“There is still no clear or overwhelming indication, in terms of the most recent monthly trade data, measured in dollars, that the weaker rand is helping to improve South Africa’s trade position, although the base effects are favourable, which means that the annual rate of growth in South Africa exports is up an impressive 24.9 per cent year-on-year,” said Kevin Lings, chief economist at Stanlib.
“The lack of a convincing improvement in South Africa’s foreign trade is partly seasonal, but also because the growth in South African exports is more a function of global growth than merely rand weakness. Equally, the extensive labour market disruptions in the mining and manufacturing sectors have severely undermined South Africa’s exports performance.”
The country’s trade balance recorded a surplus of 17.1 billion rand in January 2014, compared with a revised surplus of 2.59 billion rand in December 2013. The market was expecting a trade balance of 12.2 billion rand.
“The latest deterioration in the trade balance reflects a sharp increase in imports, while exports rose only fractionally. The trade balance usually worsens noticeably at the start of the year. In fact, the January 2014 trade deficit is slightly better than the deficit recorded in January 2013,” Lings explained.
The value of imports rose by 26.3 per cent month-on-month at the beginning of 2014, while exports increased by 0.1 per cent month-on-month.
The rise in imports included an increase in oil, imports of machinery and equipment, vehicle imports and chemical imports. Exports of vehicles however, declined by 20 per cent while exports of precious metals rose by 15 per cent month-on-month.
“Given the general slowdown in the domestic economy, especially consumer spending, it is logical to expect import demand to ease somewhat over the coming months, depending on the timing and strength of South Africa’s promised pick-up in infrastructural investment,” said Lings.
“A significant portion of South Africa’s growth in imports, at least since the beginning of 2010, has been driven by consumer activity, including the purchase of motor vehicles and cell phones. This moderation in imports is expected to becoming increasingly evident during 2014.”