SA posts record trade surplus in May

South Africa posts biggest trade surplus since at least 1996 in May as exports of precious metals and stones surge.

Johannesburg - South Africa posted the biggest trade surplus since at least 1996 in May as exports of precious metals and stones surged.

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The trade surplus widened to R18.7 billion ($1.27 billion) from a revised deficit of R130 million in April, the Pretoria-based South African Revenue Service said in an emailed statement on Thursday. The median of 10 economist estimates compiled by Bloomberg was for a surplus of R4.1 billion.

A recovery in exports, which are starting to benefit from the rand’s 21 percent decline against dollar over the past 18 months, could help narrow the deficit on the current account that swelled to 5 percent of gross domestic product in the first quarter. Africa’s most-industrialised economy has been weighed down by low metal prices, the worst drought in more than a century and weak demand from the nation’s main export markets. Domestic output contracted 1.2 percent in the first quarter.

“The big surprise came from the precious metals component, which rose 49 percent month-on-month”, Carmen Nel, an economist at FirstRand’s investment banking unit, said by phone from Cape Town. “It may reflect the cyclical under-performance in precious metals exports in recent months and quarters.”

Exports rose by 14 percent to R104.7 billion, led by the jump in precious metals and a 27 percent increase in vegetable shipments. Imports dropped by 6.6 percent to R86 billion. Exports have risen 10 percent this year to R452 billion compared to the same period in 2015.

The rand strengthened after the data was released and was 0.7 percent stronger against the dollar at 14.6940 by 6.30pm in Johannesburg.

An increase in interest rates by the central bank and a decline in consumption are “allowing for imbalances within the local economy to be adjusted to a degree”, ETM Analytics economist Manisha Morar said by phone from Johannesburg.

“With the external deficits compressing, it will over time support a more balanced economy and one that provides a better backdrop against which the rand is traded,” she said.

* With assistance from Simbarashe Gumbo

BLOOMBERG