Softer rand puts trade in surplus

SA has recorded its largest trade surplus in almost six years as exports leapt and imports fell, indicating that the weak rand may finally be having an effect.

In May the trade balance, based also on data from Swaziland, Botswana, Lesotho and Namibia, surged to an R18.7bn surplus from a R127m deficit.

The rand firmed on the news, although most of its movement was related to a strengthening in emerging-market currencies.

May exports increased 14%, or R12.8bn, while imports fell 6.6%, or R6bn, from April.

Slightly better commodity prices boosted exports.

Although still well below par, the prices of SA’s major commodity exports were off their early-2016 lows, Reserve Bank deputy governor Francois Groepe said on Thursday.

Barclays Africa economist Miyelani Maluleke said the surplus appeared to have been driven by “an unusually large spike” in precious metal exports, which could reverse in short order.

Despite this, there seemed to be a gradual adjustment in SA’s merchandise trade accounts, which partly reflected the benefit of the weaker exchange rate on exports and import-substitution,

Maluleke said.

Exports of vegetables, minerals, chemicals, precious metals and base metals increased in May while imports of precious metals, machinery and equipment, and mineral products fell.

The decline in imports is in line with weak domestic demand and high prices due to a weaker rand.

The cumulative trade shortfall from January to May was at R653m compared with R27bn over the same period in 2015 — another indicator that exports performed much better in the first five months of 2016 compared with the same period in 2015.

An improving trade balance, if sustained, will help reduce the deficit on the current account, which will in turn prop up the rand.

The current account deficit widened to 5% of GDP in the first quarter of 2016 from 4.6% in the previous quarter as more dividends were paid to foreign investors than was received in inward investment.