SA – China trade could suffer due to virus disruption – economists

As the impact of the coronavirus on global trade continues to wreak havoc, economists yesterday warned a slowdown in Chinese economic activity could affect South Africa’s mineral exports to China and tourism to SA.

Against a background of almost R1 trillion wiped off the South African Securities Exchange (JSE) last week – the fourth-biggest weekly loss since 1978 – Momentum Investments economists Sanisha Packirisamy and Herman van Papendorp painted a gloomy picture of the future.

Citing a PricewaterhouseCoopers (PwC) study, they said the scope for coronavirus-induced business disruption in SA could be significant as China was SA’s largest trading partner.

Bilateral trade accounted for nearly a third of total China-Africa trade in 2017, according to Control Risks Group.

Last year, China bought nearly 11% of SA’s exports, while almost a fifth of SA’s imports originated from China.

The PwC study cited International Monetary Fund forecasts anticipating trade disruption would shave 0.2% off gross domestic product growth in SA this year.

This was taking into account affected export revenues and disruptions to manufacturing and retail supply chains exposed to imports, and tourism.

A 2018 tourism report from Statistics SA recorded 97,000 Chinese tourists to SA in 2018. China was the seventh-largest origin of foreign visitors to SA.

A dip in Chinese activity could be disruptive to key industries, where the economy plays a significant role in the supply chain.

For example, PwC cited cellphones – SA’s largest import category by value from China, with China supplying 85% of the country’s cellphone imports.

In its economic and market snapshot for February 2020, Momentum noted that:

• Although growth risks posed by the economic spillover effects of the coronavirus were skewed to the downside, only a modest dent was expected to impact annual growth in the US.
• While the coronavirus has had a minimal economic effect so far, the number of infections has jumped in the eurozone, highlighting risks of short-term economic damage.
• Japan’s growth plunged by a larger margin than anticipated in the final quarter of last year on soft durable goods spending and limited fiscal support from government, which only ramped up towards the end of the year.
• Chinese officials have implemented a number of economic support measures to help offset the effect of the outbreak, but risks of softer activity spilling over into the second quarter remained significant.
• Coronavirus worries slammed riskier asset classes further last month amid concerns over the spread of Covid-19 outside China.

– brians@citizen.co.za

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