SA exporters stand to lose as Greek crisis spirals

Despite Greek government assurances that a new action plan to save the economy will soon be in place, the impact of the country’s financial collapse is already rippling across the European Union (EU), and could spread down to SA. Anxiety about excessive national debt has reportedly spread to Portugal, with observers adding Italy, Ireland and Spain to the list of nations teetering on the brink. Greece’s financial problems were first mentioned at the end of 2009 – a combination of the international financial crash and local, uncontrolled spending prior to the October 2009 national elections. Although the government tried to cover up the extent of its massive problem, the economy was facing its most severe crisis since 1993 – with the highest budget deficit and the second highest debt to gross domestic product (GDP) ratio in the EU. Its 2009 budget deficit stood at 12.7% of GDP, and its debt level at 113% of GDP. The number of reports of the severe economic crisis accelerated and the news became worse until April 23 this year, when the Greek government finally admitted financial defeat, and requested that the EU/IMF (International Monetary Fund) bail-out package be activated. The size of this bailout was reported to be for the equivalent of almost R451.5-billion and was expected to take three weeks to negotiate. Then on April 27, the Greek debt rating was decreased to “junk status” by Standard & Poor’s amidst fears of default by the Greek government. Its ability to repay its debt – which now equalled 115% of its GDP – remained doubtful. Standard & Poor’s estimated that, in the event of default, investors would lose 30%-50% of their money – and stock markets worldwide declined in response to this announcement. The lack of spare cash in Greece is also expected to hit the country’s ability to pay for imports, and the ramification of this could reach the shores of SA, according to Liz Whitehouse, MD of trade consultants, Whitehouse & Associates. Exports from SA to Greece totalled just over R1.3-billion for 2008 – the latest trade stats available from the SA Revenue Service (Sars) customs –and equalling our export trade with Ireland and Denmark. “What is concerning is that we export manufactured products to Greece,” said Whitehouse, “especially in the categories of ‘vehicles, aircraft, vessels and transport equipment’ totalling R600-million; ‘high precision instruments’ worth R150-m; and ‘machinery, mechanical appliances, and electrical equipment’ of R106-m. “A total of R856-m – or 65.8% of our total exports go to Greece, exports we cannot afford to lose.”