Il South Africa represents a quarter of the economy of the African continent and is an important gateway to other markets in the area, also thanks to the dense network of trade agreements that the country has stipulated over the years: it is not only a member of the WTO, but also of the Southern African Development Community (SADC) . Today South Africa's largest investor and commercial partner is the European Union with which, in 1999, it signed the Trade Development and Cooperation Agreement (TDCA) and, in 2016, the Southern African Economic Partnership Agreement (SADC EPA), through which numerous customs duties have been removed and 250 denominations of European origin have been recognised, 50 of which are Italian.
South Africa: GDP rebound in 2021
The South African economy rebounded in 2021 (+5,1%). Coface points out that this is largely due to the positive base effect and the boom in commodity exports, after activity was disrupted by Covid-19, the July riots and power outages in the second half of the year . In 2022, economic growth should return to a slower pace (+2%). Domestic demand will be the main driver. However, household consumption (60% of GDP) will remain constrained by extremely high unemployment, a lack of hiring and limited wage increases in the public sector, together with a slowdown in consumer credit due to monetary policy tightening.
Inflation and rate hikes
In November 2021, in response to an average annual inflation of 5%, the Central Bank raised its key rate by 25 basis points to 3,75%. It is expected that rates will continue to rise hand in hand with both US and UK tightening monetary policies. This will put pressure on the rand, which, added to high energy and food prices, will fuel inflationary pressures. Commercial banks will be forced to raise their rates, while public investment and consumption will be subject to fiscal consolidation. Private investment (13% of GDP), both foreign and domestic, will continue to struggle, where the business environment will be affected by high operating costs. Resulting in a major obstacle to job creation. According to analysts, only the renewable energy sector should do well.
Foreign trade
In this context, the contribution of foreign trade should turn slightly negative. While the demand and prices of exported minerals (38% of exports) could weaken, moderate growth in domestic demand and rising energy prices will drive imports. Furthermore, automotive exports (10% of the total) are likely to remain hampered by the lack of components, while tourism (7% of GDP in 2019) will see a slow recovery.
The current account surplus of the past two years is set to decline in line with the goods surplus. Reducing the services deficit as tourism recovers will not offset these developments, especially as relocation and income deficits will persist due to customs duties, remittances from foreign workers, and income repatriation from foreign investors. IDEs remain limited, but foreign exchange reserves are stable (equivalent to about five months of imports). External debt, of which 62% is owed by the public sector, accounted for 53% of GDP at the end of June 2021.
A positive impact on revenues will come from the profits of mining and consumer companies (27% of GDP). However, this will not stabilize the debt burden, whose interest accounts for around 15% of spending and 4,8% of GDP. Although the debt is mostly domestic and in the rand (89%) and has a long maturity, its amortization, together with the deficit, will represent around 13,3% of GDP in 2021/22. Furthermore, the fact that non-residents hold 30% of the national share implies sensitivity to international capital movements. Thus, the consolidation will depend on mineral prices, wage pressures, the health situation and also on possible new capital injections into weak state-owned enterprises.
Although more than 90% of the agri-food products on sale have local origins, the importation of Italian products is growing strongly. The main products imported are: wheat, vegetable oils other than palm oil and olive oil, convenience foods and poultry. Among the main imported products: processed meat, cheese, vinegar, vegetables and legumes, water, chocolate and cocoa, olive oil. Sales of wine, balsamic vinegar and olive oil are constantly increasing, and Italy also has an important weight in the dairy market with about 14% of imports. The opportunities for Made in Italy agri-food are on the rise in the South African multi-ethnic market, where 11 different official languages coexist and the majority of the population lives in five urban agglomerations totaling one million inhabitants: Johannesburg, Cape Town, Durban, Pretoria and Port Elizabeth. It is estimated that by 2030, 71% of the South African population will live in large urban centres.
