Strong rand causes export slump

Johannesburg - The rand's strengthening since the start of 2009 has hampered the competitiveness of South Africa's manufactured export products, compounding the challenges associated with sharply weaker global demand, said the Industrial Development Corporation (IDC) in an economic report on Wednesday.

The IDC notes that in the first semester of 2009, manufactured exports declined by just over 23.5% compared to the same period in 2008, with the largest decline being recorded in the basic iron and steel sub-sector (a 47.1% contraction in exports), which it says is indicative of the massive slowdown in infrastructure development and global manufacturing production.

The basic iron and steel sub-sector accounts for 15.5% of overall manufactured exports.

"The enormous increase in tobacco exports may be associated with better harvests locally or poor output levels in other countries, such as Zimbabwe, rather than a significant increase in international demand," says the IDC.

The consumption-inducing incentives provided by the US and some European countries, where subsidies are paid for the purchase of new vehicles, have resulted in a rise in motor vehicle sales, but this is not likely to be sustainable.

"The implications for South Africa are that exports of motor vehicles may remain depressed for quite some time," says the IDC.

- I-Net Bridge