The latest 'Real Economy Bulletin' (REB), published by economic research institution Trade and Industrial Policy Strategies (TIPS) on December 8, points to an upswing in South Africa’s economy and its trade and investment performance, with gross domestic product (GDP) exceeding pre-Covid-19 levels for the first time.

This outcome points to considerable resilience, especially around private-sector adaptations to the extraordinarily high levels of loadshedding over the past quarter.

The latest REB points out that GDP grew by 1.6% in the third quarter, reaching R6.7-trillion and showing stronger-than-expected resilience to loadshedding and continuing volatility in the global economy.

REB editor, TIPS economist Nishal Robb, points out that 2022 was the worst year of loadshedding on record by a substantial margin in terms of both duration of outages and gigawatt-hours of energy shed.

He explains that electricity on the national grid stabilised in the past quarter, although at a low level relative to the pre-pandemic average. “Eskom’s electricity production declined in the third quarter – its share of on-grid electricity fell to 88% – but that was offset by an increase in private sales to the national grid.”

Robb adds that enterprises have also now had time to adapt, including by reorganising working time and finding off-grid solutions, usually either generators or solar. “These responses ultimately improve national competitiveness by reducing energy costs.”

Nonetheless, he cautions that absent government support for lower-income households and small business will deepen inequality as the largest firms and wealthiest households replace public electricity in ways that others cannot.

Manufacturing sales grew 12.7% in real terms between September 2020 and September this year, being 7% higher in September than before the pandemic. The key sectors contributing towards this included food and beverages, and automotive sales.

In terms of expenditure, TIPS reports that the expansion was driven primarily by growth in public investment, which rose 0.3% in total, while State investment increased by 3.6%, more than offsetting a 1% decline in private investment.

Despite the fall, TIPS notes that private investment remains above pre-pandemic levels in real terms, sitting at only 13%, which is still significantly below the level of around 20% required for steady growth.

In terms of international trade, South Africa’s trade balance has continued to narrow, with export prices softening while growth has brought a surge in inputs.

Extraordinarily high prices for coal cushioned a fall in prices for metals, while mining prices internationally remain well above pre-pandemic levels.

In the third quarter, South Africa’s trade surplus narrowed to R50.7-billion from R73-billion in the second quarter, but remains extraordinarily high by historic standards.

As for employment, South Africa currently had about 615 000 fewer formal jobs than before the start of the pandemic, despite a significant recovery in the third quarter of 2021, with a recovery of close to 1.5-million jobs.

The nature of job losses continues to deepen inequality, with both white-collar formal and informal jobs exceeding pre-pandemic levels.

In addition, TIPS reports that domestic workers have continued to experience job losses in the third quarter, with 30 000 jobs being shed and representing 201 000 fewer jobs in the sector than before the pandemic.

The manufacturing sector gained 230 000 jobs since the third quarter of 2021, with about 120 000 of these being added in the third quarter, while agriculture and construction together generated 100 000 net new jobs over the past year.

In terms of foreign direct investment (FDI), the TIPS FDI Tracker – which monitors FDI projects on a quarterly basis, using published information – added 12 projects to its database  in the third quarter. The pledged investment value recorded for the third quarter was just over R22.6-billion, from nine projects, with a continuing trend towards investments linked to renewable energy projects.

Meanwhile, the REB includes two briefing notes, the first providing an update on the Just Energy Transition Partnership (JETP) in the aftermath of the Conference of Parties 27. The REB notes that, although the deal will contribute to three important energy sectors – electricity, new energy vehicles and green hydrogen – a significant financing gap remains, while the terms of loans for 81% of the deal remain unclear.

The second briefing note explores the economic implications of the Medium Term Budget Policy Statement (MTBPS), highlighting the risks associated with cuts in real terms to overall spending, driven primarily by efforts to reduce pay for public servants – most of whom work in education, healthcare and security – and social grants.

The MTBPS also plans lower spending on economic interventions and support, but higher infrastructure spending in real terms.