An analysis of the relationship between exports and economic growth in South Africa, 2000-2020

Abstract

Since 1994, the South African government has prioritised rapid economic growth. Despite theorists’ contradicting views, the country considered the global market as one of the gateways to accelerated economic growth. In the early 1990s, South Africa opened to foreign markets by removing trade barriers. However, the results of such actions were not entirely what was expected. This study analysed the relationship between exports and economic growth in South Africa from the year 2000 to 2020. The study aimed to investigate how exports affect the overall growth of the economy in South Africa. Quarterly time series data from StatsSA and the South African Reserve Bank covering the period 2000 to 2021 was used in the study’s empirical analysis and tests. The study utilized numerous econometric approaches and or tests such as; the unit root test, Johansen’s cointegration procedure, the Vector Error Correction Model (VECM), as well as Granger causality model to gain a clear perception of the relationship between exports and the rate of South Africa’s economic growth. The Johansen cointegration test was conducted to examine the contribution of exports to economic growth in South Africa. The test confirmed the presence of a long-term equilibrium relationship between the dataset. The results of the unit root test indicated that both variables became stationary at the first difference, as evidenced by passing both the ADF and PP tests. The correlation between exports and the growth of the economy is positive in the short term and long term. The outcomes of the Granger causality tests indicated that GDP Granger causes exports, signifying that economic growth in South Africa has an effect on exports. Additionally, the VECM outcomes demonstrated that there exists both a short-term and long-term relationship between economic growth and exports in South Africa. The research suggests, among other things, that the government should develop policies to promote increased exports from South Africa, as this will lead to the creation of more jobs in the long run.