The real gross value added (GVA) by the primary sector contracted by 3.2% in the fourth quarter of 2022 following a strong expansion in the third quarter, as output contracted in both the agricultural and the mining sectors. Agricultural output declined due to the lower production of field crops and horticultural products. Annual growth in agricultural output moderated sharply to 0.3% in 2022 as activity was curtailed by abnormal weather conditions, the outbreak of foot-and-mouth disease, higher input costs and intensified electricity load-shedding. The real GVA by the mining sector contracted anew by 3.2% in the fourth quarter of 2022 as production decreased in 9 of the 12 mineral groups. Annual mining output contracted by 7.0% in 2022 amid the intensified electricity-supply disruptions as well as constraints in rail transportation and harbour capacity.

Real economic activity in the secondary sector also reverted to a decrease in the fourth quarter of 2022 from an increase in the third quarter. The contraction in manufacturing output in the fourth quarter reflected lower durable and non-durable goods production. The real output of the sector supplying electricity, gas and water receded for a third successive quarter as the volume of electricity produced and consumed both decreased, reflecting the continuation of severe load-shedding up to stage 6 during the fourth quarter as well as lower demand from the electricity-intensive mining and manufacturing sectors. By contrast, the real GVA by the construction sector increased marginally in the fourth quarter of 2022 as civil construction and non-residential building activity increased. However, on an annual basis, construction activity has been declining since 2017, with the level of output still 23.1% lower in 2022 than in 2019.

Following four successive quarters of expansion, the real output of the tertiary sector contracted by 1.2% in the fourth quarter of 2022. This was largely due to a notable decrease in the real GVA by the finance, insurance, real estate and business services sector, mainly reflecting a decline in banking, insurance and business services as well as in activities auxiliary to financial intermediation. The contraction in the commerce sector reflected lower output in the wholesale trade as well as the catering and accommodation subsectors, while activity increased in the retail and motor trade subsectors. Growth in the real output of the transport, storage and communication services sector moderated notably in the fourth quarter of 2022. The slowdown reflected a decrease in land freight transportation, weighed down by the industrial action at Transnet, while passenger transportation, air transport and communication services increased.

Real gross domestic expenditure (GDE) decreased marginally by 0.1% in the fourth quarter of 2022 as real final consumption expenditure by general government contracted alongside a slower pace of increase in real inventory holdings. By contrast, real final consumption expenditure by households reverted to an increase in the fourth quarter of 2022 following a small decrease in the third quarter, while real gross fixed capital formation increased at a faster pace. Real net exports and the change in inventories subtracted the most from overall real GDP growth in the fourth quarter of 2022, while real final consumption expenditure by households contributed the most.

The increase in household consumption expenditure in the fourth quarter of 2022 was consistent with the increases in real disposable income and credit extension, and resulted largely from faster growth in real spending on durable goods and services. Purchases of furniture and household appliances, recreational and entertainment goods as well as computers and related equipment increased, while growth in consumer spending on personal transport equipment slowed. Real spending by households on semi-durable goods remained broadly unchanged for a second successive quarter while purchases of non-durable goods decreased slightly further in the fourth quarter of 2022, largely due to lower spending on food, beverages and tobacco as well as medical and pharmaceutical products.

Household debt increased further in the fourth quarter of 2022 as most categories of credit extension to households increased. However, household debt as a percentage of nominal disposable income declined slightly to 62.3% in the fourth quarter as disposable income increased at a faster pace than debt. Households’ cost of servicing debt relative to nominal disposable income increased from 7.5% in the third quarter of 2022 to 8.1% in the fourth quarter, reflecting a combination of higher debt and interest rates. Households’ net wealth increased in the fourth quarter of 2022 as the increase in the market value of total assets outweighed that in total liabilities. The higher value of assets resulted from an increase in both domestic share prices and housing stock.

Real gross fixed capital formation increased further in the fourth quarter of 2022 due to increased capital spending by private business enterprises and general government, while capital outlays by public corporations decreased. Investment in transport equipment as well as machinery and other equipment contributed the most to the increase. After contracting for five consecutive years, real gross fixed capital formation expanded marginally in 2021 and further by 4.7% in 2022 as capital spending by the private sector increased significantly.

Total household-surveyed employment increased further by 1.1% in the fourth quarter of 2022 due to increases in the formal sector and by private households, while job losses occurred in the informal and agricultural sectors. As the number of unemployed people increased by much less than the number of those employed, the official unemployment rate decreased further to 32.7% in the fourth quarter of 2022. Total employment increased sharply by almost 1.4 million (9.6%) in 2022 following the opening up of the economy after the COVID-19 restrictions, also partly reflecting improvements in the response rate of the Quarterly Labour Force Survey.

Year-on-year growth in formal non-agricultural nominal remuneration per worker moderated for a fifth successive quarter to 1.9% in the third quarter of 2022. Nominal remuneration growth per worker slowed in the private sector and contracted at a faster pace in the public sector. This reflected the delayed implementation of the 2022 public sector wage increase and the large number of low-earning youth employed under the Presidential Youth Employment Initiative which lowered the average remuneration per worker. The average wage settlement rate in collective bargaining agreements rose notably to 6.0% in 2022 from 4.4% in 2021, likely reflecting the acceleration in consumer price inflation in 2022.

Growth in labour productivity in the formal non-agricultural sector of the economy accelerated markedly from 0.2% in the second quarter of 2022 to 2.7% in the third quarter, as output growth accelerated while employment growth slowed. By contrast, the change in the nominal unit labour cost in the formal non-agricultural sector reverted from an increase of 3.4% in the second quarter of 2022 to a decrease of 1.1% in the third quarter, as growth in total remuneration slowed while that in output accelerated. After also slowing sharply in the third quarter of 2022, growth in the economy-wide nominal unit labour cost quickened to 2.7% in the fourth quarter as output growth moderated more than growth in the compensation of employees.

Domestic headline producer and consumer price inflation have both decelerated somewhat since July 2022, mainly reflecting decreases in domestic fuel prices due to lower international crude oil prices and the statistical effect of a high base in the preceding year. Despite being above the midpoint of the inflation target range of 4.5% for 22 consecutive months, headline consumer price inflation slowed gradually to 7.0% in February 2023. However, consumer food price inflation accelerated briskly over the past year, to 14.0% in February 2023, despite the marked moderation in global food price inflation in recent months. Core inflation has been accelerating steadily since early 2021 and breached the midpoint of the inflation target range from September 2022, reflecting a broadening in domestic price pressures.

The value of South Africa’s merchandise imports increased further in the fourth quarter of 2022 while the value of merchandise and net gold exports decreased. The trade surplus therefore narrowed significantly from R249 billion in the third quarter of 2022 to only R12.2 billion in the fourth quarter. South Africa’s terms of trade deteriorated further in the fourth quarter of 2022 as the rand price of imports of goods and services increased while that of exports decreased.

The value of merchandise exports contracted by 8.9% in the fourth quarter of 2022, largely due to a significant decrease in mining exports, particularly mineral products. All export volumes were negatively affected by the Transnet strike that hampered rail freight and port operations in October 2022. The value of mining exports was also impacted by a further decline in most of South Africa’s export commodity prices in the fourth quarter of 2022. Manufacturing exports decreased to a lesser extent, while agricultural exports increased.

The further increase in the value of merchandise imports in the fourth quarter of 2022 resulted largely from manufactured products, mostly vehicles and transport equipment as well as machinery and electrical equipment. Mining imports also increased slightly in the fourth quarter, mainly due to higher imports of crude oil, while imports of refined petroleum products decreased. However, on an annual basis, the import value of refined petroleum products rose sharply on account of reduced domestic oil-refining capacity, with the import value of distillate fuel increasing significantly due to, among other factors, strong demand from Eskom for the operation of the open-cycle gas turbines to bolster generating capacity during periods of peak demand.

The shortfall on the services, income and current transfer account narrowed for a second consecutive quarter from R246 billion in the third quarter of 2022 to R186 billion in the fourth quarter, with all three sub-accounts contributing to the smaller deficit. However, this was outweighed by the sizeable narrowing in the trade balance, causing the balance on the current account of the balance of payments to switch to a deficit of R174 billion in the fourth quarter of 2022 from a revised surplus of R3.1 billion in the third quarter.

The net inflow of capital on South Africa’s financial account of the balance of payments (excluding unrecorded transactions) increased to R23.5 billion (1.4% of GDP) in the fourth quarter of 2022 from R14.6 billion (0.9% of GDP) in the third quarter. On a net basis, direct investment, other investment and reserve assets recorded inflows while portfolio investment and financial derivatives registered outflows. The cumulative flows on the financial account switched to an inflow of R67.9 billion (1.0% of GDP) in 2022 from an outflow of R244.5 billion (3.9% of GDP) in 2021.

South Africa’s total external debt decreased from US$169.3 billion at the end of June 2022 to US$157.9 billion at the end of September, largely due to a decrease in rand-denominated debt. However, expressed in rand terms, South Africa’s total external debt increased over this period as the exchange value of the rand depreciated against the United States (US) dollar.

South Africa’s positive net international investment position (IIP) increased marginally further from a revised R1 008 billion at the end of June 2022 to R1 065 billion at the end of September. This reflected a smaller decrease in foreign assets than in foreign liabilities and the greater impact of the exchange value of the rand on foreign assets than on foreign liabilities as the nominal effective exchange rate (NEER) of the rand decreased by, on balance, 4.6% in the third quarter of 2022.

The NEER then increased slightly in the fourth quarter of 2022. Despite considerable volatility in the exchange value of the rand during 2022 and significant divergence among currencies, the NEER decreased by only 0.1% from the end of 2021 to the end of 2022. The exchange value of the rand was negatively impacted by the effects of severe electricity load-shedding on the domestic economic growth outlook, which influenced investor sentiment during the second half of 2022. However, the slowdown in consumer price inflation in the US tempered expectations of future interest rate increases and supported the exchange value of the rand against the US dollar for much of the fourth quarter of 2022. The NEER subsequently decreased again by 6.8% from 31 December 2022 to 15 March 2023, initially mostly due to domestic factors but more recently due to increased global risk aversion amid fears of a possible banking crisis in the US and Europe.

International and domestic bond yields increased during most of 2022. This reflected the impact of the war in Ukraine on global inflation and the concomitant monetary policy tightening as well as domestic factors such as higher inflation, the weaker exchange value of the rand and the impact of intensified electricity load-shedding on domestic economic activity. However, domestic bond yields declined during December 2022 and January 2023 amid the slowdown in domestic consumer price inflation and against the backdrop of an expected slower pace of increase in interest rates in the US, before they increased again to mid-March along with the depreciation in the exchange value of the rand.

The total nominal value of outstanding rand-denominated listed and unlisted debt securities issued by residents and non-residents in the domestic primary bond market increased by 10.5% from the end of 2021 to the end of 2022. National government’s net bond issuance was 13.6% lower in 2022 than in 2021, reflecting a lower borrowing requirement because of an improved fiscal position. By contrast, net issuance in the domestic primary corporate bond market increased considerably from R9.7 billion in 2021 to R212 billion in 2022, largely due to significant net issuance of short-term unlisted debt securities by banks to fund growing demand for credit extension amid favourable demand conditions.

The value of equity capital raised in the domestic and international primary share markets by JSE-listed companies declined by 63.8% in 2021 and by a further 47.7% in 2022 to only R13.3 billion – the lowest since 1994 – amid the continued challenging economic conditions. Share prices in the domestic share market experienced heightened volatility along a declining trend during most of 2022. Nonetheless, the share prices of JSE-listed companies rebounded towards the end of 2022, with the FTSE/JSE All-Share Index (Alsi), in rand terms, increasing by 14.6% in the fourth quarter to end the year only 0.9% lower than at the end of 2021.

Growth in the broadly defined money supply (M3) moderated slightly to 9.6% in January 2023 after accelerating gradually throughout 2022. The buoyant growth in M3 during the latter part of 2022 was boosted by the corporate sector, particularly financial companies. By contrast, growth in the deposit holdings of the household sector fluctuated lower during the first half of 2022 and remained fairly stable thereafter, likely reflecting the impact of elevated food and fuel prices as well as the higher debt repayment burden amid the rising interest rates.

Growth in total loans and advances extended by monetary institutions to the domestic private sector accelerated to double digits in September 2022 before moderating slightly to 9.7% in January 2023. Following a few years of tepid growth in credit extension, annual average growth accelerated to 7.8% in 2022 – the highest since 2015. Corporate credit was the main driver of overall credit growth over the past year, while growth in credit extended to households was more subdued, driven mostly by unsecured general loans.

The preliminary non-financial public sector borrowing requirement of R75.0 billion in the first nine months of fiscal 2022/23 (April–December 2022) was about half of that in the same period of the previous fiscal year. The significantly lower borrowing requirement reflected the much smaller cash deficit of national government and cash surpluses for all the other spheres of general government. By contrast, non-financial public enterprises and corporations reverted from a cash surplus to a deficit.

National government’s cash book deficit of R183.1 billion in the first nine months of fiscal 2022/23 was R36.1 billion less than in the same period of the previous fiscal year as growth in revenue collections was double that in expenditure. The cash book deficit was primarily financed in the domestic financial markets through the net issuance of long-term government bonds and, to a lesser extent, through foreign bonds and loans. National government’s total gross loan debt increased to R4 714.3 billion (71.0% of GDP) as at 31 December 2022 as both domestic and foreign debt increased.