Figure 1: Merchandise Trade Balance in South Africa (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
Total merchandise imports to South Africa increased to USD 93.4 billion in 2018, from an annual average of USD 81.1 billion from 2015 to 2017[1]. Exports increased to USD 93.5 billion in 2018 from an annual average of USD 80.9 billion from 2015 to 2017[2]. The stronger growth in exports has slightly improved South Africa’s merchandise trade balance to a surplus of USD 88.4 million in 2018 from a deficit averaging -USD 213.5 million from 2015 to 2017[3]. The increase in export earnings improved South Africa’s gross official reserves due to the improvement of the merchandise trade balance.
Figure 2: Gross Official Reserves in South Africa (2016-2022)
Source: IMF 2018, South Africa 2018 Article IV Report. Note: (*) Figures from 2018 onwards are projections from the IMF, 2018.
Gross official foreign exchange reserves increased to USD 51.5 billion in 2018 from an annual average of USD 48.0 billion from 2015 to 2017[4]. During this period, the ZAR appreciated by 0.6% in 2018 to ZAR 13.2 per USD (2017: 10.5%)[5]. The appreciation in currency was largely due to the stabilising political environment South Africa after the political uncertainty of 2016 which resulted in significant depreciation of the ZAR in 2016[6]. The ZAR depreciated by an annual average of -14.1% in 2015 and 2016 from ZAR 10.8 per USD in 2014 to ZAR 14.7 per USD in 2016[7]. Gross official reserves are projected to decrease to USD 50.7 billion in 2019, which is equivalent to 5.0 months’ import cover[8]. In the forward-looking medium-term from 2020 to 2022, gross official reserves are projected to decrease to an annual average of USD 50.3 billion (approx. 4.4 months’ import cover)[9]. The export growth has led to a short-term improvement of South Africa’s current account balance, which is expected to deteriorate to its medium-term average in the forward-looking medium-term.
South Africa’s current account balance deteriorated to a deficit of -USD 11.0 billion in 2018, from a deficit averaging -USD 10.5 billion from 2015 to 2017[10]. In spite of the growth in exports, which improved the current account balance, this has been undermined by services imports increasing to further deteriorate the current account balance. Services imports increased to USD 17.2 billion in 2018 from an annual average of USD 14.9 billion from 2015 to 2017[11]. The current account balance is projected to deteriorate to a deficit of -USD 12.7 billion (approx. -3.3% of GDP) in 2019[12]. In the forward-looking medium-term from 2020 to 2022, the current account balance is projected to deteriorate further to a deficit averaging -USD 14.1 billion (approx. -3.3% of GDP)[13].
Figure 3: Current Account Balance in South Africa (2016-2022)
Source: IMF 2018, South Africa 2018 Article IV Report. Note: (*) Figures from 2018 onwards are projections from the IMF, 2018.
However, South Africa is still dependent on mineral commodity exports even though other exports have grown to slowly diversify the economy and exports. Mineral commodities like platinum metals, coal, metallic ores, iron ore and aluminium contributed 33.3% of South Africa’s total export earnings in 2018 which has increased slightly from the average of 30.3% from 2015 to 2017 (2014: 31.0% of exports)[14]. Vehicle exports contributed an additional 12.8% of total exports in 2018 which has increased from an annual average of 10.2% from 2015 to 2017 (2014: 8.1%)[15]. In addition to this concentration of exports, South Africa is poorly integrated in terms of regional trade with neighbouring countries in SADC and its trade is unbalanced.
The top-five exports from South Africa to SADC are petroleum, electricity, commercial vehicles, diamonds and fertilisers, which constituted 4.0% of total exports in 2018 (2015-‘17: 4.5% of total exports)[16]. The value of the top-five exports from South Africa to SADC increased to USD 3.7 billion in 2018 from an annual average of USD 3.6 billion from 2015 to 2017[17].
The value of total exports from South Africa to SADC decreased to USD 17.0 billion (approx. 18.2% of total exports) in 2018 from an average of USD 19.9 billion (approx. 24.4% of total exports)[18]. These are relatively high or above-average levels of intra-regional trade given that the SADC average intra-regional exports level was 17.9% of total exports in 2018. The SADC intra-regional exports, meaning total exports amongst SADC countries, as a share of total exports to the world decreased from an average of 20.8% from 2015 to 2017[19].
Figure 4: Nominal Exchange Rate in South Africa (2015-2018)
Source: SARB 2019, Monthly Exchange Rate of the Rand Against the US Dollar.
South Africa’s top-five imports from SADC are nickel ores, gold, tobacco, natural gas and diamonds. Although these imports are diversified they only constituted 0.8% of total imports to South Africa in 2018 (2015-‘17: 1.0% of total imports)[20]. The value of the top-five imports from SADC to South Africa increased to USD 3.6 billion in 2018 from an annual average of USD 771.9 million from 2015 to 2017[21].
The value of South Africa’s total imports from SADC increased to USD 8.2 billion (approx. 8.8% of total imports) in 2018 from an annual average of USD 5.8 billion (approx. 7.2% of total exports) from 2015 to 2017[22]. These are very poor levels of intra-regional trade given that the SADC average intra-regional imports level was 20.9% of total imports in 2018[23]. The SADC intra-regional imports, meaning total imports amongst SADC countries, as a share of total imports from the world increased only slightly from an average of 20.7% from 2015 to 2017[24].
Table 1: SADC Regional Trade for South Africa (2015-2018)
Source: UNCTAD 2019, UNCTADStat Database.
South Africa maintains a persistent yet declining merchandise trade surplus in SADC which decreased to USD 8.8 billion in 2018 (2015-’17: USD 14.0 billion). In addition, South Africa might consider increasing its imports from SADC given its persistent trade surplus in SADC and disproportionate under-reliance on SADC imports. Hence, there is significant room to increase South Africa’s imports from SADC countries. This would make South Africa’s intra-regional trade balance in SADC more equitable.
[1] UNCTAD 2019. UNCTADStat Database, United Nations Conference on Trade and Development: Geneva. Available At: https://unctadstat.unctad.org/ [Last Accessed: 26 September 2019].
[2] UNCTAD 2019. UNCTADStat Database, ibid.
[3] UNCTAD 2019. UNCTADStat Database, ibid.
[4] IMF 2018. South Africa 2018 Article IV Report; International Monetary Fund: Washington, D. C. Available At: https://www.imf.org/ [Last Accessed: 15 October 2019].
[5] IMF 2018. South Africa 2018 Article IV Report; ibid.
[6] SARB 2019. Monthly Exchange Rate of the Rand Against the US Dollar, South African Reserve Bank: Pretoria. Available At: http://wwwrs.resbank.co.za/ [Last Accessed: 15 October 2019].
[7] IMF 2018. South Africa 2018 Article IV Report; ibid.
[8] IMF 2018. South Africa 2018 Article IV Report; ibid.
[9] IMF 2018. South Africa 2018 Article IV Report; ibid.
[10] IMF 2018. South Africa 2018 Article IV Report; ibid.
[11] IMF 2018. South Africa 2018 Article IV Report; ibid.
[12] IMF 2018. South Africa 2018 Article IV Report; ibid.
[13] IMF 2018. South Africa 2018 Article IV Report; ibid.
[14] UNCTAD 2019. UNCTADStat Database, ibid.
[15] UNCTAD 2019. UNCTADStat Database, ibid.
[16] UNCTAD 2019. UNCTADStat Database, ibid.
[17] UNCTAD 2019. UNCTADStat Database, ibid.
[18] UNCTAD 2019. UNCTADStat Database, ibid.
[19] UNCTAD 2019. UNCTADStat Database, ibid.
[20] UNCTAD 2019. UNCTADStat Database, ibid.
[21] UNCTAD 2019. UNCTADStat Database, ibid.
[22] UNCTAD 2019. UNCTADStat Database, ibid.
[23] UNCTAD 2019. UNCTADStat Database, ibid.
[24] UNCTAD 2019. UNCTADStat Database, ibid.
