Investec economist Lara Hodes said the narrowing of the deficit reflects the effects of an improvement in export growth and relatively modest consumption and investment activity, which have contributed to suppressing import growth.
“However, South Africa’s export potential will likely be inhibited by weak external demand conditions, underpinned by ongoing trade tensions, which remain a key risk to global trade, production and investment activity,” Hodes said.
“Markit reiterated this in their latest global manufacturing PMI release, which suggests that the performance of the global manufacturing sector remains weak, with new export business continuing to contract.”
Sars said that, on a monthly basis, South Africa’s trade surplus rose to R5bn in March from R3.87bn as exports surged 7.5 percent, while imports advanced 6.6 percent.
March’s data also marked the second consecutive month of a trade surplus, suggesting there is a steady demand for South African exports.
The rand showed a muted response. Lukman Otunuga, research analyst at FXTM, said: “While the rand has the potential to find support from the trade balance data in the near term, the local currency remains influenced by external forces.
“With the US-China trade talks in Beijing and the US jobs report on Friday, this could be a volatile week for the rand”
Analysts said the size of the surplus was tempered by the effect on imports of rising international oil prices. Eskom was forced to increase its diesel usage for its open-cycle gas turbines to help meet demand for electricity.
Import growth was also expected to come under pressure on persistently depressed consumer and business confidence and subdued domestic consumption.
Data from the SA Reserve Bank showed that growth in corporate credit increased to 6.2 percent in March from 6.1 percent was driven by growth in overdrafts and leasing finance. Consumer credit growth also rose.
Analysts from Momentum Investments said in a research note that corporate credit was expected to translate into increased investment growth only from 2020 onwards, because of policy uncertainty and subdued domestic demand, which have dampened investment plans.
“Momentum Investments expects a further recovery in household credit growth, which should help consumer spend at the margin, while growth in corporate credit is likely to take longer to translate into investment,” it said.