Consumers are complying

First the panic-buying upswing, then a steep drop off in purchases.

This is what card payments facilitator BankservAfrica says happened before and after the country went into lockdown on Friday. The lockdown sees most businesses closing shop as part of the efforts to halt the spread of the Covid-19 pandemic.

BankservAfrica’s data shows a surge in purchases, especially two days before the lockdown, followed by a sharp drop off on Saturday after the 21-day lockdown went into effect.

As indicated in the graph below, the transaction volumes just after March 21 to before March 27 indicate just how much consumers were purchasing.

Daily point-of-sale and ATM transaction volumes, March 2019 vs March 2020

Shergeran Naidoo, head of stakeholder engagements at BankservAfrica, says they found that South Africans used their month-end salaries to rush to the stores.

“The normal volume of transactions from Tuesday [March 24], a day after the president’s national lockdown announcement, to Thursday [March 26] reached an incredible 148% of volumes processed at POS [point-of-sale] terminals and ATMs as the country’s population prepared for the 21-day period. South Africans knew they had to fill their cupboards and fridges,” says Naidoo.

Busy complying

The increased hike in transactions, however, took a huge U-turn, “bearing in mind that [as] this is month-end, one would have expected higher than normal transaction volumes”.

On Sunday (March 29), transaction volumes, however, were just 28% of the normal for the same day last year.

Naidoo says only 1.2 million transactions were recorded compared to an average of 5.4 million on a more typical day after month-end.

He says the number of transactions was only about 60% of the transactions on low spending days like Christmas Day and Easter Sunday.

He adds that it is unlikely that these low levels of transaction volumes will be seen again.

Mike Schüssler of economists.co.za describes the current situation as an economic activity standstill.

Plummeting GDP on the cards

Schüssler says the drop in transactions suggests that about 70% of the consumer-facing economy has fallen away – and that will certainly mean a plummeting GDP level.

He says although it is difficult to provide a forecast, one could say that as consumers make up about 60% of expenditure, a one-month lockdown could see GDP fall.

“On an annualised basis, this will be spread over the first two quarters of the year. Most of this decline will be evident in the second quarter,” says Schüssler.

“While the third and fourth quarters could see growth again, the catch-up will not be as great. A GDP decline could be on the cards.”