Determining the factors causing the underutilisation of export opportunities of South African firms

Abstract

South Africa is struggling with low economic growth, poverty, and high unemployment levels. From exports, a country earns foreign exchange which can be used to meet economic growth and other goals which can ultimately lead to economic development. South Africa is a small, open economy and therefore more dependent on international trade. The country relies on exports to support production and employment. Numerous plans have been put into place to increase South Africa's export levels. However, the country's export performance is not living up to expectations and policy goals. Past research has found that South Africa utilises a comparatively small percentage of its export potential. Similarly, a large percentage of South Africa's export potential has been identified in relatively new markets. This study aims to investigate the issue of underutilisation of export opportunities by South African firms. Literature on South Africa's export firm-level behaviour is mainly based on cross-sectional survey data and focuses on the characteristics of export firms. Research on South African firms' international market selection (IMS) strategies is also limited. To attend to this knowledge gap, this study utilised primary level data to obtain a better understanding of export challenges and decisions of South African firms. A single, embedded case study approach was followed to identify participants for the study. A literature review, desktop analysis analysing secondary data from documents, and semi-structured interviews were used as data sources. The findings from the interviews with managers and other key personnel at South African export firms were compared with those from the literature and desktop analysis. Triangulation of the three data sources was therefore applied to increase the credibility and validity of the findings. One of the main findings was that the participants apply a non-systematic IMS approach, relying on existing relationships and networks when selecting new export markets for their products. Considerable time and effort are put into maintaining these business relationships. Another strategy to deal with export barriers is to have a representative located in the import markets. Most of the exporters were aware of the potential export opportunities identified in this study. However, they were generally not interested in investigating the new markets due to supply-side obstacles, such as electricity issues, high cost of capital, low product quality, and price competitiveness. Other obstacles include connectivity issues such as high transport cost and logistical inefficiency, as well as varying standards and protocols expected in target markets, and the lack of government cooperation to meet these requirements. To increase export levels, it is essential that South African exporters are supported to overcome the barriers they face in utilising export potential. This study is among the first to interview South African exporters to highlight their challenges and identify how they can be supported to increase exports and utilise the opportunities in the global market. From the findings, several policy recommendations can be made to potentially help increase South Africa's export levels. These recommendations include establishing better cooperation, communication, and trust between exporters and the government to speed up the processes of obtaining the documentation needed for exporting and adhering to international standards and regulations. Other recommendations are: investing in road, rail and port infrastructure, as well as the automation of border procedures; providing improved trade finance and credit insurance conditions to qualifying exporters; creating incentive schemes for export firms to invest in solar systems; and supporting the establishment of new trade relationships and networks by means of trade missions, trade fairs, and matchmaking with other exporters.