Abstract
South Africa’s industries in the agricultural sector spend some of the statutory levy income on export promotion and market development (EPMD) activities. Some industries argue that statutory levy expenditure on EPMD activities generates satisfactory returns on investment but empirical evidence is yet to be presented to support the argument. Hence, this study filled this gap by building a unique data set based on statutory levy expenditure on EPMD for four industries (citrus, deciduous fruits, table grapes and wine) and used econometric analysis to assess the impact of EPMD on social welfare over a 10-year period (2006–2015). Furthermore, we estimated the returns generated on social welfare per rand of statutory levy expenditure. In the analysis, we controlled for unobserved heterogeneity, multicollinearity and reverse causality. The results suggest that statutory levy expenditure on EPMD has a statistically significant positive impact on social welfare across the four industries. On average, a unit increase in statutory levy expenditure on EPMD leads to an improvement in social welfare ranging between 0.2% and 0.4% depending on the industry. In addition, the results suggest that 1 rand spent on EPMD for the four industries in question, on average, generates a US$26 worth of improvement in social welfare. Conclusively, statutory levy expenditure on EPMD played a key role in enhancing social welfare improvement. Therefore, there is a need to mobilise more resources to facilitate the EPMD initiative into new markets and products for the industries.
Highlights
Problem statementFollowing the establishment and approval of statutory measures as provided for by the Marketing of Agricultural Products Act, No 47 of 1996 (MAP Act), industries through the administrator bodies oversee the implementation of various statutory measures
The four industries used R10.9m worth of statutory levy expenditure for export promotion and market development (EPMD) per quarter, while exports worth R5198m were collectively exported per quarter
Table grapes industry was the biggest contributor towards social welfare, implying that a unit increase in statutory levy expenditure on EPMD leads to 0.4% improvement in social welfare
Summary
Problem statementFollowing the establishment and approval of statutory measures as provided for by the Marketing of Agricultural Products Act, No 47 of 1996 (MAP Act), industries through the administrator bodies oversee the implementation of various statutory measures (i.e. registration, records and returns, and levies). About 15% of the statutory levy expenditure has generally been allocated for EPMD, for the citrus, deciduous fruits, fynbos (proteas), potato, table grapes, wine and winter cereals industries. Annual growth rate in total statutory levy expenditure on EPMD across the citrus, deciduous fruits, table grapes and wine industries highly fluctuated over the 10-year period.
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