Episode Transcript
[00:00:00] Speaker A: Hired bill on the street, on the air. Why pay more for business banking? Does your account come with a private jet? A five star lunch? A butler named James didn't think so. At Capitec you get the same low fees as personal banking. So you always know what you get and what you pay. Open your account in minutes and save up to 50% on transaction fees. Visit Capitechbank Co Za to get started. Capitec, the business bank for everyone. Capitec is an authorized FSP 4669. Conditions apply.
[00:00:35] Speaker B: Inside your business on Kai Biz is brought to you by Capitech Business Banking Kaya Biz.
[00:00:41] Speaker A: Inside your business Yep, we're getting inside.
[00:00:44] Speaker B: Your business and that means getting a better understanding of how money moves within your organizations, within our economy and overall a better understanding of what that does mean in terms of growth. To help us unpack this further, the bank serve Africa Economic Transactions Index we joined by Elise Krier Kruger independent economist. Elise, welcome. Welcome back to Kahibiz. Always exciting to speak to you.
[00:01:07] Speaker C: Good evening.
[00:01:07] Speaker B: Google Edu Fantastic. I guess just as a gentle reminder for many of us who might not be familiar with the bank serve Economic Transactions Index, just give us a quick refresher as to why this reading and this data remains important, especially when it comes to it playing an influence as an indicator of our economic growth.
[00:01:26] Speaker C: Yes, so the Banks of Africa Economic Transactions Index measures the value of electronic transactions that clear through Banks of Africa as the biggest clearinghouse in Africa. And we do that on a seasonal adjusted and a real basis. So we strip out the impact of inflation. So we really measure the value of transactions done on an electronic basis and that gives a good indication of economic activity. And we have tracked over time that there's a good correlation between this Banks of Africa index and the real GDP growth numbers that will be released by stats ESA a few months later. So it's a great time. Is indicator of what is actually happening in the economy on ground level.
[00:02:08] Speaker B: Yeah. So let's talk about what is happening in the economy. It does seem as though we saw an increase in the month of June in terms of the index level. Help us understand what this actually tells us.
[00:02:18] Speaker C: Yes, I'm quite excited to say that the June increase was the second consecutive monthly increase. So we've also had a May increase.
So if you compare to the first quarter, there suddenly is a bit of an upward tick in economic activity towards the end of the second quarter. So that is really I think positive news. It shows that there's a bit of life in the economy that's starting to get, I mean, as we know, quite a few of our sectors have been in technical recession in the first quarter and we're starting to see some of those moving back into growth scenarios, specifically like the mining and the manufacturing sectors. And also retail is still in positive territory. So we're seeing a bit more life. And it's as if the underlying structural, I would say, drivers in the economy still supporting demand.
[00:03:04] Speaker B: I'm glad that you highlight the optimism because we need it as South Africans to know where some of the positives are. But this is not without notable risk. Talk us through some of the challenges that impact these sectors.
[00:03:17] Speaker C: Yes, indeed. So, I mean, since April we've had a lot of talk about the global risks that have increased, both on the geopolitical side, but also on the US trade policy side, where we've seen the US imposing the import tariffs and also chopping and changing that all the time, making it very difficult for businesses to know what is the actual scenario you're actually looking at and what will be the eventual impact on economic growth. So that uncertainty factor has got a negative impact on confidence and on investment decisions. And that is a, I would say, negative overlay that we had to deal with just since April.
On top of that, obviously the normal struggles of high unemployment in the economy always needed a factor to think of. But we also have a couple of tailwinds now, positive factors that are offsetting some of this negative developments.
[00:04:15] Speaker B: I assume, Elise, as an economist, you've been paying attention to some of the headlines where the governor of the South African Reserve bank has cautioned us that hey, inflation might be on the, on the top end, not the top end, but rather heat up and increase towards the end of the year. How do you view the influence that this could have on economic transactions, on the economy?
[00:04:38] Speaker C: Yes, well, on the inflation front, I mean, we have all along expected an upward trend in the second half of the year. That is partly due to a low base of calculations given that we had fairly big fuel price drops in the second half of last year. So I do expect that. But still, be I'm forecasting a 3.5% average headline CPI for the year, which in my book is still a very good CPI number for South Africa, despite the fact that we might see it trending slightly upwards.
So yes, you know, it's uncertain how the global scenario will play out, but, you know, one should always just caution to disrespect the negative and, you know, not to not think about the positive as well. Because what's happening in terms of the global environment is on the one side it's been negative, but on the other side we had the gold price for instance, increasing as a safe haven status. We've got some of our commodity prices increasing and those are not subject or those commodities are not subject to the import tariffs of the US for instance.
A bit of a buffer that's built in from that point of view. The lower oil price has given us some nice fuel price drops in the last few months.
That will actually change now for July and August. But point is just that we should see the whole picture and I think on the inflation front as well, if we don't retaliate in South Africa with import tariffs on our side, we should not import so much inflation because it's really more on the countries that do impose the import tariffs. So I'm not too concerned that that factor will result in our inflation projections to be completely different.
So yes, I'm still very positive about the 3.5% headline CPI average. That is still a number for South Africa.
[00:06:23] Speaker B: Oh yeah, definitely. Slap bang in the middle. We'd rather have it there than any higher. Always a pleasure speaking to you, Elise, and thank you so much for your time.
[00:06:32] Speaker C: Thank you.
[00:06:32] Speaker B: Elise Greer is an independent economist joining us today to unpack the Bank Serve Africa Economic Transactions Index. Essentially this is understanding how money moves behind the scenes. You and I often we think it's just about the transactions that we pay for. But consider the big transactions that take place between businesses, the deal flow, all of that essentially is what they measure, which gives us a better understanding understanding of the economic activity we're witnessing. When the index picks up, you know what that means. The economy is showing some signs of strength and recovery. And as Elise mentioned, there's some good news that we need to celebrate here. It's seven minutes to seven o'. Clock.
