Q & A: Chris Harmse’s 2022 highs and lows and what he foresees in 2023

• Author: Adri Senekal de Wet Adri Senekal de Wet in discussion with Chris Harmse, an economist of Sequoia Capital Management
• Published date: 20 December 2022
• Publication title: Star, The (Johannesburg, South Africa)

De Wet: Looking back on the highs and lows on the economic front during 2022, what stands out for you

Harmse: On the positive side: The better-than-expected economic growth rate of 1.6% in quarter three (Q3), lower unemployment over each quarter namely 34.9% a year ago, coming down to 33.9% in Q1 to 32.9% in Q3.

Few are aware that the economy in fact created more than 1 million jobs over the past year, as employment increased from 1.4 million from 14.282m in September 2021 to 15.765m at the end of September.

Although the lifting of the COVID-19 lockdown rules contributed towards this, the strength in the economy also played a role. Another high was the effects of the two primary sectors on the economy. Both sectors are currently experiencing a super cycle of growth.

With the gold price hovering at around $1 800 (R31 206) and platinum near $1 100, profits of these two sectors as well as other non-metals like coal and iron boosted profits.

Together with a better-than-average agriculture crop, the SA Revenue Service could earn more than R186 billion in tax income over the past 18 months. The total revenue of the mining sector has grown by 63% during the first six months of the 2021/2022 tax year alone. The finance minister could finance the initial “COVID-19” grant or R350 per month to 8 million people to prevent them from starvation and utter poverty.

The “low” of this year’s economy remains the Eskom tragedy. Not only is the company’s inability to deliver electricity in a state of collapse, but the company faces internal sabotage and external, and the company is used as a political weapon between various factions in the ANC.

Eskom, together with Transnet’s inability to provide adequate port and rail facilities for the lucrative mining and agriculture export demand, led the economy and the government to lose billions in extra revenue.

The effects of the Russia-Ukraine war also added to the above structural problems in the economy, so that the South African economy remains on the brink of a possible recession.

This as the sharp increase in fuel and food prices contributed to stagflation in the economy and forced the SA Reserve Bank’s Monetary Policy Committee (MPC) to increase its repo rate seven consecutive times, more than doubling it from 3.0% to 7.0% in November, 2022.

The increase in fuel prices during 2022 was also a “low”. The price for 95 ULP petrol increased by R3.85 or 19.6% during the first 11 months of 2022. The diesel price increased over the...