| dc.description.abstract | It has long been recognised that exports are a key factor in promoting economic growth
in a country. In South Africa, the government’s National Development Plan (NDP) 2030
highlights the pivotal role that exports play in the country’s economy, particularly as a
driver of economic growth. Yet South Africa’s export performance has been lacklustre for
many years, failing to act as the economic growth stimulant that the country sorely needs.
Not only are strong export flows important for a country’s economic growth prospects and
general well-being, but they also need to be sustainable. The longevity or duration of
South Africa’s export relationships is generally short (often less than five years), which
means that exporters do not gain sufficient traction in foreign markets to ensure ongoing
orders and a good return on their (often considerable) investment in cross-border
expansion. Although South Africa’s poor export survival rate is of great concern to many
in the country, the determinants that affect these rates have not been the focus of any
academic research. The aim of this study is to understand why South Africa struggles to
develop and sustain long-term export relationships. It sets out to do this by examining
both the determinants of and the constraints to the country’s export survival, which
together could inform new, more effective approaches to export promotion and
development.
The literature review provides a theoretical and empirical appraisal of studies relating to
export survival, focusing specifically on the determinants thereof. Most trade theories
assume that export relationships are of an enduring nature. However, various empirical
studies have found that this is not the case. Identifying the factors that influence (both
positively and negatively) export survival in South Africa could reveal ways to strengthen
the country’s export relationships and, in turn, reinvigorate its economic growth prospects.
South Africa’s export survival is then empirically investigated using survival analysis
techniques to identify the determinants encouraging (or deterring) longstanding export
relationships. The two models included are the Cox proportional hazard model and the
Probit random-effects model. The main data source is UN Comtrade, the data sources
for gravity variables are Centre d’Études Prospectives et d’Informations Internationales
(CEPII) and the World Bank’s World Development Indicators. The product type variables
(referenced priced goods, differentiated goods and homogeneous goods) are classified
by using Rauch’s classifications on an HS 6-digit level (Rauch, 1999). The competition
variable is based on the Herfindahl-Hirschman Index (HHI) and export costs are obtained
from the World Bank’s Doing Business report. The country’s export relationships are
examined in relation to regional groupings, importing countries’ income levels (from lowto
high-income), HS2-digit sectors and export value. Interestingly, it is with Sub-Saharan
Africa that South Africa has the most sustainable export relationships, with Mozambique
in the lead position. Furthermore, South Africa’s longest export relationships are with
lower middle-income and low-income countries. On a sectoral level, hides and skins
provide South Africa with the most durable export opportunities.
Among the determinants of longer export relationships between South African producers
and foreign buyers are: a common border with and close proximity to the import market;
a common language and shared colonial history; higher-value export transactions; a
relatively weak domestic currency (Rand); a low concentration of competitors in the import
market; a multiple-spell (as opposed to a single-spell) approach, which encourages
‘learning-by-exporting’; and a focus on exports of differentiated goods. Contrary to
expectations, exporting to countries that are, for example, landlocked and impose high
import tariffs are not deterrents to South Africa forming enduring export relationships.
Although the findings in this study resonate with those in some of the other studies on
export survival, South Africa’s specific circumstances need to be taken into account when
formulating policy recommendations and solutions. One of the keys to developing longterm
export relationships is selecting the right destination markets. South Africa’s export
promotion agencies should therefore make the dissemination of regular and reliable
market information a priority so that exporters’ market selection efforts are both focused
and cost-effective. In addition, the country’s policymakers need to be made fully aware of
the importance of export survival or longevity and that export promotion and assistance
do not stop once exporters have successfully accessed their chosen target markets. | en_US |
