Exports slump 'shows need to diversify'

The difficulties highlighted both the need for SA to diversify its trade relations and the problems caused by the relative strengthening of the rand, which has undermined a key pillar of the government's industrial policy action plan, namely a stable and competitive currency.

This is regarded as a major instrument of industrial development and export promotion.

Another crisis

Davies's comments come in the wake of those made by Finance Minister Pravin Gordhan last month when he warned the fiscal debt problems of Organisation for Economic Co-operation and Development countries could spill over into another crisis and lead to a second wave of trade and employment cutbacks.

However, Davies cautioned against too much pessimism in a written reply to a parliamentary question by Democratic Alliance MP Pierre Rabie, saying that if Europe's debt crisis was limited to Greece, Ireland, Spain, Portugal and Italy, as expected, the effect on SA's exports would be minimal when compared to the credit crisis of 18 months ago.

The department had been working on diversifying the export markets within the European Union (EU), with special focus on Eastern European economies as these were expected to survive the crisis, he said. "Since the onset of the EU debt crisis this year, the euro has devalued by 18% against the US dollar and 14% against the South African rand.

Diversify relations

"Anecdotal information provided to us by exporters of manufactured goods into the EU suggests that the combination of continued depressed demand and the devaluation of the euro have made trading conditions more difficult. The department continues to monitor the situation but we are of the view that recent developments highlight the imperative for us to seek more diversification in our trading relations," he said.

Davies said that total South African exports to Europe last year amounted to US$10,6bn, representing 18% of all exports. Of these, $7,2bn were manufactured goods, or 16% of SA's total manufacturing exports.

This export figure declined last year from a record high of $11,6bn in 2008. "The countries expected to be affected most by the euro-zone debt crisis are Greece, Ireland, Spain, Portugal and Italy. Combined, these countries constitute about 19% of SA's exports of manufactured products to the euro zone."

Source: Business Day