Identifying the export trade barriers of the business services sector in South Africa

Abstract

A service can be traded either directly between a consumer and provider of the service or a service can serve as an input into the manufacturing of various products and other services that are traded. Trade in services has therefore become an essential part of global trade and contributes significantly to global, as well as South African economic growth, development and productivity. Service trade has furthermore been growing at a greater rate than trade in manufactured goods. The growth of services trade can be attributed to growth in goods trade, technological advances, rising per capita incomes, micro-economic reforms, as well as increased consumer and business demand, and technological change. According to the GATS’ (General Agreement on Trade in Services) services sectorial classification list, the service sector can be classified into twelve major categories and these sectors can further be divided into 160 sub-sectors. One of the sub-sectors that have been identified that has significant growth potential globally and for South Africa is the sub-sector, ‘other business’ services. This sub-sector falls under the sector, business services. Trade data revealed that this sub-sector is one of the top three traded service categories internationally, as well as for South Africa. For the purpose of this study the focus was specifically on ‘other business’ services provided by members of the BEPEC (Built Environmental Professional Export Council). The services performed by the members of the BEPEC are: consulting engineering, architectural, quantity surveying, and construction project managing services. These services are inputs into the manufacturing or construction of human creations such as buildings, structures, dams, roads etc. Trade barriers, however, hinder the free flow of services from the service provider to customers in other countries. This is no different for the providers of 'other business’ services. Therefore in order to increase the competitiveness of South Africa’s ‘other business’ services sector internationally; the primary objective of this study was to identify the internal, as well as external barriers experienced by the exporters of ‘other business’ services. These internal and external barriers were identified by means of a questionnaire that the members of the BEPEC, who are exporters of ‘other business’ services, completed. Once these barriers were identified recommendations were made to the South African government. The most significant internal barriers were found to be: • lack of information about foreign markets; • lack of information on how to enter these foreign markets; • lack of personnel who are experienced in export activities; • scarcity of internal financial resources for export purposes and export promotion. • The most significant external barriers were found to be: • exchange rate risk and the risk of non-payment; • corruption and bribery; • risks involved with political instability in a country; • restrictions on immigration provisions such as delay in obtaining entry visas, residency or work permits; • poor infrastructure; • foreign government procurement policies; • distance to the target market. All of the identified barriers can mostly be addressed by the South African government by providing training, the provision of market related information, and trade negotiations.