What lies ahead for SA into 2023


Most of the SA economists are expecting economic growth to slow in 2023. There has been a lot of mixed economic data which included two consecutive quarters of negative economic growth in 2022.

The National Bureau of Economic Research (NBER), says it cannot be determined whether the economy will either avoid a full recession or experience a short, sharp contraction as opposed to a long, stretched one. Growth prospects have been lowered, GDP growth expectation for 2022 to 1.9% (from 2.1% in the 2022 Budget read in February-end) and 1.4% in 2023 (from 1.6%).


The expectation is that inflation will slow but not at the anticipated pace. We are currently sitting with inflation of 7.4% (Oct 2022) and forecast for 2023 for 6% by mid-year, driven by softening global oil prices, food prices coming down and other factors which lie outside of control of the Reserve Bank. Agricultural commodities such as wheat, corn, fruit and livestock inflation will continue to push through

In addition, we face 2nd round inflationary effects from the Rand. If the Rand weakens, we will have an added inflation pressure as our typical basket of purchases are imported (i.e. petrol).

Inflation figures for 2022

Interest rates

It is anticipated that the Monetary Policy Committee (MPC) of the Reserve Bank is to hike between 0.5% and 0.75% with a hold of rates from the 3rd quarter of 2023.

January is likely to see the MPC switch to a 0.50% hike (26 January start date), instead of continuing the 0.75% increases as the Reserve bank has followed the Fed with over much of 2022. The Federal Reserve of the USA shifted to a 0.5% hike in December (SA did not have December MPC meeting).

SA Repo rate

SA Equities

SA equities have an attractive valuation, both within the global universe and against its own history. SA equities are looking cheaper on a valuation basis compared to other emerging markets and more than developed markets.

This should stand it in good stead during potential global equity drawdowns, but particularly during subsequent recoveries when global risk appetite rises. Even more so, as SA is the fifth most under owned market within global emerging market (GEM) equity funds.

JSE All Share Index Price/Earnings ratio

Fixed Income

Inflation beating returns are still expected from bonds for the coming year. Income growth is expected with the rising income yields. Looking at history, SA real bond yields are attractive, as well as relative to those in global markets. These attractive yields have priced in the country and fiscal risk premiums. With the expectation of falling inflation in the coming year to become less supportive of inflation-linked bonds (ILBs).

Emerging Market real bond yields based on current inflation rates remain positive in most EM countries, with SA’s real yields among the highest.


The SA real cash yield has been rising from a low level in line with interest rate increases and is now only slightly below its historical average. It appears that there is still some scope for this to increase compared to history. Cash alternatives provide a better opportunity for clients compared to traditional cash held in a bank account (i.e. income funds).


The ANC conference wrapped up and we saw the 8th of January statement which reiterated its support for the step-aside rule, while a cabinet reshuffle is anticipated this month. The SONA is due on the 9th of February, and the Budget around 22nd. 

The ANC’s new Deputy President, Paul Mashatile, is expected to drive implementation of structural repair to the country’s infrastructure when he becomes Deputy President of SA, and renewable energy build is also expected to raise the medium-term outlook.