LAWRENCE EDWARDS, MATTHEW STERN AND JING CHIEN: The case for a bold export strategy in SA

SA’s seventh administration is now largely settled and the multiparty cabinet is getting down to work. A “basic minimum programme of priorities” was set out in the government of national unity’s (GNU’s) statement of intent, including the need to accelerate economic growth and increase and accelerate fixed capital investment, industrialisation and job creation.

However, there is no mention of exports or the role of international trade. This early omission is of considerable concern. As a small, open economy SA cannot rely on domestic consumption alone to generate growth. Countries that export successfully typically benefit from faster GDP growth, stronger industries and greater resilience to global economic shocks. 

Despite a stated interest in boosting export growth and diversification in previous national policy frameworks, the country has adopted a more inward-looking approach over the past decade-and-a-half. This has included halting tariff reductions and increased use of import-related interventions, including antidumping duties, safeguard measures and local content requirements.

More recently, industrial, trade and competition policies have been guided by the department of trade, industry & competition’s Reimagined Industrial Strategy, which emphasises localisation, implementation of “master plans” and a more assertive stance by the Competition Commission towards dealing with concentration. Except for some references to the African Continental Free-trade Area (AfCFTA), the strongly domestic orientation of this strategy has overshadowed policies focusing on boosting exports.

This inward-orientation, coupled with infrastructural constraints, has hampered the country’s ability to tap into global markets, particularly in manufacturing where greater export opportunities lie. SA’s export performance has consequently been poor, marked by stagnating volumes, declining diversity and a heavy reliance on commodities. To reverse the trend policymakers must adopt an outward-looking strategy informed by solid research and evidence. 

The available evidence suggests the net impact of SA’s trade and industrial policy interventions on export performance has been disappointing across multiple metrics (for the full analysis, see the policy paper Trade Policy Research Priorities for SA):

• Since 2000 export growth has slowed and by 2022 export volumes were only 5.7% higher than in 2008.
• SA’s export performance has been meaningfully weaker than that of other middle-income countries. In strong contrast to SA, most of these countries’ exports increased as a percentage of GDP in 2000-22. 
• SA has experienced a decline in the number of products exported, with a rising concentration of exports in its top destinations.
• The number of products with a revealed comparative advantage has fallen from 253 to 140 in 2000-23. 
• Commodity exports remain the main feature of SA’s export bundle, with the share of primary and resource-based manufacturing in exports remaining at about 70%. 
• Firm export data reveals falling exporter numbers, driven by low levels of entry and declining survival rates of new exporters. 

These export trends threaten the country’s wider development objectives. Renewed efforts are needed to raise the competitiveness of SA firms globally and shift the country back onto an export-led growth path. 

This requires knowledge we lack. We do not have a deep enough understanding of why SA exports have underperformed and what can be done to reverse this trend. We don’t know where the new market opportunities for exporting are. 

Regarding existing trade and industrial policies, we have limited empirical evidence on their contribution and impact on export performance. We don’t know enough about what policies have worked, which ones have not worked and which ones could work.

Looking into the future, trade policy has to work in an environment of continuous change. We require a common, informed and sensible position ahead of regional, bilateral and multilateral discussions (including the AfCFTA and Group of 20) on the green transition, digital transformation and rising geopolitical fragmentation and protectionism, which pose major challenges and opportunities for export growth.   

The GNU’s statement of intent commits the parties to “evidence-based policy and decision-making”. SA needs growth, growth needs exports, and exporters need a conducive policy environment with well-informed government programmes and decision-making.   

It is, therefore, encouraging to see greater enthusiasm from within the department for driving exports. In a July media statement minister Parks Tau clearly articulated its commitment: “As you would appreciate, in the short term the domestic market is too small and growing too slowly to sustain manufacturing-led growth. To reduce our dependence on our small domestic market, [the department] will implement new export measures, coupled with expanding the current measures and improving their effectiveness. In partnership with the government, business, labour and civil society, we will work together to expand our export footprint.”

Two weeks later deputy minister Andrew Whitfield communicated the same sentiment: “SA must also create an export-orientated economy. A dedicated focus on manufacturing growth will also lead to export growth. The creation of an export-orientated economy can be realised through a dedicated focus on implementing measures to boost the competitiveness of local industries in global markets, streamlining export processes, lowering trade barriers, offering financial and technical assistance to exporters and cultivating beneficial trade alliances with other nations.”

Transforming these commitments into credible outcomes requires not only partnerships between government, business, labour and civil society, as argued by Tau, but if the department’s trade policies and decisions are to be truly evidence-based far stronger links with academic and research institutions will be essential.

• Edwards is research fellow at Economic Research Southern Africa and a professor at the University of Cape Town School of Economics. Chien is a lecturer in the same school and research co-ordinator  in the university’s international services and manufacturing  research unit.  Stern is founder and head of trade and regional integration at DNA Economics.