|
Related Topics |
|
In today's blog we take a look at South Africa's concentration of trade. What is trade concentration? Well the aim of the concentration of trade is to show how clustered/dependent South Africa's trade is on a small number of (products).
This is particularly true for South Africa's exports, in which a small number of products makes up a large percentage of total exports. While the same is true for imports, it not nearly as significant as it is with exports. |
|
Concentration of trade
So how would one plot the concentration of trade? We ranked the products/tariffs from largest contributor to trade to smallest contributor to trade, then calculated the cumulative contribution to total trade as the contribution of the next product is added to the biggest contributor and the process continues.
The graphic below shows the results of the concentration of trade for both imports and exports. Note the graphic is based on all trade data from January 2010 to December 2017.
The graphic below shows the results of the concentration of trade for both imports and exports. Note the graphic is based on all trade data from January 2010 to December 2017.
As can be seen from the graphic above, the red line (which shows exports) goes up a lot faster than the green line, showing fewer number of products makes up a greater percentage of total exports compare to imports. For exports the 100 biggest items for exports makes up 66% of total exports while 100 biggest items for imports makes up 51.3% of total imports. Showing the variety of goods imported is greater than than the variety of goods being exported.
The concentration of trade points to what we believe to be one of South Africa's economy's biggest problems. We do not manufacture/produce a wide enough variety of goods for the export market or for domestic consumption. We rely on exporting commodities such as coal, iron ore, platinum, gold etc.
While we import a large variety of items, in particular vehicles, and complex machinery and equipment. Sadly we either do not have the capacity to manufacture these items or the technical know how to do so. And even if we are able to produce these type of items the likelihood is pretty high that the cost of manufacturing it is prohibitively expensive and therefore not competitive on the international market.
South Africa needs to incentivize the production or manufacture of complex items which can then be exported (as they have done with motor vehicle manufacturing), as this will draw in foreign direct investment, help with skills development and developing the know how as well as decreasing the country's dependence on the export of mostly commodity items.
Passing motions such as expropriation of land without compensation is not going to help South Africa draw foreign investments though, as which company in their right mind will invest here when their property and assets cannot be protected by the laws of the country. The ruling ANC needs to be very very careful with this and will need to think long and hard before going this route. We hope it is just being used as a political point scoring stunt in order to win a few extra votes in the 2019 general elections.
While we import a large variety of items, in particular vehicles, and complex machinery and equipment. Sadly we either do not have the capacity to manufacture these items or the technical know how to do so. And even if we are able to produce these type of items the likelihood is pretty high that the cost of manufacturing it is prohibitively expensive and therefore not competitive on the international market.
South Africa needs to incentivize the production or manufacture of complex items which can then be exported (as they have done with motor vehicle manufacturing), as this will draw in foreign direct investment, help with skills development and developing the know how as well as decreasing the country's dependence on the export of mostly commodity items.
Passing motions such as expropriation of land without compensation is not going to help South Africa draw foreign investments though, as which company in their right mind will invest here when their property and assets cannot be protected by the laws of the country. The ruling ANC needs to be very very careful with this and will need to think long and hard before going this route. We hope it is just being used as a political point scoring stunt in order to win a few extra votes in the 2019 general elections.
Let us know what you thought of this article: |