With the continued gloomy outlook in eurozone countries and a slowdown in growth in a number of developing economies, a rapidly growing Africa holds clear opportunities for South African businesses, South African Finance Minister Pravin Gordhan said on Thursday.
Tabling his Medium Term Budget Policy Statement in the National Assembly in Cape Town, Gordhan said opportunities in Africa had benefited many South Africa mining, manufacturing and retail companies.
The IMF’s World Economic Outlook, released earlier this month, estimates that Africa will grow by 5% this year and 5.7% next year – compared to growth of just 1.3% in advanced economies and 5.3% in developing countries this year.
South Africa’s exports to the EU fell 0.9% year-on-year in the second quarter, while exports to the US remained flat, and those to China and India grew by just 1.1% and 0.7% respectively. By contrast, exports to Southern African Development Community (SADC) countries grew 2.7%.
Gordhan said the SADC was now South Africa’s second-largest export market after the EU, which is expected to account for 21% of South Africa’s exports this year.
The SADC region is expected to account for 12.2% of SA exports this year, up from 9.8% in 2000 and putting it just ahead of China, which the National Treasury expects will account for 12% of SA exports this year.
The Medium Term Budget Policy Statement says the share of manufactured exports to the southern African region (21.8%) have increased rapidly over the past few years on the back of demand for chemical products, machinery and appliances, particularly mining equipment.
It says that, with strong growth forecast for the next five years, the SADC region could become South Africa’s biggest market for manufactured exports.
Overall, South Africa’s export volumes fell by 6.3% in the second quarter compared with the same period last year, after a decline of 1.5% in the first quarter.
Over the first eight months of the year, the value of exports of platinum fell by 21.9%, while exports of coal and chemical products remained robust.
In the first eight months of the year, however, imports increased by 20%, driven by strong increases in oil, machinery, vehicles and appliances. Imports are now 4% above 2009 levels, while exports are 13% below their highs.
With the fall in exports and rise in imports, South Africa’s current account deficit has widened sharply over the past year and is expected to average 5.9% this year, up from 3.3% in 2011.
Over the next three years, the current account deficit is expected to moderate to 5.5%.