South African Export Market Revival in 2010

The South African export market has taken a knock over 2009. The four months leading up to August actually reflected surplus exports, with a surplus of R400 million in July, but a 9.2% drop in exports in August pushed the trade deficit to R1.98 billion. Even with the four good months, the cumulative deficit in the export market is R20.4 billion for the year 2009.

The import/export market is driven largely by the strength of the Rand, with a strong Rand negatively affecting exports, and as the Rand has strengthened by more than 27% since December 2008, there has been a concomitant decrease in exports. Statistics for the import/export market show that imports have fallen by 25% for the year up to August, while exports have dropped by 21%.

The export of vegetable products saw the biggest decrease - 30%. Another big faller in the export market is base metals, which have dropped by 40%. Import categories most affected include vehicles, vessels and aircraft, which decreased by 31%. Exports to the US have suffered the most, while exports to the rest of Africa have suffered the least. The opposite is true for imports, where imports to the rest of Africa suffered the most and imports to the rest of the world have suffered the least.

Anthony Grant, head of customer dealing in Rand Merchant Bank's fixed income, currency and commodity division, says, "On the export side, manufacturers are having a difficult time and they are also being adversely affected by the strong rand versus the currencies of our main trading partners ... While the strong rand makes imports cheaper, importers have suffered from the lower level of consumer demand and a trend towards lower inventory levels. Furthermore, many companies that might otherwise import capital goods have put projects on hold."

According to Grant, the market should pick up in the first six months of 2010. Temi Ofong, managing principal and head of foreign exchange sales at Absa Capital, agrees that 2010 will be a better year for South Africa's export market, especially as the country benefits from the knock-on effects of the Fifa World Cup. Ofong is also optimistic about a season increase in export/import activity towards the end of the year.

Sandra wrote this article for Trade Ocean, import/export agents and freight shipping service providers.