The impact of trade liberalisation on economic growth in South Africa

Abstract

Over the years, South Africa has embarked on significant strides towards trade liberalisation with a view to generate economic growth that enhances employment and reduces poverty. The purpose of this study is to determine whether trade liberalisation has enhanced economic growth in South Africa. The specific research objectives were to (i) provide an understanding of the country’s trade liberalisation policies (ii) empirically determine the short-run and long-run effects of trade liberalisation on economic growth between 1970 and 2017 and (iii) to provide policy recommendations based on the findings. To this end, utilising three different proxies of trade liberalisation, the study employed the Autoregressive Distributed Lag (ARDL) Model to determine the long-run and short-run impact of South Africa’s trade liberalisation on economic growth. The study found that trade liberalisation enhanced economic growth in South Africa and noted that the results hold only when using trade openness and real effective exchange rate as proxy for trade liberalisation. This suggest that trade liberalisation in South Africa has had a general positive effect on economic growth. Despite the positive effect on economic growth, there is still a need to ensure that within the trade policy, increased focus on sectors that have the potential for value added and job creation.