SA recorded a welcome and relatively large trade surplus in September of R6.7 billion, helped by a sharp rise in exports and a significant decline in imports

In September 2016, South Africa’s trade balance recorded a further surplus of R6.7 billion. This compares with a trade deficit of R8.9 billion in August 2016. The market was expecting a small trade deficit of around –R0.6 billion for the month, although the trade data is extremely difficult to forecast accurately on a month-by-month basis, especially since the data is not seasonally adjusted and prone to revisions. South Africa has recorded a trade surplus in four of the last five months.

During September exports rose by a substantial R9.05 billion, while imports fell by –R6.53 billion. An impressive combination. Furthermore, in the first nine months of 2016 South Africa recorded a trade deficit of –R9.95 billion, compared with a deficit of –R37.19 billion during the same period in 2015. This improving trend is expected to continue into 2017.

As mentioned above, the value of imports fell by -6.6%m/m (-R6.53bn) in September 2016. This decline included a R4.8 billion (30%m/m) decrease in oil imports, and a R1.6 billion (66%m/m) drop in imports of precious metals and stones. Over the past year, South Africa’s imports have declined by -1.0%y/y in Rands. The slowing growth in imports is closely linked to the country’s overall economic performance. Unsurprisingly, South Africa’s tax collection of import duties is now well behind budget. Given that economic growth is expected to remain relatively subdued over the coming months, import demand should also remain relatively subdued in 2016/2017.

The value of exports rose by a very welcome 10.1%m/m (+R9.05bn) in September 2016. This increase included a massive R4.8 billion (37%m/m) surge in the value of precious metal exports as well as a R1.9 billion increase in coal exports and a R1.61 billion jump in vehicle exports. In dollars terms, South African exports were up 9.3%y/y. This is the best export performance South Africa has achieved since 2011.

In conclusion, South Africa’s trade balance has generally improved over the past year, at least on a trend basis, helped largely by slowing import growth and some growth in selected export categories. Unfortunately, the slowdown in import growth largely reflects the weakness in the South African economy, rather than an improvement in import substitution. This overall trend is expected to continue during the remainder of 2016 and into early 2017, which should help to substantially narrow South Africa’s current account deficit, reducing the pressure on the Rand exchange rate.

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