South African current account gap narrows as imports slip

South Africa’s current account deficit shrank by much more than expected in the third quarter, reflecting lower import volumes amid weaker demand and logistics bottlenecks.

The deficit on the current account, the broadest measure of trade in goods and services, shrank to an annualized 0.3% of gross domestic product, or 19.3 billion rand ($1 billion), from a revised 2.7% of GDP in the prior quarter, the South African Reserve Bank said in a statement Thursday. 

The consensus of nine economists in a Bloomberg survey was for a deficit of 1% of GDP. South Africa has now posted a current-account shortfall for a sixth straight quarter.

“The fall in imports, which led to the shrinking of the current account deficit in the third quarter, reflects a collapse in demand,” said Bloomberg Africa economist Yvonne Mgango. “This corresponds with the sharp slowdown in credit growth and contraction of household consumption expenditure in the same quarter.”

South Africa’s economy contracted 0.2% in the three months through September, hobbled by poor logistics and the country’s erratic electricity supply, which has suffered almost daily power outages this year.

The trade surplus widened to 189.1 billion rand in the third quarter from 22.2 billion rand as the value of merchandise imports decreased more than that of goods exports, the central bank said. The drop in import values was due to lower volumes, it said.

Import Volumes

The lower import volumes aligned with data from the South African Revenue Service, which showed a large decline in imports of machinery and electronics, followed by lower imports of vehicles and transport equipment in the third quarter.

In addition to weaker domestic demand, logistical problems may have impacted imports. The country’s ports have suffered severe backlogs due to breakdowns and bad weather that at one stage last month resulted in almost 100 vessels waiting offshore to dock.

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African Rainbow Capital Ltd. said separately on Thursday that the rollout of solar installations slowed during the third quarter, noting wider industry trends and reduced instances of load shedding, as power cuts are known locally. 

South African households and businesses have made significant efforts to install back-up power solutions to counter daily electricity outages, including solar panels and battery storage systems, and much of the equipment is imported.

The services, income and current transfer account shortfall widened marginally to 208.5 billion rand in the third quarter, compared with a prior 207.4 billion rand, primarily as a result of larger deficits on the services account and primary income account, the central bank said. 

The deficit on the services, income and current transfer account as a ratio of GDP remained unchanged at 3.0% in the third quarter.