South Africa’s GDP increase of 1.9% in the first three months of 2022 brought the economy back to its pre-Covid19 size, reported Statistician-General Risenga Maluleke just under a month ago, also noting that during that quarter 7 out of 10 manufacturing divisions reported positive growth. Year-on-year growth to March 2022 reached 3% against Bloomberg’s forecast of 1.2%. Household consumption expenditure increased by 1.4% during the first quarter of 2022 (quarter/quarter) which probably reflects the increases in wages over the past year to March 2022, this per FNB’s economist, Thanda Sithole.
SA’s stock prices seem cheap, mineral exports remain high but at decreasing prices as noted in the last MD’s Insights and the hikes in the repo rate have maintained Rand strength, but again, on a declining basis, particularly against the US Dollar, currently trading at R16.33. Its performance against the Euro is better, currently trading at R17.03, but also down from R16.81 over the last two weeks. The good news ends here.
Inflation, steady at 5.9% in March and April 2022, accelerated to 6.5% in May, breaching the SARB’s targeted range. More repo rate increases can be expected, with the wage hikes noted above adding to this impetus.
Real growth in the economy, according to Momentum’s economist Sanisha Packirisamy, averaged 0.5% for the past 5 years and 1% over the past 10 years, which is insufficient to cater for the needs of a growing population which means that even though the economy grew faster than predicted in reaching the pre-Covid19 peak, on average South Africans are becoming poorer. This does not bode well insofar as social ills are concerned and South Africa will become an ever more dangerous society.
Projections for the second quarter of 2022 will be influenced by the KZN floods, load-shedding, which is ruining small businesses as outages increase, accelerating inflation and interest rates, and on the international stage the impact of the war in Ukraine and China’s strict lockdown policies will also depress forecasts.
The likely impact of the above factors will be a reduction in Capex if demand declines and tighter budgeting would follow. For our partners, this might be a good time to take a closer look at some of our cost-cutting offerings such as Teams Voice Plus and PureCom as well as the Unify offerings for the security sector. Considering this – we have negotiated big discounts for the entire of Q3 on the Unify solutions on all deals under 5000 euros (no ICO needed). Please look out for these fantastic discounts and take advantage of them while you can.