Trade conditions in SA improved slightly in December, positively affected by foreign trade and inward tourism, the latest trade conditions survey of the SA Chamber of Commerce and Industry (Sacci) shows.
But poor overall demand, power outages and exchange rate fluctuations continue to stifle economic prospects, the survey shows.
The trade activity index (TAI) improved five points, from 43 in November to 48 in December but remains under the neutral 50-point mark, suggesting SA trade activity is still in negative territory.
The index, released on Thursday, includes sales volumes, new orders, supplier deliveries, inventory levels and employment subindices.
It shows the trade milieu remains difficult, with respondents generally still perceiving conditions as fragile. The results show 38% were positive about the conditions in December, with only 43% anticipating improvements in the next six months.
Seasonally adjusted expectations declined from 51% in October 2023 to 50% in December 2023. Notably, 64% of respondents viewed trade conditions in December 2023 as worse than a year earlier.
Sacci CEO Alan Mukoki said 67% of respondents reported lower sales volumes, while 37% experienced increased new orders in December.
“Though input cost increases seemed to ease, poor demand restrained the rise in sale prices,” Mukoki said. “Expectations were negatively influenced by constrained holiday spending, particularly in financially pressured households.”
He said the ongoing decline in new vehicle sales serves as a leading indicator, signalling potential challenges for the economy, Retail trade volumes are also showing a negative trend.
“But despite the prevailing weak trade conditions, seasonally adjusted expectations for the next six months, within the survey scope, verge on a positive scenario.” He added that foreign trade and inward tourism have positively affected trade in the short and medium term.
Freight rates
The positive affect of foreign trade may be short-lived. According to Investec, global trade growth is expected to be weak in 2024 after slowing in 2023, and supply chain capacity has already seen a high level of underutilisation.
Investec chief economist Annabel Bishop said that recently some container freight rates rose substantially as geopolitical tensions escalated.
Bishop said a slowdown in global trade growth in 2024 would contribute to the weaker outcome for global growth, with the escalation in the Red Sea conflict, particularly between Iranian-backed groups and the US, a downside risk to an already weaker outlook.
“Inflationary concerns have also risen over the jump in container freight to Europe on the attacks in the Red Sea’s Bab el-Mandeb Strait by Yemen’s Houthi faction, lifting global risk aversion, strengthening the US dollar, and so weakening the rand,” Bishop said.
She added that the rand remains among the worst-performing emerging-market currencies year on year, with US data releases key for the domestic currency, and the movements in the US dollar itself.
Sacci economist Richard Downing said November’s Black Friday sales did not significantly boost trade, with more concern centred on rand volatility and exchange rate fluctuations.
Downing said that while input cost increases have moderated, some retailers still face price hikes of up to 12%.
Uncharted waters
The lack of stable electricity supply played a notable role in November and December trade conditions, stifling economic prospects. With current political manoeuvring, it contributed to uncertainty, he said.
North West University economics professor Raymond Parsons said global research indicates that policy uncertainty indices tend to spike when elections are due, and SA is also moving into uncharted political waters as 2024 unfolds. Parsons said Reserve Bank governor Lesetja Kganyago and others have highlighted the coming elections as among the key risks facing the SA economy.
Downing also highlighted the affect weak trade conditions have had on employment opportunities but said seasonal employment led to businesses hiring temporary staff in December, causing the employment index to rise from 34% of respondents in October to 40% hiring new staff in December.
“Looking ahead, 43% of respondents are considering hiring additional staff in the next six months.”
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