Ethel Hazelhurst
A chilling sign of what may lie ahead for South Africa is that exports to China, which grew 52 percent last year, are losing momentum. At R20.8 billion in the first three months of the year, they were up only 8 percent compared with the same period last year. And exports to Europe were flat at R37bn.
The figures reflect the double whammy inflicted by the euro zone’s debt problems.
Europe, sliding into recession, is cutting back on spending, including on other countries’ goods and services.
There is both a direct and indirect impact on South Africa. The European market for our exports has stopped growing and could soon be shrinking. And China, whose manufactured exports to Europe are drying up, no longer needs increasing quantities of South Africa’s raw materials.
China, which overtook four other countries to become the largest national market for South Africa’s exports in 2009, helped South Africa ride out the global recession of 2008/09 and recover some of its lost ground in the following years. Without this source of growth the domestic economy will battle to achieve its earlier annual growth levels of about 5 percent.
The Reserve Bank expects growth of only 2.9 percent this year – not enough to meet the government’s target of creating 500 000 jobs a year.
One market where demand was still healthy, surprisingly, was Japan. That economy, hit last year by an earthquake and a tsunami, grew 4.1 percent in the first quarter on an annualised basis.
South Africa’s exports to Japan nearly tripled to R9.8bn from R3.4bn. However, the value is comparatively small – less than 6 percent of total exports worth R171.3bn in the period.
South Africa is increasingly looking to the rest of Africa to grow its export markets – but there is still a way to go before it can make up for lost revenue elsewhere. In the first three months, the value of goods sold to the rest of the continent expanded 16 percent to R27.4bn.
Total exports to the rest of the world were up just less than 10 percent in the first quarter after growth of more than 14 percent last year.
South Africa’s poor trade performance extended to April, when it recorded a R9.9bn trade deficit, from R5.5bn in March – and a R36.5bn cumulative deficit in the first four months.
Commenting on the April deficit, Isaac Matshego, an economist at Nedbank, said: “These figures reflect some of the impact of domestic supply disruptions early in the year but they also confirm that the current global weakness is (having a negative impact on) the domestic economy.”
Matshego said that import demand from both advanced and emerging economies had slowed and he quoted data from the Netherlands Bureau for Economic Policy Analysis (CPB). The CPB has revealed that global trade rose only 2.7 percent in the first three months of the year, compared with the same period last year. This was a sharp deceleration; in the first quarter of last year trade was up 9.5 percent on the first quarter of 2010.
Many people are looking to the weaker local currency to boost exports. However, Meganomics economist Colen Garrow said the depreciated rand would not necessarily prove “a bonanza for exports, especially since destination markets in the EU and China are weakening”.