External Journals

This paper examines the impact of trade liberalization on export performance in South Africa during the 1980s and 1990s. It employs a time series regression analysis in which export performance is assumed to be determined by external market conditions, the ability to compete in the world markets, and the extent of diversification of the commodity composition of the country's exports. The results indicate that, external market conditions were the important determinant of export performance across all sectors during the sample period. While competitiveness contributed to the increased performance of manufacturing and mining exports, diversification into new export lines faltered in all sectors, pointing to a greater sensitivity of exports to demand conditions than to supply factors.

  • Year 2002
  • Publication Author(s) Newman Kwadwo Kusi
  • Countries and Regions South Africa

SADC Member States have chosen regional integration as part of their strategy for global participation. While not a first best strategy, regionalism can complement more general trade and investment liberalization. Unfortunately the SADC Trade Protocol is seriously flawed. Back-loaded and confusingly differentiated tariff reduction schedules are well-known problems. Less clearly understood are the effects of complex and restrictive rules of origin.

As they are now, SADC rules of origin will hinder regional economic integration and, at best, have no impact on global competitiveness of regional producers. They will make SADC irrelevant for the most dynamic, internationally competitive manufacturers in the region. In many cases rules of origin have been designed to undo the trade creating effects of tariff liberalization.

These rules of origin should be a principal item on the agenda for the review of the Trade Protocol scheduled for 2004. Without fundamental reform, SADC is doomed to economic irrelevance

  • Year 2002
  • Publication Author(s) Frank Flatters
  • Countries and Regions Southern African Development Community (SADC)
Saturday, 15 June 2002

Trade and the Environment

The paper discusses the current developments concerning the environment and trade, as well as its implications for South Africa. This is followed by a brief outline of the threats and opportunities that are created for the economy by this renewed emphasis on sustainable development

  • Year 2002
  • Publication Author(s) Dockel Max; Roland Mirrilees
  • Countries and Regions South Africa

The paper will examine the structural characteristics of the SADC economies and its lop-sidedness in terms of size and patterns of production, consumption and trade. This basic problem of the transformation of the economies in the sub-region will constitute an important part of my analysis of the determinants of exports from SADC. Though the picture of the economic performance of a few of the Southern African economies appears to be improving, the region's economies are still characterised by poor manufacturing capabilities, declining market share in international markets and a sluggish economic growth.

The paper will also provide a comprehensive overview of the multifaceted issues that act as deterrent to growing trade in the SADC region. In doing this, the paper examines the factors influencing the performance of SADC economies. The paper argues that until policy makers constantly address the issues ranging from the macro-economic factors such as price stability, foreign exchange regimes and gross capital formation, first at the domestic level, efforts at trade liberalisation at the regional and international level though not meaningless, will not deliver growth in trade from the region.

It is the intention of the present paper to drive home a message that for trade to develop and grow at the regional level, the policy makers have to start the game at the national level, focusing on those macro-economic strategies that enhance stability such as retention of skilled labour, infrastructure, monetary policies and constantly fine tuning these policy instruments to be in line with trade policies espoused at the regional level. The determinants of exports growth from SADC will ultimately be influenced by the structural changes taking place in these economies and the supply-side constraints bedevilling the individual economies of the region

  • Year 2002
  • Publication Author(s) Daniel Ndlela
  • Countries and Regions Southern African Development Community (SADC)

South Africa is a major sea trading nation with a relatively open economy that accounts for approximately six per cent of real world seatrade. This performance places South Africa within the top 12 international maritime trading nations. The literature reviewed clearly shows the importance of maritime transport costs and their ability to significantly impede international trade. South Africa's atypical increasing transport cost rate on imports is identified, along with some of the potential determinants. South African shipping policy is shown to be one of the most liberal maritime policy regimes in the world. Regulatory intervention is all but absent, although maritime fiscal policy is less favourable as the international policy environment has evolved to a point where South African shipowners and operators now compete internationally on an inequitable fiscal basis. South African ports policy is investigated with the focus on the changing tariff environment. In addition, some of the benefits and costs of the new tariff structure on cargo owners and ports are revealed.

  • Year 2002
  • Publication Author(s) Mihalis Chasomeris
  • Countries and Regions South Africa

Developments in the automotive industry have received considerable positive publicity over the last few years. Firstly, and most importantly, this is a consequence of rapid export expansion, initially of components, but latterly also of vehicles. Recently, for example, Toyota announced a R3.5 billion investment programme partly to provide for the export of Corollas to Australia. In April, Ford announced that they had invested R1 billion in their Eastern Cape engine plant and would be massively expanding production as the sole world supplier of the 1.3 litre RoCam engine.

A second positive development is that the automotive sector has been the recipient of considerable foreign investment including substantial fixed investment in assembly plants and component production. This has been at a time of weak market demand, falling import duties and the abolition of local content requirements. Thirdly, productivity has improved rapidly and there is substantial evidence of improvement in a range of benchmarks such as quality and operational shopfloor efficiency (Barnes and Kaplinsky, 2001). In June, for instance, the Pretoria BMW plant received the highest quality rating of any plant in the BMW group. Fourthly, employment has remained relatively stable under difficult circumstances. Relative to the rest of the manufacturing sector, the automotive industry's share of sales, value added and investment have all increased over the period 1993-2001. On the whole it appears that the industry has weathered import liberalisation rather well.

The above developments have been strongly influenced by the Motor Industry Development Programme (MIDP). As a result, the MIDP is frequently cited as a successful example of trade and industrial policy and even as an example for other sectors to follow. But rapid export growth does not, in itself, signify success as exports have been strongly supported by sector specific policy measures. The objective of this paper is to probe these developments in greater depth by examining the process of international integration under the MIDP in some detail, focusing on the export experience and its effects at the sub-sector and firm level. The paper also attempts to draw some conclusions as to the broader implications for trade and industrial policy.

  • Year 2002
  • Publication Author(s) Anthony Black
  • Countries and Regions South Africa

In the early 1990s, about two-thirds of South Africans were without electricity, relying on dirtier and less convenient fuel such as coal. As a result, urban air is severely degraded, with health guidelines for concentration of particulate materials being exceeded. Eskom dominates the electricity market of sub-Saharan Africa generates about 95% of South Africa's electricity. Electricity generation has been showing an upward trend in South Africa, with an increase of approximately 40% between 1990 and 2000. More than 85% of the coal produced in the country is used to generate electricity. Energy prices in the country do not reflect the impact of pollution and other externalities, and hence undermine investment decisions that could favour less polluting technologies. The study will investigate factors determining the demand of energy in the electricity sub-sector and evaluate the main environmental issues associated with electricity production in the country. The research will also investigate possible long run shifts in production technology.

  • Year 2002
  • Publication Author(s) O.A. Akinboade; E.W. Niedermeier
  • Countries and Regions South Africa

Based on Edwards' (1989) intertemporal general equilibrium model of a small open economy, this study attempts to estimate the degree of real exchange rate misalignment and its impact on the international trade competitiveness of the South African economy for the period 1985:1-2000:4. For this purpose, a one-step Engle-Granger approach and five years moving average technique have been employed to estimate the exchange rate misalignment, while impulse response analysis and variance decomposition techniques of cointegrated VAR (vector auto regression) have been established to assess the impact of the misalignment on trade competitiveness. The study reveals that the real exchange rate had been consistently overvalued during the period 1988:3-1998:2 but undervalued during periods 1998:3-2000:4. For most of the periods during 1985:1-1988:2 the rand had been undervalued. Moreover, the study discloses that the exchange rate misalignment debilitates South Africa's international trade competitiveness accounting for 20 percent of the variation in competitiveness.

  • Year 2002
  • Publication Author(s) Samuel Asfaha; SN Huda
  • Countries and Regions South Africa

This paper contributes to the debate over the effect of trade on the demand for labour in the manufacturing sector in South Africa. Previous work in the area has decomposed employment to find the likely contribution of trade effects, has investigated the correlation between employment and trade, and has used fixed effects panel data models. This paper develops the earlier work, by estimating a labour demand equation using dynamic panel data method of Arellano and Bond (1991). This leads to results that are consistent with the findings of decomposition analysis that trade has had a positive effect on employment 1972-93, but that there has been a negative effect since 1993, the period of trade liberalisation. There is no evidence that the effects of trade are distributed unevenly between skills, when proxied by racial groups. Overall, the results show the importance of trying to model the dynamics of the processes at work and suggest that further work at the level of the company as well as the industry is likely to be important.

  • Year 2002
  • Publication Author(s) Alvin Birdi; Paul Dunne
  • Countries and Regions South Africa

This paper uses two firm level surveys, the National Enterprise (NE) survey and the World Bank and Greater Johannesburg Metropolitan Council (GJMC) co-ordinated survey, to explore the implications of globalisation on employment in South Africa. We use the firm surveys to analyse the impact of trade liberalisation on the level and skill structure of employment. In the latter case we extend existing research in this area by focussing on the relationship between trade and choice of technology. We also analyse the impact of increased export orientation and foreign direct investment on employment. The results indicate substantial heterogeneity in the response of firms to trade liberalisation. On average large firms negatively affected by trade liberalisation reduced employment. No such relationship was found amongst small firms. Overall, however, the decline in employment due to trade liberalisation is likely to be small. Export competitiveness has improved through trade liberalisation, but this has not led to increased employment. Evidence of the impact of technological change on the skill structure of employment is also found. Increased use of computers, foreign investment and the importation of raw material inputs raise the skill intensity of production.

  • Year 2002
  • Publication Author(s) Lawrence Edwards
  • Countries and Regions South Africa

The South African architectural, construction and engineering services industries have notable competitive advantages, particularly in providing basic infrastructure and particularly on the African continent. However, the sector has been in decline for over two decades, threatening the survival of those advantages. Exporters face many hurdles, ranging from corruption in Africa and the Middle East to protracted licensing and visa procedures in the industrialized nations. Based on interviews with industry associations and South African companies in this sector, specific export hurdles are highlighted. Not all export hurdles are relevant to the GATS negotiations, or even the WTO, as some export barriers are linked to domestic policy issues or regulation, demonstrating the extent to which the trade strategy of a sector and its domestic policy are inextricably linked.

South Africa's trade liberalization of the architectural, construction and engineering service industries is highly advanced and therefore only modest scope exists for further offers of market access. Despite this openness, there has been little foreign entry into the domestic market, mainly due to the weakness of the Rand and the lack of familiarity of foreign competitors with local conditions and labour practices. This situation is likely to change when the imminent revival of demand in these industries is confronted with the contraction of local capacity that has resulted from two decades of falling output.

To assist the South African policy makers and GATS negotiators, the GATS commitments made by actual and potential target markets for South African construction and engineering exports are scrutinized, leading to suggestions for requests for further market access. Obstacles to the presence of natural persons prove to be most commonly employed limitation on market access. The lack of international standards for accreditation of academic achievements and professional qualifications appears to be the greatest formal stumbling block in the export of engineering services. Construction services also suffer from a lack of transparency in building regulations in target markets and the proliferation of country-specific standards. As it is unclear to what extent the current obstacles are dampening or even preventing exports, it is not possible to quantify the impact that lifting formal barriers will have on South Africa's exports. Lastly, some areas for further research are highlighted.

  • Year 2002
  • Publication Author(s) Ethel Teljeur; Matthew Stern
  • Countries and Regions South Africa

The major objective of this study is to evaluate the role of exchange rate policy in determining trade flows with respect to Southern African economies. The study provides a structural analysis to the empirical strength of the influence of exchange rate movements on trade flows for small low-income countries on the basis of the prevalence of export demand pessimism, import demand pessimism and export supply pessimism. Through an empirical estimation of real exchange rate and output elasticities of import and exports of eight SADC economies, namely Zimbabwe, Zambia, Botswana, Malawi, Lesotho, Swaziland, South Africa, Mauritius, the main findings of the study indicate that exchange rate policy has not played an active role as a trade facilitation tool in regional economies. Moreover, the tendency of the pervasive effects of distorted macroeconomic and structural macroeconomic fundamentals is reflected in some inconsistent results as well as the statistical insignificance of some of the elasticities.

Overall, the analysis shows that output elasticities are generally large and well-determined. By contrast, the real exchange rate elasticities are less-well determined and generally quite low. Hence although there is considerable evidence that the real exchange rates do affect trade volumes in the expected directions, the results are in most cases quite pessimistic as regards the size and effectiveness of the underlying elasticities. Thus the main conclusions of the study point towards the general overview that trade and exchange rate policy implementation in regional economies is highly constrained by the underlying structural features of the economies which make import substitution difficult while exhibiting inelastic export response both on the demand and supply side.

High degrees of import compression, excessive dependence on a few traditional export products while importing manufactured goods and machinery that are critical inputs in the production process has perpetuated the low responsiveness of imports and exports to changes in the real exchange rates in SADC economies. Thus in light of the findings, sustained exchange rate policy implementation which hinges on extensive institutional and technological capacity as well as maintaining comprehensive coherent macroeconomic packages remains a critical factor in ensuring that exchange rate policy performs its central role as a trade facilitation tool.

  • Year 2002
  • Publication Author(s) Daniel Ndlela; Thandinkosi Ndlela
  • Countries and Regions Southern African Development Community (SADC)

SADC Member States have chosen regional integration as part of their strategy for global participation. While not a first best strategy, regionalism can complement more general trade and investment liberalization. Unfortunately the SADC Trade Protocol is seriously flawed. Back-loaded and confusingly differentiated tariff reduction schedules are well-known problems. Less clearly understood are the effects of complex and restrictive rules of origin.

As they are now, SADC rules of origin will hinder regional economic integration and, at best, have no impact on global competitiveness of regional producers. They will make SADC irrelevant for the most dynamic, internationally competitive manufacturers in the region. In many cases rules of origin have been designed to undo the trade creating effects of tariff liberalization.

These rules of origin should be a principal item on the agenda for the review of the Trade Protocol scheduled for 2004. Without fundamental reform, SADC is doomed to economic irrelevance

  • Year 2002
  • Publication Author(s) Frank Flatters
  • Countries and Regions Southern African Development Community (SADC)

The paper reports on the construction and testing of a Standard International Food Policy Research Institute (IFPRI) computable general equilibrium model for South Africa. A 1998 social accounting matrix (SAM) for South Africa is compiled using national accounts information and recently released supply-use tables. By updating to a recent year, and by distinguishing between producers and commodities, this SAM is an improvement on the existing SAM databases for South Africa.

Furthermore, this SAM is made consistent with the requirements of IFPRI's standard comparative static computable general equilibrium (CGE) model. This model is then used to simulate the economy- wide impact of a range of hypothetical policy levers, including: increased government spending; the elimination of tariff barriers; and an improvement in total factor productivity. Results indicate that assumptions made regarding the mechanisms of macroeconomic adjustment are important in determining the expected impacts of these policies. Firstly, despite mixed results concerning changes in household income distribution, the impact of expansionary fiscal policy appears to be growth enhancing, with the Keynesian style adjustment mechanism producing the most positive results.

Secondly, a complete abolition of import tariffs also appears to generate increases in gross domestic product, with negative and positive consequences for aggregate manufacturing and services respectively.
Finally, an increase in total factor productivity is growth enhancing, with the most positive results derived under neoclassical assumptions of the macroeconomic adjustment mechanisms. These simulations are meant to demonstrate the usefulness for economy-wide policy modelling and the paper concludes by highlighting areas of policy analysis that might benefit from more detailed applications with this framework.

  • Year 2002
  • Publication Author(s) James Thurlow; Dirk van Seventer
  • Countries and Regions South Africa

In this paper, we examine the changing role of trade in South Africa and SADC from different vantage points. We first review progress in liberalizing South Africa's trade regime, and conclude that, while signs of progress are clear, the levels and complexity of protection continue to pose barriers to the evolution of efficient trading patterns and a constraint to growth. We also find that trade liberalization has not led to de-industrialization of the South African economy: while import penetration has risen, exports have grown as well, so that the net impact from expanding trade is positive. But the net numbers remain small, and the limited employment creation is biased towards skilled workers, suggesting that the full potential from expanding trade has not been realized. We turn our focus next to the SADC region, and examine the fiscal implications of the proposed SADC FTA, highlighting both the administrative complexity of harmonizing tariff regimes among the diverse SADC economies, and the differential fiscal costs of the proposed arrangements for the participating economies. Finally, we look at the economic impact of alternative free trade areas (FTAs) for the region, using a multi-region simulation model. We find that these FTA initiatives are beneficial for the region, not only for participants, but even (in the case of the EU-South Africa FTA) for non-participants, since the rest of southern Africa benefits as well from the EU-South Africa agreement. But it is also clear that South Africa alone is not large enough to serve as the growth pole for the entire sub-region.

  • Year 2001
  • Organisation The World Bank
  • Publication Author(s) Jeffrey Lewis
  • Countries and Regions South Africa, Southern African Development Community (SADC)
Published in SADC Trade Development

Almost immediately after the first democratic election, South African policy makers embraced the policy of trade liberalisation (see Holden 2000). To many observers, the offer made by South Africa to the World Trade Organisation (WTO) has been very generous. Various attempts to evaluate the impact of trade liberalisation on the South African economy have been undertaken since (see, for example, IDC 1997, Valodia 1998, and Lewis 2001). These attempts have either been of a general equilibrium nature or of a very micro firm level nature.

In this paper, we consider the partial equilibrium effects of trade liberalisation on selected South African sectors and clusters of commodities following Greenaway & Milner (1993). This methodology is somewhere in between the general equilibrium analysis and the firm level analysis, in that it can be conducted right the whole range of imported merchandise but also at a fine level of commodity detail (HS8).

We first present some basic theory on the welfare gains and losses of tariff changes, after which we attempt to operationalise the welfare gains and losses of changes in import tariffs. We conclude by presenting some indicative results based on (relatively old) IDC data for imports and associated tariffs. We also apply the methodology to more recent tariffs, which allows us to evaluate welfare gains and losses of tariff changes at a more detailed level of clusters of commodities.

  • Year 2001
  • Organisation TIPS and University of Cape Town
  • Publication Author(s) Dirk van Seventer; Lawrence Edwards
  • Countries and Regions South Africa
Published in SADC Trade Development

The past two decades have witnessed far-reaching reforms in the provision of telecommunications services. Before the 1980's, telecoms services were mainly provided by state-owned enterprises and in rare cases by private monopolies with territorial or functional licenses. The 80's saw the role of the state being increasingly changed from that of service provider to that of regulator and policymaker. These developments were a result of technological changes that enabled some segments of telecommunications to be subject to competition. Regulatory reform was also often undertaken by governments as a strategy to attract investment in the sector to enable increased telephone penetration. Developing countries also faced pressure from Bretton Woods institutions and other international organisations to liberalise their markets. Liberalisation, privatisation and deregulation thus became the order of the day (Frempong and Atubra, 2001).

This paper deals with an issue that is often mentioned as an afterthought in discussions of regulatory reform: regulation and regulatory institutions. A review of a recent collection of writings on privatisation in developing countries reveals that little detailed work has been carried out on the experience of regulation (Makhaya, 2001). This tendency to overlook regulation is worrying as a study on developing countries found that the most disturbing issue in telecoms reform is the slow pace in developing regulatory capabilities (Achterberg, 2000). It is now a wellaccepted fact that liberalisation and/or privatisation of utilities such as telecommunications requires post-reform regulation for various reasons. These industries are characterised by natural monopoly in some segments; local calls are a well-cited example. Regulation is needed to protect consumers in areas that, even with modern technology, are still not contestable. In areas that can be opened up to competition, there are barriers to entry due to the nature of capital investment required and incumbency advantages such as customer loyalty. Competition has to be nurtured and the regulator has the power to influence the development of competition and the form it will take (Helm and Jenkinson, 1998).1 Regulation is also needed to ensure that license obligations (e.g. quality standards, interconnection) are met and to monitor the performance of any social obligations that firms have to undertake. Most importantly, regulation is needed to ensure that competition emerges in the sector. Without proper regulation, abuses of market power can go on unchecked and competition stifled.

It should also be acknowledged that privatised infrastructure facilities continue to occupy a strategic role in an economy: they have links to growth, poverty and the environment and regulation has to be put in place to deal with these externalities (Naidu, 1995). Telecommunications form the backbone of the knowledge economy. It is an important provider of income, employment and is a determinant of a nation's competitiveness (Chowdary, 1998). Public investments in communications and transport have been linked to economic growth.2 Community economic development also flows from increasing access to telecommunications: job creation, job maintenance and the creation of home-based industries are all facilitated by access to telecommunications. All the countries that are mentioned in this discussion regard competitive 1 This observation was made for the UK experience. 2 A study of 119 countries spanning the 1960 to the 1980s found a strong correlation between economic growth and public investment in transport and telecommunications (Easterly and Rebelo, 1993). 2 prices for telecommunications services as an important policy goal, given the linkages of the sector to production in other sectors.

The issue of regulation is particularly relevant to South Africa at this stage as the telecommunications industry is undergoing restructuring. Various policy directives have been issued to determine the course of the sector's development. The development of regulatory institutions is thus a crucial matter that needs to be adequately addressed. The regulator has various important functions to perform in this period of transition and beyond. Thus it is a cause of concern that ICASA is perceived as weak and under-resourced (Business Day, 01 February 2001). Policies such as market liberalisation and privatisation can lead to sub-optimal outcomes if the right institutions and processes do not exist. A study by Wallsten (1999) demonstrates that privatisation without competition can have negative effects. Wallsten performs a regression using data from 30 African and Latin American countries between 1984 and 1997 to show that privatisation, by itself, is negatively correlated with mainline penetration and connection capacity. Only when a strong regulator and competition accompany privatisation do gains such as increases in per capita main lines, increases in payphones and decreases in local price calls begin to emerge.

Most discussions of regulatory reform often assume that the appropriate regulatory institutions exist without exploring the validity of this assumption. This paper will attempt to identify the main determinants of regulatory effectiveness, especially in the context of setting up new institutions. The discussion will include a comparative study of the development of regulatory institutions in Ghana and Malaysia and the lessons these countries hold for South Africa. The paper will begin by a brief outline of the countries and their efforts towards regulatory reform followed by a discussion of what is meant by an effective regulator. The paper will then provide a comparative study of the determinants of regulatory effectiveness followed by a concluding section.

  • Year 2001
  • Publication Author(s) Gertrude Makaya

Since the early 1980s South Africa's trade policy regime has shifted from one of import substitution towards one of export orientation. This shift has been encouraged by trade liberalisation which accelerated in 1994 with tariff liberalisation, export orientation policies that ranged from direct support (GEIS) to marketing related support, and the GEAR macroeconomic strategy that was explicitly expected to transform South Africa into a 'competitive, outward orientated economy' (GEAR, 1996). Accompanying each of these policies is some instrument that is used to gauge the effectiveness of the policy in raising the competitiveness of South African exports. For example, the trade liberalisation and export promotion policies aim to reduce the anti-export bias associated with South Africa's history of protection (Holden, 1992, Bell et al., 1993, IDC,1997). The GEAR strategy aims to enhance the competitiveness of South African production by stabilising the real effective exchange rate at a competitive level over time.

The success of these policies has been mixed. Manufacturing exports have grown rapidly since the mid 1980s and now account for 43.8 % of total exports. Export orientation has also risen with the share of production rising from 6.6 % in 1984 to 22 % in 1998. While some of this growth was driven by surplus domestic production capacity in the 1980s and early 1990s, the continued rise in exports since 1993 as domestic demand recovered suggests that shift towards export markets has become permanent. Yet the structure of trade is still very capital and skill intensive (Bell and Cattaneo, 1997, Edwards, 2001b) and appears out of norm with other middle income countries (Tsikata, 1999). Some of this is due to number of capital biased domestic supply side policies, but the inability of labour intensive sectors to compete has also played a role (Edwards, 2001b). Employment in manufacturing has also continued to fall since many of these policies were implemented. Finally, while exports have grown, this growth is not significantly greater than other dynamic emerging countries (Golub, 2000).

This paper evaluates the competitiveness of South African production during the 1990s. Through this some insights into the mixed performance of South African exports can be achieved. The paper is structured in three parts. The first part provides a detailed review of measurements used to analyse the changing competitiveness of South African exports. The second part utilises a variety of classifications to present an overview of the changing commodity and regional structure of South African manufacturing trade. The third part utilises a 'œdynamic' Revealed Comparative Advantage measure to analyse the changing competitiveness of South African exports at a sectoral level.

  • Year 2001
  • Organisation University of Cape Town
  • Publication Author(s) Lawrence Edwards;Volker Schoer

This paper tests a 'generalised' version of Thirlwall's balance-of-payments (BOP) constrained growth model by examining the existence of a long-run relation between the output growth rates of OECD countries, South Africa and the rest of the Southern African Development Community (RSADC). Although the policy implications of the study are not mutually exclusive, they can be viewed from the individual perspectives of OECD, South Africa and RSADC. First, OECD is BOP constrained with respect to middle income countries (MIC) represented by South Africa and low-income countries (LIC) represented by RSADC. OECD will grow faster by providing MIC and LIC greater access to their markets to maintain the demand for their products buoyant. Second, South Africa is only BOP constrained with respect to OECD. The message to South Africa's policy makers is plain: high rates of growth will be the result of an improvement in the structural demand features of South Africa's exports to OECD. Third, RSADC is only BOP constrained with respect to South Africa. Growth-promoting policies in South Africa may have a high and positive impact on the whole SADC region. Policy-makers in RSADC, however, should reduce their dependence on South Africa by improving the structural demand features of their exports to OECD.

  • Year 2001
  • Organisation National Institute for Economic Policy (NIEP)
  • Publication Author(s) Kevin Nell

This paper presents results based on a recent South African firm-level survey. It examines the export behaviour of South African manufacturing firms, it attempts to characterise the decision to export and it also considers the destination of exports. We find the following:

  • 71% of South African firms export. These firms export on average 18% of their output.
  • The proportion of firms exporting is one of the highest for a number of African countries. However, given that a firm exports, the percentage of output exported is amongst the lowest.
  • There are very few specialist exporters. Less than half the firms in the sample export more than 10% of their output.
  • More than a quarter of exporters export only to countries in the SADC region.
  • SADC is the major market for all sectors and for more than 50% of firms in all sectors except the iron and steel sector and the textiles and garments sector.
  • Other major markets include the rest of Africa, Western Europe, Asia and North America, although there are noticeable differences in major markets between sectors.
  • For those firms that export, about 55% of exports go to SADC and 45% to the rest of the world. Less than 6% of total output for all firms is exported to the rest of the world. However, these figures mask important differences between sectors.
  • Exporters produce more output per employee and have higher average labour costs.
  • Estimates of production functions for firms suggest that firms with some foreign ownership produce more output than identical firms with none. This suggests that foreign ownership may be an important channel for technological transfer.
  • Production function estimates suggest that returns to scale are constant.
  • Exporting in general does not make a difference to efficiency but exporting out of SADC does. Firms that export outside of SADC produce more output with the same amount of inputs than those that do not. 3
  • Larger firms are more likely to export suggesting that fixed costs may be important for exporting.
  • Larger, more efficient firms are more likely to export outside of SADC. It is argued that there may be some efficiency threshold which firms need to overcome in order to enter global markets.
  • Further research on factors determining the amount exported is needed. It seems as though if a firm is exporting, its size is not an important factor in determining the amount exported.
  • If an increase in manufactured exports is a policy goal (we suggest that it should be), policy should focus on encouraging firms to export more rather than persuading more firms to export.
  • In order to provide better insight into the dynamic evolution of South African manufacturing firms it would be very valuable to add a time dimension to the survey data. Expanding the human capital and skills section would also be useful.

  • Year 2001
  • Organisation Centre for the Study of African Economies, Univers...
  • Publication Author(s) Neil Rankin
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