(Bloomberg) — An index measuring South African economic transactions fell to a 10-month low in October after a strike at the state-owned port and rail operator hobbled exports, suggesting a weak start to the final quarter.
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The BankservAfrica Economic Transactions Index, which tracks interbank payments, dropped to 130.7 from a revised 131 in September, signaling ongoing strain in the economy, independent economist Elize Kruger said in a statement.
Labor unions at Transnet SOC Ltd. went on a 12-day pay strike last month curtailing mineral, agricultural and manufacturing exports. The Minerals Council South Africa estimated that the industrial action cost mining companies about 815 million rand ($47 million) a day.
In addition to the strike and ongoing power cuts, “the economy has also been buckling under the significant rise in the cost of living,” said Kruger. The South African Reserve Bank has increased interest rates by a cumulative 275 basis points since November 2021 to curb surging prices, adding to pressure on consumers with debt exposure.
Another hike is expected on Nov. 24, when the central bank’s monetary policy committee is due to announce its final interest-rate decision of the year, Kruger said. That may crimp economic expansion in the coming months because household spending accounts for about two-thirds of gross domestic product.
Slowing global growth may also weigh on the economy. International trade flows in October continued to dwindle in the face of heightened economic, inflationary and political pressures, according to Kruger.
Read More: South Africa Port Force Majeure Partly Lifted as Strike Ends
The deteriorating economy may result in labor protests and potential social unrest, which the country can ill afford, she said. “Much needed infrastructure upgrades — including road, rail, power and water — and broader structural reforms are urgently needed to address the declining trajectory of the South African economy.”
The central bank and National Treasury predict the economy will expand by 1.9% this year, though the former may revise its forecast next week.
BETI is an early economic scorecard for South Africa in terms of growth trends and correlates closely with the central bank’s co-incident indicator and GDP data.
(Updates with quote from economist in paragraph seven)
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