The Structure and Competitiveness of South African Trade

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.