Impact of export promotion and market development on social welfare in South Africa: Evidence from the agricultural sector

South Africa’s industries in the agricultural sector spend some of the statutory levy income on export promotion and market development (EPMD) activities. Some industries argue that statutory levy expenditure on EPMD activities generates satisfactory returns on investment but empirical evidence is yet to be presented to support the argument. Hence, this study filled this gap by building a unique data set based on statutory levy expenditure on EPMD for four industries (citrus, deciduous fruits, table grapes and wine) and used econometric analysis to assess the impact of EPMD on social welfare over a 10-year period (2006–2015). Furthermore, we estimated the returns generated on social welfare per rand of statutory levy expenditure. In the analysis, we controlled for unobserved heterogeneity, multicollinearity and reverse causality. The results suggest that statutory levy expenditure on EPMD has a statistically significant positive impact on social welfare across the four industries. On average, a unit increase in statutory levy expenditure on EPMD leads to an improvement in social welfare ranging between 0.2% and 0.4% depending on the industry. In addition, the results suggest that 1 rand spent on EPMD for the four industries in question, on average, generates a US$26 worth of improvement in social welfare. Conclusively, statutory levy expenditure on EPMD played a key role in enhancing social welfare improvement. Therefore, there is a need to mobilise more resources to facilitate the EPMD initiative into new markets and products for the industries

Factors Affecting Uganda's Bilateral Trade Flows: An Application of the Gravity Flow Model

Uganda is a fast growing economy with many sources of foreign exchange most especially from agricultural trade exports. However, no information about Uganda’s bilateral trade flows has been documented using the gravity flow model yet this model lies at the centre of explaining any country’s bilateral trade flows. Identification of Uganda’s bilateral trade flows can suggest a desirable free-trading partner and conjecture the volume of a missing trade or unrealized bilateral trade flows. Although Muhammed and Andrews (2008) have employed the gravity flow model in Uganda, no work has been done to assess the determinants of Uganda’s bilateral trade flows and potential. However, a detailed understanding of Uganda’s bilateral trade flows would provide an additional practical framework for derivation of informed trade policy decisions to improve the country’s trade regime. It is against this background that the Augmentedgravity flow model was employed to study Uganda’s total bilateral trade flows and her trade potential. The main objective of this study was to explore the determinants of Uganda’s total bilateral trade flows and her predicted trade potential. Specifically,(i) to determine the factors that influence total bilateral trade flows between Uganda and her trade partners, (ii) to predict Uganda’s bilateral trade potential and performance and iii) to determine Uganda’s degree of trade integration with her major trade partners. Time series data of Uganda and her major trading partners (Switzerland, Netherlands, Belgium, UK, France, South Africa and Kenya) were used for the period 1970 -2006. The study employed real GDP, Distance, real exchange rate volatility, real exchange misalignment, membership to COMESA, membership to the East African Community (EAC) and having had a common colonial master as the explanatory variables with 259 observations. Feasible Generalised Least Squares (FGLS) estimation, Relative difference x (Rd) and Absolute difference (Ad) indices, as well as the ratio of actual to potential total bilateral trade flows were the analytical tools employed to achieve the set objectives. Empirical findings reveal that Uganda’s total bilateral trade flow is positively influenced by Uganda’s real GDP, real GDP of her trading partners, membership to COMESA, membership to the EAC and having had similar colonial masters. On the other hand, distance, population of Uganda and that of her trade partners, real exchange rate volatility and misalignment showed a negative influence on Uganda’s total bilateral trade flows. Generally, Uganda has a good trade performance and can easily be integrated in trade. However, there is still need to promote export trade and invest generously in public infrastructure among others in order to improve her trade performance. Results also reveal that Uganda has a high degree of trade integration (111.09 percent) with most of her trading partners but she cannot easily integrate with UK and France markets specifically. The lower level of trade integration with UK and France is associated with the high non-tariff trade barriers as well as large distance between Kampala and the respective capital cities

The role of agricultural trade and policy complementarities in poverty reduction in South Africa

Although South Africa exhibits an increasing positive trend in agricultural exports, poverty still remains a considerable challenge in the country. This study sought to determine whether South Africa’s increasing trend in agricultural export performance translated into lower poverty levels between 1996 and 2014. Specifically, the study evaluated the effects of export intensity of agricultural goods disaggregated by end-use category on poverty outcomes with the help of the concept of ‘policy complementarities”. Rather than the commonly used poverty measures such as poverty head count ratio and poverty gap, relative poverty is used in this study. Export intensity is individually interacted with proxies of access to credit, educational and governance systems to capture the role of policy complementarities. To address the reverse causality problem associated with exports and poverty, a Two Stage Squares (2SLS) estimator was used. Results suggest that South Africa’s agricultural trade performance exhibits significant poverty reducing effects. In presence of supportive complementary domestic policies (e.g. increased access to credit), increasing exports of household consumption goods and intermediate goods reduces poverty outcomes by 21% and 15.2%, respectively. Results also suggest that imports of household consumables significantly reduce poverty levels by 9.5-22%, depending on the model used. Conclusively, South Africa’s good performance in agricultural trade translated into poverty reduction. Policy wise, there is need to further enhance the populace’s education levels, increase people’s confidence in public institutions of governance, as well as boost the depth of the financial sector. It is also necessary to promote importation of household consumables, particularly those that are not necessarily produced in the country

Agribusiness, trade and investment trends in Africa

This paper answers three questions, namely: (i) Is Africa trading with its self-enough? (ii) What are the driving and restraining forces of agribusiness development in Africa? (iii) Why agribusiness development, trade and invest in Africa? A review of relevant literature coupled with panel data econometric estimation based on 12 African countries for a period of 11 years (spanning from 2005 to 2015) was used to address the stated questions. Findings suggest that African countries are trading less with each other as compared to trading with non-African countries. Intra-African trade is dominated by grains, followed by vegetables and fruits and South Africa is a key trading partner on the continent. The increasing in population dynamics, urbanization, growing middle class with differential incomes, increase in consumption patterns on basic and diversified products and food waste are some of the driving forces of agribusiness while identified restraining forces include policy uncertainties, lack of infrastructure, trade distortions and climate change. Policy implications: There is need to; enact free trade within Africa (removal of trade barriers), develop infrastructure across the continent, and ensure political stability given that these factors will lead to increased development of agribusiness sector, more investment and competitive intra-Africa trade

How has consumer education influenced pork consumption in South Africa? Instrumental variable regression analysis

We evaluate the impact of consumer education on pork consumption in South Africa by using time series data on levy expenditure on consumer education over a ten-year period. Furthermore, we introduce quantitative measures of two non-economic factors (health and nutrition, and tastes and preferences) based on previous research which indicates that they are important drivers of meat consumption. We employ an instrumental variable regression analytical framework. To account for the dynamic response of consumer education effects on consumption patterns, a lagged variable for expenditure on consumer education is included in the specified model. The positive estimate (0.045) on consumer education is highly significant, implying that consumer education is associated with a 4.5% increase in pork consumption. In concurrence with previous studies, findings show that peoples’ tastes and preferences for processed pork products positively impact on pork consumption while health and nutrition (severe malnutrition) exhibits a negative effect on pork consumption. As recommendation, consumer education should focus more on the low-income earners since this segment of the population accounts for a relatively small proportion (10%) of total pork consumed

The effect of the GSP scheme on the European Union’s horticultural imports from SADC member countries: A Triple-Difference Approach

This work evaluates the effect of the Generalised System of Preferences (GSP1) on EU’s fruit imports from Southern African Development Community (SADC) member countries during 2005-2014, using a new and advanced micro-econometric tool known as the Triple-Difference estimator. The estimator is advantageous given that it is robust to policy endogeneity and it uses a very flexible benchmark to which the intensive margin and extensive margin of trade performance are compared. Two preference margin measures are used as proxies for the preferential treatment granted to SADC member countries by the EU. Furthermore, highly disaggregated data at HS 6-Digit level, for 12 SADC member countries and 27 EU member states are used for the analysis. The analysis employed takes into consideration of zero-trade flows. Empirical results suggest that the EU-GSP scheme generally has a significant positive impact on EU’s fruit imports from SADC member countries. Notably, the Least Developed Countries (LDCs) benefited more from the scheme as compared to the non-LDCs

The effect of the GSP scheme on European Union's horticultural imports from SADC member countries: A Triple-Difference Approach

This work evaluates the effect of the Generalised System of Preferences (GSP1) on EU’s fruit imports from Southern African Development Community (SADC) member countries during 2005-2014, using a new and advanced micro-econometric tool known as the Triple- Difference estimator. The estimator is advantageous given that it is robust to policy endogeneity and it uses a very flexible benchmark to which the intensive margin and extensive margin of trade performance are compared. Two preference margin measures are used as proxies for the preferential treatment granted to SADC member countries by the EU. Furthermore, highly disaggregated data at HS 6-Digit level, for 12 SADC member countries and 27 EU member states are used for the analysis. The analysis employed takes into consideration of zero-trade flows. Empirical results suggest that the EU-GSP scheme generally has a significant positive impact on EU’s fruit imports from SADC member countries. Notably, the Least Developed Countries (LDCs) benefited more from the scheme as compared to the non-LDCs

Is there justification for levy expenditure on export promotion and market development in the agricultural sector in South Africa?

South Africa’s industries in the agricultural sector spend some of the statutory levy income on export promotion and market development (EPMD) activities. Some industries argue that levy expenditure on EPMD activities generates satisfactory returns on investment but empirical evidence is yet to be presented to support the argument. Hence, this study fills this gap by building a unique dataset based on levy expenditure on EPMD for four industries (citrus, deciduous fruits, table grapes and wine) and using econometric analysis to assess the impact of EPMD on exports, net agricultural income and social welfare over a ten years’ period (2006- 2015). Furthermore, we estimate the returns generated on exports, agricultural net income and social welfare per Rand of levy expenditure on exports, net agricultural income and social welfare. In the analysis, we control for unobserved heterogeneity, multi-collinearity and reverse causality. Results suggest that levy expenditure on EPMD has a statistically significant positive impact on exports, net income and social welfare across all industries. On average, a unit increase in levy expenditure on EPMD leads to an increase in exports by 7.3 percent (table grapes and deciduous fruits), 5.6 percent (wine), 5.25 percent (citrus). For agricultural net income, a unit increase in levy expenditure on EPMD is on average associated with a 7.5 percent, 4.9 percent, 4.3 percent and 3.6 percent increase for table grapes, citrus, wine and deciduous fruits, respectively. Across all industries, the range of social welfare improvement lies between 0.2 percent and 0.4 percent per unit increase in levy expenditure on EPMD. Furthermore, results suggest that one Rand spent on EPMD for the four industries in question on average generates a R404 increase in exports, R39 of additional agricultural net income and a US$26 worth of improvement in social welfare. All in all, levy expenditure on EPMD plays a key role in fostering exports, agricultural net income and social welfare improvement. Policy wise, there is need for mobilisation of more resources to facilitate the EPMD initiative into new markets and products for the industries

Geographical Indication (GI) in the wine industry: Does it matter?

Despite the increasing competitiveness of South Africa’s wine industry globally and the industry’s outstanding number of geographical indications (GIs), the impact of these GIs on wine exports has not been assessed (and if it has been assessed such work is not publicly available or not seen by the authors). Understanding the impact of the GIs is critical in enhancing informed policy decisions towards securing more geographical indicators for wines and other products. In addition, the unearthed evidence may be the basis for more government interventions in support of the initiative while protecting the good reputation in communities where production occurs. Based on E-Bacchus database for GI, we use the gravity flow model framework to empirically analyse the effect of GI on South Africa’s wine exports to the European Union (EU). Three proxies are used to capture the impact of GI. Results suggest that GI fosters South Africa’s wine exports into the EU irrespective of the proxy used. With respect to the dummies, GI leads to an increase in South Africa’s wine exports by about 170 percent (0.169, p<0.1). When the actual number of GI names was used, the estimated coefficient (0.007, p<0.1) also suggests that GI enhances wine exports into the EU by 0.7 percent. While using the difference between the number of GI names for South Africa and EU, findings show that GI is associated with 87 percent increase in wine exports. Conclusively, GI positively impact on South Africa’s wine exports into the EU

Factors influencing communal livestock farmers' participation into the National Red Meat Development Programme (NRMDP) in South Africa: the case of the Eastern Cape Province

In 2005, ComMark embarked on the Eastern Cape Red Meat Development Programme (ECRMDP) as an initiative to increase formal market participation of communal farmers. With the end of support from ComMark in 2008, the National Agricultural Marketing Council (NAMC) took over. With funding from the Department of Rural Development and Land Reform (DRDLR) and partnerships with the provincial departments and the municipalities, the programme has expanded effectively within the Eastern Cape Province and it has been rolled out to other provinces as well, hence it is now known as the National Red Meat Development Programme (NRMDP). The initiative emanated from the observation that the local demand for beef outstrips production, hence resulting into importation of more beef. This was against the background that there was untapped potential in the communal farming areas where 40% of beef production takes place in South Africa, of which 3.3 million heads of cattle is found in the Eastern Cape alone. Although the programme has so far had a significant contribution towards communal farmers’ participation in formal markets as well as their understanding of the value of formal market participation, empirical evidence to support this notion is still desirable. Hence this case study was conducted to determine the factors that influence farmers’ participation in the programme, focusing on the Eastern Cape Province. A logistic regression model was used to determine factors influencing farmers’ participation in the programme, and the results indicated that distance to markets, stock size, days of fattening and the contribution of the programme (income earned from livestock sales through the programme) significantly influence farmers’ participation. This is an indication that farmers are slowly beginning to understand how they can best make use of the opportunity presented by the programme. Hence policy wise, it is commendable to encourage communal livestock farmers to participate in the programme