Exporting and Export Dynamics Among South African Firms
According to the National Development Plan increased exports, particularly among small and medium firms, are an important job-creation strategy. Yet much of the South African debate on exporting occurs in an environment based on anecdote and prejudice rather than fact.
This paper examines both the international and South African evidence on exporting at the level of the firm, in order to draw policy lessons for the promotion of exports and exporting in South Africa. Three key themes emerge. First, export participation is related to the size and productivity of the firm. Hence enlarging the pool of exporting firms requires an increase in the number of enterprises with export potential. This requires policies which encourage growth and increases in productivity. Second, the bulk of South Africa’s exports come from a small number of firms, yet many existing exporters export only a small proportion of their output. To increase South Africa’s export volume requires existing exporters to export more, most likely to markets similar to the ones to which they currently export. Third, the destination of exports and the characteristics of the firm, including the type of workers it employs and the type of product it exports, are related.
Generally, South African firms export to two distinct markets – the high-income markets of Europe and North America and the lower-income markets of Africa, especially SADC countries, although exports to non-traditional markets such as India and China seem to be increasing. Firms exporting to developed countries have high levels of productivity, produce high quality products, employ highly skilled workers and pay high wages. They are also more likely to specialise in exporting. Those exporting into Africa have productivity levels similar to firms that produce only for the domestic market, employ lower skilled workers and pay lower wages. There is little overlap between the two – Africa is not a stepping stone to other markets. This suggests that the most viable export markets for smaller firms, which must be of the requisite size to become successful exporters, are in Africa.