Better-than-expected goods trade surplus of R19.7 recorded in September

A better-than-expected goods trade surplus in September shows there could be some good news in a world rocked by financial crises, but the trend is not expected to continue due to various factors, such as slowing exports, while commodity prices continue to fluctuate.

Statistics SA announced today that goods exports increased to a fresh record high of R191.6 billion in September, while imports rose to R171.9 billion, with export growth outpacing monthly imports to reach the better-than-expected goods trade surplus of R19.7 billion in September.

However, Oxford Economics Africa says it expects merchandise imports to remain elevated, while export growth will slow down and cause South Africa’s terms of trade to deteriorate in 2022. Coupled with a buoyant US dollar, this will keep the rand under pressure over the coming months.

According to Statistics SA, goods exports in September increased by 10.0% compared to August, while imports increased by a more measured 2.3%, resulting in the merchandise trade surplus improving to R19.7 billion from a downwardly revised R6.2 billion in August.

ALSO READ: Sars records trade balance surplus of R7.18bn for August

Commodity price volatility and trade surplus

Oxford Economics Africa says the latest trade results highlight the degree of commodity price volatility, while supply chain constraints continue to disrupt industries. Export receipts are 12.8% higher year-to-date at 1.52 trillion, compared to R1.35 trillion over the same period during 2021.

Cumulative imports for the year were R1.34 trillion, 34.4% more than the R999.7 billion in imports recorded during the same period in 2021. The cumulative merchandise trade surplus for 2022 is R175.4 billion.

The largest increases in imports in September were mineral products and vehicles and transport equipment goods, while precious metals, wood pulp and paper, together with vehicles and transport equipment exports showed substantial increases.

Oxford Economics Africa says from a regional perspective, South Africa logged a R32.4 billion merchandise trade surplus in relation to the African continent during September, while recording a R14.3 billion trade surplus with Europe and a trade deficit of R36.8 billion with Asia.

“Commodity prices fluctuated significantly throughout 2022, driven by a multitude of factors. World demand is set to decelerate in 2023 on the back of a weaker macroeconomic outlook, which is expected to weigh on steel and base metals prices,” Jee-A van der Linde, senior economist at Oxford Economics Africa, says.

“Despite heightened downward pressure from rising US rates, precious metals prices show some level of resilience thanks to safe-haven buying, as geopolitical and financial risk premia remain elevated.”

ALSO READ: SA follows rest of the world in reduced potential growth

Logistical bottle necks

However, Van der Linde says, price volatility is only part of the full story, with logistical bottlenecks another big contributing factor. In South Africa, inefficiencies at rail and port utility Transnet also place undue demands on the economy and the recent strike by Transnet workers increased congestion at local ports. Van der Linde says we will only see the impact of the strike in later trade statical releases.

Regarding global factors, Van der Linde says although easing restrictions in China have helped to reduce global supply chain pressures, high energy prices and materials shortages were obstinately disruptive.

Oxford Economics Africa expects rising costs and weakening demand to weigh on global supply chains for the second half of this year and into 2023.

“The last time South Africa recorded a merchandise trade deficit was in April 2020, but that might change over the coming months with South Africa’s terms of trade expected to deteriorate in 2022,” Van der Linde points out.