The real output of the primary sector in the third quarter of 2022 reflected higher production volumes in especially the agricultural sector. Agricultural production in the third quarter benefitted from higher field crops and the increased output of horticultural products but was still significantly lower in the first three quarters of 2022 compared with the same period in 2021 as input costs rose sharply alongside the persistence of foot and mouth disease. The fairly broad-based increase in mining production in the third quarter of 2022 following four successive quarterly contractions resulted from the increased output of gold, diamonds, coal and manganese ore despite the decrease in the output of platinum group metals (PGMs), iron ore and copper.

Real economic activity in the secondary sector expanded in the third quarter of 2022 following a contraction in the previous quarter due to increases in the construction and manufacturing sectors, compensating for the further decrease in output by the electricity, gas and water sector. The increase in residential and non-residential building activity as well as in construction works in the third quarter followed an extended period of decrease in the real output of the construction sector. Manufacturing output was buoyed by the higher production of especially motor vehicles, parts and accessories and other transport equipment, partly reflecting the further normalisation of operations at a major vehicle manufacturing plant following earlier severe flooding, while the closure of domestic oil refineries continued to weigh on petroleum production. The volume of both electricity produced and electricity consumed decreased sharply in the third quarter following the most severe quarterly electricity load-shedding on record.

The real output of the tertiary sector increased further by 1.1% in the third quarter of 2022 due to especially the transport, storage and communication sector as well as the finance, insurance, real estate and business services sector. Activity levels in the trade, catering and accommodation sector also increased as real wholesale and motor trade increased. By contrast, the lower output of the retail trade subsector reflected subdued sales of specialised food, beverages and tobacco products; textiles, clothing, footwear and leather goods; as well as hardware, paint and glass. Real retail trade activity was also adversely impacted by constrained electricity supply, rising operating costs and subdued household demand along with a decline in households’ real disposable income. The real output of the finance, insurance, real estate and business services sector increased as equity market, insurance as well as real estate and business services activity rose.

Contrary to the rebound in real GDP, growth in real gross domestic expenditure (GDE) moderated to 0.6% in the third quarter of 2022 alongside a decrease in real final consumption expenditure by households and a slower pace of increase in real gross fixed capital formation. The increase in gross fixed capital formation reflected capital expenditure on especially residential buildings and transport equipment. Final consumption expenditure by general government increased in the third quarter, mainly on account of increased spending on non-wage goods and services.
A sizable inventory build-up in the third quarter reflected increases in inventories in three industries, namely trade, catering and accommodation; transport, storage and communication; and mining and quarrying. The change in inventories and real net exports contributed positively to overall economic growth in the third quarter of 2022.

The decrease in real final consumption expenditure by households resulted primarily from lower expenditure on food and non-alcoholic beverages as well as recreation and culture, while spending on restaurants, transport and housing increased. Real spending on semi-durable goods and non-durable goods contracted further, while that on durable goods increased. In addition, real spending by households on services decreased in the third quarter. The decrease in household consumption expenditure was consistent with lower real disposable income of households in the quarter. Despite rising interest rates, better stock availability and improved business confidence among new vehicle dealers resulted in the increased real outlays on personal transport equipment.

Households’ debt burden increased at a slower pace in the third quarter of 2022 as most categories of credit extension moderated. Household debt as a percentage of nominal disposable income edged lower to 62.8% in the third quarter as the increase in nominal disposable income exceeded that in household debt. A combination of higher debt levels and interest rates caused households’ cost of servicing debt relative to disposable income to increase to 7.5% in the third quarter.

Households’ net wealth declined further in the third quarter of 2022, as the increase in liabilities outweighed the slight increase in total assets. As a consequence, the ratio of net wealth to nominal disposable income decreased further to 332% in the third quarter.

Real gross fixed capital formation increased slightly further in the third quarter of 2022 on account of capital outlays by general government and public corporations. Capital spending by the general government increased on account of capital outlays by provincial governments. A decrease in investment by private business enterprises in machinery and equipment outweighed an increase in capital outlays on transport equipment and residential buildings. Real gross fixed capital formation was 4.4% higher in the first three quarters of 2022 than in the same period of 2021.

Total household-surveyed employment increased further by 204 000 in the third quarter of 2022 on account of formal sector employment, while private households and the agricultural sector shed jobs. Encouragingly, total employment increased by 10.4% in the year to the third quarter of 2022, with the increase arguably partly related to the significant improvement in the response rate of the Quarterly Labour Force Survey from a year earlier. The official unemployment rate decreased further to 32.9% in the third quarter of 2022 as the number of unemployed South Africans decreased.

The pace of increase in formal non-agricultural nominal remuneration per worker moderated further to 3.6% in the second quarter of 2022, as the decrease in nominal remuneration per public sector worker became more pronounced. This partly reflected the delayed implementation of the 2022 public sector wage increase. Growth in nominal remuneration per worker in the private sector remained unchanged at 5.7%. The average wage settlement rate in collective bargaining agreements increased to 6.0% in the first nine months of 2022, likely reflecting higher inflation outcomes.

Labour productivity growth in the formal non-agricultural sector of the economy moderated significantly to 0.5% in the year to the second quarter of 2022 as output growth slowed faster than that in employment. The year-on-year rate of increase in nominal unit labour cost in the formal non-agricultural sector accelerated to 3.0% in the second quarter, while nominal unit labour cost for the economy as a whole moderated to 1.6% in the third quarter as year-on-year output growth accelerated more than growth in the compensation of employees.

Despite slowing somewhat in recent months, both domestic headline consumer and producer price inflation remained elevated above the 6% upper limit of the inflation target range. Similar to the increase in global inflation, domestic inflationary pressures continued to largely reflect the higher international energy and food prices due to supply and demand imbalances, as exacerbated by the war in Ukraine. The sustained monetary policy tightening by most central banks and the concomitant slowdown in global economic activity reduced demand for crude oil, which lowered fuel prices and contributed to the recent moderation in global consumer and producer price inflation. The gradual acceleration in underlying inflation to above the midpoint of the inflation target range in recent months reflected a broadening in price pressures. Inflation expectations also adjusted upwards to above the inflation target range, although inflation is expected to moderate over the longer term.

The value of both South Africa’s exports and imports of goods increased to all-time highs in the third quarter of 2022. However, the trade surplus narrowed further from R252 billion in the second quarter of 2022 to R233 billion in the third quarter as the value of merchandise imports increased at a faster pace than that of net gold and merchandise exports. An increase in the rand price of imports of goods and services alongside a decrease in that of exports resulted in a further deterioration in South Africa’s terms of trade in the third quarter.

The value of merchandise exports increased by 2.5% in the third quarter of 2022 alongside a marginal increase in mining products, as a decrease in PGMs was more than fully counteracted by an increase in mineral products, especially coal, chromium ore and concentrates as well as pearls and precious and semi-precious stones. Coal exports to Europe surged, mainly to replace imports from Russia. The exports of citrus, paper and paper products, machinery and electrical equipment as well as other manufacturing exports such as plastics, rubber and articles thereof, increased. However, the value of exports of vehicles and transport equipment and chemical products declined.

The further increase in the value of merchandise imports in the third quarter of 2022 was dominated by the imports of refined petroleum products due to reduced domestic oil refining capacity. The increase in the value of imports of machinery and electrical equipment reflected the importation of steam generators for the Koeberg nuclear power station. These increases outweighed the decrease in the importation of automotive parts and components following the flood-related shutdown at an automotive plant in KwaZulu-Natal (KZN) in April 2022.

The deficit on the current account of the balance of payments as a ratio of GDP declined from 1.6% in the second quarter of 2022 to 0.3% in the third quarter as the further narrowing of the trade surplus was more than offset by a marked decrease in the deficit on the services, income and current transfer account. The deficit on the income account decreased considerably in the third quarter due to a combination of higher gross income receipts and lower gross income payments, with the latter mainly due to smaller gross dividend payments compared with an unusually high level of gross dividend payments in the second quarter.

The net flow of capital on South Africa’s financial account of the balance of payments (excluding unrecorded transactions) reverted to an inflow of R14.6 billion in the third quarter of 2022 following an outflow of R1.4 billion in the second quarter. On a net basis, direct and other investment recorded inflows while portfolio investment, financial derivatives and reserve assets registered outflows. Net financial account flows as a ratio of GDP reverted to an inflow of 0.9% in the third quarter of 2022 from an outflow of 0.1% in the second quarter.

South Africa’s total external debt decreased from US$173.8 billion at the end of March 2022 to US$169.3 billion at the end of June. However, in rand terms, the country’s total external debt increased by almost 10% from the end of March 2022 to R2 752 billion at the end of June following the depreciation of the exchange value of the rand against the US dollar over this period.

South Africa’s positive net international investment position (IIP) increased noticeably from a revised R257 billion at the end of March 2022 to R998 billion at the end of June. This reflected a significant increase in the value of foreign assets and a slight decrease in foreign liabilities. The exchange value of the rand had a notable effect on foreign assets and, to a lesser extent, on foreign liabilities as the nominal effective exchange rate (NEER) of the rand decreased by, on balance, 6.2% in the second quarter of 2022.

The NEER decreased further in the third quarter of 2022 before increasing somewhat from the end of September to 30 November. The exchange value of the rand was suppressed by the negative effects of the increased incidence of electricity load-shedding in the third quarter and into the fourth quarter of 2022 on the domestic economic growth outlook and investor sentiment. In addition, global monetary policy tightening and a stronger US dollar placed the NEER under further pressure.

The increase in both global and domestic bond yields during 2022 reflected the impact of the war in Ukraine, which contributed to heightened global inflationary pressures that led to monetary policy tightening by most central banks. The increase in domestic bond yields during most of 2022 also reflected the depreciation in the exchange value of the rand, among other factors. However, domestic bond yields declined somewhat up to the end of November following the release of the 2022 Medium Term Budget Policy Statement (2022 MTBPS) on 26 October 2022, along with the appreciation in the exchange value of the rand over this period.

The FTSE/JSE All-Share Index (Alsi) declined by 3.8% in the third quarter of 2022 as concerns over the negative consequences of electricity load-shedding on domestic economic growth mounted and as domestic interest rates increased, among other factors. These lower share prices also mirrored declines on international bourses due to the moderation in global economic growth amid monetary policy tightening by most central banks.

Domestic money market interest rates increased during the course of 2022 as monetary policy responded to domestic inflationary pressures. Funding conditions in the interbank lending market have been relatively stable following the introduction of the surplus-based monetary policy implementation framework (MPIF) in early June. The rates on forward rate agreements (FRAs) diverged somewhat in recent months when the shorter-dated rates continued to edge higher, while that on longer-dated rates fluctuated lower from late September.

Growth in the broadly defined money supply (M3) accelerated to 9.8% in October 2022, reflecting increases in the deposit holdings of financial companies, partly boosted by dividend receipts and interest receipts on government bonds. Growth in the deposit holdings of non-financial companies accelerated to 8.7% in October, contrasting the somewhat slower growth in that of households of 6.8% which partly reflected the impact of higher inflation as well as increasing debt repayments following tighter monetary conditions.

Growth in credit extension by monetary institutions to the domestic private sector accelerated to double-digit rates in September 2022, a rate last seen at the end of 2012. Credit extension was boosted by strong growth in loans to companies and steady growth in loans to households, as banks expanded their loan books.

The preliminary non-financial public sector borrowing requirement decreased by a substantial R55.3 billion year on year to R61.6 billion in the first six months (April–September 2022) of fiscal 2022/23. The lower borrowing requirement resulted from a significantly smaller cash deficit of the consolidated general government, in particular national government. The reduction in the national government’s deficit resulted from a marked increase in revenue collections in almost all tax categories. Furthermore, all other levels of general government and the non-financial public enterprises and corporations, or state-owned companies (SOCs), recorded cash surpluses for the period under review.

National government’s cash book deficit decreased by R38.5 billion to R164.0 billion in the first half of fiscal 2022/23 compared with that in the same period a year earlier as growth in revenue collections outpaced that in expenditure. National government’s total revenue increased by 8.7% year on year to R784.6 billion in the first half of fiscal 2022/23 as all tax categories increased, except for the fuel levy. The net borrowing requirement of national government in the first half of fiscal 2022/23 was mostly financed in the domestic financial markets through the net issuances of long-term government bonds. National government’s total gross loan debt expressed as a percentage of GDP rose to 71.4% as at 30 September 2022, notably higher than a year earlier.