The contraction in the real GVA by the primary sector in the third quarter of 2023 resulted from lower agricultural and mining output. The real GVA by the agricultural sector contracted sharply and reflected the lower production of field crops as well as horticultural and animal products, with the poultry industry weighed down by the avian influenza outbreak. Mining output decreased anew as production volumes decreased in 7 of the 12 subsectors, with platinum group metals (PGMs), gold, manganese ore, other metallic minerals and coal contributing the most to the contraction.

The real output of the secondary sector reverted from an expansion in the second quarter of 2023 to a contraction in the third quarter. Manufacturing and construction output decreased, while the real output of the electricity, gas and water supply sector increased. Production volumes decreased in 8 of the 10 manufacturing subsectors, reflecting subdued domestic and global demand conditions, with activity also impeded by ongoing electricity load-shedding, rising production costs, supply chain disruptions and logistical constraints. Real economic activity in the construction sector contracted further as civil construction as well as residential and non-residential building activity decreased. After contracting for five consecutive quarters, the real output of the sector supplying electricity, gas and water expanded in the third quarter of 2023. The volume of both electricity produced and consumed increased, reflecting improved electricity generation capacity.

The real output of the tertiary sector increased further in the third quarter of 2023 as the real output of the general government and personal services sectors as well as the finance, real estate and business services sector increased further. The expansion in the real GVA by the finance, insurance, real estate and business services sector resulted from increased activity in the monetary intermediation, real estate and business services subsectors. The real output of the transport, storage and communication sector reverted to an increase following a decrease in the previous quarter as activity in land and air transportation, transport support and communication services increased. The real output of the commerce sector contracted further in the third quarter as real wholesale and motor trade activity decreased, while real retail trade increased marginally. The average level of the real output of the commerce sector in the first three quarters of 2023 was 1.6% lower than in the corresponding period of 2022.

Real gross domestic expenditure (GDE) declined by 3.0% in the third quarter of 2023 following an increase of 1.3% in the second quarter. Real final consumption expenditure by households and gross fixed capital formation contracted in the third quarter while real final consumption expenditure by general government increased, alongside a notable de-accumulation in real inventory holdings. The change in real inventory holdings subtracted 2.3 percentage points from growth in real GDP in the third quarter of 2023, while real gross fixed capital formation and final consumption expenditure by households deducted a further 0.5 and 0.2 percentage points respectively. By contrast, real net exports contributed 2.9 percentage points to overall real GDP growth.

Real final consumption expenditure by households decreased further in the third quarter of 2023, in line with the decline in the real disposable income of households. Household spending on durable goods contracted further as real purchases of personal transport equipment as well as computers and related equipment declined, with the decrease in passenger vehicle sales a reflection of the restrictive lending environment amid higher interest rates and elevated vehicle prices. Real outlays on non-durable goods contracted further as real spending on petroleum products and household fuel, power and water decreased. By contrast, real household spending on semi-durable goods reverted to an increase in the third quarter as spending increased in most categories.

Household debt as a percentage of nominal disposable income decreased to 61.9% in the third quarter of 2023 from 62.5% in the second quarter as the increase in nominal disposable income exceeded that in household debt. Households’ cost of servicing debt as a percentage of disposable income edged higher to 8.9% in the third quarter from 8.8% in the second quarter due to the combination of higher debt and interest rates. Households’ net wealth declined in the third quarter of 2023 as total assets decreased and total liabilities increased. The decline in total assets was due to the lower market value of equities as the FTSE/JSE All-share Index (Alsi) declined by, on balance, 4.8% in the third quarter, while the value of housing stock increased.

Real gross fixed capital formation contracted in the third quarter of 2023 as capital spending by the private and public sector decreased. The lower private fixed investment was largely driven by reduced investment in computer software, computer equipment and construction works. Measured by asset type, real gross fixed capital outlays on all asset categories decreased in the third quarter, except for transfer costs. Despite the contraction, the average level of real gross fixed capital formation in the first three quarters of 2023 was 4.9% higher than in the same period of 2022.

Total household-surveyed employment increased notably by a further 399 000 (2.4%) in the third quarter of 2023, surpassing its pre-COVID-19 peak following broad-based job gains. Employment increased significantly in the formal and agricultural sectors and, to a lesser extent, in the informal and private household sectors. Formal sector employment was largely driven by job gains in the finance, insurance, real estate and business services sector as well as in the community, social and personal services sector, which likely reflected the continued uptake in employment related to the Presidential Youth Employment Initiative as well as the Expanded Public Works Programme.

The total labour force increased by 1.3% to 24.6 million in the third quarter of 2023, supported by the significant increase in employment. This, together with a decrease in the number of officially unemployed persons, resulted in a further decline in South Africa’s official unemployment rate from 32.6% in the second quarter of 2023 to 31.9% in the third quarter. The not economically active population decreased by 186 000 (1.1%) persons in the third quarter of 2023, with the expanded unemployment rate, which includes discouraged work seekers, decreasing for an eighth successive quarter to 41.2% in the third quarter of 2023 from a recent peak of 46.6% in the third quarter of 2021.

The year-on-year pace of increase in formal non-agricultural nominal remuneration per worker moderated from 5.5% in the first quarter of 2023 to 4.3% in the second quarter as nominal remuneration growth per worker slowed in both the public and private sectors. The average wage settlement rate in collective bargaining agreements was 6.4% in the first nine months of 2023 compared with 6.0% in the corresponding period of 2022.

Growth in labour productivity in the formal non-agricultural sector slowed further from 0.6% in the first quarter of 2023 to no growth in the second quarter as year-on-year employment growth exceeded that in output. Likewise, growth in nominal unit labour cost in the formal non-agricultural sector slowed from 5.0% in the first quarter to 4.3% in the second quarter as year-on-year output growth accelerated at a faster pace than that in total remuneration. Growth in economy-wide nominal unit labour cost accelerated from 3.5% in the second quarter of 2023 to 5.6% in the third quarter as year-on-year growth in the compensation of employees accelerated while that in output slowed.

Domestic inflationary pressures started easing from mid-2022 before increasing somewhat in recent months. Both headline consumer and producer price inflation accelerated in September and October 2023 as a result of production cost pressures from electricity load-shedding, rising fuel prices and elevated food prices — which were partly impacted by the avian influenza outbreak. Producer price inflation of final manufactured goods accelerated from 2.7% in July 2023 to 5.8% in October, largely due to the higher price inflation of coal, petroleum, chemical, rubber and plastic products as well as, to a lesser extent, food products. Headline consumer price inflation accelerated from a recent low in July 2023 to 5.9% in October, reflecting higher goods price inflation amid higher fuel prices and elevated food prices. Conversely, consumer services price inflation trended broadly sideways from July to September 2023, before slowing in October. Underlying inflationary pressures continued to moderate, with core inflation slowing to below the midpoint of the inflation target range in October 2023.

South Africa’s trade surplus with the rest of the world widened to R189 billion in the third quarter of 2023 from R22.2 billion in the second quarter as the value of merchandise imports decreased much more than that of merchandise and net gold exports. The decrease in the value of exports reflected lower prices, while that of imports reflected a notable decline in volumes. South Africa’s terms of trade deteriorated further in the third quarter of 2023 as the rand price of imported goods and services increased while that of exports decreased along with the further decline in international commodity prices.

The value of merchandise exports decreased by 3.0% in the third quarter of 2023 as increases in manufacturing and agricultural exports were outweighed by a decrease in the exports of non-gold mining products. The decrease in mining exports in the third quarter reflected lower exports of PGMs, mineral products – specifically iron ore and coal – base metals and articles thereof as well as pearls, precious and semi-precious stones. The further increase in the value of manufacturing exports benefitted from higher exports of vehicles and transport equipment, which outweighed the lower exports of other manufactured goods, especially chemical products, textiles and articles thereof, machinery and electrical equipment as well as prepared foodstuffs, beverages and tobacco.

The value of merchandise imports decreased by 9.5% in the third quarter of 2023 following 12 consecutive quarterly increases. Manufacturing imports decreased sharply, with agricultural and mining imports also contracting, but to a lesser extent. Import values decreased in almost all manufacturing subcategories, with the largest declines recorded in machinery and electrical equipment, chemical products, resins and articles thereof as well as vehicles and transport equipment. The value of mining imports decreased slightly as the lower value of base metals and articles thereof as well as pearls, precious and semi-precious stones were weighed down by reduced imports of copper wire and rough diamonds.

The shortfall on the services, income and current transfer account increased slightly to R208 billion in the third quarter of 2023 from R207 billion in the second quarter and, as a ratio of GDP, remained unchanged at 3.0%. The wider deficit could mainly be attributed to larger deficits on the services and income accounts along with a smaller deficit on the current transfer account. This, together with the larger trade surplus, resulted in a narrowing of the deficit on the current account of the balance of payments from R185 billion (2.7% of GDP) in the second quarter of 2023 to R19.3 billion (0.3% of GDP) 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 R39.7 billion in the third quarter of 2023 from R2.3 billion in the second quarter. On a net basis, all financial account categories, excluding portfolio investment, recorded inflows.

South Africa’s total external debt decreased from US$162.2 billion at the end of March 2023 to US$155.5 billion at the end of June. However, expressed in rand terms, South Africa’s total external debt increased from R2 889 billion to R2 944 billion over the same period as the exchange value of the rand depreciated against the US dollar.

South Africa’s positive net international investment position (IIP) increased further from a revised R1 798 billion at the end of March 2023 to R2 128 billion at the end of June, reflecting a significantly larger increase in foreign assets than in foreign liabilities. The exchange value of the rand had a notable impact on foreign assets and, to a lesser extent, on foreign liabilities as the nominal effective exchange rate (NEER) of the rand declined, on balance, by 4.3% in the second quarter of 2023. While the US Standard & Poor’s (S&P) 500 Index continued its strong growth in the second quarter of 2023, the Alsi declined slightly, further contributing to the increase in the positive net IIP.

The NEER increased, on balance, by 2.5% in the third quarter of 2023 following increases in July and September and a decrease in August. During the third quarter, the exchange value of the rand appreciated due to improved investor sentiment following the outcome of a stronger-than-expected expansion of the domestic economy in the second quarter and the reduced severity of electricity load-shedding. However, concerns about global economic growth and the effects of prolonged elevated global interest rates partly countered the positive impact of these developments. The NEER decreased by 1.7% from the end of the third quarter of 2023 to 30 November amid higher domestic inflation and lower business confidence.

The yield on 10-year South African rand-denominated government bonds fluctuated higher from 10.29% on 2 February 2023 to 12.23% on 4 October. This reflected heightened concerns over South Africa’s fiscal outlook alongside a deterioration in revenue collection, the deprecation in the exchange value of the rand and higher international bond yields. Subsequently, the yield declined to 11.24% on 30 November, tracking the appreciation in the exchange value of the rand and lower international bond yields.

The total nominal value of outstanding listed and unlisted rand-denominated debt securities issued by residents and non-residents in the domestic primary debt market increased by 9.4% year on year to R6.3 trillion at the end of October 2023. General government accounted for 72.4% (R4.6 trillion) of the total amount of debt securities in issuance in the domestic primary debt market at the end of October 2023, with funding activity reflecting government’s larger borrowing requirement. The nominal net issuance of rand-denominated debt securities in the domestic primary debt market by financial corporations in the first 10 months of 2023 was 28.2% lower than in the corresponding period of 2022, mainly reflecting much smaller net issuance of unlisted debt securities by banks.

Year-on-year growth in the broadly defined money supply (M3) decelerated from a post-COVID-19 high of 11.2% in June 2023 to 6.1% in October. The recent slowdown in M3 growth reflected a notable deceleration in the growth in deposit holdings of companies and, to a lesser extent, that of households as it was supported by higher interest rates. Although growth in all three maturity categories slowed over this period, growth in long-term deposits and in short- and medium-term deposits still outpaced that in the more liquid cash, current account and other demand deposits.

Year-on-year growth in total loans and advances extended by monetary institutions to the domestic private sector decelerated from a high of 9.9% in February 2023 to a low of 4.7% in October as loans to companies slowed at a faster pace than loans to households. The moderation in credit extended to companies reflected a slowdown in general loans, mortgage advances, credit card advances and overdrafts. The year-on-year growth in loans and advances to the household sector decelerated gradually for nine consecutive months to 5.2% in October 2023 following a broad-based slowdown across the various types of credit categories. The higher interest rate environment alongside muted income growth continued to impact negatively on households’ ability to borrow.

The preliminary non-financial public sector borrowing requirement increased significantly by R168.7 billion year on year to R219.3 billion in the first six months (April–September 2023) of fiscal 2023/24. This reflected the significantly higher cash deficit of the consolidated general government, in particular national government, largely due to lower cash receipts from operating activities related to lower revenue collections in most tax categories. In addition, all other levels of general government recorded smaller cash surpluses, while the non-financial public enterprises and corporations, or state-owned companies, recorded a cash deficit in the first six months of fiscal 2023/24 compared to a surplus in the first six months of the previous fiscal year.

National government’s cash book deficit of R253.0 billion in the first half of fiscal 2023/24 was R89.0 billion more than in the first half of fiscal 2022/23 as expenditure growth outpaced that in revenue. The primary deficit was also substantially larger relative to the corresponding period of the previous fiscal year. National government’s total gross loan debt increased by 9.2% year on year to R5 080 billion as at 30 September 2023. The increase could be attributed to a rise in the outstanding stock of both domestic and foreign debt, owing to net issuances as well as the exchange rate revaluation effects brought about by the depreciation in the exchange value of the rand against other major currencies.