Impact of export promotion and market development on social welfare in South Africa: Evidence from the agricultural sector

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.