The report, South Africa Economic Update 5: Focus on Export Competitiveness, examines the performance of South Africa’s export firms against that of peers in other emerging markets— and analyzes the challenges. It assesses South Africa’s economic prospects in the context of the global economic environment and prospects.
With this Economic Update, we hope to enrich the on-going debate on growing a sector critical for South Africa’s economic growth. As with previous editions, this report is intended not to be prescriptive but to offer evidence-based analysis that will help bring South Africa’s policymakers, researchers, and export stakeholders closer to finding innovative and sustainable ways to grow the sector. The report highlights opportunities for growth, particularly with Sub-Saharan Africa being the largest market for non-mineral exports. It also explores strategic directions that can ignite export growth and help South Africa realize its goals of creating jobs and reducing poverty and inequality.
The report identifies three areas that present opportunities to promote the competitiveness and spur the growth in South Africa’s export sector:
- Boosting domestic competition would increase efficiency and productivity. By opening local markets to domestic and foreign entry, South Africa would enable new, more productive firms to enter and place downward pressure on high markups. This would lower input costs and tip incentives in favor of exporting by reducing excess returns in domestic markets. Competition would also stimulate investment in innovation and, over time, condition the market to ensure that firms entering competitive global markets have reached the productivity threshold to support their survival and growth.
- Alleviating infrastructure bottlenecks, especially in power, and removing distortions in access to and pricing of trade logistics in rail, port, and information and communication technologies would reduce overall domestic prices and further enhance competitiveness. It would be especially beneficial for small and medium-size exporters and non-traditional export sectors, which these costs tend to hit harder.
- Promoting deeper regional integration in goods and services within Africa would generate the right conditions for the emergence of Factory Southern Africa, a regional value chain that could feed into global production networks. South Africa could play a central role in such a chain, leveraging the scale of the regional market, exploiting sources of comparative advantage across Africa to reduce production costs, and providing other countries in the region a platform for reaching global markets. Progress on all three fronts would help catapult South Africa toward faster-growing exports, allowing it to realize the higher, more inclusive, job-intensive growth articulated in the National Development Plan.
Source: World Bank