SA becoming more vulnerable to global crisis

The growing financial deficit and slump in commodity prices are increasing South Africa’s vulnerability to the global financial crisis. In September the trade deficit swelled to R7.11 billion from a R5.12 billion shortfall in August. Our key export, commodities, were hit hard in October with gold prices falling by 18%, silver by 21% and copper by 37%. If the world does go into a recession as predicted by many economists, these prices are likely to fall even further. Martin Bailey, vice president of the Chartered Institute of Logistics and Transport (Ciltsa), says that most large organisations are no longer going ahead with new capital projects. In the mining sector specifically this delay in expansion plans could assist in narrowing the deficit as it reduces imports significantly. Anglo Platinum, for instance, announced at the end of October that it was reviewing projects following the near 42% drop in platinum prices this year. On the positive side, finance minister Trevor Manuel has said the economy will be shielded from the worst of the global crisis – we have a strict but effective credit control act and according to the Reserve Bank the country's banks are well-capitalised.