Manufacturing exports and transport costs from South Africa's secondary cities

Abstract

This study makes use of theoretical and empirical sources to examine the determinants of manufactured exports from secondary cities in South Africa. This study attempts to give policymakers a clearer understanding of the decisions made by manufacturers to locate in a specific region. Drawing on the reasons that countries or regions export, as given in the literature, a number of factors were identified as possible determinants of exports. These determinants include: location of economic activity, distance, transport cost, and transport infrastructure. These factors have been accepted as some of the determinants of exports, but to what extent do they influence the export of manufactured goods from secondary cities in South Africa? An analysis of the state of land freight transport and manufactured exports from South Africa gives an indication of how infrastructure development, distance, and location of economic activity influence manufactured exports. Since 1994, manufactured exports have become the largest export sector from South Africa and the majority of these exports are transported by road to the ports. Durban is the largest harbour for the export of manufactured goods from South Africa and receives the bulk of the manufactured exports from Gauteng. More than 80 per cent of manufactured exports from South Africa come from metropolitan areas. The relatively small percentage of manufactured exports from secondary cities indicates that there is a lack of support for firms to establish in those regions. Using a cross-section analysis of the 22 secondary cities chosen, a series of regressions are modelled to determine the factors that influence manufactured exports from these regions. The empirical evidence suggests that cities with higher education levels and higher gross value added (GVA) are more successful in exporting manufactured goods. An evaluation of location (distance) and transport cost found that distance and infrastructure affect the transport cost of manufactured exports from secondary cities.