also the overall economy. "Increases of over approximately 600% in recent years are unsustainable and disproportionate to many citizens' income levels. Electricity, a public good, should arguably be like water, a fundamental right, accessible and affordable for all South Africans. Electricity and Energy Minister Kgosientsho Ramokgopa highlighted the detrimental effects of the rising electricity costs during a recent public address. Image: File "For the average South African household, rising electricity costs have become a serious financial concern. Many families find themselves allocating a growing portion of their income to energy bills, which can lead to difficult choices between essential services such as food, education, and healthcare. This financial strain can cause stress and adversely affect family life," he said. To curb the effects of energy poverty, Vally said: "The rising costs of electricity calls for urgent structural reforms to the energy pricing model in South Africa. Policymakers must explore ways to stabilise prices for households and reduce the burden on vulnerable populations. There must be a concerted effort towards transitioning to a sustainable energy future that emphasises renewable energy sources." Taking to X, former Eskom COO, Matshela Koko, lamented the rising costs of electricity in spite of a promise that IPPs (independent power producers) would help reduce energy prices. "Eskom's electricity sales have plummeted from 220 TWh to 180 TWh over the past decade, yet electricity costs have skyrocketed by 600%. Here's the truth: wind, solar, and battery storage won't lower the electricity prices you see on your electricity bills. It is irrespective of the near-zero marginal cost of production of wind and solar projects." Get your news on the go, click here to join the Cape Argus News WhatsApp channel. Cape Argus
Daily Maverick
8 hours ago
- Daily Maverick
The Finance Ghost: Shoprite still the checkout champion in retail wars
While there are opportunities to make money in the South African economy, you have to be pretty selective about where you look. It's not news to you that South Africa's economic growth has been less than inspiring, leading to South Africans becoming poorer by global standards. Nedbank's recent results are evidence of lacklustre economic activity, with the bank struggling to get enough loans out into the wild to offset the impact of a dip in interest rates. In the retail sector, The Foschini Group put forward some fascinating arguments at their Capital Markets Day about the shocking trend in the average South African's real income (ie adjusted for inflation) over the past decade and why this is forcing the group to see its value offerings as the best local growth engine. These corporate nuggets are a useful reminder that while there are definitely opportunities to make money in the South African economy, you have to be pretty selective about where you look. One of the most interesting ways to see this play out each year is in the retail sector, a competitive bloodbath of companies trying to compete for some of the most price-sensitive consumers in the world. There's no rising tide that lifts all boats here. Instead, there are boats that can get past the challenging waves and there are others that are getting smashed into the harbour. Last week in this column, I covered Boxer vs Woolworths Food as an excellent example of the power of having a focused model in a difficult economy. It's amazing how the clothing retail sector is filled with executives who find themselves drawn to offshore opportunities (traps?), with Woolworths continuing to suffer an Australian hangover. The Foschini Group is unfazed by this, with a clear message to the market that they will continue to pursue an international strategy despite reporting disappointing numbers in their UK and Australian businesses. The grocery sector has also seen some truly ugly offshore expansion stories. Spar is the standout example, with the group still reeling from its European exposure. Closer to home, even a grocery giant like Shoprite has learnt some hard lessons from trying to grow in Africa. For better or worse, the local market is where the best money is to be made by our retailers. This is where they understand their customers and can execute sensible strategies around store formats, supply chains and acquisitions (where those opportunities are still available in the market). The success that Shoprite has seen through focusing on South Africa rather than Africa is lovely to behold, while even Pick n Pay is starting to see the benefits of a turnaround strategy that has simplification at its core. This brings us to this week's corporate updates, with important financial news coming in from market leader Shoprite and laggard Pick n Pay. Before digging into these numbers, it's worth noting that the year-to-date performance is poor for both stocks, with Shoprite down nearly 10% and Pick n Pay down 15%. Before the latest results came out, Pick n Pay was actually 'ahead' this year, ie less negative than Shoprite. The share price performance can tell a different story from the underlying business performance because of the expectations baked into the share price. The market has incredibly high expectations for Shoprite, with Pick n Pay seen as a much more speculative play. We'll start with Pick n Pay, before ending off with Shoprite at the top of the food chain. Positive momentum at Pick n Pay – unless you're a franchisee There's an incredibly odd situation at Pick n Pay that goes against conventional wisdom. The corporate-owned stores are showing a faster turnaround than the franchise stores, despite the latter typically benefiting from being owner managed. Although this sounds great in theory, the problem is that Pick n Pay has a vast base of franchise stores. For the turnaround to be successful, they need both corporate-owned and franchise stores to pull their weight. In the past three reported periods (being the first and second halves of FY25, as well as the first 17 weeks of FY26), corporate-owned stores grew turnover by 3.1%, 3.6% and 4.0% respectively. In stark contrast, franchise supermarkets managed -1.4%, 1.1% and 0.2% respectively. It's not hard to spot the more consistent story with positive momentum. As encouraging as the corporate-owned story is, Pick n Pay's efforts to shrink into profitability have led to a situation where total sales growth is non-existent. Essentially, the store closures are offsetting the growth in other stores. While this is the right decision in terms of the turnaround, it doesn't exactly tell a story of growth. Pick n Pay Clothing remains the gem, with an astonishing 12.5% increase in like-for-like sales in the latest 17-week period. While the timing of winter has played a role here and this isn't indicative of sustainable growth, this store format's consistently strong performance shows that Pick n Pay can still win when they get the model right. Lots of wagging tails at Shoprite Shoprite's latest update covers the 52 weeks to 29 June 2025, so it's not directly comparable to Pick n Pay's release. Still, it tells an incredible story of a group that just doesn't stop winning, with HEPS from continuing operations expected to be 9.4% to 19.4% higher. This was driven by sales growth of 8.9%, with Supermarkets RSA leading the charge with growth of 9.5%. Digging deeper into Supermarkets RSA reveals that Checkers and Checkers Hyper delivered growth of 13.8%, while Shoprite and Usave were far more modest at 5.2%. Boxer is giving Shoprite a proper go when it comes to lower-income shoppers, whereas higher-income shoppers have flocked to Checkers at a time when Pick n Pay has been shedding customers. It's not all good news, though. There's a concerning trend in sales momentum from the first half to the second half of the year, with Supermarkets RSA growing 10.4% in the first half and 8.5% in the second half. There's certainly nothing wrong with 8.5% growth, but Shoprite is trading on a demanding earnings multiple and any slowdown in growth will be a concern for the market. Unlike Pick n Pay, which must shrink into profitability, Shoprite is expanding in key verticals. They love the pet opportunity for example, with Petshop Science opening 60 new stores to take the total footprint to 144 stores. Interestingly, the worrying trend in the birth rate is on full display at Shoprite, with just one new Little Me store opened in this period, taking the total to 11 stores. With the furniture business being sold to Pepkor and with a decision to further reduce the exposure to certain countries in Africa, Shoprite's focused grocery strategy is working beautifully. They are experimenting in other categories, but they understand what the core of the business must be in order to continue being successful. The risk, as always, lies in overpaying for the shares. Based on the guided range for HEPS with a midpoint of R13.57, the price/earnings (P/E) multiple is just below 20x. My observation of retail stocks on the JSE is that they start to run out of puff at a P/E above 20x, so there's not much room for multiple expansion here. If Shoprite can maintain this kind of growth in HEPS though, investors won't need multiple expansion to be rewarded. DM
