• South Africa’s current account balance has widened to its largest surplus ever at R343 billion, for the second quarter.
  • The current account surplus has been aided by a stronger trade account – with merchandise exports at a record high.
  • South Africa’s terms of trade improved further in the second quarter of 2021, as the rand price of exports increased more than imports.

South Africa’s current account balance widened to its largest surplus ever at R343 billion for the second quarter, according to data released by the SA Reserve Bank (Sarb) on Thursday.

The current account balance is considered an indicator of an economy’s health. It is the difference between credits – incomes and receipts – and debits – imports and payments.

The current account balance, in monetary terms, was R261 billion in the first quarter. As a ratio of GDP, the surplus widened from 4.3% in the first quarter to 5.6% in the second quarter.

The Bureau for Economic Research (BER) had expected the surplus to be greater than 5%. A survey by FNB economists revealed expectations for a surplus of 7.1% of GDP.

Similarly, Investec economist Kamilla Kaplan noted that forecasts were for a surplus of 7% of GDP, this mainly off the back of a larger surplus on the trade account.

According to the Reserve Bank, merchandise exports increased to a “new all-time high” during the second quarter. Merchandise includes agriculture, mining and manufacturing exports. Imports increased by 3.4%, its second highest level since the second quarter of 2019.

Stats SA reported this week that on a quarter-on-quarter basis, exports lifted 4%, linked to the increase in trade of mineral products, precious metals and stones – as well as vehicles and transport equipment. The commodities boom has been helping bolster the trade account, Fin24 previously reported.

The Sarb noted that the trade surplus widened to a record high of R614 billion in the second quarter of 2021, up from R451 billion in the first quarter.

The higher value of exports however is linked to price increases rather than volumes.

“The widening to a record high of the trade surplus in the second quarter was due to the increase in value of merchandise exports, especially mining exports,” the Sarb said. These commodities include pearls, precious and semi-precious stones, and precious metals – particularly platinum group metals, driven by higher rand prices for rhodium. The carb also noted increased export prices of coal, and to a certain extent, iron ore.

Increases in imports is also linked to the increase in prices, the Sarb said.

“South Africa’s terms of trade (including gold) improved further in the second quarter of 2021 as the rand price of exports of goods and services increased more than the price of imports,” the Sarb said.

The services, income and current transfer account saw its shortfall widen from R190 billion in the first quarter to R271 billion in the second quarter. As a ratio of GDP, it increased from 3.2% previously to 4.4%.

“The larger shortfall can mainly be ascribed to a noticeably larger deficit on the income account, which was moderated by a narrowing of both the services and current transfer deficits,” the SARB said. More details on what drove the income account deficit will be revealed in the September 2021 Quarterly Bulletin.

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