SA’s current account deficit fell sharply in the fourth quarter as stronger export growth boosted the country’s trade surplus even as global trade tensions clouded the outlook.
The Reserve Bank on Thursday said the gap narrowed to R31.6bn from a revised R55.6bn in the third quarter. As a percentage of GDP the deficit improved to 0.4% from 0.8% previously.
The improving current account — the broadest measure of a country’s trade in goods and services with the rest of the world — comes amid escalating tensions, particularly between major economies. Economists have cautioned that the spectre of US tariffs and an expanding trade war are a risk to SA’s export performance and global trade dynamics.
The central bank said the trade balance — the difference between the value of exports and imports — improved further, with the surplus rising to R232.9bn in the fourth quarter from R200.4bn in the preceding three months.
Higher export volumes and firmer prices underpinned the improvement, boosting foreign exchange reserves that act as buffer against external shocks.
The rand, which to some extent takes its cue from demand from foreign buyers to pay for SA exports, strengthened more than 1% against the dollar, bringing the gains so far this week to almost 3% and outpacing emerging market peers such as the Brazilian real, the Mexican peso, the Russian rouble and the Indian rupee. Imports also increased, driven largely by higher volumes.
Still, the income account deficit — which tracks interest, dividends and profits paid to foreign investors — widened further. That pushed the broader services, income and current transfer account deficit to R264.5bn from R256.1bn in the third quarter, underscoring the country’s heavy reliance on foreign capital and the regular outflows to offshore investors that come with it.
As a ratio of GDP, the deficit remained unchanged at 3.5%, meaning both the outflows (payments to foreigners and for services) and the size of the economy grew at about the same pace during the quarter. Over the full year the deficit widened faster than the economy grew (R260.9bn or 3.6% of GDP in 2024, up from R215.5bn or 3.1% of GDP in 2023), meaning SA’s reliance on foreign capital became a bigger strain on its finances in 2024 than in the previous year.
SA’s terms of trade (including gold) — which measure the prices of exports relative to imports — improved in the fourth quarter, driven by stronger export prices and a decline in import prices. There was a modest narrowing in the services and current transfer account deficits, providing a partial offset to the widening income account deficit.
Gold exports
“The biggest contributing factor to the larger trade surplus was the increase in net gold exports,” the Reserve Bank said.
“The value of net gold exports increased significantly in the fourth quarter of 2024, reflecting the increased physical quantity of gold exported and the average realised price. The average monthly price of gold per fine ounce reached a quarterly record high in the fourth quarter of 2024 due to gold purchases by central banks and increased investment demand.”
The Bank said there were increases to a lesser extent in exports of pearls, precious and semi-precious stones, and platinum group metals. “On the imports front, the decline in the value of chemical products, machinery and other equipment, and refined petroleum products, in particular imported diesel, contributed to the widening in the trade surplus.”
For full-year 2024, the current account deficit narrowed sharply to R44.5bn (0.6% of GDP), compared with R112.1bn (1.6% of GDP) in 2023.
With the deficit on the services, income and current transfer account widening to R260.9bn (3.6% of GDP) in 2024 from R215.5bn (3.1% of GDP) the year before, it is safe to attribute the annual improvement in the current account to the stronger trade balance, which more than doubled year on year to R216.4bn (3.0% of GDP).
Asked about the role of slight improvements in the transport and logistics sector in driving higher export volumes, the Bank said it benefited “to some extent”.
“The total volume of cargo handled at ports in SA increased from the third quarter of 2024 to the fourth quarter. Challenges were, however, still present in the quarter under review, including the impact of the post-election unrest in Mozambique which resulted in logistical disruptions affecting the shipping of some of SA’s mineral products that transit through the port of Maputo,” it added.
Trade tensions
Still, economists warn the escalating trade tensions could have an impact on SA’s export performance after US President Donald Trump launched a trade war with China, Canada and Mexico, a move that threatens global trade dynamics.
SA could see the current account deficit widen in the first quarter of 2025, Investec economist Lara Hodes said.
“Globally, uncertainty prevails around the extent of US trade tariffs, escalating fears of a trade war which could have a marked effect on global trade and growth,” she said.
The impact of the trade war was uncertain, independent economist Elize Kruger said.
“Indirect effects could entail lower GDP growth in the countries mostly affected by tariff changes, resulting in less demand for imports from other, unaffected countries,” she said.
For SA, the direct effect would be felt most keenly by the aluminium and steel sectors.
“Given SA’s exposure to China and Europe (specifically Germany) as trading partners, the indirect effect of tariff imposition could hit SA via reduced demand for our commodities and other exports to these affected countries,” Kruger said
Minerals Council chief economist Hugo Pienaar also highlighted how geopolitical tensions could affect the current account, both in terms of trade quantities and prices.
“Continued geopolitical uncertainty should keep the gold price elevated, providing some underpin to SA’s mineral export earnings,” he said.
“The fiscal stimulus response from China to support its economy through trade tensions with the US could impact the demand and price of iron ore, a major SA export to China.”
On the imports side, Pienaar said a possible end to the war in Ukraine and an easing of tensions in the Middle East, along with potentially increased oil production in the US, should result in a lower oil price.
“As a major import item, a lower oil price would reduce our import bill and benefit the overall current account balance,” he said.
Update: March 6 2025
This article has been updated to include additional comment from the Reserve Bank and economists.
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