Trade tensions in the global goods market expected to persist into 2020 after the global volume of merchandise trade went into reverse last year. Photo: Siphiwe Sibeko/Reuters
Trade tensions in the global goods market expected to persist into 2020 after the global volume of merchandise trade went into reverse last year. Photo: Siphiwe Sibeko/Reuters

PwC warns of tough year ahead but fresh opportunities do exist

By Siphelele Dludla Time of article published Feb 6, 2020

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JOHANNESBURG – South African exporters should brace for a tough trading year ahead as its key trade and investment partners experience a slowdown in growth, hurt by a global economic downturn, advisory firm PwC flagged on Wednesday.

PwC said it expected the trade tensions in the global goods market to persist into 2020 after the global volume of merchandise trade went into reverse last year.

In its global economy 2020 outlook, PwC said about 69.4 percent of South African chief executives were somewhat or extremely concerned about trade conflicts and local economic growth.

“A switch from globalisation to ‘slowbalisation’ is bad news for South African exporters of, for example, wine fruit producers, platinum mines and vehicle manufacturers,” PwC said.

“It is an unwelcome development that will require export-orientated South African companies to consider various scenarios for the world economy and global trade patterns in the short to medium term.”

The advisory firm expects the global economy to expand at a rate of around 3.5percent, in line with other international organisations, but said the euro zone and China could expect muted growth.

PwC economist Christie Viljoen said South African companies needed to adapt accordingly as global growth was slowing.

“This does not even take into account what is happening with the coronavirus. There is pressure on the Chinese economic growth and the global economy is growing at a modest pace,” Viljoen said.

“All of those elements make for a negative picture.”

South Africa has in recent years been a net exporter of goods such as meat, wine, fruits, steel and dairy products to Asia, Europe and Africa.

The export of agricultural commodities, mineral and manufactured items remains an important generator of foreign currency and creator of employment opportunities.

However, Viljoen said it was not all doom and gloom as South African companies could use this opportunity to diversify or find newer markets for their goods.

Viljoen said South African companies could trade within the sub-Saharan Africa region or with BRICS trading partners, or even explore markets where there are trade barriers.

According to the International Monetary Fund’s latest estimates, India overtook the UK and France to become the fifth-largest economy in the world last year.

“The UK economy is growing at a slower pace and demand for South African goods is under pressure. But with India doing so well, we would advise that export companies must look at wider markets and diversify,” Viljoen said.

“The African Continental Free Trade Agreement coming into life trade is opening up in the continent. Other big economies are restricting trade, those are opportunities for us to explore. Political issues can open up economic issues when traditional markets are closed.”

PwC said its own calculations showed that business services were among the most impactful industries in South Africa based on the growth and jobs that can be created by investment in the sector.

BUSINESS REPORT

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