A decision support model to identify realistic export opportunities for South Africa

Abstract

Export-led economic growth has been an important feature of almost all economies where significant economic growth has taken place over the previous thirty years. After 1994, the achievement of economic growth through the acceleration of exports has been recognised as an imperative policy by the South African government. Authors such as Dunning (1997) and Shankarmabesh, Olsen and Honeycutt Jr. (2005:203) agree that it is no longer "if” governments should be involved in the allocation of resources and the promotion of trade, but the principal questions are "how much?" and "what kind of?" government involvement there should be . However, national resources are scarce and, therefore, great selectivity is required in developing and implementing export promotion strategies and activities (Cuyvers, 2004:256). Limited alternatives should be considered when a nation wish to stimulate economic growth through export promotion. (Jaffe, Salazar & Brambila, 1996). "The challenges faced by governments, therefore, lie in the necessity to choose specific sectors for export promotion and allocate their limited resources among these sectors" (Shankarmabesh, et al., 2005:204). This selectivity should be based on the analysis of potential export opportunities. The involvement of governments in the designing of export promotion programmes to promote specific domestic sectors has led to the export success of the Asian "tiger economies" (Glenday & Ndii, 2000). In many exporting countries, however, public and private export promotion institutions face a double allocation problem namely how to allocate limited resources to activities in different export markets, and how to allocate the resources to alternative export promotion instruments (Cuyvers, De Pelsmacker, Rayp and Roozen, 1995:173). South African trade promotion organisations face a similar allocation problem as expressed in the National Export Strategy (SES): "South Africa's current export promotion activities have: relied on historical export performance trends. Current promotion activities do not take into consideration new export opportunities in unexploited markets or opportunities for new products in existing markets. There was little, if any, scientific justification for current funding of export promotion activities" (DTI. 2005:47). In the light of the above mentioned this study was commissioned by the Department of Trade and Industry (DTI) and firstly focused on the application of a Decision Support Model (DSM) for South Africa. The DSM for South Africa was based on the DSM developed by Cuyvers et al. (1995:173-186). The DSM was adapted by taking the South African trade circumstances into consideration. The next step was to identify realistic, export opportunities with the use of the DSM and thereafter, with the export expertise of the DTI, cluster these realistic export opportunities into regional clusters. These export clusters will enable the DTI to focus their export promotion activities and to allocate limited resources more efficiently. The results from this study contribute towards strategic policy making on export promotion and will be part of the NES of South Africa arid will provide the DTI with scientifically justified realistic export opportunities (DTI, 2005:47-56).