LETTER: Counting on the good fortune of global events is a bad growth strategy

The SA economy and fiscus have benefited immensely from the commodities boom of the last two years (“SA trade surplus jumps, but is well below 2021 levels,” June 30).

In terms of coal and precious metals, the country has numerous deep deposits and the global appetite for raw materials has boosted the country’s profile. But counting on the good fortune of global events is not a solid path for substantive future growth.

The country’s trade surplus increased in May. However, the current total of R105.9bn is paltry when compared with the R200.34bn at the same time in 2021. So far year on year imports have grown 29.1% and exports just 8.2%. Continued logistical problems, exacerbated by blockades of the crucial N3 route between Gauteng and KwaZulu-Natal, as well as increased rolling blackouts, will further depress export capabilities.

Since the end of March, the London Metal Exchange Index has dropped 23% (as of June 29). Materials such as tin, aluminium and copper are all down. With further interest-rate hikes firmly on the table for the rest of the year (from most central banks around the world), the conditions for borrowing and economic activity will be depressed. Businesses and capital more broadly will likely reassess current operations, and possibly shift to locales with fewer operational risks than SA.

If China (one of SA’s biggest trading partners) were to change course with its “zero-Covid-19” policy stance, renewed demand for commodities would boost the economy and fiscus even more. But the prospect of such a radical shift by the Chinese government is unlikely. SA should instead do far more to generate economic activity, investment and industrialisation by getting the basics right to ensure it is always an attractive and reliable destination for trade.

The low-hanging fruit for reform pertains especially to port and rail infrastructure; already neighbouring countries are benefiting from SA’s foot-dragging as importers and exports across various industries look for new avenues of least resistance to get goods and materials into and out of the country.

Chris Hattingh
Centre for Risk Analysis

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