South Africa Under Fire for Revisions to Trade Data

South Africa’s tax office is under fire from analysts from Citigroup Inc. to ETM Analytics after making unexpected data revisions that resulted in a halving of the trade deficit this year.

The South African Revenue Service said yesterday it’s adjusting trade numbers from 2010 to include exports and imports from four neighboring countries that share a customs union with South Africa. The shortfall in the first nine months of the year was lowered to 64.5 billion rand ($6.3 billion) from 126.4 billion rand.

Investors have dumped South African assets this year, sending the rand down 17 percent against the dollar, as the government battles to contain twin deficits on its trade and fiscal balances. The rand is listed by New York-based Morgan Stanley as one of the “fragile five” currencies along with those from India, Indonesia, Turkey and Brazil because of their reliance on foreign capital inflows.

“The timing is a bit suspect,” Jana le Roux, an economist at ETM Analytics in Johannesburg, said by phone. “The finance minister has been talking down the notion that South Africa is part of the fragile five countries and with these more favorable trade numbers, they might say South Africa is not as fragile as the markets generally perceive it to be.”

Adrian Lackay, a spokesman for the Pretoria-based tax agency, said by phone today that “there is no other motive or purpose other than a statistical data one.” The changes were made to improve the accuracy of the figures, he said.

Rand Gains

The revisions, which were announced in an e-mailed statement after 7 p.m. local time yesterday, caused the rand to gain 1 percent against the dollar to a two-week high of 10.1776. The currency fell 0.3 percent to 10.2193 as of 12:11 p.m. in Johannesburg.

“Maybe the politicians are trying to make South Africa look a bit better than it actually is,” Christie Viljoen, an economist at NKC Independent Economists, said by phone from Paarl, outside Cape Town. “More complete data is always welcome, but the motives behind this and the process is not quite the standard we expect from SARS.”

The revisions come less than a month after Finance Minister Pravin Gordhan announced changes to the reporting of government fiscal data, which cut the budget deficit for the year through March 2013 to 4.2 percent of gross domestic product from a previously published figure of 5.1 percent.

The Reserve Bank said on its website yesterday that revisions to its current-account data will be less significant than those made by the revenue agency as it already includes estimates for trade with Botswana, Lesotho, Namibia and Swaziland. The current account has had a deficit for more than a decade, with the National Treasury estimating a shortfall of 6.5 percent of gross domestic product this year.

Avoiding Volatility

The deficit of 6.5 percent of GDP recorded in the second quarter may be closer to 5.3 percent after the revisions, Michael Kafe, an economist at Morgan Stanley in Johannesburg, said in an e-mailed note to clients yesterday. The central bank is due to publish the data in its Quarterly Bulletin on Dec. 3.

The large revisions to the trade data should have necessitated better communication from the revenue agency, said Gina Schoeman, an economist at Citigroup Inc. in Johannesburg. While the agency may have wanted to avoid volatility in the rand by publishing the data in after-hours trading on local financial markets, there is still uncertainty over how the adjustments will affect other economic data, she said.

“Everyone is scurrying around to make sure that their calculations are correct and what the impact might be on the current account in the Quarterly Bulletin, and all that means is that the currency will remain volatile,” Schoeman said.

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