THE South African economy should record positive, but low economic growth in 2013, says Cannon Asset Managers’ chief investment officer Adrian Saville. He said in a note on Thursday that growth greater than 2.5% would be "a notable outcome".

South Africa’s GDP slumped to just 1.2% in the third quarter of last year.

Interest rates are expected to remain low because of low rates in advanced economies, sluggish local economic performance and social pressure domestically. The rand could be heavily influenced by progress in Europe with regard to fiscal and monetary consolidation.

"Although extremely tough to call, I believe that the euro will hold together, which will be to the rand’s advantage," he said.

While domestic issues also threaten the local currency, Cannon’s models measure the rand as "significantly oversold".

On a purchasing power parity basis — the theory that currencies adjust according to changes in their purchasing power — fair value for the rand against the US dollar indicates the rand to be as much as 35% undervalued.

The rand was last at R8.98 to the dollar from R9.02 overnight.