South Africa’s net exports and the current account exports grew by 3% in the second quarter of 2016 compared with the same period in 2015.
According to National Treasury’s Medium Term Budget Policy Statement (MTBPS), the increase was supported by manufacturing and mining exports, particularly platinum group metals.
The first half of the year saw a 2% decline in the share of exports to African markets compared with the same period in 2015, reflecting weaker economic conditions in the region.
“In recent years, despite the large and sustained depreciation in the value of the rand, South Africa has not experienced strong export growth.
“Since 2010, the real effective exchange rate has depreciated by 20.9%.
“Yet the main factor in export growth is global demand, which has been moderate,” National Treasury said.
National Treasury said the one-percentage-point increase in global demand could add as much as 0.3% to medium-term growth.
Soft domestic demand was reflected in the decreased volume of imports, which fell by 3.1% in the first half of the year compared with the same period in 2015.
“Notable exceptions included vegetable products, oils and fats, where increases of between 43% and 60% reflected the effects of the drought.
“Over the medium term, improved domestic demand should support import growth, but the weaker currency will limit the expansion of volumes.”
National Treasury said imports are expected to contract in the current year and grow by 2.7% in 2017.
Current account narrows
The current account deficit narrowed in the second quarter as net exports increased and the trade account recorded a surplus, despite some weakening of the terms of trade.
“The deficit was funded through an increase in net portfolio investment, mainly into government bonds, and a rise in net foreign direct investment.
“Over the next three years, the current account deficit is expected to average 3.9%, down from an average of 5.2% between 2013 and 2015.
“The forecast does not project any major gains in the terms of trade.”
South Africa’s competitiveness improves
National Treasury said South Africa’s position in the Global Competitiveness Index improved by six spots to 47 out of 138 in the past three years.
The country is the second-most competitive in sub-Saharan Africa, after Mauritius, which is ranked at position 45.
“South Africa maintains its regional leadership in financial markets, technological readiness, innovation and business sophistication, supporting competitiveness.
“South Africa’s rankings for ease of access to loans, enhanced local competition and better use of talent in terms of how pay reflects productivity have improved significantly.
“There were notable declines in several institutional categories, including public trust in politicians (down 11 spots to 109), favouritism in decisions of government officials (down 10 to 115) and reliability of police services (down 13 to 115).
“In addition, South Africa scores poorly in labour-employer relations (138), hiring and firing practices (135) and flexibility in wage determination (135).” – SAnews.gov.za