SA starts year with trade deficit after surplus in 2023

South Africa started the year on the backfoot with a trade deficit after recording a full year total trade balance surplus of R62.2 billion, with exports of R2.04 trillion and imports of R1.98 trillion constituting a total trade of R4.02 trillion.

According to the trade statistics for January released by the South African Revenue Service (Sars), the country recorded a preliminary trade balance deficit of R9.4 billion with exports of R144.3 billion and imports of R153.7 billion, including trade with Botswana, Eswatini, Lesotho and Namibia.

However, the preliminary trade balance deficit of R9.4 billion was an improvement from the R24.4 billion trade balance deficit for January last year. Sars says export flows for January 2024 were 4.5% higher compared to the R138.0 billion recorded in January 2023, while import flows were 5.4% lower, decreasing from R162.4 billion in January 2023 to R153.7 billion in January this year.

“Logistics challenges at South Africa’s congested ports are a major headache for businesses and a significant downside risk to the domestic economy in 2024,” Jee-A van der Linde, senior economist at Oxford Economics Africa, says.

The latest trade statistics show that goods imports increased by 2.5% in January compared to December, while exports slumped by 12.8%.

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Largest export declines in vehicles, food and electronics

Vehicles and transport equipment decreased by 44% compared to December, while prepared foodstuff decreased by 40% and machinery and electronics by 25% recording the largest declines in rand terms out of all the export items during January.

On the other side of the trade ledger, sizeable import increases were recorded for original equipment components (+58%) in January compared to December and machinery and electronics (+9%), showing that residential and business’ efforts to shield themselves from electricity outages continue.

In terms of trade partners, South Africa logged a R27.2 billion merchandise trade surplus compared to the African continent during January, while recording a R12.3 billion trade deficit with Europe. At the same time, South Africa registered a trade shortfall of R32.5 billion with Asia.

Van der Linde points out that port congestion and load shedding worsened considerably in recent months, with a key coal export line to Richards Bay shut and export activity mostly suspended after two coal freight trains collided in mid-January.

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Transnet the main reason for export decline

“This was another setback for the economy in general and industry in particular as government and businesses scrambled to stop Transnet’s decline. Our base case remains for the South African economy to avoid a recession in the fourth quarter of 2023 but expect that growth will stay weak. We estimate that the economy expanded by a meagre 0.5% in 2023 and that growth will pick up only slightly to 0.7% this year.”

The economists at the Nedbank Group Economic Unit say the deficit was due to a steep contraction in exports that remain constrained by subdued global demand conditions, with the disruption to coal exports following the train collision in Richards Bay in mid-January adding further downside pressure.

“The import of mineral products declining by 19.3% and vehicles and transport equipment, declining by 5.5%, contained the upside. Trade conditions are expected to recover from the second half of the year as key central banks cut interest rates and global demand improves.

“However, the outlook remains clouded by domestic structural constraints and ongoing geopolitical tensions, which have impacted the flow and cost of trade,” they say.