Bloomberg News

South Africa Posts Record Trade Gap as Strikes Curb Output

November 30, 2012

South Africa posted a record trade deficit in October as mining strikes cut output and machinery and chemical imports surged.

The shortfall widened to 21.2 billion rand ($2.4 billion) from 13.8 billion rand in September, the Pretoria-based South African Revenue Service said today in an e-mailed statement. The median estimate of seven economists in a Bloomberg survey was 15.5 billion rand.

South Africa’s trade gap of 104.6 billion rand in the first 10 months of this year is more than 10-times bigger than a year ago as a series of strikes since August shut mines owned by companies including Lonmin Plc (LMI) and Anglo American Platinum Ltd. (AMS) The labor turmoil will reduce this year’s economic growth rate by 0.5 percentage point and lower exports by more than 12.5 billion rand, according to the National Treasury.

“South Africa’s trade performance will remain weak in the coming months on the back of the unfavorable global and local environment,” Dennis Dykes, chief economist of Nedbank Group Ltd. in Johannesburg, said in a note to clients. The current account deficit, the broadest measure of trade in goods and services, “will deteriorate to well over 6 percent.”

Mineral exports, which includes iron-ore and coal, increased 2.9 billion rand, or 22 percent, in the month. Shipments of precious and semi-precious stones and metals, which includes gold and platinum, dropped 1.9 billion rand, or 14 percent. Total exports rose 7.8 percent in the month to 61 billion rand, the revenue service said.

Undermine Rand

Imports climbed 17 percent to 82 billion rand, led by a 27 percent surge in machinery and 19 percent increase in chemical purchases.

The widening trade gap is adding to pressure on the current account and threatening to undermine the rand. South Africa posted a current-account deficit of 6.4 percent of gross domestic product in the second quarter, the most in almost four years.

Africa’s biggest economy relies on foreign investment in stocks and bonds to finance the shortfall, inflows that have fluctuated this year as slower economic growth led some investors to sell riskier, emerging-market assets.

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

The rand erased its gain after the data was released, dropping 0.7 percent to 8.8443 per dollar at 3:30 p.m. The currency has declined 8.5 percent this year, the second-worst performer of the 16 major currencies tracked by Bloomberg.

To contact the reporter on this story: Mike Cohen in Cape Town at mcohen21@bloomberg.net

To contact the editor responsible for this story: Nasreen Seria at nseria@bloomberg.net


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