The real gross value added (GVA) by the primary sector contracted further in the fourth quarter of 2023 due to a further sharp contraction in agricultural output as the production of field crops as well as horticultural and animal products decreased. By contrast, mining output reverted to an increase in the fourth quarter as the production volumes of especially platinum group metals (PGMs), coal, chromium ore and diamonds increased.

The slight increase in real output of the secondary sector in the fourth quarter of 2023 was largely driven by increases in the real GVA by the manufacturing and electricity, gas and water sectors, while that by the construction sector decreased further. Manufacturing production reverted to a marginal increase as output increased in 6 of the 10 manufacturing subsectors. However, the sector was still facing a challenging operating environment due to rising input costs related to the ongoing electricity load-shedding and logistics disruptions at Transnet as well as weaker domestic and global demand. The level of real economic activity in the sector supplying electricity, gas and water increased further in the fourth quarter of 2023. A notable turnaround in both electricity production and consumption reflected an improved electricity generation capacity at Eskom which eased electricity load-shedding somewhat and supported economic activity in the energy-intensive mining and manufacturing sectors. The further contraction in the real GVA by the construction sector reflected lower civil construction and residential building activity in the fourth quarter of 2023.

Economic activity increased slightly further in the tertiary sector in the fourth quarter of 2023 as the real output of the transport, storage and communication services; finance, insurance, real estate and business services; and personal services sectors increased, while that of the commerce and general government services sectors decreased. The real GVA by the transport, storage and communication sector increased at a faster pace in the fourth quarter, underpinned by increased activity in road transportation, transport support and communication services, while rail freight transportation activity decreased further. The expansion in the finance, insurance, real estate and business services sector resulted from increased activity in the financial markets, real estate and business services subsectors. The real GVA by the commerce sector contracted for a third successive quarter in the fourth quarter of 2023, reflecting weaker domestic demand amid constrained household finances. Real economic activity decreased in the retail, wholesale, motor trade as well as catering and accommodation subsectors in the fourth quarter.

Real gross domestic expenditure (GDE) increased by 1.0% in the fourth quarter of 2023 following a decrease of 3.0% in the third quarter. Real final consumption expenditure by households increased slightly alongside a moderate accumulation in real inventory holdings, while real final consumption expenditure by general government and gross fixed capital formation contracted in the fourth quarter. The change in real inventory holdings contributed the most to growth in real GDP in the fourth quarter of 2023, while real net exports subtracted the most.

Real final consumption expenditure by households increased by 0.2% in the fourth quarter of 2023 following two successive quarterly decreases, supported by a marginal increase in the real disposable income of households in the fourth quarter. Real outlays on services and durable goods reverted to an increase in the fourth quarter of 2023, with the latter led by increased spending on personal transport equipment; computers and related equipment; as well as recreational and entertainment goods. The further contraction in household spending on non-durable goods in the fourth quarter was broad-based among the subsectors, while the reduced outlays on semi-durable goods reflected lower spending on motorcar tyres, parts and accessories; clothing and footwear; and miscellaneous goods.

Household debt as a percentage of nominal disposable income decreased slightly to 62.3% in the fourth quarter of 2023 from a revised 62.4% in the third quarter as the increase in nominal disposable income narrowly exceeded that in household debt. Households’ cost of servicing debt as a percentage of disposable income remained unchanged at 9.0% in the fourth quarter of 2023. Annual growth in household debt accelerated slightly in 2023, with the ratio of household debt to nominal disposable income increasing to 62.4% from 62.0% in 2022. Households’ cost of servicing debt relative to nominal disposable income increased to 8.8% in 2023 from 7.3% in 2022, reflecting the cumulative 125 basis point increase in the prime lending rate in 2023 as well as the higher outstanding stock of debt.

Households’ net wealth increased in the fourth quarter of 2023 as the market valuation of their total assets increased more than their total liabilities. The higher asset valuation emanated largely from higher share prices as the FTSE/JSE All-Share Index (Alsi) increased in the fourth quarter of 2023 and, to a lesser extent, slightly higher residential property prices. On an annual basis, households’ net wealth increased only marginally relative to their disposable income in 2023, with net wealth remaining at around 3.9 times the value of their annual disposable income in both 2022 and 2023. The net wealth of households was supported by domestic share prices in 2023 as the Alsi, on balance, increased by 5.3% in rand terms in 2023 compared with a decline of 0.9% in 2022 and, to a lesser extent, by the higher value of housing stock. Growth in nominal residential property prices remained subdued and slowed further in 2023, remaining below headline consumer price inflation amid higher interest rates and weak domestic economic activity in the opening months of 2024.

Real gross fixed capital formation contracted marginally further in the fourth quarter of 2023 as the public sector further reduced fixed investment spending, while capital spending by the private sector remained unchanged. Measured by asset type, real fixed investment spending decreased on all asset categories except for non-residential buildings and other assets, which comprise research and development, computer software, mineral exploration and cultivated biological resources. Total real capital expenditure increased by 4.2% in 2023, marking the third consecutive annual increase. Consequently, the ratio of nominal gross fixed capital formation to nominal GDP increased to 15.2% in 2023 from 14.2% in 2022.

Total household-surveyed employment decreased for the first time since the third quarter of 2021 when it contracted by 22 000 (0.1%) in the fourth quarter of 2023. Employment in the formal sector decreased as significant job losses were recorded in the community, social and personal services sector, with the agricultural sector also shedding jobs. Conversely, more people were employed in the informal and private household sectors in the fourth quarter. Employment contracts of a limited duration decreased the most in the fourth quarter of 2023, reflecting the termination of employment contracts related to Phase IV of the Presidential Youth Employment Initiative (PYEI) that commenced in February 2023.

The official unemployment rate increased from 31.9% in the third quarter of 2023 to 32.1% in the fourth quarter as the total labour force increased slightly to 24.6 million, reflecting an increase in the total number of unemployed persons. The not economically active population increased by 111 000 persons in the fourth quarter of 2023 despite a decrease of 107 000 in the number of discouraged work seekers. Consequently, the expanded unemployment rate, which includes discouraged work seekers, decreased for a ninth consecutive quarter to 41.1% in the fourth quarter of 2023.

The year-on-year pace of increase in formal non-agricultural nominal remuneration per worker moderated marginally further to 3.7% in the third quarter of 2023 as growth in nominal remuneration per worker slowed sharply in the public sector, largely due to the notable increase in the number of lower-earning temporary employees. The average wage settlement rate in collective bargaining agreements was 6.3% in 2023 compared with an annual average of 6.0% in 2022.

Growth in labour productivity in the formal non-agricultural sector slowed for a fourth successive quarter from an increase of 3.5% in the third quarter of 2022 to a decrease of 2.0% in the third quarter of 2023, as year-on-year growth in employment accelerated, partly due to the marked increase in temporary public sector employment over this period, while output growth slowed. Growth in nominal unit labour cost in the formal non-agricultural sector accelerated from 4.2% in the second quarter of 2023 to 5.9% in the third quarter, as year-on-year growth in total remuneration accelerated and that in output slowed. Growth in economy-wide nominal unit labour cost moderated slightly to 5.7% in the fourth quarter, following an acceleration in the third quarter of 2023.

Domestic inflationary pressures eased during most of 2023, with headline consumer price inflation decelerating from a recent peak of 7.1% in March, largely due to base effects from lower food and transport price inflation. Headline inflation then quickened in the three months to October 2023, largely reflecting cost pressures emanating from non-core items such as electricity, food and fuel, before receding again to 5.1% in December. Subsequently, consumer price inflation accelerated to 5.6% in February 2024 following an acceleration in fuel and health insurance services price inflation. Underlying inflationary pressures remained fairly contained, with core inflation remaining close to the midpoint of the inflation target range up to January 2024, before accelerating to 5.0% in February.

South Africa’s trade surplus with the rest of the world narrowed to R88.1 billion in the fourth quarter of 2023 from R181 billion in the third quarter as the value of merchandise imports increased at a faster pace than the value of merchandise and net gold exports. The increase in the value of merchandise imports reflected higher volumes and prices, while that of exports reflected higher prices. South Africa’s terms of trade deteriorated further in the fourth quarter of 2023 as the rand price of imported goods and services increased more than that of exports.

The value of merchandise exports increased by 0.8% in the fourth quarter of 2023 as increases in the value of manufacturing and agricultural exports outweighed the decrease in mining exports. The lower mining exports reflected a decrease in the export values of pearls, precious and semi-precious stones as well as base metals and articles thereof, which outweighed the higher export value of PGMs. The value of manufacturing exports increased for a sixth consecutive quarter in the fourth quarter of 2023, mainly reflecting higher exports of chemical products; prepared foodstuffs, beverages and tobacco; and paper and articles thereof. Agricultural exports were boosted by the increased exports of fruit, in particular grapes, in the fourth quarter of 2023.

The value of merchandise imports increased by 5.6% in the fourth quarter of 2023 as the value of mining and agricultural imports increased. Mining imports were buoyed by mineral products, reflecting further increases in the imports of crude oil and refined petroleum products, especially distillate fuel (diesel). The value of crude oil imports surged by 85.4% in the fourth quarter of 2023 as both the physical quantity and the realised rand price thereof increased. The value of manufactured imports decreased slightly in the fourth quarter of 2023, largely due to lower imports of machinery and electrical equipment.

The shortfall on the services, income and current transfer account increased from R215 billion in the third quarter of 2023 to R254 billion in the fourth quarter. The larger deficit resulted from a wider deficit on the income account, mostly reflecting higher net dividend and interest payments, while the deficits on the services and current transfer accounts decreased. This, together with the smaller trade surplus, resulted in a widening of the deficit on the current account of the balance of payments from R34.4 billion (0.5% of GDP) in the third quarter of 2023 to R166 billion (2.3% of GDP) in the fourth quarter. On an annual basis, the deficit on the current account widened from R30.0 billion (0.5% of GDP) in 2022 to R112 billion (1.6% of GDP) in 2023.

The net flow of capital on South Africa’s financial account of the balance of payments (excluding unrecorded transactions) switched to an outflow of R1.1 billion in the fourth quarter of 2023 from an inflow of R39.7 billion in the third quarter. On a net basis, all financial account categories except portfolio investment recorded inflows.

South Africa’s total external debt increased slightly from US$155.5 billion at the end of June 2023 to US$156.1 billion at the end of September. However, expressed in rand terms, South Africa’s total external debt decreased slightly from R2 944 billion to R2 932 billion over the same period as the exchange value of the rand appreciated against the United States (US) dollar.

South Africa’s positive net international investment position (IIP) decreased from R2 130 billion at the end of June 2023 to R1 924 billion at the end of September as the rand value of foreign assets decreased more than that of foreign liabilities. The removal of the cross-holding structure between Naspers Limited and Prosus N.V. in the third quarter of 2023 that was initially implemented in the third quarter of 2021, resulted in a significant decline in both foreign assets and foreign liabilities.

The nominal effective exchange rate (NEER) of the rand decreased by 1.7% in the fourth quarter of 2023 following an increase of 2.5% in the third quarter. The decrease was driven by, among other factors, the ongoing concerns over global economic growth, particularly in South Africa’s major trading partners, persistent geopolitical tensions and the constrained domestic fiscal position. However, the exchange value of the rand appreciated by 1.1% against the US dollar in the fourth quarter of 2023, largely due to a change in interest rate expectations in the US. The NEER increased by 1.0% from the end of 2023 to 15 March 2024.

The yield on 10-year South African rand-denominated government bonds decreased from 12.23% on 4 October 2023 to 10.96% on 20 December, reflecting the notable appreciation in the exchange value of the rand, lower domestic headline consumer price inflation and increased demand for domestic bonds by non-residents. The yield then increased to 11.72% on 15 March 2024 following the subsequent depreciation in the exchange value of the rand, along with an acceleration in domestic consumer price inflation.

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 8.1% year on year to R6.3 trillion at the end of 2023. General government’s net issuance of listed debt securities in 2023 was 6.8% more than in 2022, while the net issuance by financial corporations of R108 billion in 2023 was 45.7% lower than in 2022. This mainly reflected a lower net issuance of unlisted debt securities by banks due to reduced funding needs as investor demand for credit slowed amid weak economic growth.

Growth in the broadly defined money supply (M3) decelerated from 7.6% in December 2023 to 6.6% in January 2024, resuming its downward trend since mid-2023. The quarter-to-quarter seasonally adjusted and annualised growth in M3 slowed from a recent high of 13.6% in the fourth quarter of 2022 to 2.6% in the fourth quarter of 2023 – the slowest rate of increase since the second quarter of 2021 – as growth slowed across all three main maturity categories. Corporate sector deposits, notably those of financial companies, sustained the growth in M3 in the first half of 2023 but moderated sharply thereafter. By contrast, household deposits remained firm throughout 2023, supported by higher interest rates.

Year-on-year growth in total loans and advances extended by monetary institutions to the domestic private sector slowed significantly from 9.7% in January 2023 to 3.3% a year later. The quarter-to-quarter seasonally adjusted and annualised growth in total loans and advances also slowed notably from 7.4% in the first quarter of 2023 to 4.0% in the fourth quarter as growth in credit extension to companies decelerated at a faster pace than that to households. The broad-based moderation in credit extension occurred amid the higher interest rates and a tightening of lending standards by banks that coincided with weak domestic economic activity and weaker consumer spending.

The preliminary non-financial public sector borrowing requirement increased significantly by R187.5 billion year on year to R249.4 billion in the first nine months (April–December 2023) of fiscal 2023/24. This reflected the substantially larger deficit of the consolidated general government, in particular national government. National government’s higher deficit can largely be attributed to higher cash payments due to increased interest payments on national government debt and inter-governmental transfers, along with lower cash receipts from operating activities related to weak revenue collection in most tax categories. 

National government’s cash book deficit increased by R111.3 billion year on year to R284.8 billion in the first nine months of fiscal 2023/24 as expenditure increased at a faster pace and revenue contracted slightly compared to the same period of the previous fiscal year. National government’s total gross loan debt increased by R439 billion (9.3%) to R5 153 billion as at 31 December 2023 compared with a year earlier.