The Covid-19 pandemic has disrupted all components of the economy – all sectors in terms of demand and supply, employment, investment, growth, confidence and exports.

An economist from the Faculty of Economic and Management Sciences at the North-West University (NWU) says exports are critical for economic growth and are recognised as a driver of growth, especially for an isolated and small economy like that of South Africa.

According to Prof Danie Meyer, a development economist and director of the TRADE research focus area at the NWU, South Africa had a consistent net export trade balance over the last 12 month period, with the country experiencing a negative trade balance only in July 2019 and January 2020 (see Figure 1, which contains a summary of the exports and imports over the past 12 months).

“This is quite an achievement over a 12-month period for a developing country with a struggling economy. In March 2020, basically just before the world, including South Africa, went into a lockdown of economic activities, the country experienced an unexpected spike in exports, with a positive trade balance of over R24 billion – the highest over the 12-month period.”

Prof Meyer says that, in the next month, exports unfortunately crashed to the lowest value over the 12-month period, leading to a negative net export amount of R35 billion. “We can only speculate as to what could have happened if the lockdown had not occurred, but it can be stated with relative certainty that exports would have been similar to those of the previous month and possibly on an upward curve. Although exports ‘crashed’, imports stayed at relatively the same level, causing a massive trade deficit.”

According to him, this situation is expected to continue for the next few months, as the virus situation in South Africa seems to be months behind the global average.

Figure 1: Summary of exports and imports over the past 12 months

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Source: SARS (2020)

What has happened to the exports?

“We analysed March 2020, the month before lockdown, and April 2020, the first month of the lockdown (the data for May will only be available at a later stage),” says Prof Meyer.

According to this analysis, vehicle exports came to a near standstill in April. In March the sector contributed 13,3% to the value of exports, but in April this value went down to 3,5% of total exports.

“The automotive industry plays a dominant role in the manufacturing sector, and this industry is critical to the local economy. The two other export sectors, namely iron and steel, and precious metals, also had huge decreases in exports. However, the agricultural sector, and specifically the vegetables subsector, increased its contribution to exports from March to April.”

Prof Meyer says that, lastly, they analysed the ranking of South Africa’s export and import trade partners. “China is our biggest trade partner by far, but we have a substantial trade deficit with them, meaning we import much more from them than we export to them, and we also export mainly raw products to China.”

He says South Africa’s net negative trade balance is mostly due to the country’s trade relationship with China. “In contrast, South Africa has a positive trade relationship with all the other major trade partners. For example, South Africa exports more to the United States of America than we import from them, with more final products being exported to the United States of America.”

Prof Meyer says South Africa had an overall positive trade balance of approximately R4,2 billion with the United States from January to April 2020, while a huge trade deficit of R27 billion was recorded with China.

Table 1: Ranking of South African trade partners using April 2020 data

Source: SARS (2020)

For more information, contact Prof Danie Meyer at 082 850 5656 or daniel.meyer@nwu.ac.za.