With a GDP of $66.0 billion recorded in the third quarter of 2022, South Africa is the second largest economy in sub-Saharan Africa after Nigeria.
On the demand side, exports and government consumption were the main growth drivers. On the supply side, agriculture, transportation, and manufacturing were the main growth drivers.
South Africa’s trade balance was $11.29 billion in October 2022, down 56% from $25.91 billion in October 2021).
Exports totaled $104.05 billion in October 2022, while imports were $92.76 billion. Exports increased by 0.7% to $103.4 billion, while imports increased by 19.74% to $77.5 billion during the same period.
Major export partners included the US (9.7% of total overseas sales), China (7.4%) and Germany (5.8%).
Imports declined, due to decreases in chemical products (-10%), plastics and rubber (-18%), textiles (-17%), and vehicles and transport equipment (-8%), partially offset by an increase in mineral products (14%). Imports from China accounted for 18.5% of total purchases, followed by imports from India (7.9%) and the US (7.2%).
According to the Organisation for Economic Cooperation and Development, the South African economy is expected to contract in 2023 as tight monetary policy measures are designed to curb inflation. In addition, the repo rate is expected to reach 7.25% by the end of the first quarter of 2023. From a trade perspective, the value of Exports totaled $104.05 billion in October 2022, while imports were $92.76 billion. Exports increased by 0.7% to $103.4 billion, while imports increased by 19.74% to $77.5 billion during the same period.
Major export partners included the US (9.7% of total overseas sales), China (7.4%) and Germany (5.8%).
Imports decreased, reflecting declines in chemical products (-10%), plastics and rubber (-18%), textiles (-17%), and vehicles and transport equipment (-8%), partially offset by an increase in mineral products (14%). Imports from China accounted for 18.5% of total purchases, followed by imports from India (7.9%) and the US (7.2%).
According to the Organisation for Economic Cooperation and Development, the South African economy is expected to contract in 2023 as tight monetary policy measures are designed to curb inflation. In addition, the repo rate is expected to reach 7.25% by the end of the first quarter of 2023. From a trade perspective, the value of rand exports is expected to decline, leading to a further deterioration in the trade balance.
Imports of petroleum and petroleum products are expected to increase significantly in the short to medium term (2023 to 2025) as a result of the closure of refineries in the country.
The last operating refinery, Natref, with a production capacity of 108,000 barrels per day, ceased operations last July, citing delays in the arrival of crude oil shipments as the main reason.
The delays were the result of Transnet strikes and fuel price fluctuations during the first half of the year, which adversely affected rail and road freight supply chains.
In October 2022, the Minerals Council estimated that Transnet’s failures had lost South Africa $3.2 billion in the export of bulk commodities such as coal and iron ore. Furthermore, the price of retail diesel 500 increased from R17.28 in January 2022 to R26.01 in December 2022, resulting from the Russian-Ukraine conflict and weaker dollar-to-rand exchange rate.
On a positive note, the first week of 2023 saw a R2.70 diesel and R2 petrol price cut as a result of the rand’s improved performance against the US dollar (R16.90 as at 9 January 2023). The decreased fuel prices may result in short-term trade benefits such as improved product speed to market enabling the processing of higher trade volumes.
Other notable trade sector developments include the contribution of the vehicle industry to exports, which was subdued after the KwaZulu-Natal floods of April last year.
The ongoing load-shedding by the state power utility, Eskom, is another factor that has had affected production — a direct feeder into the country’s trade activity.
The African Continental Free Trade Area (AfCFTA) agreement is expected to cushion the faltering trade balance. If effectively implemented, the AfCFTA could lead to increased demand for South African products from neighbouring Southern African Development Community economies and eventually the rest of the continent. For South Africa, this would translate into lower import and export costs and higher exports by volume and value.
Other initiatives to increase South Africa’s trade performance include the development of Special Economic Zones (SEZs) and Industrial Development Zones (IDZs) in the country.
Examples include the Atlantis SEZ, which aims to become a centre for the production of solar cells, wind turbines, biofuels, electric vehicles and green building materials, and the Nkomazi SEZ, which is strategically located to serve the Maputo development corridor, focusing on the logistics, minerals, agricultural processing and automotive sectors.
Key industrial development zones include the Coega and Richards Bay IDZs, which are designed to improve manufacturing (energy, vehicles) and trade (through port facilities near the plants).
Removing legal restrictions on the movement of goods and services in and out of the country is critical to improving trade activity. With the global recession and energy insecurity at home, South Africa must continue to focus on making better use of existing manufacturing capacity and promoting new and emerging industries such as the electric vehicle segment.
Other aspects of improving trade outcomes include expanding the supply of skills in the labour market to support the export of goods and services that require specialised knowledge.