South Africa's Oil Bill Surges, Widening Trade Gap to Six-Year High

Crude oil imports tell the story plainly. South Africa paid 82% more for oil in the second quarter of this year even though the physical volume it brought in rose by just 1.8%. The price, not the barrel count, broke the budget.

The South African Reserve Bank confirmed Thursday that the country’s current account swung from a 2.3% surplus in the first quarter to a deficit of 2.6% of gross domestic product in the second, equivalent to R205.5 billion or $12.8 billion. That is the largest quarterly deficit since the third quarter of 2019, and it arrived well beyond what analysts had pencilled in. Economists surveyed by Bloomberg had forecast a more modest shortfall of 1.3% of GDP. The actual figure was double that.

The deterioration centered on trade. The merchandise trade surplus collapsed from R428.8 billion in the first quarter to R146.4 billion in the second, as imports climbed far faster than exports. Exports of goods and services rose by R92.3 billion, reflecting higher prices and modestly increased volumes. Imports, by contrast, surged by R376.6 billion, driven by both volume and price increases. That four-to-one gap in growth rates is what tipped the balance.

The timing matters. The second quarter was the first full three-month period to absorb the economic shock of the Iran war, which began when the United States and Israel attacked the Islamic Republic on February 28. The conflict has constrained traffic through the Strait of Hormuz, a critical global shipping passage, pushing oil and fertiliser prices sharply higher. The Reserve Bank identified rising global fuel prices, linked directly to supply concerns from the conflict, as a key driver of the abrupt shift. The crude oil import bill illustrates the point precisely: an 82% jump in value against a 1.8% rise in volume.

South Africa’s terms of trade also worsened over the three months through June, with the rand price of imports rising faster than the rand price of exports. That pricing squeeze compounded the volume effects and left households and businesses absorbing higher costs on imported goods.

Meanwhile, the services, income and current transfer account deepened its own deficit. That shortfall widened to R351.9 billion from R247.2 billion in the first quarter, pushing the ratio to 4.5% of GDP from 3.1%, the largest gap on that measure since the second quarter of 2022.

The current account data landed alongside a separate and troubling economic signal. Earlier this week, figures showed South Africa’s economy contracted by 0.2% in the three months through June, a larger decline than expected and one that snapped a run of six consecutive quarters of growth that had been supported by export performance. A widening external deficit and a shrinking economy arriving together raise pointed questions about how durable the country’s recovery can be if global commodity prices remain elevated and the Strait of Hormuz stays disrupted.