The deficit on the current account of the balance of payments rose sharply in the fourth quarter (Q4) of last year to R165.5-billion from a revised R34.4-billion in Q3, according to data unveiled on Thursday by the South African Reserve Bank (Sarb). 

The current account is a key part of a country’s balance of payments and is essentially an accounting of its transactions with the rest of the global economy.  

“The current account deficit as a ratio of gross domestic product widened to 2.3% in the fourth quarter of 2023 from 0.5% in the third quarter,” the Sarb said. 

This was largely driven by a trade surplus which shrank as imports expanded faster than exports.

The trade surplus withered to R88.1-billion in Q4 2023 from R181.1-billion in the previous quarter.

“The deterioration in the current account is expected to continue in 2024, at least in the first half of the year, as economic conditions remain subdued,” Nedbank said in a note on the data.

“The trade account was volatile throughout 2023, reflecting the uncertainty in both the domestic and global environments. Trade performance will remain contained by subdued global demand and lower commodity prices, which will weigh on export volumes and prices.” 

This chips away at one of the planks of support for the rand. Prices of key South African commodity exports such as platinum group metals have been falling.

It must be said that trade volumes for both exports and imports would have been higher were it not for the snarl-ups at the ports and the rail network as Transnet maintained its descent into dysfunction. 

One bright spot has been gold, which scaled record peaks this week above $2,100 an ounce, lifted by its “safe-haven” status on a global stage riven by uncertainty and tension. 

“… net gold exports should offer some support as the global risk-off environment bolsters the price of the safe-haven asset. Import growth will also remain soft on muted domestic demand and weaker investment activity,” Nedbank said.

The rand brushed off news of the wider current account deficit on Thursday and extended its gains against the dollar this week, which have taken it to below 18.80/dlr from over 19/dlr. 

But that has largely been a function of dollar weakness against major currencies as traders bet that the US Federal Reserve will begin cutting rates this year.

That in turn will give the Sarb cover to begin its own trimming cycle. 

But if the current account continues to worsen while rates fall, the rand will remain vulnerable. DM