- Title
- The effects of Real Exchange Rate (RER) on the export competitiveness of South African fruit industry
- Creator
- Peter, Bathathu
- Subject
- Foreign exchange rates -- South Africa Free trade -- South Africa
- Date Issued
- 2017
- Date
- 2017
- Type
- Thesis
- Type
- Doctoral
- Type
- PhD
- Identifier
- http://hdl.handle.net/10353/15732
- Identifier
- vital:40514
- Description
- South Africa has diverse climatic conditions that allow it to grow and produce various fruit cultivars across the country. Limpopo, Western Cape, Mpumalanga, Eastern Cape, KwaZulu-Natal, and Northern Cape are South Africa’s main fruit production regions. In 2015, fruits ranked the 7th largest sector on exports and the largest in South Africa’s agricultural exports. South Africa’s major export partners for fruit in the same year were Netherlands, United Kingdom, Russian Federation, United Arab Emirate, and Hong Kong China. Correspondingly, exports to non-traditional markets such as India and China have increased rapidly. South Africa has prioritized exports as the engine for economic growth and job creation. The country has two major export destinations namely; the high income countries of Europe and North America, and the low-income markets of Africa, especially Southern African Customs Union (SADC) countries. South Africa’s Real Exchange Rates (RER) fluctuated widely since early 1970’s. This occurred after the collapse of the Bretton Woods system of fixed exchange rates in 1973. South Africa’s RER has been depreciating since then. Consequently, there has been a proliferation of debates on the relationship between the RER and exports performance. The most commonly held belief is that the RER depresses trade thereby increasing riskiness of trading activity. The South African fruit industry has been operating in the background of the depreciating RER. A high degree of RER volatility has posed a serious challenge to policy making environment because the magnitude of its impacts on trade flows is still unknown. The policy making environment becomes stagnant. Policy makers and researchers continue to examine the effects of RER on trade for an indefinite period. The South African fruit producers are unable to anticipate income earnings from trade due to increased risks associated with RER. South Africa’s agricultural sector encompasses the Historically Disadvantaged Individuals (HDI) which the country wants to prioritise and give them opportunities to participate in trade. The risks associated with the RER impair the development of the HDIs. The Thesis seeks to examine South Africa’s trade performance and the competitiveness of South African fruit industry as well as the effects of the RER. Specifically, the Thesis examines South Africa’s global fruit trade performance, explores the export competitiveness of South African fruit industry, and estimates the export demand equation for South African fruit exports to the world. The Thesis used the data obtained from the Department of Agriculture, Forestry and Fisheries (DAFF) for the period of 1080 to 2015 to estimate the export demand equation. The data from the International Trade Centre (ITC) for the period of 2001 to 2015 was used to examine South Africa’s global trade performance and competitiveness. The analytical framework followed incorporates the South Africa’s fruit Trade Performance Index (TPI) and the effects of RER on South African fruit industry. The TPI presents South Africa’s global fruit trade and its competitiveness using Trade Map, while the effects of RER are investigated on local fruit sales and on exports using the regression model. The Trade Map is the dominant trade analysis tool increasingly being used by the researchers and policy makers to make informed decisions on trade issues. The Thesis also made use of the Trade Map tools to examine South Africa’s global fruit trade performance and its competitiveness. The market analysis tools developed by the International Trade Centre (ITC) are: Trade Map, Market Access Map, Investment Map, Trade Competitiveness Map, Standard Map, and the Procurement Map. Trade Map, Trade Competitiveness Map, and the Market Access Map are used. Subsequently, the Thesis applied econometric techniques to examine the effects of RER on South Africa’s fruit exports and on fruit sales on local markets using the regression model. In this regard, the Thesis followed the export demand equation used by Todani and Munyama (2005). De Vita & Abbott (2004), and Tandra-Ragoobur & Emamdy (2011). Todani & Munyama (2005), to estimate the relationship between exchange rate volatility and South African export. Real exports and the exchange rate volatility were the main variables used in the model. The relative prices and the income of South Africa’s trading partner were also included in the model. The results show that South Africa was the 11th largest fruit exporter after Viet Nam and Spain in 2015. During the same year, the U.S. was the largest exporter of fruit with 14percent in the world, followed by Spain and Netherlands with 9percent and 6percent, respectively. The fruit industry ranked 8th largest exporter and the largest in agricultural sectors in 2015. Its exports totaled R 37 133 million in 2015, from R 30 566 million in 2014. South Africa’s total fruit exports accounted for a 33percent share on total agricultural exports and 4percent on South Africa’s total exports in 2015. The coefficients of the regression model were all statistically significant. Most importantly, an inverse relationship between the relative price and South Africa’s real fruit exports was established. Moreover, the RER had a significant negative effect on the South Africa’s fruit export competitiveness. This imposes more pain on the development of the HDIs in South Africa’s agricultural sector. South Africa has desire to move away from the export of raw materials and traditional export commodities and promote the export of value added products, including the agro processing products. Accordingly, this affects the entire value chain of the agricultural sector, since trade cannot be anticipated. On the basis of the regression results shown by the variables included in the model, the objectives of the study were accomplished. South Africa’s fruit exports are said to be more competitive to the European markets as a result of the weaker rand relative to other countries. The overview of South Africa’s fruit trade shows that South African fruit exports are more competitive across the globe. This is probably because the South Africa’s fruit exports for the top ten commodities are ranked almost the first five in the European markets and the first ten for the world. The results are supported by previous documented research, which emphasised that the weaker rand leads to more South African fruit produce being absorbed by the international markets. The evidence from the results shows that the RER stimulates the fruit export competitiveness.
- Format
- 267 leaves
- Format
- Publisher
- University of Fort Hare
- Publisher
- Faculty of Science and Agriculture
- Language
- English
- Rights
- University of Fort Hare
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