Sars defends trade calculation decision

Markets
The South African Revenue Service (Sars) defended the timing of its decision to include trade with neighbouring countries in its calculation of the country’s international trade statistics

JOHANNESBURG — The South African Revenue Service (Sars) defended the timing of its decision to include trade with neighbouring countries in its calculation of the country’s international trade statistics on Friday — a move that has been questioned by financial analysts.

The inclusion of trade with Botswana, Lesotho, Namibia and Swaziland (BLNS) — which form part of the of the Southern African Customs Union — will have a substantial impact on South Africa’s official trade balance and potentially its balance of payments, notably its current account — a broad measure of transactions the country does with the rest of the world.

The impact on the current account, however, is expected to be less dramatic.

South Africa’s total trade deficit for 2012 was R116,9 billion, Sars said in a statement, but had the BLNS trade data been included, the deficit would have been a much reduced R34,6 billion.

In 2011, had the BLNS trade figures been included South Africa’s trade balance would have moved from a deficit of R24,6 billion to a surplus of R44 billion.

Although he welcomed the inclusion of the data, Nomura analyst Peter Attard Montalto flagged the timing of the decision as odd.

“We are very suspicious of the timing now — when government is very annoyed at its inclusion as a stressed country and a taper target”, he said in a research note.

“It (is) a particular surprise its happened without any consultation or working papers or even mention by policy makers that actually trade numbers were better than they look.”

But the process has and will continue to be a transparent one, according to Sars.

The trade between South Africa and what are known as the BLNS countries, has always been recorded, but had for historical reasons been kept separate from official international trade statistics, group executive of operations finance and debt management at Sars John Cruickshank told the Mail&Guardian.

“We are of the view that it represents real economic activity,” Sars spokesperson Adrian Lackay, said.

The trade balance is one of the elements that makes South Africa’s current account, which has recorded significant deficits in recent months — coming in as high as 6,5% of gross domestic product in the second quarter of 2013.

The deficit is largely financed through the inflow of foreign capital, which has been in steady supply as a result of the expansive monetary policies in the developed world designed to boost their flagging economies.

— Mail&Guardian