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Friday, August 29, 2008

South Africa Trade Gap Widens In July

South Africa's trade deficit widened to 14.3 billion rand ($1.9 billion) in July, close to a record, as oil prices surged, boosting import costs. The deficit increased from 200 million rand in June, according to data out today from the South African Revenue Service. The shortfall was close to a high of 14.7 billion rand reached in October 2007.

Crude oil climbed to a record $145.29 a barrel in New York on July 3, while the rand's 12 percent drop against the dollar in the first half of the year boosted import costs. The rand has weakened this year on concern South Africa will struggle to attract the foreign investment needed to finance its import needs as the current account deficit widened to a 26-year high of 9 percent of gross domestic product in the first quarter.

Against the dollar, the rand dropped as low as 7.728 from 7.674 before the data was released, and was trading at 7.70 as of 2:34 p.m. in Johannesburg.

The South African government is spending 568 billion rand over the next three years on power plants, roads and stadiums as it prepares to host the 2010 FIFA World Cup. About 40 percent of the equipment needed for the infrastructure investment will be imported, according to government estimates.

Imports jumped 25 percent to 75.6 billion rand, mainly due to a 53 percent surge in oil, the revenue services said. Exports increased 1.8 percent to 61.3 billion rand as a drop in gold and platinum prices offset an increase in coal exports. The price of platinum, South Africa's biggest export, plunged 15 percent last month, while gold dropped 2.7 percent.

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