Annual Forum Papers

Trade in services generally is viewed as a potentially viable option to contribute to the much needed economic diversification in Botswana. This study is informed by the ongoing policy discussions about the need to develop an educational hub in Botswana. It is intended to be a constructive contribution to these policy discussions. We analyse trends in tertiary education trade. Both exports and imports of tertiary education are discussed. The study does an audit of the policies, regulations and institutions in the education sector with the view to assess their readiness to support the establishment and maintenance of an education hub. The data we use are obtained mainly from the Government of Botswana, which grants most of the scholarships to citizens studying in different countries across the globe. Other information is obtained from the local tertiary institutions, which offer education mainly to citizens but do enrol a few foreign students. Also, the study discusses the trade arrangements that Botswana is party to and makes an assessment of how they can assist (or inhibit) Botswana's endeavours to develop and education hub. The study is intended for policy makers and it is hoped that it will promote productive policy direction.

  • Year 2009
  • Organisation Services Sector Development Thematic Working Group; TIPS, BIDPA and UoM
  • Publication Author(s) Johnson Tsoro Maiketso
  • Countries and Regions Botswana

With the EU sugar reforms, the overall economic weight of the sugar sector has fallen. The sugar sector's contribution to GDP is now comparatively small, around 1.9% of GDP in 2008. In this context, the Mauritian government and the private sector defined the Multi-Annual Adaptation Strategy (MAAS) to restructure and establish a more competitive sugar sector. Among the different policies of the MAAS, one measure is the implementation of the Voluntary Retirement Scheme (VRS) which is in line with the right sizing of the labour force and a reduction in the labour costs in the sugar industry. The aim of this study is to assess the impact of the EU sugar reforms on the livelihood of the VRS beneficiaries. Firstly, we analyse their living conditions before and after the reform. We, then, adopt a gender assessment evaluation of the VRS to evaluate its differential impact on men and women. Third, we investigate as to how the land and compensation they benefited have been used.

Lastly, we focus on the training aspect of the scheme. We analyse the different training programmes and see their contribution in improving the living standards of the beneficiaries. In line with the above, focus group discussions and a survey were undertaken. Focus group discussions were conducted on VRS beneficiaries in the North and South of the island. Our survey considers 175 VRS beneficiaries from five sugar estates. We observe that a high percentage of the beneficiaries move to a lower income bracket with their expenditure exceeding their present income level. Further both men and women are affected negatively under the scheme but the impact appears to be more significant for women. Further, most of the VRS II beneficiaries have not yet been trained. For those who have undergone training, they have not yet obtained a new job or applied their knowledge to set up their own business.

  • Year 2009
  • Organisation Trade and Pro-Poor Growth Thematic Working Group; TIPS, BIDPA
  • Publication Author(s) Rojid Sawkut;Tandrayen Verena;Seetanah Boopen;Sunnassee Vinesh
  • Countries and Regions Common Market for Eastern and Southern Africa (Comesa), European Union (EU)

Tourism is increasing becoming an important phenomena for developing countries and as such it affects the livelihood of many poor people. According to Yunis (2004), tourism is growing much faster in developing countries than in developed countries. However, its potential for poverty reduction has been insufficiently recognized and exploited in developing countries (PPT 2004). The increasing importance of the tourism sector in developing economies obliges a greater investigation to ensure that tourism becomes embedded in poverty reduction strategies. Tourism is generally viewed as an engine of economic growth rather than as a mechanism for delivering on poverty reduction. It is normally argued that tourism is driven by foreign and private sector interests, and is therefore not well placed to contribute to poverty alleviation (PPT 2004). Tourism can indeed exacerbate poverty through increased local costs, loss of access to resources and social and cultural disruptions. However, tourism has the potential to change lives of the poor in developing countries as well.

  • Year 2009
  • Organisation Trade and Pro-Poor Growth Thematic Working Group; TIPS, BIDPA
  • Publication Author(s) Erwin Naimhwaka
  • Countries and Regions East African Community (EAC), Southern African Development Community (SADC)

About 70-75 percent of Botswana beef exports are consumed in the European Union (EU) beef market. In 1997, the EU introduced a directive which made it mandatory for beef exported to the EU to be identifiable and traceable from farm to fork through a computerized system. Botswana then introduced the livestock identification and trace-back system (LITS) in 1999 to fulfill the EU export requirements and maintain the much needed EU market access.

We believe the EU-imposed LITS may pose as a non-tariff barrier to Botswana beef trade with the EU. We use a two-period causal comparative approach to examine the effects of the EU-imposed LITS on Botswana's beef exports, revenue and poverty. The EU-imported de-boned meat requirement of individual identification of cattle and traceability of beef products has imposed an extra financial burden on government almost the size of the current budget for social safety net programmes in Botswana. Both fresh or chilled boneless beef and frozen beef exports to the EU and the real value of total boneless bovine meat exports have declined significantly over the study period.

The incidence of poverty in the rural areas was more than double that experienced in urban areas. However, the majority of cattle were owned by poorer rural households. Cattle income constituted 62 percent of gross income for poorer cattle-owning households. Thus, an increase (decrease) in income from cattle is likely to have a positive (negative) impact on the incidence of poverty in the country. Any circumstance that negatively (positively) impacts trade in the cattle industry will have a negative (positive) impact on poverty in Botswana. Livestock development support programmes that target cattle-owning households to improve cattle off-take in the rural areas will positively and significantly contribute towards poverty reduction in the country.

  • Year 2009
  • Organisation Trade and Pro-Poor Growth Thematic Working Group; TIPS, BIDPA
  • Publication Author(s) Davis Marumo;Milly Monkhei
  • Countries and Regions Botswana, European Union (EU)

The focus of this article is on The SADC Trade Protocol aims for liberalization of all trade by 2012. Member countries have agreed to liberalize 85 percent of intra-SADC trade by 2008 and liberalize sensitive products by 2012. The article looks at whether SADC achieved its objectives with relation to liberalization and also tackles the challenge in maintaining fiscal sustainability after liberalization especially for low income countries.

This publication was prepared for the Inside Southern African Trade (INSAT) News Publication Issue 15 available on the Southern African Global Competitiveness Hub website, http://www.satradehub.org  

  • Year 2009
  • Publication Author(s) Mmatlou Kalaba
  • Countries and Regions Southern African Development Community (SADC)

This paper evaluates the trade, business and investment climate currently in place within the island states of the Western Indian Ocean. Operating on the premise that trade-based globalization poses a considerable challenge to island states' economic stability and prospects for equitable development, this report argues that both state institutions and exporting firms in the Comoros, Madagascar, Mauritius and the Seychelles must aggressively seek to put in place policies and practices that are conducive to attracting foreign investment, encouraging private sector growth and expanding export capabilities. As part of this analysis, this paper provides a politico-economic overview of the Western Indian Ocean island states as well as a theoretical outline of academic perspectives relating to island states' prospects for growth in a globalizing world economy. This is followed by an examination of trade and investment-related trends in these four countries (informed by primary interview research) and the presentation of potential policy options these countries can pursue to improve their competitiveness and overall trade performances.

Keywords: Development Finance, Economy, Globalization, Investment, Island States, Trade, Western Indian Ocean

  • Year 2008
  • Organisation TIPS
  • Publication Author(s) Graham Sherbut
  • Countries and Regions Common Market for Eastern and Southern Africa (Comesa)

The Zambian economy has undergone profound reforms in the last two decades. It has transited to a market economy from the previously centrally planned economy. As part of the economy-wide reforms, the country's industrial and trade policies have also been re-oriented to suit the needs of the market-oriented economy. This paper therefore reviews the evolution of Zambia's industrial and trade policies from 1964, when the country gained independence, to 2009. This period is divided into two: the first period being before the reforms in 1991, and the second period being 1991 – 2009.

The paper observes that Zambia managed to rapidly industrialise immediately after independence through direct establishment of state-owned enterprises and promotion of import substitution strategy. However, the performance of these firms remained unsatisfactory, often operating at less than full capacity. The sector failed to create linkages with the rest of the economy and could not generate adequate employment for the country. The trade policy during this period discouraged export sales and encouraged production of domestic consumer goods through the use of high tariffs and quantitative and foreign exchange controls. Government used the anti-export bias policies to industrialise. By 1991, the performance of these strategies proved to be unsustainable. Government introduced the Structural Adjustment Programme and re-oriented its trade and industrial policies towards the market. Government's role has changed from that of an investor to creating a conducive (mainly macroeconomic stability and licensing reforms) and incentivised environment for private export oriented industrialisation strategy. The incentives have included fiscal incentives and infrastructural support. The reforms have resulted in an increased production and export of manufactured goods by more than 300% between 1991 and 2008. 

 

  • Year 2009
  • Organisation TIPS
  • Publication Author(s) Dale Mudenda
  • Countries and Regions Zambia

The paper focuses on the conduct of trade and industrial policies in Malawi, their linkages and impacts on the performance of the trade and industry sectors. The study establishes that Malawi has gone through three stages of trade and industrial policy. From focusing on the production and trade of a few agricultural commodities during the colonial era, the authorities shifted, in the post-independence era to industrialise through import substitution policies. Following poor economic performance in the late 1970s and early 1980s, Government adopted economic liberalisation policies under the Structural Adjustment Programmes (SAPs) which, in fact, caused manufacturing activities to decline during the SAPs period. Substantial policy reforms ensued aimed at enhancing the performance of trade and industry. Government has adopted and applied a range of policy measures aimed at boosting investment and export incentives and regional integration and miscellaneous trade agreements were pursued to expand the market. In spite of steps towards a favourable policy environment, little progress has been made in particular areas such as that of the diversification of exports.

  • Year 2009
  • Organisation TIPS
  • Publication Author(s) Lawrence Mapemba
  • Countries and Regions Malawi

This paper looks at the nature and extent of linkages between trade and industrial policies in Zimbabwe. The paper establishes that the trade and industrial policies are interlinked in Zimbabwe. The study indicates that trade policy is one of the implementation strategies of the industrial policy - further illustrated in this paper specifically using the example of the clothing and textile industry. The policies are strongly linked in that one focuses on production capacities and the other provides a platform for the exchange of the goods produced. Also, the paper highlights the fact that the two policies are dependent on regional integration.

The paper recommends that the country needs to create a conducive macroeconomic environment for the economic agencies. It is critical to restore and increase the country’s normal capacity utilisation and other sectoral linkages such as the agriculture, mining, tourism and construction which have been under severe stress in the past ten years. The paper suggests that while a strong focus has been placed on priority industries, the country must also give priority to other products.

  • Year 2009
  • Organisation TIPS
  • Publication Author(s) Evengelista Mudzonga
  • Countries and Regions Zimbabwe

This paper aims to establish the links between the industrial policy and the trade policy in Botswana. The paper finds that after gaining independence the Botswana government has deliberately targeted industrialisation as a strategy to overcome the high concentration of economic activities and welfare of the country centred on diamonds. The strategy aimed at creating an enabling environment for the establishment, growth and development of particular types of firms through financial support. The government also centered trade policy in negotiating for preferences for Botswana's products whilst securing import requirements at competitive prices. There is evidence, nevertheless, that the formulation of trade policy, such as tariff policy, was largely disengaged from Botswana's industrial policy considerations. Commitments under SACU and SADC affect Botswana government's use of trade policy for own purposes.. Partly combined moreover with the cession of industrial policy to South Africa for most of the pre- and post-independence period, the study generally concludes that the link between the Industrial policy and trade policy has been weak.

  • Year 2009
  • Organisation TIPS
  • Publication Author(s) Farai Zizhou
  • Countries and Regions Botswana

Market selection methods, of which a vast number exist, are a critical tool in firms' and government's policy, planning and budgeting processes. To this end, the primary aim of this paper is to determine the international market selection method best-suited to the identification of potential export opportunities for South Africa. The secondary aim is to apply the chosen method to South Africa in order to determine realistic export opportunities (country-product combinations). The decision support model chosen for application in this study consists of a screening process of four consecutive filters, through which relevant information on markets (such as country risk indicators, macroeconomic data, imports per product group, etc.) is fed, and which allows the identification realistic export opportunities. Results are reported on the application of this decision support model to the case of South Africa, adapted for an analysis of foreign trade data at the SITC four-digit level up to 2004. In this way, South Africa's export opportunities in individual countries are listed and categorised according to criteria such as import market characteristics and South Africa's market share in the various markets.

  • Year 2009
  • Organisation TIPS
  • Publication Author(s) Ermie Steenkamp;Riaan Rossouw;Wilma Viviers;Ludo Cuyvers
  • Countries and Regions South Africa
Published in Trade and Industry

The drive towards SADC trade liberalisation is a goal that is emphasised in most documents of the SADC Secretariat, including the protocol on trade and the regional indicative strategic development plan (RISDP). This trade liberalisation aims to deepen regional integration through increased intra-trade between SADC member states, which was to be facilitated by the removal of trade barriers. Up to so far, the only barriers that have noticeably been reduced are import tariffs. At the same time individual member states are required to meet the growing challenges of global and regional competitiveness. The trade profile of an average SADC member country is characterised by high reliance on few products for trade revenue, which also contribute enormously to the value of total trade, and also has most prospects of industrial development. Therefore, the need for competitiveness is dependent upon the ability to protect the very same sectors that are being liberalised.

The initial steps of trade liberalisation in the region involved reduction of tariffs under the implementation of the protocol on trade, however the expected response from trade was low. It is a well known fact that there exist other weaknesses in these economies such lack of productive capacities to respond to trade incentives and infrastructural constraints which restrain potential trade. This study examines the extent to which trade protection under regional integration processes of developing countries affects the least developing members of the bloc. The static comparative tariff analysis method of relative tariff ratio is applied to determine the degree of protection between members of SADC. The results show that the least developing members of the bloc grant more access to the developing members, and they also face the most restrictive protection in the counterpart markets. Furthermore, the potential for the least developing members to build up their industrial capacity is negatively affected by deeper integration as they rely on trade instruments.

  • Year 2008
  • Publication Author(s) Mmatlou Kalaba
  • Countries and Regions Southern African Development Community (SADC)

This paper investigates the impact of the quality of infrastructure on exports, with a specific focus on Sub-Sahara Africa. Improving the quality of infrastructure has a positive effect on exports by lowering the transport costs faced by the exporter. This paper provides a new specification on how to model transport costs in the gravity model. Specifically, minimum and maximum infrastructure variables are included in the model rather than exporter and importer infrastructure variables. The gravity model forms part of a Heckman selection model, which is used to deal with the biases induced by excluding zero bilateral exports in the gravity model. The results suggest that it is the minimum quality of infrastructure between two trading countries that matters most for transport costs and therefore trade. This result also holds when using disaggregated export data and specific infrastructure variables. No robust evidence was found that Sub-Sahara Africa exports less than expected or that improving the quality of infrastructure has a significantly different effect on Sub- Saharan exports. However, using disaggregated trade data it was found that Sub-Saharan countries, given its characteristics, export more primary products and less manufactured goods (although the findings for manufactured goods are not robust).

  • Year 2008
  • Organisation TIPS
  • Publication Author(s) Lawrence Edwards;Martin Odendaal
  • Countries and Regions South Africa

South Africa's energy system has been, and still is, one of the key contributing factors to the social and economic development of the nation. By international standards, the South African economy is very energy-intensive, meaning that the country uses a large amount of energy for every rand of economic output. Historically world economic and political factors have had a profound effect on international oil prices which in turn have impacted heavily on individual nation's energy policies.

The focus of this research centres on issues concerning industrial energy use. The theoretical background to this research is well grounded in traditional trade theory, with trade patterns and the international competitiveness of countries explained as a function of both supply and demand side factors. The empirical work undertaken seeks to verify such explanations by determining the extent to which changes in the energy intensity of the South African manufacturing sector are due to changes in the types of goods produced domestically versus changes in the types of goods internationally traded.

  • Year 2008
  • Organisation University of Kwazulu-Natal
  • Publication Author(s) Marcel Kohler
  • Countries and Regions South Africa

The future direction of South African industrial policy is the subject of vigorous and healthy debate. The outcome is important for the country's economic development. This study is an attempt to contribute to these discussions through an overview of and some questions about the economic impacts of South Africa's post apartheid trade and industrial policy. It comprises two main parts. These parts can be read independently.

The first part reviews some key themes in international policy discussions and draws lessons from the recent experiences of other developing countries. The second and largest part of the report reviews South Africa's industrial policy over the past decade. While not comprehensive, the range of policies examined is sufficient to dismiss the claim made by some that South Africa has not had an industrial policy. In fact, whether by intention or not, South Africa has experimented with a very wide range of policies that have had a direct impact on the path and success of its industrial development.

This review raises some serious questions about the economic impacts of South Africa's industrial policies and of some future alternatives that are now under discussion. Despite the intensity of and broad interest in the debate, there appears to have been very little serious economic analysis of past policies or of future plans. Basic assumptions about the effectiveness of sector-specific interventions, for instance, appear to be poorly founded. Many policies have impacts that are at variance with stated intentions. International experience is drawn upon with great selectivity to support particular views about preferred policy directions.

The real questions facing South Africa are not whether South Africa does or should have an industrial policy. They are not about whether there should be more or less government intervention. The most important questions are pragmatic and not ideological they are about what works and does not work in South Africa and why.

  • Year 2008
  • Organisation Development Network Africa
  • Publication Author(s) Frank Flatters;Matthew Stern
  • Countries and Regions South Africa

The purpose of this paper is to investigate whether a relationship between export volumes and exchange rate volatility exists as suggested in the ASGISA document. It goes about this by first investigating the theoretical channels that predict the relationship between export volumes and exchange rate volatility. The theoretical prediction though, is ambiguous depending on the justification, model and factors taken into account in reaching the result. Furthermore, the paper provides evidence that the empirical results are ambiguous as well, as some countries tend to exhibit a negative relationship and others a positive relationship. Thus the paper goes on to estimate two measures of exchange rate volatility (a moving average standard deviation and the conditional volatility extracted from GARCH modelling) using the real effective exchange rate. These measures provide varied results in testing for stationarity. A cointegrated model for export volume using the Johansen estimation technique is then estimated with the volatility variables included in either the short or long run model, depending on the sensibility of the results produced.

NOTE: This I am currently revamping this paper, it was my mini-dissertation done toward the completion of my Masters in Economics at UCT. I am still estimating the cointegrated model, and so am not sure if any of my volatility variables will be able to enter in the long run model (in the previous paper this was not possible). I have not summarised the results yet for this reason. The model will be estimated with data ranging from the first quarter of 1961 to the first quarter of 2007 (the reason for the revamp is that this paper previously only considered data up until the first quarter of 2005). The model will also be estimated for the period starting 1972 (after the collapse of Bretton Woods) until the present, or a structural break at this period will be investigated (to see if the behaviour changed as a result of the introduction of the floating exchange rate in spite of the variability of the Real effective exchange rate before this time). The policy implication will be suggested at the end. Originally there was a negative effect of exchange rate volatility on the GROWTH of export volumes (so a significant negative short run effect), but not on the level of export volumes.

Finally, I may (time permitting) include a third estimation of a volatility variable that has been suggested in some of the international literature (a linear moment model/instrumental variable type approach) and the effects of this volatility measure on export volumes.

  • Year 2008
  • Organisation South African Reserve Bank
  • Publication Author(s) Siobhan Redford
  • Countries and Regions South Africa

Trade-in-services is fast becoming one of the foremost areas of research and policy making in the international trade arena. Although the General Agreement on Trade-in-Services (GATS) was implemented in 1995, it is only recently, with the realisation of the close linkages between goods and service exports and the advent of better data, that researchers have begun to pay more serious attention to questions such as 'comparative advantage' and 'trade liberalisation' in the service trade. While research on the subject has lagged, negotiations and policy analysis (because of GATS) has had to make do with what little is understood about the service sector. One reason for the lack of clear stylised facts about service exports is the diverse nature of the industries that comprise it. The World Trade Organization (WTO) defines twelve service industries, each with specific characteristics, measurement issues and economic incidence. Furthermore, each service industry consists of four modes of trade. In addition, trade involves both imports and exports. South Africa has a long history of travel service exports. The first Europeans settled in the Cape to provide services to passing ships on their voyages to the East Indies and back to Europe. Cape Town, known as the 'Tavern of the Seas', offered sailors and soldiers accommodation, entertainment and health care before commencing the second leg of their journey. Today, South Africa offers the international traveller a diverse travel experience. Blessed with unique natural landscapes, fauna and flora, history and cultures, together with a built environment offering quality services, travel exports are one of the fastest growing sectors in the South African economy. Given this, South Africa seems to enjoy a comparative advantage: Travel service exports comprise more than 65% of the country's total service trade, significantly higher than the world average of 38%. This paper defines travel service exports and reflects on its development in South Africa. Using a new United Nations Conference on Trade and Development (UNCTAD) dataset, tests the hypothesis that South Africa has a comparative advantage in exporting travel services. The relative advantage of this sector is also compared against that of other countries. The evidence supports the notion that South Africa has a revealed comparative advantage in exporting travel services.

  • Year 2008
  • Organisation Department of Economics, Stellenbosch University
  • Publication Author(s) Johan Fourie
  • Countries and Regions South Africa

The Southern African Development Community (SADC) has been implementing the trade protocol for more than seven years. The aim is to liberalise trade flows between members and eventually lead to deeper integration in the region. As member states are preparing to enter another layer of integration in the form of a free trade area, it is also an appropriate moment to evaluate the performance of the implementation of the trade protocol. In this paper, an assessment of intra-SADC trade performance is done by focusing on intra-SADC export share, comparing intra-SADC share with other regional blocs and intra-country trade share. The results show that despite impressive growth in total exports between 2000 and 2006, intra-SADC trade remains weaker. A comparison of SADC with other regional blocs shows that intra-regional trade provides the necessary impetus for deeper integration and regional progress. However, SADC is lagging behind most regions. SADC's growth of extra-regional trade was more than with fellow members. Trade between countries also reveals that more than two thirds of total trade is with South Africa. Potential causes for this outcome include exports of raw materials and intermediate goods, failure to meet tariff reduction requirements, increasing commodity prices, existence of other forms of barriers as well as the challenges relating to weak manufacturing capacity, poor physical infrastructure and unresponsive supply side bottlenecks. As SADC enters another level of integration, it should make sure that the necessary mechanisms to address these challenges are in place so that the region can realise the associated benefits.

  • Year 2008
  • Organisation TIPS
  • Publication Author(s) Mmatlou Kalaba;Mbofholowo Tsedu
Published in Trade and Industry

The Motor Industry Development Program (MIDP) is widely regarded as a major success of South Africa's post-apartheid trade and industrial policies. The program was introduced in 1995, has been modified and/or extended several times, and is currently scheduled to continue until 2012. A DTI-funded review, the third since the programs inception, is now under way and is considering further adjustments to and possible extensions of the program after 2012. At the same time high-level discussions are under way in several ministries and agencies about future industrial policy strategies for South Africa. The MIDP's success makes it an obvious model for new approaches to industrial policy, and in particular for increased emphasis on sectoral strategies and interventions.

  • Year 2005
  • Publication Author(s) Frank Flatters
  • Countries and Regions South Africa
Published in Trade and Industry
Friday, 13 April 2007

Trade Information Service 2005

One of the objectives of the Department of Trade and Industry (the dti) is to develop capacitiesfor improving the export performance of businesses. To do so, the dti/TISA require easily accessible practical strategic and analytical tools for identifying growing markets to which South African firms could export. This report will help the dti/TISA and its target group of South African exporters to analyse aspects of the global market in its various facets. In doing so, thedti/TISA will strengthen its role as a provider of strategic tools to be used as a basis for analysinggrowing global markets for South African exports. A key objective of the report is to assist TISA to become an important source of strategic market information identifying the most lucrative markets and value chains for South African exports.

  • Year 2005
  • Organisation TIPS
  • Publication Author(s) Owen Willcox
  • Countries and Regions South Africa
Published in Trade and Industry
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