Cashing in on commodities: South Africa posts record trade surplus in June

The trade surplus in June rose to R57.7-billion – its highest level – from R54.4-billion in May, the SA Revenue Service said in a statement on Friday. 

“Exports for the year-to-date (1 January to 30 June 2021) increased by 51.0% to R895.7-billion from R593.29-billion over the same period during 2020. Imports for the year-to-date of R640.16-billion were 19.3% more than the R536.58-billion recorded during the same period in 2020. The preliminary cumulative trade balance surplus for 2021 is R255.56-billion,” the SA Revenue Service said.

That is almost five times the cumulative trade surplus of R56.71-billion for the first six months of last year. Exports in June amounted to R166-billion, almost 44% more than the R116-billion recorded in June of last year.

This is driven primarily by the commodities cycle. Exports of precious metals and stones rose 7% in June compared with May, to almost R51-billion. Base metals exports rose 9% to almost R14-billion. Overall exports only increased 2% between May and June. 

The prices of precious metals such as rhodium have been launched into orbit – it was fetching $30,000 an ounce at one point – because of scarcity on one hand and soaring demand on the other as the global economic recovery picks up steam. 

South Africa is experiencing a “positive terms of trade shock” – effectively, more capital is coming into the country via trade than flowing out of it. This in turn has underpinned the value of the rand, which has helped to contain inflation and given the central bank policy space to keep rates unchanged so far this year at historically low levels.

It has also flowed to the bottom lines of mining companies, which have been posting record profits and paying far more in taxes and royalties. Anglo American Platinum last week unveiled stellar interim earnings and said it had paid R16.6-billion to the fiscus, which is R14.4-billion more than it did in the first six months of last year. Social welfare initiatives announced by the government have been made possible because of this extra source of revenue for Treasury. 

No commodity boom lasts forever, and it remains to be seen how South Africa steels itself to prepare for the inevitable bust that will follow. If Treasury had low budget deficits or surpluses, it might be able to save something for a rainy day, or build hospitals or roads or that sort of thing. As things stand, much of the money will be used for social relief, which is no bad thing. The problem is that needs are so great because the overall economy is not creating jobs and generating wealth more widely. DM/BM