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Why is SA importing tons of gold from the US?

Update: The unwrought gold was destined for Rand Refinery.

PRETORIA: South Africa, by nature a big exporter of commodities, has received two very big shipments of unwrought gold from the US in the last nine months. Unwrought gold is impure gold which needs further processing, mainly refining, before it can be used for manufacture of other articles.

In a story by the digital news outlet Quartz, data from the US Census Bureau was analysed and showed that the trade balance of South Africa with the United States has changed drastically in the last couple of months. This data was verified by Moneyweb.

According to the US Bureau, South Africa had a $110m trade surplus with the US in March 2012 and a $401.5m surplus in January 2013. In March 2013 this changed to a deficit of $688.8m. (The tables below show the surplus/deficit ratio from the US perspective)

2013: US trade in goods with South Africa

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding.

Month Exports Imports Balance
January 2013 448.5 850 -401.5
February 2013 666.6 580.3 86.3
March 2013 1,335.9 647.1 688.8
Total 2013 2,451.0 2,077.4 373.6

Source: US Census Bureau

2012: US trade in goods with South Africa

NOTE: All figures are in millions of U.S. dollars on a nominal basis, not seasonally adjusted unless otherwise specified. Details may not equal totals due to rounding.

Month Exports Imports Balance
January 2013 575.9 766.9 -190.9
February 2012 529.4 496.4 33
March 2012 707.4 817.5 -110
April 2012 666 671.2 -5.2
May 2012 593.5 726.8 -133.3
June 2012 587.7 787.5 -199.8
July 2012 586.4 757.7 -171.4
August 2012 519.3 642.3 -123
September 2012 1,112.8 787.9 324.9
October 2012 610.2 721.9 -111.7
November 2012 505.9 735.6 -229.6
December 2012 558.8 745.6 -186.8
TOTAL 2012 7,553.3 8,657.1 -1,103.8

Source: US Census Bureau

Using the US Bureau data available on its website (which reaches back to 1985), it’s clear that South Africa experienced its biggest monthly deficit in this 28-year period, during March 2013. The closest previous deficit was $324m in September 2012 and before that $208.4m in October 2012.

Quartz also quotes data indicating that this shift in the trade balance is due to two large shipments of unwrought gold (allegedly worth $982m) that was shipped from John F. Kennedy Airport in New York for South Africa.

Moneyweb could not verify this detail for shipments specifically from JFK airport from the statistics available, but it did correlate with the Census Bureau data which shows that exports in gold (non-monetary excluding ores and concentrates) was at a sudden high of $778,893m in March 2013 and another large export shipment in September of 2012 of $504,139m. The total cumulative exports in this category for unwrought gold up until the end of March 2013 was indeed equal to the amount quoted by Quartz – $981,936m.

The question is: Why is South Africa, a gold producer, importing tons of gold from the US? International media outlets have been guessing whether it is to meet demand due to wildcat strikes that hit the country. Another theory is that the gold was imported to fulfil demand for Krugerrands to meet elevated demand.

Peter Major, mining analyst at Cadiz Corporate Solutions, does not think this is the case. He told Moneyweb that one possibility could be that it is to meet the excess capacity of the Rand Refinery.

“The Rand Refinery is probably the most modern and efficient refinery in the world and it can handle about a 1 000 tons per year, but with the country’s declining gold production it probably only gets 190 tons per year,” he said.

His guess is that the refinery, which has a very good track record and has been advertising itself to countries all over the world, might be refining gold for other countries. “I would guess that you are seeing a billion dollars of gold coming in, but you will probably see that billion dollars of gold going out again in a month or two,” he said.

A second gold analyst, who wishes to remain anonymous, confirmed that he would also guess it was destined for the Rand Refinery.

The Precious Metals Act, No. 37 of 2005, prohibits any person from owning unwrought gold unless he or she has a refining licence, is an authorised dealer, is a producer of the precious metal or has a permit or certificate from the regulator.

Update: Since publication of this article, it emerged that the vast amounts of imported gold were destined for Rand Refinery. CEO Howard Craig, states this is nothing out of the ordinary. Read more here.

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