While South Africa’s trade outlook remains positive, current trade activity is still in negative territory, according to the December 2024 Trade Conditions Survey by the South African Chamber of Commerce and Industry(Sacci).
Sacci indicated that the trade outlook remained well into positive territory, but present trade activity was still in negative territory. And experts say the negative growth experienced in the third quarter of 2024 has impacted growth in the final quarter of 2024.
“The survey suggests that although some structural economic impediments may be resolved, the poor economic performance at present is preventing trade from reaching its more optimal potential. However, 40% of the respondents indicated that present trade conditions were, nonetheless, better than in December 2023.”
Of note employers in the trade sector in South Africa have expressed intent to employ more people in the next six months after employment in the trade sector was relatively stable in December, despite challenging trade conditions and tight profit margins.
Employment in the trade sector was relatively stable, with respondents employing staff in November (45%) and December (41%), while 57% intend to employ more people in the next six months.”
Trade conditions slowed down in August 2024 and deteriorated even further, with only 35% of respondents experiencing positive conditions in December 2024.
“The outlook for trade in the next six months improved notably, with 65% of respondents in December compared to some 54% of respondents in October 2024 being positive. The sales volumes index of 37 for December 2024 indicates that most respondents find trade conditions challenging. Increased new orders dipped to 28% of respondents.
Sacci noted that the difference of 26 index points between present supply deliveries and expected deliveries reflects the logistical problems currently experienced, mainly with rail and sea transport.
“Lower stock levels confirm the existing tight trade conditions. The six-month sales outlook is nevertheless at a high level, with 72% of participants anticipating better sales compared to 58% in October 2024.
Sacci mentioned that input costs eased somewhat as the index shed 9 index points between October 2024 and December 2024, while sales prices rose by a modest 2 index points between November and December 2024. “It is expected that both input costs and sales prices will accelerate in the next six months. As inflationary expectations may rise, it could deter an easier monetary stance and cause the SA Reserve Bank to continue a cautious approach. However, with consumer inflation at a lower rate of 3% and producer prices declining by 0.1% in November, a more aggressive reduction of interest rates may be warranted.”
Sacci said recently released data on some trade activities suggest that despite slow economic growth and high unemployment, trade experiences are diverse. “The latest data indicate dissimilar year-on-year performances: retail sales volumes +6.3%; merchandise export volumes -9.3%; real value of building plans passed +16%; merchandise import volumes -4.6%; wholesale trade sales +3.4%; and new vehicle sales +2.5%.
Waldo Krugell, an economics professor at North-West University, said that he suspects when we finally get the December retail sales data, it will show that the spending associated with December holidays was up.
“The trade conditions also show that the demand side of the economy is still constrained. The question is how will this change in 2025 without more repo rate relief or significant new investment? Even with all the optimism about the economy, these mixed signals may show that we are stuck in a low-growth trap.”
Economist Dawie Roodt expressed disappointment that data for December has been showing negative growth. “My sense was that the economy was picking up speed. The third quarter of 2024 was negative growth, and it appears the fourth quarter will not be great. The good news is that if there is a low base in 2024, there is potential for growth in 2025. I still remain optimistic that the economy will grow faster in 2025. I do think that we need to revisit our macroeconomic policies as past policies are not working.”
BUSINESS REPORT