Potential import slump and weaker rand could balance seafreight trade

WHILE IMPORTS will continue to spur the economy in the year ahead, the industry is bracing for the impact of the raft of interest rate increases and its impact on consumer spending. “South Africa’s burgeoning middle class and the developments around 2010 will continue to drive imports, but there is uncertainly around the economic impact of the National Credit Act and rising interest rates,” says Safmarine’s Africa region executive Alan Jones. “The effect of the interest rate increase usually has a 6-9 month lag. We are already seeing motor industry and retail sales dropping quickly and we’re not sure which interest rate is making the impact – it was certainly not one of the last two. With that in mind there’s the potential for a considerable slowdown in imports because credit is tighter and we could see an increase in bank repossessions of cars and houses – and when that happens the economy could slow because consumers won’t have disposable income for a period. “Linked to that is the uncertainty regarding the supply of electricity which may lead people to delay investment or new developments in the short term,” says Jones. For carriers this is significant. “If people wait six months what would have moved in July to December this year may only move in January to June next year. It will come eventually but timing will be an issue and that’s important for us because we have vessels committed.” The plummeting exchange rate is also a concern although it could ultimately be good news for carriers as it may serve to balance cargo flows. “It could result in a reduction of imports and an increase in exports which would ultimately benefit carriers, creating a more balanced trade.” According to Jones the average mix, depending on trade lane, is around 60-40 in favour of imports.