Trade surplus plunges and a deficit now looks likely, analysts say

SA’s trade surplus more than halved in the year to end-December as the Russia-Ukraine war threw a spanner in the works and curbed exports, while imports gained traction over the same period.

The cumulative trade surplus was R193.38bn for the rest of 2022, compared with R431.74bn in 2021, the Revenue Service said in a statement on Tuesday.

As a relatively small and open economy, SA is susceptible to global trends. The war in Ukraine undermined global trade for the better part of 2022, resulting in generally weaker commodity prices.

At the same time, central banks in the developed markets in particular lifted interest rates aggressively over the past year to fight off runaway inflation, boosting the value of the dollar in the process that further undermined commodity markets, to which SA is disproportionally exposed. 

China’s strict Covid-19 policy at the time also curbed export activity before it was subsequently abandoned early in December. To top it all, SA had a myriad of constrains that hobbled mining companies from fully taking advantage of sky-high export coal prices because of insufficient rail capacity.

Coal exports through the Richards Bay Coal Terminal dropped to about 50-million tonnes in 2022, the worst performance since 1993, when it shipped out 51-million tonnes, the data showed last week. As a result, exports increased a modest 11.1% on a cumulative basis for the rest of the year while imports surged 31.8% over the same period.

“Global oil prices in 2022 were notably above the average logged in 2021, driving up the rand value of SA’s imports, while a subdued global environment weighed on export potential,” Investec economist Lara Hodes said .

For December, the trade surplus was R5.43bn, down sharply on the R29.88bn surplus registered in the same period a year earlier. Exports for the review month rose just 4.6% year on year while imports rose 25%.

FNB chief economist Mamello Matikinca-Ngwenya said before the release of the data that SA’s trade balance would be likely to shift into a deficit over the foreseeable horizon as global growth slows and commodity prices soften.

“However, prices could be supported by the anticipated recovery in China, mainly if the recovery is broad-based,” Matikinca-Ngwenya said.

The reopening of China’s borders has engendered a sense of optimism about the global economic recovery and consequent demand for commodities. These statistics include trade data from Botswana, Eswatini, Lesotho and Namibia.

mahlangua@businesslive.co.za