A comparative analysis of the determinants of South Africa's export performance in selected SADC countries

Abstract

In the international trade market, exports are known as one of the fundamental key players and are regarded as the driving instrument for every prosperous economy, hence, the National Development plan of 2030 had made exports the main concern by stating that exports must increase by 6% in 2030. Therefore, It is crucial to identify the determinants of export performance since South Africa and SADC economies rely on exports. The primary objective of the study is investigated as a comparative analysis of the determinants of export performance in South Africa's and selected SADC countries. The study consist of a balanced panel of 161 observations consisting of seven countries covering the period from 1992-2014. The study applied the panel data techniques and incorporated the famous gravity model. In addition, the study applied the newly FMOLS estimation approach. The results of the study depict that South Africa's GDP, SADC GDP, distance, exchange rate, foreign direct investment, openness of trade and land-locked variables in the model are found to be significant and have an effect on exports performance. However, FDI resulted to be negative and statistically insignificant. Therefore, since distance is empirically found not to have an impact on other SADC countries to import in the study, the transport costs of a specified mode of transport or communication may be considered to replace the distance variable. This study recommends that in order to enhance the export performance in South Africa and selected SADC countries, policy makers should embark on attracting other countries outside the SADC region to accelerate trading by diversifying their exports, since, openness of trade is significant to these economies. Moreover, maintaining an effective exchange rate, while, giving export firms the opportunity of accessing the foreign exchange to obtain the items needed for the production process which will encourage exports through the competitive market.