South Africa's trade surplus expanded to 20.5 billion rand in August as imports decreased faster than exports. However, it is noted that rising oil prices may put pressure on the trade balance in the coming months.
According to trade data published by the South African Revenue Service (SARS), South Africa's goods trade surplus reached 20.5 billion rand in August, compared to revised 18.0 billion rand in July. This result exceeded forecasts made by Bloomberg.
The SA Economics division of Investec reported that the improvement was due to a sharper decline in imports than in exports. Imports fell by 13.7 billion rand, or 7.8% compared to the previous month, while exports decreased by 11.3 billion rand, or 5.8%, which led to an increase in the goods trade surplus.
SARS explained the reduction in export flows largely due to smaller volumes of platinum group metals, gold, and zinc ores and concentrates. Vegetable product exports also dropped by 9.0% month-on-month, and machinery and electronics exports fell by 3.0%.
Platinum group metals remain an important part of South Africa's mining portfolio, accounting for just over 27% of this portfolio. According to Statistics South Africa, platinum group metal production decreased by 13.5% year-on-year in July.
On the import side, the reduction is partly linked to decreased purchases of petroleum products, excluding crude oil. Purchases of original equipment components and automated data processing machines also declined. These drops largely offset growth in other categories, leading to a larger monthly decrease in the import bill.
Investec warned that the easing from imports may be temporary. The bank expects an increase in import values in the near future as higher energy prices will affect the trade balance. In September, the price of Brent crude averaged over $100 per barrel, returning to May levels amid heightened tensions in the Middle East. Higher oil prices typically increase the cost of refined petroleum products and related resources, which constitute a significant portion of South Africa's import basket.
The August figures demonstrate competing factors influencing South Africa's external trade position: the weakening of volumes of some key mineral exports is balanced by a sharp drop in imports. Investec believes that the prospects for the trade balance will depend on global demand for South African exports, commodity prices, and the cost of energy imports. With high oil prices and persistent weakness in platinum group metal production, the trade balance trajectory in the last quarter will depend on the ability of export revenues to continue offsetting the pressure caused by rising energy costs and other import expenses.