Designing policies to increase total exports requires an understanding of the drivers of these two distinct processes. South African exporters are bigger, more capital-intensive and have higher levels of labour productivity than non-exporters. The gap in total factor productivity between exporters and non-exporters seems to depend on the export destination. Theoretical models and empirical research indicate that productivity levels, firm size and transport costs are important for export participation. To increase the number of South African firms participating in the export market, policies need to encourage the growth of existing firms, the entry of new firms and improve firm level productivity. Transport costs need to fall, as these make firms uncompetitive in the international market. Export processing zones can also provide an opportunity to experiment with policies before they are implemented countrywide.
