Politics and SOEs may hurt SA trade – analyst

Aug 01 2017 06:02
Lameez Omarjee

Johannesburg – South Africa’s trade has been on a positive trajectory since April, with data from the South African Revenue Service (SARS) showing a trade surplus of R10.67bn for June 2017. However, an analyst warns that politics and state-owned enterprises (SOEs) could knock exports in coming months.

The trade data released on Monday showed the surplus increased from R9.5bn reported in May and was above market expectations of R9.4bn. For the period between January to June the trade balance surplus was R27.68bn, compared to the R5.04bn deficit reported for the same period last year.

“The significance of this trajectory is that import prices are falling relative to the country’s exports,” explained Karl Gotte, head of commercial banking at Standard Bank. This is also contributing to the stable inflation of 5.1% reported in June.

The data showed that total exports worth R102.14bn decreased by 0.6% from May to June. Similarly, imports fell by 4.2% to R91.47bn. Exports are 1.1% more than the R101.7bn reported in June 2016, while imports are 1.3% less than the previous year which stood at R92.69bn.

But Gotte warned that export volumes could be impacted by the current political stance and issues with the SOEs.

Gotte said that although output in the agricultural and mining sectors has improved in recent months, the growth is still low compared to global trends. This means it is unlikely to make a “significant impact” on South Africa’s economic challenges.

The disinflation may impact consumer purchasing power positively and some relief is expected in sales, said Gotte. The recent rate cut by the South African Reserve Bank to 6.75% may also encourage short-term foreign inflows. This could boost business activity as both business and consumer confidence is expected to recover.

Low import duty collection

Stanlib chief economist Kevin Lings said that the low import values reflect the state of the economy, this being the weak domestic demand, a lack of domestic fixed investment by the private sector and slowing consumer spending.

“South Africa’s tax collection of import duties remains well behind budget, and is expected to disappoint further during the current fiscal year.

“This overall trend is expected to continue during 2017, which should help to contain South Africa’s current account deficit, reducing the pressure on the rand exchange rate,” said Lings.  

He explained the improved export values are attributed to higher commodity prices, a more stable supply of electricity and less labour market unrest. Manufactured exports still aren’t driving growth, he added.

The rand has gained 5.2% against the dollar over the period and is supported by the improved trade surplus, said Lings.

Analysts from TreasuryOne did not expect movements in the market following the release; the rand exchange hardly moved as the data did not over- or underperform on expectations.

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sars  |  trade  |  trade surplus  |  sa economy



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