September machinery equipment and oil imports brings the South African trade deficit from R5 billions in August to R7 billions.
Last Week Friday South African Customs figures released imports rose 4% to R68bn which Oil imports R1bn and machinery and appliances imports R2bn; while exports rose a more modest 1.4% to R61bn in September.
South trade deficit this year was R62 billions (January to September) which is R7billions higher than the same period 2007.
According to IMF September report, South African trade deficit is one of the highest in the world at 7.3% of GDP – which seems down a little bit compared to 8.9% in the first quarter, when electricity shortage damages South African mining exports.
South Africa is running a current account deficit, which means that South African markets will have great foreign capital requirement to finance the trading deficit.
The trade deficit is a vital indicator for the worse rand. Except trade deficit, government spending, high hiking interest rate and dividends also bring down the Rand value.
If there is not enough and fast relief in foreign capital inflows, the Rand has to be weaker again. New financial minister predicted the ratio of deficit take-up GDP would be worse in 2009.
“Foreign investors already got rid of R50 billions South African equities. Less investment, and sizzling capital requirement, South African companies will face loss in profit.
The worse Rand will boost the South African exports, which will narrow the trade deficit in the future. In the other hand, gold and mining exports are major export of South Africa. The gold price is falling down, and the mining industries might not see so much improvement in export.
