Picture: ISTOCK
Picture: ISTOCK

Commodities continued to propel export performance, resulting in SA’s trade account recording a fourth consecutive quarter of surplus.

Metals prices have strengthened over 2017 on tightening supplies, while global merchandise goods trade also rebounded as global growth has continued to pick up momentum.

"Despite the more favourable global backdrop, growth in the local mining and manufacturing sectors has been constrained by weak domestic demand and persistent policy uncertainty, which continues to manifest in depressed business and consumer confidence," Investec economist Kamilla Kaplan said.

"Weak rates of domestic consumption and investment have contributed to import compression," she said.

The South African Revenue Service recorded a R4bn trade balance surplus, far lower than many economists’ projections for September 2017.

The surplus was attributable to exports of R101.76bn and imports of R97.76bn.

SA’s cumulative trade surplus in the first nine months of 2017 stands at more than R47bn versus a cumulative deficit of R6.7bn in the same period in 2016.

The rand weakened slightly immediately after the release of the data, but later recovered to trade at R14.14 to the dollar.

Capital Economics economist John Ashbourne said that the rand was the worst performing major currency in the sub-Saharan region over the past month, falling by 3.7% and breaching the R14 to the dollar mark for the first time since December 2016.

The rand has taken a knock as the market continues to digest the medium-term budget policy statement and prospects of a downgrade by all three credit rating agencies in November.

Ashbourne said while political noise often haunted the rand over the short term, economic factors tended to drive the currency over the longer term.

"Over the longer term, South Africa’s exchange rate has essentially moved in line with the price of its export goods.

"This suggests that short-term political shocks do not have a lasting effect on the rand," he said.

BNP Paribas economist Jeff Schultz said: "This is likely to keep the current account deficit well contained at below 3% of GDP in the third quarter and lessens the country’s external funding requirement."

The current account deficit was 3.3% in 2016, but based on the surplus, economists are projecting that to drop below 3%.

"With an increasingly uncertain domestic political climate and credit ratings downgrades looming, we believe that this is likely to remain one of the few favourable backstops to the currency and SA’s still more favourable inflation outlook," added Schultz.

NKC economist Elize Kruger said: "With eight consecutive monthly trade surpluses now recorded and the cumulative trade surplus for the first nine months notably higher than in 2016, it is clear that the tide has turned for the trade account and subsequently, this will also have a positive impact on the country’s current account deficit."

Kruger said export growth had been supported by a moderate recovery in SA’s major trading partners as well as higher commodity prices, while the sluggish local economy was keeping a lid on import growth.

"Both developments favourably impact on the trade balance, the current account balance and, subsequently, also provide support for the rand exchange rate," she said.


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