Today will bring the usual end-of-month economic data deluge out of South Africa, with trade balance numbers for August headlining a data card that also includes money supply and private sector credit extension, as well as government budget stats. Recall that South Africa’s trade surplus narrowed from +R24.2bn in June to +R17.6bn in July as monthly import growth of +6.6% m/m exceeded export growth of +1.8% m/m. The notable improvement in imports during July was likely supported by a stronger ZAR, which works to lower the cost of South African imports. Still, July’s sixth consecutive monthly trade surplus was encouraging as it will continue to support economic growth and, to a degree, counter the government’s weak fiscal position. As for the August print, the trade surplus is expected to widen to R18.3bn, supported by strong gold prices and still-weak consumer import demand. In the long run, if GNU governance addresses infrastructural crises, specifically port inefficiencies, exports should find additional support.
In addition to the trade data, the government budget data will also be noteworthy, especially as we approach the MTBPS in October. Recall that the budget swung into a seasonal deficit of -R79.9bn in July from a surplus of +R38.6bn in June. Interestingly, an amount of +R80.bn from the GFECRA monies was paid out to the National Treasury during July, which offset redemption payments of +R9.8bn and resulted in a gross borrowing requirement deficit of -R9.7bn that was notably lower than the main budget deficit. When considering historical trends, the budget is likely to reflect a seasonal improvement this week. More broadly, GFECRA support will likely continue to ease the total borrowing requirement over the medium term, which has become a key risk given that the Treasury must continue to supply funds to failing SOEs. However, South Africa’s tight fiscal situation will only be adequately addressed once the government adjusts policy to liberalise or implement austerity measures.