The year 2022 proved to be another challenging one for the South African economy as the country struggled to recover from the lingering effects of the Covid-19 pandemic. High inflation, steep repo rate hikes, persistent load shedding, supply chain disruptions, and sluggish economic growth defined the year, while unemployment and business confidence remained low.
Inflation Surge
After averaging 4.5% in 2021, inflation rose sharply in 2022. It started the year at 5.7% in January, climbed to 5.9% in March due to surging fuel prices, and broke through the South African Reserve Bank’s target range to reach 6.5% in May — the highest since 2017. Inflation peaked at 7.8% in July, marking a 13-year high, before slightly easing to 7.4% by November. Food prices and transport costs were the main contributors to the persistent price increases.
Repo Rate Increases
To control inflation, the South African Reserve Bank (SARB) raised the repo rate six times in 2022. The rate began the year at 4% and was increased by 25 basis points in both January and March. In May, it rose by 50 basis points — the first such increase since 2016. Larger hikes followed in July, September, and November, with 75 basis points each time, ending the year at 7%. Economists forecast that the rate would reach 7.5% in the first quarter of 2023.
Economic Growth and Challenges
The economy initially showed signs of recovery in early 2022, with GDP growing by 3.0% year-on-year in the first quarter — returning to pre-pandemic levels. However, the second quarter saw a 0.7% contraction due to the combined impact of the war in Ukraine, strict lockdowns in China, load shedding, and floods in KwaZulu-Natal.
The economy rebounded in the third quarter, growing by 2.2%, as eight out of ten industries recorded positive growth. However, continued load shedding toward the end of the year posed new risks, and fourth-quarter GDP figures were yet to be released by year-end.
Rand Performance
The rand faced significant volatility throughout 2022, weakened by power cuts, global risk factors, and domestic political uncertainty. In April, it became the world’s worst-performing currency after losing 8.5% of its value against the US dollar. By September, it had fallen to R17.75 per dollar, and in December, it slipped further to R17.95 following the release of the Phala Phala report, which implicated President Cyril Ramaphosa in possible constitutional violations.
Unemployment Crisis
South Africa’s unemployment crisis persisted in 2022, although marginal improvements were recorded. The unemployment rate dropped from 34.5% in the first quarter to 32.9% in the third quarter. Despite the decline, the rate remained above pre-pandemic levels and continued to pose a serious challenge to economic recovery.
Business Confidence
Business confidence fluctuated during the year. It rose to 46 points in the first quarter but fell to 42 in the second quarter due to flooding in KwaZulu-Natal and global instability. Confidence declined further to 39 in the third quarter, with 61% of businesses dissatisfied with prevailing conditions.
As 2022 drew to a close, South Africa’s economy remained under pressure, grappling with inflation, power shortages, and global uncertainty — all of which continued to test the resilience of businesses and households alike.
