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Trade surplus decrease by R7.2 billion, as loadshedding causes concerns for trade prospects

04 October 2022 Bobby Madhav, FNB Head of Trade & Structured Trade and Commodity Finance
Bobby Madhav, FNB Head of Trade & Structured Trade and Commodity Finance

Bobby Madhav, FNB Head of Trade & Structured Trade and Commodity Finance

South Africa’s trade surplus decreased to R7.2bn in August 2022 compared to the surplus of R24.8bn for the previous month. The surplus was lower than market expectations of R23.7bn and the second lowest surplus since May 2020.

The smaller surplus was the result of a decrease in exports of 1% month-on-month and a sizable increase of 10.4% in imports compared to the previous month.

The decline in exports came mainly on the back of substantial lower exports of precious metals and stones of R5.4bn (-15%); base metals of R2.0bn (-11%) and chemical products of R1.5bn (-13%).

The export values of South Africa’s mining products continue to be impacted by the country’s inability to mine and ship these products to export markets during a time of high (although somewhat softer) global commodity prices. Vegetable product exports increased by R1.0bn (+8%), benefitting from high soft commodity prices.

The narrowing trade surplus continues to be driven by the upward trend in imports since June 2020. Compared to the previous month, imports of mineral products increased by R5.1bn (+14%); machinery and electronics by R4.8bn (+16%) and Original Equipment components by R1.1bn (+13%).

Asia was once again the only region that South Africa recorded a marked deficit with (R36.bn). The deficit with this region has been ever-increasing recently, with imports from China rising considerably and exports to that country moderating.

Whilst China remains the top import and export partner of South Africa, Chinese imports now make up 21.6% of total South African imports. The US was the country’s second largest import partner (7.2% of the share) and Germany the third (6.9% share).

Half of South Africa’s imports now originate from a mere five import partners. The country’s export partner base is far more diversified, with the top five export partners contributing approximately 32% to total exports.

Various local developments weigh down on the outlook for trade going forward. Inflationary pressures led the Reserve Bank to increase its repo rate by 75 basis-points, employment data indicated that formal employment declined, and business confidence remains under pressure.

However, it is the record-breaking incidences of load-shedding experienced during September that will have the greatest impact on trade prospects for the coming months. Not only was the load-shedding continuous (and still in place at the writing of this piece), but it also happened at generally higher stages. Manufacturers and miners struggle to maintain production in these conditions, hurting not only these industries, but the economy in general.

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