Analysis of export and employment opportunities for the South African manufacturing industry

Abstract

Throughout history the role of trade in economic growth has been consistently debated. Although different opinions exist within the literature, this study offers evidence that there is a positive relationship between trade and economic growth. The South African government realises the importance of international trade with regard to economic growth and employment creation. As a result, government has addressed the importance of increasing exports in a number of policy documents. The research objectives of the study were focussed on identifying the sectors within the South African manufacturing industry in which an increase in export would offer the greatest benefits with regard to economic growth and employment creation. The subsequent research question relates to identifying the export opportunities within these sectors in order to address government’s policy objectives of stimulating economic growth and creating more jobs. In order to identify the sectors that offer the greatest benefits for economic growth and employment creation a social accounting matrix multiplier analysis (SAMMA) was employed. Once these results had been obtained, the Decision Support Model (DSM) methodology was applied in order to identify the realistic export opportunities (product-country combinations) for these sectors. The results from the SAMMA indicated that three of the top five manufacturing sectors that had the greatest effects on GDP and employment creation are related to agricultural or primary manufacturing. Comparing the top performing sectors from the SAMMA with those that offer the greatest potential export value according to the DSM offers interesting results. It seems that the South African economy is structured in such a way that the lower value manufactured exports have a greater effect on the broader economy (in terms of GDP and labour creation) when compared to higher value manufactured exports with higher export potential. The results from the DSM for the sectors identified in the SAMMA indicate that the most realistic export opportunities for South Africa are in markets where South Africa has, at the time of this study, very little or no market share. However, these markets have a large import demand that are growing in the short or long term or both. Examples include palm oil (151110) in Singapore; wheat/meslin flour (110100) in Angola; unsweetened concentrated milk and cream (040110) in Saudi Arabia; wooden doors and frames (441820) in Japan and parts of seats (940190) in Mexico. Further research opportunities include exploring the marketing strategies to pursue these identified export opportunities and also identifying the barriers to realising more value added manufactured exports