The results of the year-long research study conducted by the IMF staffers show that, on average, every one percentage point growth a year in SA generated between 0,5 and 0,75 of a percentage point increase in sub-Saharan growth.
As the data covered the period from 1960-99, and only five years since SA’s first democratic elections, which has seen a sharp increase in trade, investment, and overall business ties with the rest of the continent, it was likely — although not proven by the paper — that SA was an increasingly powerful engine for growth for the continent.
This was the first publicly available research that has provided a figure to illustrate what has been widely assumed to be SA’s role as an engine of growth for the region. Another finding of the study was that trade played a relatively small part in SA’s role in African growth.
The IMF working paper titled, Implications of South African Economic Growth for the Rest of Africa, by Vivek Arora and Athanasios Vamvakidis is available on the IMF internet site. It is part of a series of studies undertaken by the two economists on the spillover effects of growth in key world economies.
Arora is the fund’s resident representative in SA and Vamvakidis is the IMF’s representative in Croatia.
By comparison, in a previous paper, Arora and Vamvakidis found that the US played a larger role as a growth generator for the world economy than SA did in sub-Saharan Africa.
Every one percentage point increase in US growth was responsible in the longer term for between a 0,75% and 1% rise in growth in the world economy, they found.
The basis on which the researchers built their model to assess how much growth every 1% of South African growth generated in the wider region meant that they could take growth data only up until 1999. This was because they considered five-year averages in order to smooth out the effects of economic cycles and, in addition, complete data was not available at the time they ran the model for the last two years.
The powerful role of SA as the region’s engine of growth was highlighted by the authors’ assessment that SA was the only country in sub-Saharan Africa with such a large positive spillover on other countries.
Even during economic sanctions in the apartheid era, the study indicated SA had a significant effect on the continent’s economic growth.
SA’s influence, the economists said, was only in part due to trade and came from a combination of its sheer economic size in relation to its neighbours and factors such as sentiment.
They said the extent of SA’s trade with the continent had been relatively small, reflecting apartheid-era trade patterns.
Even if they had run net trade account deficits with SA, which lowered growth, "countries may benefit from trade with SA as a result of factors such as greater efficiency, economies of scale, and technological gains associated with such trade".
The study did not seek to isolate the effect of trade on other possible channels through which growth may be transmitted.
Arora and Vamvakidis said the effects of economic growth in SA were likely to go beyond trade into channels like economic sentiment and financial linkages.
During 1994-2002, SA’s average share of the rest of Africa’s external trade rose to three times its 1970-93 average, the paper said. But it was still only 2% of the rest of sub-Saharan Africa’s total trade with the outside world.
The IMF economists said this was very small compared with the US’s share in other countries in South and North America and China and Japan’s share in Asia.
Part of the reason for SA’s role as a continental growth engine, the economists said, was the size of its economy compared with other African states.
In 2003, the South African economy accounted for 38% of the expansion of the sub-Saharan African economy measured on the basis of market exchange rates. SA’s investment in other African countries in the period 1998-2002 was equivalent to 5% of the gross domestic product of those countries.
