SA’s Trade Surplus Is Continuing Its Upward Swing

1 July 2021 – South Africa’s bum per trade activity rose above expectations in May as the country recorded the largest monthly trade surplus ever on the rise in exports.

The SA Revenue Service (Sars) yesterday said South Africa’s trade surplus rose to R54.60 billion in May from an upwardly revised R51.26bn in April.

The trade balance has remained firmly in the surplus to date, recording R51.2bn in April, marginally narrower than the R52.6bn surplus for March.

The May trade balance reading easily beat market expectations of a R46.5bn trade surplus by a significant margin.

Sars said exports increased 1.5 percent, or R2.37bn between April and May to total R163.51bn, boosted by higher shipments of vehicles and transport equipment, vegetables and chemical products to the US, China, Germany, Japan and the UK.

Imports, however, fell by R97 million to R108.91bn over the same period driven by sharp declines in purchases of precious metals and stones, and original equipment components.

The country’s main import partners were China, Germany and the US.

South Africa’s trade balance has recorded a surplus for 13 consecutive months, with exports benefiting from elevated commodity prices and rising demand in its major trading partners.

Investec economist Lara Hodes said the modest monthly pick-up in exports was largely buoyed by vegetable products and vehicles and transport equipment as global auto demand continues to recover.

Hodes said while some categories of key imports grew over the period, a notable decline in precious metals and stones largely drove the contraction on the import side. She said May’s favourable reading was supported by the results from JP Morgan’s global manufacturing PMI survey, despite persistent supply side constraints and accelerating input costs.

“Robust commodity prices and increasing global demand should continue to buoy export growth,” Hodes said. “However, while imports have been propped up by the rand and US dollar denominated oil price, domestic consumption and investment activity remain relatively subdued.”

Sars said the year-to-date preliminary trade balance surplus of R202.59bn was an improvement from the R10.63bn surplus for the comparable period in 2020.

Trade activity and confidence could be boosted further by a rapid, efficient vaccination roll-out which could place South Africa on a sustainable growth path.

However, the sustained trade surplus is positive and poses upside risk to the healthy current account outlook.

FNB economist Thanda Sithole said they were forecasting a current account surplus of around 1.9 percent of gross domestic product (GDP) for 2021.

Sithole said the sustained trade surplus and the generally positive outlook on the current account fundamentally provided support to the rand through external funding relief.

“As a result, we are constructive on the rand; we expect it to be strong this year relative to last year when it was negatively influenced by global financial turmoil at the height of the pandemic,” she said. Source (Business report)