South Africa’s import levels and trade linkages with Russia and Ukraine are weak, although some sectors of the country could be more negatively impacted than others by the conflict in the region.
Stellenbosch’s Bureau for Economic Research noted that, in terms of the broader growth impact, the country’s trade links with Russia were relatively limited, with the country making up less than 0.4% of total merchandise exports in 2021.
“SA imported goods worth R9.2 billion from Russia in 2021, less than 1% (0.7%) of total imports.
“However, some listed companies have more exposure to the country, and specific sectors, such as citrus producers and fruit exporters in general, are more susceptible to downside risk should trade with Russia come under pressure amid the impact of sanctions and/or a likely steep downturn in the Russian economy,” BER said.
Compared with Russia’s, South Africa’s trade linkages with Ukraine are minor.
“A more indirect, but potentially larger, impact on SA exports will be if a dragged-out conflict and the cancellation of Nord Stream 2 (the pipeline linking Germany and Russia) lead to sustained higher European gas prices. This will weigh on real GDP growth in the region.
“While the higher oil price will also have inflationary consequences here, the ongoing geopolitical tension has boosted the prices of some of SA’s key export commodities, including platinum-group metals and gold,” the BER said.
South Africa is the world’s second largest palladium producer after Russia.
“Outside of the direct losses from an escalating war, the most direct impact on the global economy could be to sustain current high inflation for even longer.
“In addition to higher global grain prices, the Brent crude oil price breached $100/barrel for the first time since 2014 towards the end of the week,” BER said.
Brent averaged $96 per barrel in February, almost 10% higher than in January.
The result is that the domestic petrol price will increase by a substantial R1.46/litre on Wednesday.
“An environment of persistent supply shocks that could start to dampen demand complicates the future interest rate path for many central banks. While central banks are generally not reactive to once-off cost-push pressures, multiple supply shocks mean a greater risk of secondary price effects emerging,” the Bureau said.
