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  • Writer's pictureDr Roelof Botha

On Balance - Economic Update January

Updated: Jul 4

The downside

In January, the International Monetary Fund (IMF) cut its 2024 economic growth forecast for South Africa to one per cent, citing the country’s logistical and energy challenges as critical reasons for this more subdued outlook. With ongoing frustrations over delays in exporting their products, South African farmers can attest to these problems, especially those involving deciduous fruit. Residential property market activity also remains under pressure due mainly to high interest rates (the current prime overdraft rate is 11.75%, 175 basis points higher than before the COVID-19 pandemic). At the end of last year, the BetterBond index for mortgage bond applications was 12.5% lower than a year ago, but this should recover as soon as rates start declining.

The upside

Lower interest rates are around the corner.

Inflation in South Africa remains on a downward trajectory. The December reading of Statistics SA’s consumer price index (CPI) shows consumer inflation down to 5.1%, from 5.5% in November to 5.9% in October. The producer price index, which invariably acts as a leading indicator for consumer prices, has also resumed a clear downward path, with the December reading of 4% suggesting that inflation will continue to fall in 2024.

On Balance - Economic Update January

Other good news for the millions of households with credit facilities (especially homeowners) is the welcome decline in South Africa’s long-term bond yield, which could indicate an imminent turning point for mortgage bond rates. Since early October last year, the 10-year bond yield has shed more than 130 basis points, meaning that international capital markets are pricing in a lower interest rate scenario for South Africa in 2024.

Manufacturing sector shines

On a high note, South Africa’s manufacturing sector is ending 2023, with November’s total sales figure of R314 billion representing a new monthly record, both in nominal and real terms.

On Balance - Economic Update January

During the first eleven months of 2023, nominal year-on-year sales growth of 10% was recorded, well above the average inflation rate of 6%. Food and beverage processing represents the most significant manufacturing division, accounting for more than 22% of total manufacturing sales. It remains a boon to South Africa to enjoy a considerable measure of food security, with an agriculture sector that is a significant generator of foreign exchange earnings, whilst also playing a vital role in the return to price stability after the supply-side shocks of 2020 to 2022.

Record trade surplus

As predicted in the January edition of On Balance, South Africa recorded another trade surplus in 2023—for the eighth year in succession. Data released by SARS at the end of January confirms a new record for total exports, breaking the R2-trillion mark for the second successive year. The R1-trillion level for exports was achieved in 2015, and thanks mainly to a 31% increase in export earnings in 2021, a doubling of this level was achieved in 2022.

Tourism recovery on track

South Africa’s tourism industry is well on its way to a full recovery, with the number of overseas travellers in 2023 breaching the two-million mark – an increase of 42% over the number in 2022. Europe continues to dominate the South African tourism industry regarding overseas arrivals, accounting for 64% of the total. Combined with North America, these two regions were responsible for more than 82% of all tourist arrivals from overseas in 2023. The imminent further recovery of tourism bodes well for higher economic growth in 2024, as the sector possesses a pervasive value chain with other economic sectors, most notably accommodation, restaurants, transportation, and retail trade in clothing, ornaments, and artefacts.


Dr Roelof Botha

On Balance by Dr Roelof Botha deliberately emphasizes positive news that, more often than not, confirms the resilience of the South African economy and the immense scope for new business opportunities.



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