SA’s trade performance ‘robust’, with imports expected to grow

• Global supply chains may start to operate more fluidly this year, writes

Lynette Dicey

Over the past three years, the global economy has undergone significant shocks including Covid-19 lockdowns, supply chain disruptions and geopolitical events in Europe. These shocks have filtered into the South African economy and been complemented by additional shocks, most notably in the form of domestic electricity supply constraints. Despite these challenges, SAs international trade performance has been robust, says Justin Milo, head of trade for SA at Standard Bank.

Strong trade growth was initially led by the export sector and then followed by strong import growth in 2022, he says. SAs exports expanded by

11% in 2022 year on year, according to statistics published by the South African Revenue Services (Sars). These exports were largely driven by the cross-border sale of mined commodities such as coal, precious metals, iron and manganese ore, as well as certain manufactured goods including iron, steel and motor vehicles.

Contrary to trends observed in recent years, export growth was trumped by a significant increase in imports, which grew by 31.8% year on year in 2022, with key import drivers being oil and petroleum products, vehicles, electrical goods and pharmaceuticals. The country s trade balance, while still reflecting a surplus of R193bn in 2022, is significantly down from the trade surplus of R431bn recorded in 2021.

Various headwinds and tailwinds will undoubtedly impact imports and exports in the year ahead, predicts Milo, explaining that potential export tailwinds include the relatively weak rand relative to the dollar, the performance of the domestic automotive export sector and increasing global demand for mineral products. In addition, exports may be negatively affected by the anticipated peak in global inflation and consequent reduction in commodity prices, electricity supply constraints affecting domestic production, reduced rail and port efficiency and muted growth in global economic output. The IMF s World Economic Outlook report expects 2.9% year-on-year growth in 2023.

Despite low GDP growth expectations, SAs imports are expected to grow, largely due to increased demand for diesel and other petroleum products, increasing private sector electricity generation, robust domestic demand for manufactured goods and the progressive normalisation in global supply chains.

The relative fortunes of SAs importers and exporters will therefore depend on specific industry factors, as well as broad macroeconomic factors, both of which may present opportunities and risks for trading counterparties, says Milo.