Trade balance dipped unexpectedly in June

South Africa’s merchandise trade balance unexpectedly dipped in June, with the value of the country’s exports and imports shrinking to register a trade shortfall of R3.5 billion. Lower export figures were mainly due to fall in the value of mineral goods, precious metals and stones, as well as vehicle and transport equipment exports.

According to Sars there was also a drop in the import of prepared food, machinery and electronics. The latest trade statistics show that goods imports decreased by 1.6% compared to May to reach R171.2 billion in June, while exports fell by 8.6% compared to the previous month.

Economic research group, Oxford Economics Africa, expected little change in the surplus but has noted that monthly merchandise trade flows will remain volatile for the time being. The group also says mineral producers find it difficult to get their goods to local ports, which are constrained by backlogs and inefficiency.

“The knock-on effects are undermining industry, a salient contributor to merchandise exports, which is already curtailed by scheduled power outages. What’s more, fixed investment intended to expand existing production capacity is undermined by weaker demand and unforeseen capital expenditure to source alternative energy generation.”

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Favourable impact of weak rand erased

These factors seem to have erased the favourable impact of a weak rand in June on domestic exporters, while headwinds for global economic growth bode ill for South African vehicle exports, which are particularly sensitive to changes in demand from Europe and the UK.

South Africa’s trade deficit of R3.5 billion in June is in sharp contrast to a downwardly revised merchandise trade surplus of R9.6 billion in May. The trade deficit was also much lower than the consensus forecast of R11.9 billion and marks the second goods trade deficit this year.

The largest declines in rand terms out of all the export categories during June were vehicles and transport equipment that declined by 28% compared to May, mineral products declined by 13% and precious metals and stones by 9%.

At the opposite end of the trade ledger, large decreases in imports were recorded for prepared food that declined by 20% compared to May, precious metals and stones by 32% and machinery and electronics by 1%.

South Africa logged a R33 billion merchandise trade surplus for the African continent during June and a trade deficit of R4.2 billion with Europe, as well as a trade shortfall of R36.3 billion with Asia. Export receipts were 2.3% higher compared to a year ago at R998.7 billion, while cumulative imports for the year stand at R993.1 billion, 17.3% more than the value recorded during the same period in 2022. The cumulative merchandise trade surplus for 2023 is roughly R5.6 billion over the past year.