The case of South Africa 1
Trevor Bell, Greg Farrell and Rashad Cassim
The aim of this chapter is to consider the relationship between competitiveness, international trade and financial factors in the South African economy.
The term 'competitiveness' is used here in two closely related but distinct senses. One of these refers to a country's ability 'to realise central economic policy goals, especially growth in income and employment, without running into balance of payments difficulties' (Fagerberg 1988:355). This may be thought of as competitiveness in the macroeconomic sense, or what we shall refer to as macro-competitiveness. Competitiveness, however, may also be defined as the ability of an economy, or sectors of it, to compete in world markets. Conventionally emphasised sources and indicators of competitiveness in this sense are movements in real exchange rates, productivity and unit labour costs, which are reflections of price competitiveness. As distinct from these, there are various sources of the ability to compete in world markets, such as product differentiation and innovation, and (of particular interest in the context of the present study) access to finance, which may be regarded as aspects of non-price competitiveness.
Section 2 considers the competitiveness of the South African economy in the macroeconomic sense, by examining the historical relationship between GDP growth and the ratio of the current account deficit to GDP. On this basis, it finds that there has apparently been a significant deterioration in the competitiveness of the South African economy.
The rest of the chapter is in effect an attempt to shed light on this problem. The rate of growth of exports is clearly one factor pertinent to South Africa's macro-competitiveness. One concern of the chapter, thus, is with explaining trade performance in recent years. A long historical view, however, is seen as indispensable for this purpose. The evolution of the growth and sectoral pattern of South Africa's exports in the period 1911-72 is therefore described briefly in Section 3.
Section 4, the longest in the chapter, discusses variations in the growth and sectoral pattern of South Africa's trade in 1972-97, divided into two subperiods: 1972-83, which includes the great gold-led, commodity price boom of that