In October 2010, South Africa’s trade balance recorded a deficit of R3.2bn compared with a R3.6bn surplus in September. The market expected a deficit of R2.0bn, but this was based on a small number of analysts.
During the month, the value of exports fell by 6.3%m/m, while imports rose by a substantial 7.0%m/m. The fall-off in exports, which amounted to R3.34bn during the month, was mainly due to a decrease in mineral exports (coal) (-R2.96bn), lower precious metal exports (-R1.1bn) and reduced metal exports (-R0.53bn). These declines were partially offset by a R2.5bn increase in vehicle exports.
On the import side (which rose by R3.5bn in October) machinery and equipment imports jumped by R1.7bn, while imports of vehicles rose R1.26bn and chemical imports increased R0.41bn.
In the first ten months of 2010, SA imports are up 8.6%y/y or R38.7bn, while exports are up an impressive 12.3% or R52.2bn, despite the strong Rand. The combination resulted in South Africa recording a cumulative deficit of only R13.2bn for the year to date. This compares with a deficit of R26.7bn during the corresponding period in 2009.
Looking forward, SA exports are likely to struggle to accelerate significantly into 2011 given the still strong Rand, while import intensity is likely to rise as domestic expenditure improves. This implies that the trade balance could be under some pressure over the coming 12 to 24 months, although the deterioration might not be that substantial given the still sluggish domestic economy and lack of private sector fixed investment activity. This implies that although the trade balance is likely to weaken during the next 12 months, with SA running a more persistent trade deficit, the deterioration should not become alarming.
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