Cargo container. Image:

Cargo container. Image:

Weak rand fuels growth in South Africa’s export market

Local exporters benefit from a weak rand.

Cargo container. Image:

Cargo container. Image:

Statistics South Africa has released data for the Export and Import Unit Value Indices (UVI), and the UVI for exported commodities shows an annual rate change of 3,4% in June 2019.

The export category perceived a slight increase

The main contributors for the 3,4% perceived in June, was caused by the export of metal products, machinery and equipment. Minerals contributed 1,6% to the category and other transportable goods obtained -0,8%.

From May 2019 to June 2019 the UVI for exported commodities only increased by 0,7% in total. Contributing to this monthly increase were metal products, machinery and equipment.

Local exporters also benefit from the rand decline as it allows goods and services produced here to be cheaper for foreigners and more attractive when compared to other markets.

Imports decreased in its’ annual rate

The UVI for imported commodities proves the annual rate of change of at -3,8% in June 2019. From May 2019 to June 2019 the UVI for imported commodities decreased by 1,1%. The cause of this decrease is brought by metal products, machinery and equipment.

The decline in the annual rate was caused by transportable goods which brought in -3,0%, metal products; machinery and equipment accumulated -2,3%, and crude petroleum 1,0%.

Imported goods and services become more expensive, with a decline in the currency. This trickles down to everything else being more expensive for South Africans to purchase daily like petrol and other heavily impacted products.

The impact of the rand slump on imported products will be felt more severely in a few months and not immediately. The rand has depreciated at 6.5% against the dollar in August, dubbed as one of the worst performance rates among emerging-market currencies.

How is the Unit Value Indices calculated?

The unit value index stipulated provides information on the trends in import and export unit values, that are weighted with quantities of the proposed time period. To compile export and import unit value indices, a record of transactions is obtained by the South African Revenue Services.

Exports: What benefits could stem from a weak rand?

The only up-side of deteriorating currency is what it does for the tourism industry. South Africa’s one of the largest sources of income from the tourism industry, contributing 8.6% to the country’s Gross Domestic Product. When the rand is weak, South Africa becomes more appealing to tourists as a holiday destination as they can get more for their money.