Determining the market accessibility of South African exports

Abstract

In the New Growth Path (NGP) and the National Development Plan (NDP) the South African government has put forth plans to increase economic growth in South Africa and to eliminate large-scale and persistent unemployment that the country currently experiences. The South African government specifically regards growth in exports and export diversification as the solution to achieve macroeconomic goals, including an increase in regional trade and exports in other fast-growing economies. However, exporters constantly face trade impediments or trade costs that inhibit trade to foreign markets. In addition, the South Africa Department of Trade and Industry emphasises that, in order to help address current account deficits and the high unemployment rate, the country should pay more attention to the trade impediments that South African exporters may face in foreign markets. Although studies were done by international organisations, such as the World Economic Forum and the World Bank, to measure the trade costs faced in different countries around the world, none of these studies were conducted from a particular exporting country’s point of view. This study is therefore a first in its field because it investigates the market accessibility of different markets around the world from a South African point of view. Investigating the trade impediments that South African exporters face in different world countries, can provide export promotion organisations and exporters with a better view with regard to markets that are more accessible for exports from South Africa. The main objectives of this study were: (i) to determine global market accessibility for South African exports; (ii) to identify from relevant literature the different impediments to trade or trade costs that influence the market accessibility of markets; (iii) to analyse the impact that trade impediments has on international trade by reviewing literature; (iv) to collect data on trade impediments that are quantifiable and to compare the size of trade impediments faced by South Africa in different world regions; (v) to develop a market accessibility index for South African exports in countries around the world; (vi) to determine whether member countries of the Southern African Development Community (SADC) are indeed amongst the countries to which South Africa has the highest market access due to proximity and regional trade agreements; (vii) and lastly, to make recommendations to South African exporters and export promotion organisations on the typical trade impediments they are facing in different world regions and specific countries in order for them to plan their export endeavours and policy recommendations accordingly. The literature study focused on defining and identifying different impediments to trade and their influence on trade. Trade impediments are viewed as any part of trading processes that increase the costs of trade. This study focused on the impediments experienced during the transit of goods and specifically included transportation costs, transportation times, the efficiency of logistics, customs administration, border administration and infrastructure (including both telecommunications and physical infrastructure). An equal weights method (variables are weighted equally within each category and amongst categories) and a principal component analysis (PCA) (a statistical procedure that makes use of a linear transformation to convert different variables into a smaller set of values of linearly uncorrelated variables) were chosen and compared to calculate South Africa’s market accessibility index. The results revealed that Western Europe, South-Eastern Asia and Northern Europe are the most accessible regions to South Africa while Singapore, Hong Kong and Malaysia are the most accessible countries for South African exporters. Additionally, it was expected that Southern African Development Community (SADC) member countries would be amongst the countries in which South Africa has the highest market access due to proximity and regional trade agreements with South Africa. This, however, was not the case since SADC member countries lack logistics, customs and infrastructure performance. It is recommended that South African trade promotion organisations, industry organisations and other export councils use the results of this study to plan their export endeavours and policy negotiations. Keywords: market accessibility, trade impediments, transportation costs, transportation times, logistics, customs, infrastructure, South Africa