SA: Imports surge causing trade deficit to rise
Thématique :
sud afrique
Isa Mariam- Business Day - 04/03/2008
South Africa’s trade deficit reached over R10.2 billion last month, exceeding forecasts of an R8bn shortfall following the rising cost of oil which buoyed imports and power outages which curbed output from the mining and manufacturing sectors.
Data from the South African Revenue Service (SARS) showed that imports during December 2007 increased by 13% to reach R49.57 billion, mainly a result of a 15% leap in mineral products. Exports fells by 8% to R39.36bn which reflects an unusually large fall of over R2.8bn in the value of exports of precious and semiprecious metals and stones. According to analysts, this may stem from the effect of a shutdown of the main mines in the country for five consecutive days during February after a spate of power outages.
“The electricity crisis may have inhibited exports. There was a significant drop compared with December in terms of precious and semiprecious metals, which is odd. There is usually a fall in that category in January, but this one was historically large”, said Efficient Research economist Fanie Joubert.
The fall in the value of precious metals exports was inconsistent with record prices for gold and platinum in January. Since the two metals are traded in dollars, it was also strange because the rand weakened during the month which would normally boost revenue.
The trade gap widened sharply from December when it amounted to R1.2 billion. In January 2007, the deficit reached R12.06bn. Nedbank economist Carmen Altenkirch stated that the next year should see trade deficits remaining large.
In response to higher interest rates consumer demand is slowing, but imports of machinery and mechanical equipment will maintain pressure on the trade deficit as the official infrastructure of the government spending programme gathers momentum.
A mandatory 10% cut in power consumption over the next few years will likely increase the shortfall, eroding output from the mining and manufacturing industries which consume over half of the country’s electricity and provide the bulk of export revenue.
As a result of economic growth exceeding expectations, power supply has failed to keep up and over the past four years, expanded by an average of 5% per annum. Officials predict that this growth will subside to about 4% this year, due in part to power constraints and a global slowdown.
“It reinforced once again the problems on our trade account and our current account deficit”, said ETM economist Russel Lamberti. “I think from a longer-term perspective it certainly shows we are in for a structurally weaker current account.”
The current account deficit, at 7.2% last year, is expected to increase to a near 60-year peak at 8% of gross domestic product by 2010. This will likely put more pressure on the volatile rand. The currency’s slide should help boost the competitiveness of exports at a time when global demand is weaker, although it also contributes to inflation pressures which are already alarming.
South Africa’s trade deficit reached over R10.2 billion last month, exceeding forecasts of an R8bn shortfall following the rising cost of oil which buoyed imports and power outages which curbed output from the mining and manufacturing sectors.
Data from the South African Revenue Service (SARS) showed that imports during December 2007 increased by 13% to reach R49.57 billion, mainly a result of a 15% leap in mineral products. Exports fells by 8% to R39.36bn which reflects an unusually large fall of over R2.8bn in the value of exports of precious and semiprecious metals and stones. According to analysts, this may stem from the effect of a shutdown of the main mines in the country for five consecutive days during February after a spate of power outages.
“The electricity crisis may have inhibited exports. There was a significant drop compared with December in terms of precious and semiprecious metals, which is odd. There is usually a fall in that category in January, but this one was historically large”, said Efficient Research economist Fanie Joubert.
The fall in the value of precious metals exports was inconsistent with record prices for gold and platinum in January. Since the two metals are traded in dollars, it was also strange because the rand weakened during the month which would normally boost revenue.
The trade gap widened sharply from December when it amounted to R1.2 billion. In January 2007, the deficit reached R12.06bn. Nedbank economist Carmen Altenkirch stated that the next year should see trade deficits remaining large.
In response to higher interest rates consumer demand is slowing, but imports of machinery and mechanical equipment will maintain pressure on the trade deficit as the official infrastructure of the government spending programme gathers momentum.
A mandatory 10% cut in power consumption over the next few years will likely increase the shortfall, eroding output from the mining and manufacturing industries which consume over half of the country’s electricity and provide the bulk of export revenue.
As a result of economic growth exceeding expectations, power supply has failed to keep up and over the past four years, expanded by an average of 5% per annum. Officials predict that this growth will subside to about 4% this year, due in part to power constraints and a global slowdown.
“It reinforced once again the problems on our trade account and our current account deficit”, said ETM economist Russel Lamberti. “I think from a longer-term perspective it certainly shows we are in for a structurally weaker current account.”
The current account deficit, at 7.2% last year, is expected to increase to a near 60-year peak at 8% of gross domestic product by 2010. This will likely put more pressure on the volatile rand. The currency’s slide should help boost the competitiveness of exports at a time when global demand is weaker, although it also contributes to inflation pressures which are already alarming.
