The contraction in the real GVA by the primary sector resulted from a sharp decrease in agricultural output due to the lower production of field crops and animal products, while the production of horticultural products increased. Intensified electricity load-shedding interrupted production activity, especially in the poultry industry. By contrast, the real GVA by the mining sector increased in the first quarter of 2023 following a decrease in the previous quarter as production increased in 5 of the 12 subsectors.

The real output of the secondary sector reverted to an expansion in the first quarter of 2023 from a contraction in the previous quarter. Manufacturing output increased as production increased in 4 of the 10 manufacturing subsectors, especially in food and beverages as well as in petroleum, chemical products, rubber and plastic products. Consistent with improved confidence among civil contractors, real economic activity in the construction sector increased further in the first quarter of 2023, reflecting increased civil construction as well as residential and non-residential building activity. By contrast, the real GVA by the sector supplying electricity, gas and water contracted for a fourth successive quarter in the first quarter of 2023 as the volume of electricity produced and consumed both decreased. This reflected subdued demand from the electricity-intensive mining and manufacturing sectors, severe load-shedding due to planned maintenance, and an increased number of incidents of unplanned maintenance.

The real output of the tertiary sector also reverted to an expansion in the first quarter of 2023 from a contraction in the previous quarter. This resulted from a turnaround in the real GVA by the commerce; personal services; finance, insurance, real estate and business services; as well as general government services sectors. The expansion in the commerce sector reflected increased real GVA by the retail and wholesale trade as well as the catering and accommodation services subsectors, while activity in the motor trade subsector decreased. The increase in the real GVA by the finance, insurance, real estate and business services sector resulted from increased activity in the insurance, banking, real estate and business services subsectors. Growth in the real output of the transport, storage and communication services sector accelerated in the first quarter of 2023 as both the volume of goods and the number of passengers transported by rail increased, together with an increase in air transportation, transport support services and communication services. By contrast, road transportation activity decreased.

Real gross domestic expenditure (GDE) increased by 0.5% in the first quarter of 2023 following a decrease in the fourth quarter of 2022. Real final consumption expenditure by general government switched from a marginal decrease in the fourth quarter of 2022 to an increase in the first quarter of 2023, while real final consumption expenditure by households, real gross fixed capital formation and real inventory holdings all increased at a slower pace. Real final consumption expenditure by households contributed the most to growth in real GDP in the first quarter of 2023, while real net exports subtracted the most from overall economic growth.

Growth in real final consumption expenditure by households moderated to 0.4% in the first quarter of 2023, in line with a similar slowdown in growth in the real disposable income of households. Real spending on both services and durable goods decreased slightly, with the latter largely reflecting reduced purchases of personal transport equipment. Growth in real expenditure by households on semi-durable goods accelerated in the first quarter of 2023 as real purchases of household textiles increased at a faster pace while those of motorcar tyres, parts and accessories as well as of miscellaneous goods reverted to an increase. Real spending on clothing and footwear increased at a slower pace. Despite the strong increase in the first quarter of 2023, the post-lockdown recovery in semi-durable goods consumption has thus far lagged that in the other durability components. Real spending on non-durable goods increased in the first quarter of 2023 after decreasing in the previous quarter, largely due to increased purchases of food, beverages and tobacco.

The ratio of household debt to disposable income increased to 62.1% in the first quarter of 2023 from 61.6% in the fourth quarter of 2022 as the nominal value of households’ debt increased more than their disposable income. Households’ cost of servicing debt relative to their nominal disposable income increased from 7.9% in the fourth quarter of 2022 to 8.4% in the first quarter of 2023, as both the stock of debt and interest rates increased. Households’ net wealth increased further in the first quarter of 2023 as the market value of total assets increased more than that of total liabilities. The higher value of assets resulted from an increase in the value of housing stock and share prices, as the FTSE/JSE All-Share Index (Alsi) increased by 4.2% in the first quarter of 2023.

Real gross fixed capital formation increased further in the first quarter of 2023, mainly due to faster growth in capital spending by general government. Capital investment by public corporations also increased at a slightly faster pace, while growth in fixed investment by private business enterprises moderated notably. Although higher than a year earlier, the level of real gross fixed investment in the first quarter of 2023 remained well below the pre-pandemic average level of 2019.

Total household-surveyed employment increased by a further 258 000 (1.6%) in the first quarter of 2023 and by 1.28 million (8.6%) year on year. The level of total employment has now recovered to just below the pre-COVID-19 level, almost in line with real GDP which marginally exceeded its pre-COVID-19 level in the first quarter of 2023. Most of the job gains in the first quarter of 2023 were recorded in the financial intermediation, insurance, real estate and business services as well as in the community, social and personal services sectors.

With the number of unemployed South Africans increasing at a faster pace than the number of those employed, the official unemployment rate increased marginally to 32.9% in the first quarter of 2023. A significant number of people continued to move into the labour force, as reflected in the decrease in the ‘not economically active’ category, with the number of discouraged work seekers decreasing by 87 000 (2.6%) in the first quarter of 2023. Consequently, the expanded unemployment rate decreased marginally to 42.4% in the first quarter of 2023.

The year-on-year pace of increase in formal non-agricultural nominal remuneration per worker accelerated from 2.4% in the third quarter of 2022 to 5.8% in the fourth quarter following five consecutive quarters of moderation. Nominal remuneration growth per worker accelerated in both the private and the public sector, with the latter largely reflecting the delayed implementation of an across-the-board public sector wage increase. However, growth in annual average nominal remuneration per worker moderated from 7.3% in 2021 to 4.0% in 2022, reflecting a normalisation from the pandemic-induced base effects.

Growth in labour productivity in the formal non-agricultural sector of the economy moderated from 3.5% in the third quarter of 2022 to 2.0% in the fourth quarter as year-on-year output growth slowed more than employment growth. Growth in labour productivity slowed markedly to 1.8% in 2022 from 5.6% in 2021 as the COVID-19-induced base effects dissipated.

The change in nominal unit labour cost in the formal non-agricultural sector reverted from a decrease of 1.1% in the third quarter of 2022 to an increase of 3.7% in the fourth quarter as year-on-year growth in total remuneration accelerated while that in output slowed.
Annual average growth in nominal unit labour cost accelerated slightly from 1.9% in 2021 to 2.2% in 2022. Growth in economy-wide nominal unit labour cost also quickened further from 1.7% in the fourth quarter of 2022 to 3.8% in the first quarter of 2023 as year-on-year output growth moderated while that in the compensation of employees accelerated.

Domestic inflationary pressures eased further in the opening months of 2023, especially at the producer level, along with lower domestic energy prices. However, the moderation in consumer price inflation was slowed by higher food prices. Headline consumer price inflation moderated from a recent high of 7.8% in July 2022 to 6.3% in May 2023 as domestic fuel price inflation receded sharply from 56.2% to 3.5% over this period. However, despite lower international food prices, food and non-alcoholic beverages price inflation accelerated to a recent high of 14.0% in March 2023, in part due to the depreciation in the exchange value of the rand and additional costs related to electricity load-shedding, before slowing to 11.8% in May. Core inflation continued to accelerate gradually and amounted to 5.2% in May 2023.

The value of South Africa’s merchandise and net gold exports increased more than that of merchandise imports in the first quarter of 2023. The trade surplus therefore widened to R103 billion from only R34.2 billion in the fourth quarter of 2022. South Africa’s terms of trade improved in the first quarter of 2023 as the rand price of exports of goods and services increased while that of imports decreased.

The value of merchandise exports increased by 5.2% in the first quarter of 2023 as mining, manufacturing and agricultural exports increased. Higher mining exports partly reflected the end of the Transnet strike that suppressed exports in the fourth quarter of 2022. The value of manufacturing exports was boosted by increased exports of vehicles and transport equipment, machinery and electrical equipment, prepared foodstuffs, beverages and tobacco as well as textiles and textile articles. Agricultural exports increased slightly as grapes and maize exports more than offset decreases in other agricultural exports.

The value of merchandise imports increased further in the first quarter of 2023 due to higher imports of manufactured and agricultural products. The strong increase in the value of manufactured products was mainly due to higher imports of machinery and electrical equipment, vehicles and transport equipment, prepared foodstuffs, beverages and tobacco as well as chemical products. By contrast, the value of mining imports contracted in the first quarter of 2023 due to a significant contraction in mineral products as imports of both crude oil and refined petroleum products decreased.

The shortfall on the services, income and current transfer account narrowed for a third successive quarter to R169 billion (2.5% of GDP) in the first quarter of 2023 from R190 billion (2.8% of GDP) in the previous quarter. The deficit on the services account narrowed largely due to lower net transport payments alongside higher net travel receipts, while the deficits on the primary and secondary income accounts increased slightly. This, together with the larger trade surplus, led to a narrowing of the deficit on the current account of the balance of payments to R66.2 billion (1.0% of GDP) in the first quarter of 2023 from R155 billion (2.3% of GDP) in the fourth quarter of 2022.

The net inflow of capital on South Africa’s financial account of the balance of payments (excluding unrecorded transactions) increased to R47.7 billion in the first quarter of 2023 following a revised inflow of R19.2 billion in the fourth quarter of 2022. On a net basis, all the functional categories recorded inflows.

South Africa’s total external debt increased from US$157.9 billion at the end of September 2022 to US$165.1 billion at the end of December. However, expressed in rand terms, South Africa’s total external debt decreased as the exchange value of the rand appreciated by 5.4% against the United States (US) dollar over this period.

South Africa’s positive net international investment position (IIP) increased from a revised R1 008 billion at the end of September 2022 to R1 209 billion at the end of December as foreign assets increased more than foreign liabilities. The increase in both foreign assets and foreign liabilities was mainly driven by valuation effects as domestic and foreign share market indices increased in the fourth quarter of 2022.

The nominal effective exchange rate (NEER) of the rand decreased by 5.3% in the first quarter of 2023. The exchange value of the rand was negatively impacted by the effects of intensified electricity load-shedding on the domestic economic growth outlook as well as the greylisting of South Africa by the Financial Action Task Force (FATF). The NEER decreased further in April 2023 and the rand traded at its weakest level ever against the US dollar in May, likely in reaction to accusations that South Africa provided arms to Russia and the further 50 basis points increase in the repurchase (repo) rate a few days later. However, foreign exchange markets adjusted quickly to these developments and, together with less severe electricity load-shedding, the rand appreciated by 7.9% against the US dollar from 31 May 2023 to 15 June.

Domestic bond yields have increased sharply from early February 2023, with the yield on 10-year South African government bonds reaching 12.06% on 30 May, close to the high in March 2020 at the onset of the COVID-19 pandemic. The higher bond yields reflected domestic developments such as high consumer price inflation, further increases in the repo rate and the sharp depreciation in the exchange value of the rand. However, domestic bond yields subsequently declined somewhat up to mid-June 2023, along with the appreciation 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 debt market increased by 10.4% year on year to R6.0 trillion at the end of April 2023. In the first four months of 2023, the nominal value of general government’s net issuance amounted to R60.0 billion while that of financial corporations increased to R88.7 billion, much more than the net issuance of R63.2 billion in the corresponding period of 2022. Banks dominated the net issuance by financial corporations, mainly through unlisted debt securities.

Growth in the broadly defined money supply (M3) accelerated to a post-COVID-19 high of 10.8% in February 2023 before moderating slightly to April. The acceleration largely reflected double-digit growth in the deposit holdings of financial companies from the second half of 2022 due to, among other factors, rising interest rates and a recent short-term boost through deposits earmarked for dividend distribution. Household deposits also accelerated from early 2023 as the higher interest rates likewise boosted households’ long-term deposits.

Growth in total loans and advances extended by monetary institutions to the domestic private sector accelerated to a 13-year high of 10.5% in September 2022 before moderating to 8.8% in April 2023 – still markedly higher than before COVID-19. Growth in loans to companies outpaced that in loans to households, with growth in both moderating more recently as most categories of credit increased at a slower pace.

The preliminary non-financial public sector borrowing requirement decreased by R74.3 billion year on year to R157.9 billion in fiscal 2022/23. This reflected a smaller cash deficit of the consolidated general government due to higher cash surpluses at most levels of general government and a slightly smaller national government deficit. The non-financial public enterprises and corporations reverted from a cash surplus in fiscal 2021/22 to a cash deficit in fiscal 2022/23.

National government’s cash book deficit decreased to R310.0 billion in fiscal 2022/23 and was well below the original projection in the 2022 Budget Review as revenue collections increased at a faster pace than expenditure. This contributed to a smaller net borrowing requirement, which was largely financed through the net issuance of domestic debt securities. National government’s primary deficit of R1.7 billion in fiscal 2022/23 was also significantly smaller than the originally budgeted estimate of R85.4 billion. Nevertheless, national government’s gross loan debt increased by 11.4% year on year to R4 765.5 billion as at 31 March 2023. Interest paid on national government’s debt remained the fastest-growing expenditure item as it increased by 15.1% year on year in fiscal 2022/23.