Figures released by the South African Revenue Service (SARS) on Friday show that the country’s trade balance shifted from a revised R5.27bn deficit in November to a R6.8bn surplus in December.

 

This is SA’s highest trade surplus since December 2011.

 

It was the result of a 12.7% year-on-year growth in exports to R87.45bn which outpaced a 7.6% year-on-year rise in imports to R80.64bn.

 

The size of the surplus came as a surprise to economists.

 

Though Nedbank pointed out that a large trade surplus often occurred at the year-end as imports dip after earlier pre-festive season buying, the consensus was for a surplus of only about R1.5bn.

 

"The surprisingly large improvement in SA’s trade balance in December underlines the degree to which the country is benefiting from lower oil prices," said Mr John Ashbourne, Capital Economics’ Africa economist.

 

He said that the December turnaround was driven almost entirely by lower oil prices given that imports fell by 17% year-on-year in value terms but dipped by only 3% year-on-year in volume terms.

 

In addition, export growth was relatively strong at 13.9% year-on-year. This was largely due to a pick-up in commodity exports, said Mr Ashbourne, which expanded by 16.9% year-on-year after having contracted in the preceding nine months. However, on a cumulative annual basis SA’s trade deficit registered R95.3bn last year, which is 33.5% higher than in 2013.

 

This reflects a year in which protracted strikes and SA’s enduring electricity constraint contributed to relatively weak export growth of 6.6% on average against import growth of 8.6%.

 

Investec economist Kamilla Kaplan said in a research note the effect of lower oil prices on the December trade balance had been partially countered by higher fuel imports by Eskom as the utility had become increasingly reliant on dieselpowered open cycle gas turbines to bolster SA’s electricity supply.

 

She believes that sizeable trade deficits were likely to remain a feature in 2015 for this reason and also because export growth was likely to remain inhibited by the global economic climate.

 

The Reserve Bank noted in its Monetary Policy Committee statement last Thursday that since non-oil commodity prices had been on a declining trend for three years, the recent decline in the oil price represented a positive term of trade shock that could have a favourable effect on SA’s current account.

 

However, it warned that this effect was expected to be limited, in part due to the possible constraining effects of load shedding on exports.

Source : BD LIVE