South Africa’s trade balance for August swings into a R6.84bn surplus

SOUTH Africa’s trade balance swung from a deficit in July to R6.84 billion surplus in August on the back of increasing exports in mineral products and a weaker oil price.

Data released by the South African Revenue Service (Sars) showed that exports in precious metals and stones, machinery, electronics, vehicles and transport equipment increased by R9.46bn from July to August.

Imports decreased by R1.11bn during the period, largely due to a decline in oil imports, vehicle and transport equipment, and original equipment components. Sars said the surplus was attributable to exports of R122.02bn and imports of R115.17bn.

NCK Research said the rebound was not a cause for celebration, as export demand could take strain during the rest of the year.

NKC analyst Elize Kruger said they forecast a slight deterioration in the current account deficit to gross domestic product ratio, from 3.5 percent in 2018 to 3.6 percent in 2019.

“Monthly trade statistics remain very volatile, thus the sizeable trade surplus in August is welcomed, but not necessarily reason to cheer, as the year-to-date figures suggest a moderate deterioration in the trade account so far in 2019,” Kruger said.

“With escalating trade tensions and the synchronised global economic moderation expected to become more entrenched, export demand could take some strain during the remainder of 2019, while a slight recovery in domestic demand will drive imports growth higher in coming months, which could potentially place renewed strain on the trade account.”

The surplus included trade data from Botswana, eSwatini, Lesotho and Namibia.

However, the trade deficit for the year continued to widen.

The balance of trade fell to a deficit of R850 million in the year to date, compared to a surplus of R4.67bn during the comparative period last year.

Exports increased by 6.9 percent year-on-year, while imports rose 7.6 percent during the period.

Investec’s chief economist, Annabel Bishop, said the figures did not capture the impact of the higher oil price due to the recent damage to Saudi oil production.

The attack on Saudi oil facilities earlier this month affected 5 percent of the world’s oil supplies and triggered a 20 percent spike in the oil price, though this was later reversed.

Bishop said the trade outcome was above consensus expectations of a R1.2bn surplus and was ignored by the rand, which remained driven by the elevation in global financial market risk aversion.

“South Africa’s rand terms of trade improved in August, on the trade surplus. However, South Africa’s terms of trade are, on average to date, worse than in 2018,” Bishop said.

“While August is only one month, it has seen some improvement to the trade balance, but does not yet capture the higher oil price following the recent damage to Saudi production.”