South Africa's current account surplus increased to 3.7% of GDP, or 227 billion rands ($15 billion), in 2021. In 2020, the surplus was 2% of GDP. The current account surplus contributes to the strengthening of the local currency, the Rand.
A Boom in Commodity Prices
The conflict between Russia and Ukraine is raising commodity prices, which is beneficial for a mining economy like South Africa.
An increase in exports is driving the trade surplus, which jumped to a record R448 billion Rand; in 2020, it was R289 billion. Although exports are high and supported by global demand, imports are also increasing and could narrow the surplus in the near future.
The services deficit increased by 47% to R66.2 billion in 2021. The deficit increase is due to the tourism industry, a sector that has been affected by closed borders worldwide due to Covid-19 health protocols.
An Improved Outlook
The central bank estimates that 2022 will have a surplus of 0.4%. It will be the third consecutive year that South Africa posted a current account surplus. The consistent current account surpluses are part of the reason that S&P has improved its outlook on South Africa to "positive" from "stable." It believes the government will receive more tax revenue from mining, which will help it to reduce the fiscal deficit and debt.
In the fourth quarter of 2021, the current-account surplus shrank to an annualized surplus of 1.9% of GDP, or R120 billion; the previous quarter had a current account surplus of 3.5%. The fourth quarter in 2021 was the sixth consecutive surplus streak, the longest since 2021.
Despite the good news on the current account front, the nation still faces several headwinds. It may benefit from high commodity prices, but it still has to battle inflation like many other nations. The sole producer of electricity in South Africa, Eskom, is struggling to keep up with demand, resulting in blackouts. The Kwazulu-Natal province is experiencing devastating floods, which will impact the economy down the line. South Africans are dissatisfied with their government, as evidenced by the ANC's defeat in local elections last year.
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