As we close out 2022 and look ahead to 2023, the lingering effects of the pandemic will continue to influence the business world, globalization, technology, and our social responsibility.
Overview
- Population growth
According to research, the total world population would reach 8 billion on the 15th November 2022. It is important to consider the impacts that this population’s size and its projected growth to 9 billion in 2037 will have on our planet, or then climate change. Half of the predicted global growth in population between now and 2050 is likely to occur in a few major nations in Africa and Asia, suggesting that this trend will continue.
Research indicates that South Africa is one of the few developing countries experiencing a significant increase in the proportion of persons aged 60 and over, estimated to increase from 9,2% in 2002 to 16,0% in 2050. The growing proportion of elderly persons in South Africa will bring new challenges as aging populations often experience old-age dependency, social and economic vulnerability, and increased strain on health and social care. Going forward, we need to be able to detach this growth from potential negative impact on sustainable development goals aspired to and use this milestone as a catalyst for pursuing economic and social investments to improve the lives of every South African.
- South Africa GDP
According to Stats SA latest report, the decline in South African GDP of 0.7% in quarter two, increased by 1.6% in quarter three. The main drivers of growth on the supply side of the economy were the agriculture, finance, transport, and manufacturing industries, while the demand side of the economy was increased by a rise in exports and government consumption.
The rise in the production of field crops and horticulture products was the main contributor for the 19.2% growth experienced in the agriculture, forestry & fishing industries. The second largest positive contributor of 1.9% growth, came from the finance, real estate & business services industries.
The increased economic activity in land transport, transport support services and communication services contributed to these industries growth, with an increase in manufacturing by the automotive sector, food & beverages, and metal products.
Personal services and electricity, gas & water supply industries experienced a negative growth in the third quarter. Despite the record power outages and distrusted businesses, the unemployment rate decreased for a third consecutive quarter, from 33.9% in September 2022 to 32.9% in early December 2022.
Exports in mineral products, metals, vegetable products and paper products increased by 4,2% in the third quarter.
The central bank lowered its projection for South African gross domestic growth to 1.8% this year and 1.1% in 2023. The 2023 prediction assumes state-owned power utility Eskom Holdings SOC Ltd. will heighten power outages, shaving about 0.6 percentage points off output. The MPC SA GDP growth 2024 is forecast at a still modest 1.4%, down from 1.7% previously and for 2025 SA GDP growth is estimated at only 1.5% despite government’s promises of increased fixed investment spending.
The good news is that the increase of 1.6% in the third quarter, grow the SA economy above pre-pandemic levels, with real GDP now the highest it’s ever been, exceeding the previous peak of R1 152 billion recorded in the fourth quarter of 2018.
Interest rates
On 24 November 2022, the monetary policy committee raised the benchmark repo interest rate to 7% from 6.25%. This increase brings the cumulative rate increase to 350 basis points since November 2021, with the prime lending rate now at 10.50%.
“We will still see increases in the repo rate going forward, but these will likely be at a slower pace,” said Angelika Goliger, chief economist at EY Africa. “I am expecting a couple more smaller rate rises, of 50bps and 25bps, at the first two meetings of 2023, and then hoping we will be at the top of the rate hike cycle — although not expecting rates to come down anytime in 2023.”
Inflation
The Reserve Bank, in November 2022, once again, highlighted the upside risks to SA inflation, which is still focused on a wide range of factors including oil, food administered prices, the Rand exchange rate, and salaries. The Bank’s food price inflation forecast is revised higher to 6.2% in 2023, up from 5.5% previously. Their estimate of headline inflation for this year and 2023 is slightly higher at 6.7% and 5.4%, respectively. The headline inflation is expected to average 4.5% for 2024 and 2025.
Exchange rates
The pound and Euro remained almost an pare compared from 31 December 2021 to early December 2022, however the dollar has skyrocketed to R18.404 against the dollar in November 2022 but has decreased down to R17.162 per dollar, during the first week in December 2022. This has been an increase of 1.2211% from R15.9510 per dollar to the current R17.162 per dollar. The economy Forecast Agency predicts that the dollar rand exchange rate will remain on the current levels and end at about R17.691againt the dollar on 31 December 2023.
Global economic outlook
In a recent analysis released by the Institute of International Finance, they predicted a global economic growth rate of just 1.2% in 2023, a level on par with 2009, when the world was only beginning its emergence from the financial crisis. According to research by Stanley Morgan, “the coming year is likely to see weaker growth, less inflation, and the end of rate hikes, with the U.S. narrowly missing a recession, Europe contracting, and Asia offering green shoots for growth”.
Automobile manufacturing forecast 2023
According to a report by Mordor Intelligence, currently, the African automotive market is valued at USD 30.44 billion, and it is expected to reach USD 42.06 billion.
The African automotive market was most severely affected by the COVID-19 pandemic, with expectations to reach the pre-COVID demand rates from customer industries only in mid-2023. Likely, production facilities will face a skewed production schedule, which may fluctuate based on demand.
Several major international brands are launching the latest passenger car models in the region to enhance their sales and gain market share, for example in August 2022, Mitsubishi Motors introduced the facelifted Triton range in the South African market. In August 2022, Audi South Africa finalized the installation of 33 electric vehicle (EV) charging stations across the country, which brings the total to 70 charge point in the country and are immediately available to all South African electric vehicle drivers, regardless of model or brand ownership.
South Africa is expected to play a key role in the market share for passenger cars. According to the National Association of Automobile Manufacturers of South Africa (NAAMSA), the total passenger car sales stood at 32,392 units in September 2022, up from 29,537 units in September 2021, representing a growth of 21.3%. The number of medium and heavy-duty commercial vehicle sales stood at 882 units and 490 units in September 2022, representing a growth of 6% and 20.7% respectively compared to September 2021.
South Africa is also a hub for exports of passenger cars in several other parts of the world, especially Europe, it is projected to have noticeable growth. To tap into the growing market share, several other OEMs are actively looking to export the latest models into the South African market.
Maruti Suzuki announced in August 2022, the pricing of the new Grand Vitara. As part of its export strategy the company showcased this model in South Africa, with South Africa set to become the first foreign market to receive the car, followed by other countries.
Considering these developments, the market is expected to gain significant momentum over the next year.
Changes in the marketplace
The new economy emerging during 2022 and towards 2023 is changing how we do business, and with it comes new opportunities for companies that are not only environmentally and socially responsible, but also profitable. In this new economy, there are three powerful forces reshaping our world: technology, globalization, and social responsibility.
Technology has changed the way we live, work and play. In fact, it’s hard to imagine life without it! Globalization means that it’s easier to share ideas and conduct business across borders. Social responsibility is a way to support good businesses while also having an impact on your community.
Innovation creates new opportunities globally, around technology, for example, highlighting how consumers expect brands to be as resourceful as possible, how to avoid waste, to develop new natural farming practices and how to best address carbon emissions.
According to a Harvard Business review, Russia’s invasion of Ukraine has led to a new round of predictions that the end of globalization is high, however, in the researcher’s view, “the war will likely reduce many types of international business activity and cause some shifts in their geography, but it will not lead to a collapse of international flows”. The growth and geographic reach of international flows may rise and fall over time, but the fundamental drivers of success in global strategy will remain unchanged.
Social responsibility is a way for corporations and small businesses to support good business. Social responsibility is not just philanthropy; it’s also a way to address the world’s most pressing problems, from climate change to hunger and disease. It can be an important differentiator in the marketplace as well, helping companies build relationships with their customers or employees. Companies that take an active role in their community and create initiatives that help improve the lives of people are likely to be more profitable.
The changes in the marketplace due to technology and social media have changed how we interact and do business with each other, which leads to an increase in demand for products that allow people to stay connected with one another, care for each other, and be successful.
Changes in the workplace
There is a huge demand for remote work, however Companies are wanting employees to return to the office, despite the pandemic still being a fact of life for many of us, however, we’ve learned to adapt to new behavioural patterns and expectations as we do our jobs.
Many companies now offer a “hybrid model, best of both worlds” where employees can choose to work part at home and part at the office, however to frontline workers in healthcare, retail, teaching, transport, and security and others, a “hybrid workplace” will have hardly any impact on their current day-to-day lives. Going forward, as technology opens opportunities for new ways of working and continues to redefine the relationship between us and our workplaces, frontline workers might be able to adopt some new form of “Hybrid” working.
AI-augmented workforce
The World Economic Forum predicts that AI and automation will lead to the creation of 97 million new jobs by 2025, however, people working in many existing jobs will also find their roles changing, as they will increasingly be expected to augment their own abilities with AI technology.
Initially, AI will primarily be used to automate repetitive elements of employee’s day-to-day tasks which will allow them to focus on areas that require a more human touch, for example, creativity, emotional intelligence, imagination, and high-level strategy. In retail, for example augmented analytics would assist branch managers with inventory planning and logistics and help sales personnel predict what their customers will be looking for when they walk through the door.
Having different skills are becoming more critical to address core business challenges. Companies are increasingly implementing “flat” organizational structures as opposed to traditional hierarchical roles and teams. Focussing on skills, businesses will address the fact that solving problems and answers to their core business questions will be the key to driving innovation and success within information-age enterprises.
Employees focusing on developing their skills, rather than further developing their abilities to carry out their role, leaves them in a better position to capitalize and seize new career opportunities. In 2023, the shift in focus from roles to skills is most likely to be a key trend for both companies and employees.
If you are among the millions of employees who find themselves with more freedom to choose when and where you work, then hopefully, you are utilizing it to in the best interest of your work-life balance.
The Finance role in 2022 and 2023
Chief financial officers (CFO) have always been a key part of any business, but their role is changing. As technology advances and regulations change, CFOs will have to adapt. These days, they need to be more agile than ever before and able to respond quickly when a new regulation or technological innovation comes along. New business models are emerging all the time and it’s up to finance professionals to make sure you and your teams keep up with these changes.
As more companies move toward data-driven decision making, CFOs are also becoming more data-driven themselves. Their role is no longer just about balancing books; it is about having access to information that can help inform strategic decisions across your organization and provide valuable insight into how well those strategies are working out on the ground level (or not).
In the future, more regulation and social responsibility will be placed on firms, which means that there will be a need for increased reporting and data collection. Companies will want to know what their competitors are doing, so they can adjust their own strategies accordingly. In addition, it’ll be important for them to have access to all of this information from any location. They’ll also need detailed reports on certain metrics (such as employee satisfaction) so they can make better decisions about how best to improve performance in those areas.
CFOs will be tasked with overseeing the increased use of automation, which is often done for cost cutting purposes. Controlling the costs associated with automating processes and making sure that they don’t have any unforeseen consequences will be another responsibility for CFOs.
Integrated reporting will include design statistics such as how much recyclable material is used and climate change statistics such as carbon emissions or water usage, including the reporting of diversity and inclusion, which make for a healthier, more robust company.
Digital dexterity (the ability to use technology to solve problems) will be a key competency for finance professionals going into 2023. As the world becomes more connected and digitized over time, we can expect that many more business decisions will be made by computers rather than people. This means that if you want your company’s data secure and protected against attacks while also having access to valuable insights about its operations and performance, you need someone who knows how every aspect of its network operates and isn’t afraid of working with them directly.
Data security tops the agenda. CFOs need to be aware of the risks and how to mitigate them, as well as the latest technologies for data security. The use of AI by CFOs will help them make faster decisions about investments or mergers, which will lead to increased profits for businesses around the world.
Cybercrime presents a major threat to business in general and CFOs in particular. As the world becomes more reliant on technology, cybercrime has become a significant threat to business. The number of reported incidents of cybercrimes has increased dramatically over the last decade and is expected to continue growing as technology becomes more sophisticated and harder to detect. Cybercriminals can be anyone with a computer—a teenager in his bedroom or an organized crime group operating out of Eastern Europe.
Due to increasing regulations imposed on crypto markets, crimeware gangs will move away from Bitcoin and will be seeking other forms of value transfer. It will therefor increase the CFO responsible for managing the financial risks associated with cybercrime including insurance coverage and other financial products that can help prevent and recover from losses due to fraud, theft or other security breaches.
Agile accounting is not just a buzzword but an essential new way to approach reporting. The ability to respond quickly and flexibly to market changes has always been critical for CFOs, but today’s fast-changing environment requires greater agility from financial teams than ever before.
Advanced technology is making accounting more intelligent, secure, and time efficient. With new-age technologies, accounting firms can automate tasks, save time, and improve business productivity. Innovations in accounting practices are helping business owners increase their operational efficiency and revenue with less hassle, costs, and effort.
Planning your budgets and goals timeously, monitoring it monthly, reviewing your forecast weekly and adapting where necessary, staying abreast with new technology and the risk associated with, will ensure that despite all the economic, market and other challenges, you will be able to get better, stronger, quicker, faster, and more profitable in 2023.
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