Rand hits all-time low as trade gap swells

Johannesburg - South Africa’s trade deficit widened in October to the biggest gap since January as imports of machinery, vehicles and oil climbed. The rand weakened to an all-time low.

The trade shortfall increased to R21.4bn ($1.5bn) from a revised R1.3bn in September, the South African Revenue Service said in a statement on Monday.

The median of 12 economist estimates compiled by Bloomberg was for a gap of R7.8bn. The deficit for the first 10 months of the year was R59.4bn compared with R95.1bn in 2014.

The gap on the trade account will keep pressure on the current account, the broadest measure of trade in goods and services, and the rand, which fell to a record against the dollar after the data was released.

The benefit to exports of the currency’s 20% drop against the dollar in 2015 is partly offset by falling metal prices, low global demand and power shortages in Africa’s most-industrialized economy.

“There is still little to show that a weaker currency is helping our export market, and it also reflects the weak demand conditions in our key trading partner countries, like China,” Jeffrey Schultz, an economist at BNP Paribas Securities South Africa, said by phone from Johannesburg.

“I wouldn’t expect a trade deficit of this magnitude to sustain over the medium term given the weakness in the domestic demand environment, which I think inevitably will keep a lid on imports.”

The current-account shortfall eased to 3.1% of gross domestic product in the three months through June, the lowest in almost four years, from 4.7% in the previous quarter.

The central bank will publish current-account data for the third quarter on December 7.

The rand weakened 0.2% to R14.4351 per dollar as of 14:45 after reaching R14.4651/$ earlier. The yield on rand-denominated government bonds due December 2016 rose eight basis points to 8.63%.

“On balance, the trade deficit will be relatively negative over the short term for the currency,” Schultz said.

Imports surged by 16% to R107.7bn as purchases of machinery and electronics increased by 19% and imports of vehicles and transportation equipment soared 45%. Mineral products, the category that includes oil, jumped 17%.

Exports declined by 6% to R86.4bn, led by a 19% fall in the shipments of precious metals and stones. Exports of vegetable products dropped by 36%.

The monthly trade figures are often volatile, reflecting the timing of shipments of commodities such as oil and diamonds.