South Africa’s exports have benefitted from the recovery of the Chinese economy and rising global demand for commodities, such as precious stones, which has led to growth exceeding pre-Covid-19 lockdown levels during the third quarter of 2020, Trade and Industrial Policy Strategies' (TIPS's) third-quarter 'Export Tracker' shows.
The Export Tracker found that South Africa’s exports for the third quarter of 2020 grew by 9.2% year-on-year and by 40.2% quarter-on-quarter, amounting to R388-billion.
The authors of the tracker – TIPS researchers Wendy Nyakabawo and Mawabo Ndlebe – pointed out that there had been “an impressive improvement from the historic slump experienced in the second quarter of 2020 as a result of [global] lockdowns”.
They also highlight that during that period, South Africa continued to have a positive trade balance with a trade surplus of R109-billion which was attributed largely to the impressive rebound in export demand as most economies reopened in the third quarter of 2020. This served to ease restrictions on business activities, but also meant that imports declined, albeit at a slower pace.
The main driving force for the growth of the country’s exports was demand from China for South Africa’s copper ores and concentrate, as well as demand for precious stones from the US.
There has also been an increase in South Africa’s export of coal to China, as China shifts its coal procurement away from Australia, the authors note.
Nyakabawo and Ndlebe elaborate that exports for most sectors in the top 20 have experienced increased demand during the third quarter, with 14 out of the 20 showing positive growth.
Aside from precious stones (76.2%), other products which saw year-on-year growth included cereals (78.2%) and chemicals (61.9%). Wood pulp had the largest decline, falling by 32%, followed by vehicles (25.2%), mineral fuels (18.6%) and inorganic chemicals (17%).
In terms of South Africa’s major export market – China − exports amounted to R44.5-billion, or 11.5% of South Africa’s overall exports, representing a year-on-year growth of 17.3%. Aside from ores, other products included iron and steel, fruit and nuts, copper and wood pulp.
Among these top five products, the authors reveal that all experienced growth with copper and wood pulp showing the biggest year-on-year increases of 39.5% and 18.1%, respectively.
Nyakabawo and Ndlebe explain that China’s increased demand for copper ore and concentrate is linked to the expansion of its power and construction sectors as a result of the implementation of stimulus packages.
South Africa’s second-largest export market – the US – accounted for R34-billion, which is an increase of 48.9% from the same quarter of 2019.
The top five export products to the US were precious stones, accounting for the largest share of 53.1%, vehicles (5.9%), industrial machinery (5.8%), ores (4.6%) and aluminium (4.5%).
However, the third quarter of 2020 saw a marginal increase in South Africa’s exports to Germany, which amounted to R31.6-billion, with vehicles being the largest commodity. Other key export products included precious ores, which accounted for 16.7% of South Africa’s total exports to Germany, followed by ores (15.5%), industrial machinery (10.1%) and chemical products (5.9%).
Meanwhile, the authors note that demand for chemical products grew by 700%, from R229-million in the third quarter of 2019, to R1.8-billion in the third quarter of 2020. This growth was largely driven by two product groups namely diagnostic or laboratory reagents on backing and reaction accelerators and catalytic preparations.
The authors say that diagnostic reagents are one of the most fundamental components of diagnostic testing assays, therefore the increase in their export demand can be specifically linked to Covid-19 infection testing, since they are a critical input in accurately detecting the Covid-19 infection.
Three products that achieved significant export growth during the third quarter included cereals, ores and animal feed products. To illustrate some of this growth, the authors note that South Africa’s exports of maize seed for sowing grew by just over 2 000% on a year-on-year basis. This is the strongest export growth since the third quarter of 2014 and is as a result of an increase in demand from Japan and Vietnam.