By Frans Cronje
This week the IRR released a Fast Facts report that tracks South Africa’s trade with the rest of the world. It provides data on our main import and export partners, as well as our trade with emerging markets and the rest of Africa. The country’s major imports and exports are also weighed against the value of the Rand. The story is what most analysts would expect to see – but with a twist in the currency tale.
Among individual countries, China is South Africa’s biggest trading partner, with imports and exports between the two nations totalling R263.9 billion in 2013. Trade with the European Union (EU) region is valued considerably higher, at R449.9 billion. Both relationships are heavily skewed, South Africa having a trade deficit of R45.2 billion with China and one of R119 billion with the EU.
Among other countries, Germany is our second biggest trading partner, followed by Japan and the United States. Interestingly, South Africa recorded small trade surpluses with both these countries in 2013.
In terms of emerging markets (other than China), India tops the list with R79.9 billion’s worth of trade, followed by Thailand and Brazil. Again, South Africa records significant trade deficits against all three. In fact, South Africa has no significant trade surpluses with any emerging market tracked in the report.
On the African continent, South Africa’s main trading partners are oil and gas producers such as Nigeria, Mozambique, and Angola. Again, South Africa has significant trade deficits with both Nigeria and Angola. Our main trading partners outside the energy field are Zambia, Zimbabwe, and the Democratic Republic of Congo, and here South Africa notched up notable trade surpluses. However, even our biggest intra-African trading relationship (with Nigeria) is only 10% the size of that with the EU.
Our top imports include oil, followed by a host of manufactured goods from cellular phones to pharmaceuticals. Major exports are coal, gold, iron ore, and platinum. Outside the heavily subsidised motor industry, South Africa has only one other manufactured item (machinery) in the list of its top ten exports.
Our trade data shows no evidence that the Rand weakness has helped reduce trading imbalances. In fact, quite the opposite is true, for sharp declines in the real effective exchange rate have been mirrored by sharp increases in the current account deficit. This should finally put to bed any argument that currency weakness benefits the South African economy. On the contrary, currency weakness drives up the price of imports, adds to production costs, and drives down our export competitiveness.
With both China and the EU showing signs of an economic slowdown – and with further Rand weakness on the horizon – South Africa is unlikely to turn its trade deficits into trade surpluses any time soon. The only solution is to implement domestic policy shifts geared towards increasing our manufacturing and export competitiveness. Unfortunately, however, the bulk of government policy over the past 24 months seems almost calculated to reduce South Africa’s competitiveness.
* Cronje is CEO of the IRR.
