Despite much hype to the contrary, the impact of the exchange rate on South Africa’s exports has less of an impact than many would expect because commodities are the prime driver of demand. For Maersk Line SA, chrome and iron ore account for 30-35% of its exports – and in China it’s not necessarily the exchange rate that is driving these volumes, MD Jonathan Horn told FTW last week. Fruit exports are a different story – comprising 20-25% of total container exports from South Africa – and here the weaker currency clearly played a role. “The 30% weakening of the currency against the dollar in the past year improved the rand revenue that exporters – or even the middlemen in the industry – pocketed for the same amount of product,” Safmarine MD Dirk Hoffmann said. In terms of import flows, it boils down to the price the South African consumer is prepared to pay. “And the impact of the weaker currency comes through 3-6 months after a sustained period of exchange rate weakness,” said Horn. “We saw that last year, with double digit growth in first quarter after which the growth rate dropped. If we do see a turnaround in the exchange rate it won’t kick through immediately into a lift in imports – it will take time,” he added. And a weak exchange rate is not good news for the economy in the long term. “For exporters their cost of production increases – capital goods, cost of fuel and energy – so it’s a double-edged sword. “What we expect to see in 2014 is flat import performance – or maybe even a slight decline in incoming volumes. “There are some positive signs starting to come out of the US and some of the European economies, but there’s a long way to go before we see consumer confidence and consumption increasing – and that’s what drives what comes out of Africa in terms of commodities. As they consume more, China manufactures more, and as China manufactures more, they need more commodities.” For shippers and shipping lines 2014 is likely to be a tough year which will see continued capacity oversupply with the associated pressure on freight rates at a macro level. INSERT & CAPTION The 30% weakening of the currency against the dollar in the past year improved the rand revenue of exporters. – Dirk Hoffmann
