Johannesburg - South Africa’s trade data looked much healthier on Friday after the SA Revenue Service (Sars) added more detailed information to its month-end report – but the figures remain disappointing.
The inclusion of transactions with the country’s closest neighbours – Botswana, Lesotho, Namibia and Swaziland (BLNS) – almost halved the deficit for the year to October to R76.1 billion, from the R146.6bn previously calculated. The deficit is the gap between income from exports and the cost of imports.
Traditionally, BLNS trade statistics were not included because of the free flow of trade within the Southern African Customs Union, which is made up of the BLNS countries and South Africa. However, with the country’s trade balance rapidly deteriorating, the government decided on a different approach last month.
The new method provides a more accurate reflection of South Africa’s external trade balance.
However, the trend in trade flows remains negative with the deficit rising to R12.4bn in October, from R12bn in September, as exports rose by R5.83bn and imports by R6.1bn.
Moreover, the 10-month deficit is far higher than the R38.62bn deficit in the same period last year, recalculated with BLNS trade included.
Absa Capital economist Peter Worthington had expected a better performance from exports in October, “on the assumption that car exports, which fell precipitously in September [75 percent year on year] due to the strike in the motor vehicle sector, had substantially recovered”.
Exports have been hit this year by slow growth in Europe and slowing growth in China, South Africa’s biggest markets. And the damage has been compounded by strikes in mining and manufacturing that have disrupted production.
Worthington noted: “Exports did recover in October, rising nearly 8 percent in the month, but imports also rose from a higher base by some 7 percent.
This suggests that South Africa will continue to struggle with its external balances.”
The inclusion of BLNS data will have a lesser impact on the current account: the trade account plus the services account which is running a deficit of more than 6 percent of gross domestic product (GDP).
The current account figure has always been adjusted in some measure by the Reserve Bank to take account of BLNS flows. The latest figure will be published tomorrow in the bank’s Quarterly Bulletin.
A current account deficit of more than 3 percent of GDP requires a constant inflow on the financial account to plug the yawning hole.
South Africa has been able to rely on strong foreign investment flows in the past but this is no longer the case.
Higher interest rates in the US are diverting funds that were poured into emerging markets previously. And South Africa is one of the countries to see the flows reverse.
According to Citi, non-residents had sold a net R33.2bn in domestic bonds and shares in the past month to Thursday.
Standard Bank economist Shireen Darmalingam said the rand, which had “failed to improve materially” after Sars announced revisions to the trade data last month, “remains vulnerable to the wide current account deficit”. - Business Report