Annual Forum Papers

Explaining Long-Run Growth in South Africa And OECD Countries: Implications for the Rest of SADC Countries

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

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.