The 27four Shari'ah Income Fund had another solid performance gaining 2.08% during the fourth quarter of 2022, 34 basis points ahead of its benchmark. The performance came as
positive returns from property counters, equity-linked notes, and platinum holdings more than offset Franklin Templeton's negative returns. Conditions for income-focused instruments
remained favourable.

Although consumer price inflation slowed in August, it's unlikely to return to the SARB's 3%-6% target anytime soon. The SARB's fight against inflation is complicated by the fact that South Africa's inflation problem is not driven by demand. Food and non-alcoholic beverages (NBA), as well as fuel, whose prices are determined by global supply and demand dynamics, are responsible for SA’s inflation woes. Although food and fuel prices have slowed, the medium-term outlook remains uncertain.

Their prices continue to be adversely affected by Russia's war in Ukraine. In its latest meeting, the SARB Monetary Policy Committee boosted its forecasts for local food price inflation for 2022 and 2023, citing the weaker exchange rate. It now expects food prices to rise by 8.8% in 2023 (up from 8.1%). A higher inflation rate is forecasted for 2023 at 6.2% (from 5.5%). Oil
prices are expected to remain elevated as tight supply overshadows recession risks. Many analysts believe tight supply will keep oil prices above $90/barrel in 2023. Another major risk for SA inflation emanates from electricity and other administered prices.

The National Energy Regulator of South Africa granted Eskom a 18.65% tariff hike to help it cover its debt. This is less than the 32% that the utility had asked for 2022-23, but Eskom will get a further 12.74% in April 2024. Given this background, we expect the South African Reserve Bank to keep its policy rates high to try and cool inflation. The fund continues to adhere to its policy objective.