Trade balance figures highlight large deficit

Trade balance figures reported last month by the South African Revenue Service showed a large deficit of R20.7 billion in October.

The new inclusion of peripheral African neighbors Botswana, Lesotho, Namibia and Swaziland revised the deficit figure significantly lower to R11.95bn.

The trade balance accounts for around 46% of the current account deficit, which was reported this week, and now amounts to 6.8% of GDP in 3Q2013. The widening deficit at R232.7bn, is the largest reported since 2008, five years ago.The revised current account calculation now includes the aforementioned trade with our African neighbor’s, which if omitted would worsen the figure to above 7% of GDP. 

Foreign direct investment for the third quarter was R47.4bn, which is more than R30bn better than the previous quarter. This was largely due to the conclusion of the buyout of South Africa’s third largest pharmaceutical company Cipla Medpro by Cipla India. 

The poor domestic economic news combined with the expectation of stimulus being reduced sooner rather than later in the US, witnesses our rand weakening to multiyear lows. The rand has shed around 25% against the greenback so far this year. 

Internationally, the US reported a vast improvement in the unemployment rate which dropped to 7%, while 203 000 jobs were added to the Non-Farming payroll. The news combines with recent improved economic data out of the world’s largest economy and serves to reinforce the prospect of “tapering” current easing measures. 

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.