South Africa Posts Trade Deficit in July as Imports Climb

Updated on
  • Trade deficit to keep pressure on current account, rand
  • Trade balance swings from 5.48 billion rand surplus in June

South Africa posted a trade deficit in July as imports of vehicle and transportation equipment increased, offsetting a surge in base metals exports.

The trade balance swung to a 0.4 billion rand ($30 million) deficit from a revised 5.48 billion rand surplus in June, the Pretoria-based South African Revenue Service said in an e-mailed statement on Monday. The median estimate of seven economists surveyed by Bloomberg was for a deficit of 1.6 billion rand. The shortfall for the first seven months of the year was 25.3 billion rand compared with 53.4 billion rand in 2014.

A deficit on the trade account will keep pressure on the current account, the broadest measure of trade in goods and services, and the rand, which fell to a record against the dollar last week. The current-account shortfall eased to 4.8 percent of gross domestic product in the three months through March, from 5.1 percent in the previous quarter.

“The economy is probably going to struggle to meaningfully narrow the current-account deficit much below 4 percent of GDP over the medium term,” Jeffrey Schultz, an economist at BNP Paribas Cadiz Securities, said by phone from Johannesburg. “South Africa is going to remain very reliant on portfolio flows and other investments in the capital account to finance its deficits.”

Commodity Prices

The rand weakened 0.3 percent to 13.3463 per dollar as of 3:27 p.m. on Monday in Johannesburg, taking its decline this year to 13.3 percent. Yields on rand-denominated government bonds due December 2026 rose three basis points to 8.35 percent.

Exports increased 4.7 percent to 94.2 billion rand as shipments of mineral products, which include coal and iron ore, surged by 16 percent and base metals jumped 17 percent. Imports climbed 12 percent to 94.6 billion rand as purchases of vehicle and transport equipment advanced by 20 percent.

The current-account deficit will probably narrow to 4.6 percent this year from 5.4 percent in 2014, the Reserve Bank said on July 23. Further improvement will be constrained by the recent decline in commodity prices, it said.

The Bloomberg Commodity Index of 22 raw materials has dropped 3.6 percent this month, with Brent oil tumbling below $43 a barrel for the first time since 2009.

The monthly trade figures are often volatile, reflecting the timing of shipments of commodities such as oil and diamonds.

(A previous version of this story corrected the June revision in the second paragraph.)