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SA’s export sector could be a catalyst for the country’s economic recovery and help to address growing unemployment, according to Justin Milo, executive head of Trade at Standard Bank South Africa.
The IMF predicts that global growth will increase by 4.4% in 2022, while global trade is anticipated to grow by 6.5% over the same period. These are positive leading indicators of global economic activity with a knock-on positive impact on SA exports, says Milo. SA has traditionally imported more than it exported, resulting in a trade deficit. However, thanks to a commodity price boom, SA has been recording a trade surplus for more than a year with the country’s exports outpacing imports.
“At the end of August 2021, SA’s trade surplus was R332-bn after significant growth in exports,” says Milo adding that exports had grown by 41% year on year on a year-to-date basis by the end of August following increased commodity prices and growth in the economies of SA’s trading partners which is pulling through the demand for its exports.
“Key drivers of the trade surplus include mining outputs such as precious metals, iron ore and manganese, manufactured goods such as machinery, equipment and motor vehicles and agricultural commodities such as citrus, maize, apples and grapes,” he explains. “These export flows have been channelled to our key trading partners in Asia, including SA’s largest trading partner, China, as well as Japan and India; the US; Europe, including Germany, UK and the Netherlands; and Africa, including Namibia, Botswana and Mozambique.”
Although the expectation is that SA will continue to have a trade surplus, the increase in oil prices means the trade surplus is likely to start decreasing, reveals Milo.
Supply constraints, higher than expected demand for goods, container shortages and insufficient shipping capacity have resulted in a global freight crisis which has seen shipping transport costs rise significantly in the past year. These supply chain disruptions have encouraged local corporates to increase their domestic and regional procurement to mitigate their supply chain risks — this presents a growth opportunity for local businesses, the South African export sector and regional trading partners.
Msawenkosi Hlanti, executive head of Trade Sales, SA for Standard Bank, says the crisis is an opportunity to grow the local manufacturing and SME sector. “This has far-reaching positive impacts by growing the number of available jobs, growing the economy and growing future exports.”
Once global supply chain disruptions have eased and, locally, port constraints have been addressed, Hlanti expects both imports and exports may increase.
A thriving import and export industry is positive for the local economy, says Milo. “Imports create a significant amount of value locally while increased demand for exported goods will help to develop and grow our local manufacturing sector and industrial base.” Source (Business Day Insights)