While South African exporters justifiably bemoan their lot in the face of the current strength of the rand, figures show that margins may not have been sacrificed to a great extent in the highly competitive international markets, according to Credit
Guarantee’s Luke Doig.
While the rand appreciated by an effective 2,6% against the US dollar from 2000 to 2003, export prices (at 1995 constant prices) rose by 13,7% in 2000, 16,2% in 2001 and 24,9% in 2002. Export volumes on the other hand trailed export price increases, rising only 8,9% in 2000, 2,7% in 2001 and declining by 0,8% in 2002. It was only in 2003 that export prices fell 9,5% as export volumes declined 0,5%.
Doig, the company’s senior economist, says it could be argued that market share — in terms of export volumes — may have been sacrificed to maintain margins during this period. Only in 2003 did export prices dip as export volumes fell.
”These figures support the view that too much reliance could have been placed on a weak rand to stay competitive,” he said.
”Of course, the commodity traders will be adversely affected by a strong rand, as prices are dictated in foreign currency terms and those exporters will inevitably suffer the blight.”
Doig says that with the rand unlikely to revisit double digit rand/US dollar exchange rates in the short to medium term at least, aspirant and current exporters need to adapt their operations to the more competitive global markets.
”South African exporters already have a reputation in some markets for being ‘fair weather’ players who drop out the moment the going gets rough. I’m sure this perception is exaggerated but we can’t afford any perceptions like these if we are to be taken seriously as long-term exporters,” he notes.
”There are several examples of experienced exporters — major industrial groups — who are cognisant of the need to take a long-term view of their respective export markets. They have cut margins where necessary and focused on cost efficiencies to retain market share, albeit at the expense of current profits. They are mindful of the fact that when these markets pick up or if the rand weakens down the line, they will be preferred suppliers,” says Doig.
For a country such as South Africa, whose very existence depends on a strong export culture, the adage ”Export or Die” seems apt in these circumstances, he added. – I-Net Bridge