South Africa’s current account deficit narrowed during the fourth quarter of 2013 as the value of imports fell while exports rose on improved global demand and a cessation of the strike action of the third quarter of 2013.

The fourth quarter’s current account deficit declined to 5.1% of gross domestic product (GDP) from a revised 6.4% during the third quarter, the South African Reserve Bank (SARB) said in its latest Quarterly Bulletin released on Wednesday.

Financial services institution HSBC pointed out that this was the smallest deficit since the second quarter of 2012.

However, annually the deficit widened marginally to 5.8% from 5.2% in 2012, the SARB said.

Banking group Nedbank stated that the current account deficit was likely to narrow further during this year on the back of improving global conditions, adding that any disruptions to domestic production would, however, have a negative effect.

But, BNP Paribas Cadiz Securities economist Jeffrey Schultz said that the firm was still of the view that the current account deficit was likely to remain structurally high over the medium term as a result of South Africa’s large infrastructure plans, the high risk of strikes in the country’s mining sector being drawn out further over the next few weeks, as well as the further threat of Eskom implementing load shedding and forcing large industrial users to cut their usage by up to 20% in the near term.

“We continue to pencil in an average current account shortfall of 5.3% of GDP in 2014 but highlight that should electricity supply woes and labour relations prove worse than we expect then there is a real possibility that this projection will have to be revised higher in the coming months. The deficit will, therefore, continue to rely on a hefty amount of financing [in future],” Schultz said.

Meanwhile, South Africa’s trade deficit narrowed to a seasonally adjusted R45-billion in the fourth quarter from R91-billion, totaling R74-billion in 2013 from R39-billion in the previous year.

“The current account saw some widening of its deficit on the services, income and current transfer account as dividend receipts from the rest of the world declined, but this was insufficient to counter the positive development in the trade account,” Investec pointed out.

Meanwhile, the consolidation of household finances continued in the final quarter of 2013, as the pace of increase in real final household consumption expenditure slowed marginally further and the ratio of household debt to disposable income edged lower, the SARB said.

Growth in real disposable income of households declined to an annualised rate of 2% during the fourth quarter, from a rate of 2.1% in the third quarter.

On a year-on-year basis, growth in real disposable income of households, however, moderated more noticeably from 3.9% in 2012 to 2.5% in 2013, the SARB said.

Household income continued to be negatively affected by rising inflation, the adverse effect of widespread labour unrest and, indirectly, the deterioration in the country’s terms of trade.

Real spending on durable and semidurable goods rose at a somewhat slower pace in the fourth quarter, with expenditure on furniture and appliances contracting, along with slower growth in spending on personal transport equipment and on computers and related equipment.


A rebound in manufacturing production, specifically in the motor vehicles and components subsectors, as labour relations normalised, made a significant contribution to South Africa’s economic growth rate of 3.8% during the fourth quarter of 2013, the South African Reserve Bank (SARB) said in its latest Quarterly Bulletin released on Wednesday.

The manufacturing sector added 1.8% to the quarter’s growth, while real output originating in the manufacturing sector increased at an annualised rate of 12.3% in the final quarter, following a decline of 6.6% in the third quarter.

“[However], notwithstanding the most recent recovery in manufacturing output, real production still fell short of levels recorded prior to the financial crisis,” the SARB said.

The bank noted that production benefitted from somewhat more stable global economic conditions, stronger growth in advanced and emerging-market economies and enhanced competitiveness brought about by the depreciation in the exchange value of the rand.

“For the improved performance of the manufacturing sector to be sustained, however, the ongoing increases in nominal unit labour cost and diminishing productivity growth in the sector would need to be addressed,” the SARB added.

Production in the mining industry also rose briskly during the final quarter led by diamonds, gold and platinum-group metals.

Growth in real value added by the mining sector accelerated from 11.4% in the third quarter to 15.7% in the fourth quarter.

“This firm performance could largely be attributed to pronounced increases in the production of diamonds and other mining commodities, while some growth in the production of platinum group-metals also contributed to the positive outcome,” the SARB said.

Gold production benefitted from a higher ore grade milled and lower operating costs experienced by some gold mines, and platinum production expanded further despite remnants of labour disruptions during the period. By contrast, the production of coal was affected by the scaling down of unprofitable collieries and disruptions owing to construction activity to modify certain plants.

In addition, the adverse weather conditions experienced in the preceding quarter continued to weigh upon certain opencast coal operations over the period.

The SARB further pointed out that the trade sector also made a significant contribution to growth in the fourth quarter as rising retail and wholesale sales more than fully countered a decline in motor trade activity.

Real agricultural production also registered a strong performance in the fourth quarter of 2013 primarily on account of an increase in field crop production, particularly in sugar cane, and rising civil construction activity was reflected in an increase in real value added by the construction sector, whereas real electricity production declined in the fourth quarter, partly as a result of supply constraints.