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Blog: 10 October 2016 (SA's concentration of Trade)
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We take a look at one of South Africa's problem areas when it comes to global trade. Our skewed concentration of trade between imports and exports. Concentration of trade shows the variety of goods being imported and exported. The more tariffs (all items imported or exported is assigned a tariff code based on HS codes. HS codes are international coding guidelines used by most countries around the world in order to standardise classification of goods being imported or exported), it takes to get to the total imports or exports, the wider the variety of goods being imported or exported. The smaller the number of tariffs it takes to make up the total, the less the variety of goods being imported or exported.
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Concentration of Trade
The graphic above shows how many 6 digit tariff codes (on the X-axis) it takes to make up South Africa's total trade (Y-axis) in both imports and exports. It is clear from the graphic that South Africa's exports have a lot sharper incline than that of our imports. Basically showing that South Africa's exports is a lot more concentrated. I.e. not a lot of different goods are exported hence the small number of 6 digit tariffs contributing to South Africa's total exports. In total there is around 4900 different 6 digit tariffs available in South Africa's tariff book.
It takes roughly 300, 6 digit tariffs to account for 70% of all our imports, while it takes only around 130, 6 digit tariffs to account for 70% of our exports. It takes 545, 6 digit tariffs to account for 80% of imports while it takes 263, 6 digit tariffs to account for 80% of our exports. It takes 1040, 6 digit tariffs to make up 90% of our imports while it takes 592, 6 digit tariffs to make up 90% of our exports.
Said a little differently it takes 21.3% of available tariffs to reach 90% of South Africa's imports, while it takes around 12.2% of all tariffs to reach 90% of South Africa's exports.
It takes roughly 300, 6 digit tariffs to account for 70% of all our imports, while it takes only around 130, 6 digit tariffs to account for 70% of our exports. It takes 545, 6 digit tariffs to account for 80% of imports while it takes 263, 6 digit tariffs to account for 80% of our exports. It takes 1040, 6 digit tariffs to make up 90% of our imports while it takes 592, 6 digit tariffs to make up 90% of our exports.
Said a little differently it takes 21.3% of available tariffs to reach 90% of South Africa's imports, while it takes around 12.2% of all tariffs to reach 90% of South Africa's exports.
South Africa's import graph is a lot flatter in trajectory. This is due to the fact that we are importing a far larger variety of items when compared to what we are exporting. Perhaps a sign of our lagging and ever shrinking manufacturing sector. Since we not making a lot of items ourselfs, we just import more of it. There are however certain large exports South Africa can't without. They include the import of crude oil, motor vehicles and specialised machinery and equipment. But a large chunk of South Africa's smaller imports could surely be manufactured locally, if local industry was firstly supplied with a stable and constant supply of electricity, secondly promoted and protected against "dumping" and other anti-competitive behaviours from other countries, thirdly assisted via trade agreements to allow greater exports of South African manufactured products.
On the other hand, South Africa is largely dependent on the export of their commodities. Think gold, platinum, coal, iron ore and the likes. South Africa does not have a competitive advantage in manufactring like Japan or China and is therefore less likely to export loads of manufactured goods (they do export some, for example RHD vehicles built in SA and exported to the UK) but this does not make up the bulk of SA's exports. So SA is therefore largely dependent on exporting goods other countries might not have such as it's commodities. The same way in which middle eastern countries are dependent on crude oil exports.
On the other hand, South Africa is largely dependent on the export of their commodities. Think gold, platinum, coal, iron ore and the likes. South Africa does not have a competitive advantage in manufactring like Japan or China and is therefore less likely to export loads of manufactured goods (they do export some, for example RHD vehicles built in SA and exported to the UK) but this does not make up the bulk of SA's exports. So SA is therefore largely dependent on exporting goods other countries might not have such as it's commodities. The same way in which middle eastern countries are dependent on crude oil exports.
South African policy makers will need to take a long hard look at this type of information. South Africa needs to be less reliant on the variety of items it imports and start manufacturing more of the goods they require locally. But this is offcourse made extremely hard by government itself due to the inefficient way in which ESKOM has been run. There is no guarantee of constant and stable power supply, so why would large manufacturers set up shop here if we cant promise them stable power?
A detailed look at what is being imported and why is required and from there policy makers needs to decide what we can produce locally and then put programs in place to support local companies so that they are able to manufacture and sell these products in SA instead of South Africa havng to import it.
A detailed look at what is being imported and why is required and from there policy makers needs to decide what we can produce locally and then put programs in place to support local companies so that they are able to manufacture and sell these products in SA instead of South Africa havng to import it.
