Yesterday’s trade data showed South Africa’s trade surplus narrowed in August to R5.6bn from R17.1bn. As was the case in July, a stronger ZAR likely supported imports in August as well. The seventh consecutive monthly trade surplus (albeit lower than the previous month’s reading) is encouraging as it will continue to support economic growth and, to a degree, counter the government’s weak fiscal position. Over time, a stronger ZAR could continue to work against the trade surplus due to higher volumes of consumer and capital goods imports. However, the trade surplus may persist due to the lower ZAR price of oil.
There were also monthly government budget stats published, which showed the budget balance remained in a deficit, albeit narrower than expected, at -R19.4bn in August from -R79.9bn in the previous month. Looking ahead, NT will still receive +R50bn from the GFECRA account over the coming years. With the first tranche, although the most considerable, utilised, the remaining two will continue to relieve strain on the total borrowing requirement over the coming years, but the smaller amounts mean that the government is now needed to implement reforms to ease pressure on the budget.
Finally, the money supply and credit extension data showed money supply growth of 6.1% and private sector credit growth of 4.9% y/y in August. Reading too much into the latest credit data is tempting, especially when searching for any signs of GNU-inspired confidence. Unfortunately, when adjusting for month-to-month volatility, both corporate and household credit demand dynamics are still weak. The reality is that the different dynamics at play are obscuring this clear deduction. Key amongst these is the fact that interest rates had not yet been cut in August but were widely anticipated to be cut in September, making next month’s data more useful as a true measure of built-up credit demand and confidence.