World Bank Group

08/01/2024 | Press release | Distributed by Public on 08/01/2024 06:28

Unlocking South Africa’s Potential: Leveraging Trade for Inclusive Growth and Resilience

International trade can be a powerful force for economic growth and poverty reduction. This report "Unlocking South Africa's Potential: Leveraging Trade for Inclusive Growth and Resilience" synthesizes analytical work carried over the last four years. It provides an overview of South Africa's export performance over the past decade for both goods and services and discusses how trade policies and trade facilitation reforms can support robust, inclusive, and resilient economic growth in South Africa. In a changing world that has been marked by unprecedented supply chain disruptions during the COVID-19 pandemic and growing skepticism towards trade openness, the report also emphasizes emerging opportunities for South Africa, from the African Continental Free Trade Area (AfCFTA) to trade in services and green products.

Higher exports associated with greater global and regional integration can bring substantial gains for South Africa, boosting growth and employment. South Africa has underperformed in terms of exports relative to its peers over the past two decades. Traditional drivers of growth-household and government consumption-are hampered by a weak labor market and declining fiscal space, constraining the government's ability to boost aggregate domestic demand. Hence, the external sector can be leveraged to support higher and sustainable growth in South Africa. Greater outward orientation can also help increase competition in domestic markets and support the adoption of productivity-enhancing technologies through imports. This can also enable increased economies of scale and specialization that can contribute to job creation, inclusive growth, and poverty reduction.

Export diversification both in terms of products and markets can also help South Africa mitigate the impact of exogenous shocks. The report highlights how the full implementation of the AfCFTA could increase South Africa's income and, in the long run, increase the resilience of the economy, making it better prepared to face shocks. South Africa can also take advantage of the rising demand for products from low-carbon technologies in the context of global climate commitments and further develop its exports in these areas.

Promoting broad-based gains from trade for South Africa

Based on the findings, the report also seeks to contribute to the policy dialogue with the Government of South Africa by proposing a series of actions aimed at deepening and broadening the government's efforts to improve South Africa's trade competitiveness, grouped around three priorities:

1. Using new trade agreements and other opportunities for diversification;

2. Improving trade facilitation and addressing non-tariff barriers;

3. Increasing the capabilities of local firms to become exporters and diversify products and markets.