Trade gap boosts confidence
Shaun Benton
Posted Mon, 31 Dec 2007
Heralding the New Year with good news for the country's trade balance, the South African Revenue Service (Sars) last week announced a narrowing of the gap between exports and imports for the month of November.
With exports for the month totalling R48.38-billion, and imports down to R48.99-billion, the deficit for last month amounted to only R0.61-billion, or R610-million.
This was way down from the record monthly shortfall of R14.7-billion for October, and has gone a little way to allay worries over South Africa's current account deficit.
The drop in the country's trade gap for November was attributed mainly to a decrease in imports of mineral products - including a drop in imports of oil - as well as machinery and original vehicle components, the revenue service said.
According to reports, higher imports of oil for October to prepare for greater demand during the holiday season were partially behind that month's record R14.7-billion trade gap.
In
November, oil imports reportedly dropped by over 40%, helping to narrow the trade gap.
At the same time, South Africa in November experienced saw a major increase in exports of precious stones and metals, as well as an increase in exports of mineral products and manufactured vehicles.
Imports of products into South Africa for November dropped by R7.3-billion to hit the R48.99-billion mark, while the rise in exports of R6.8-billion brought the export tally up 16%, leaving a gap of only R610-million.
Good sign for current account
Compared with October, the R0.6-billion gap augurs well for the country's current account going forward, amid concerns that South Africa's large current account deficit - showing that the country imports far more than it exports - continues to be a key weakness in the domestic economy.
Measured by the current account, increased exports into the South African economy - partially as a a result of the rise in
imports of capital goods, in line with the massive infrastructure expansion under way - saw the current account deficit widen from 6.2% in early 2006 to 6.7% by early 2007.
This widening of the current account deficit - which shows the balance between exports and imports - led to concerns over whether South Africa would have enough foreign exchange reserves to pay for increased exports going forward.
This weakness in the economy leaves the country vulnerable to the whims, moods and perceptions of foreign investors, whose inward investment becomes all the more vital for keeping the economy afloat.
Earlier this year, the shortfall in South Africa's current account - which is the widest measure of trade in goods and services - reached its highest level in 25 years, according to reports.
However, by the end September 2007, South Africa's foreign reserves were sitting at the not-too-uncomfortable level of $30.5-billion, boosting the country's confidence at
weathering the storm of increased imports expected over the coming period, with the public sector alone planning to spend over R400-billion in the immediate term.
But compared to the same period in 2006, the year-on-year deficit increased for January to November 2007, with a cumulative trade deficit of R71.3-billion, up from R67.5-billion for the same period in 2006, Sars said.
And compared to the same period in 2006, the growth in exports of 24% outpaced the growth in imports, at 21%.
World trade zones
In terms of world zones, South Africa's trade deficit with Asia decreased from R12-billion in October to R8.4-billion in November. Exports to Asia increased by R1.3-billion to R13-billion, while imports decreased by R1.96-billion to R21.4-billion over this period.
South Africa's trade deficit with Europe decreased from R4.8-billion in October to R2.2-billion in November. Exports to Europe increased by R1.5-billion to R15-billion,
while imports decreased by R1.2-billion to R17.2-billion.
And month-on-month trade over this period with the United States of America increased, from a deficit of R1.8-billion to a surplus of R0.8-billion. Exports to the US increased by 1.9-billion to R7.2-billion, while imports decreased by R700-million to R6.4-billion.
With its peers on the African continent, South Africa's trade surplus increased, from R0.09-billion in October to R4.8-billion in November. Imports from other countries on the continent decreased by R3.5-billion to R2.8-billion, while exports increased by R1.2-billion to R7.7-billion.
Source: BuaNews
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