Effects Of Consumer Goods And Industrial Products Standard On Export Diversification In South Africa

Abstract

The initial stages of economic development are generally characterized by rising per capita income alongside structural changes in both production and export activities. These changes often entail the development of new products and the establishment of additional trade partnerships, thereby fostering broader diversification within the economy. This study therefore, examined the effect of consumer goods and industrial products standard on export diversification in South Africa. The study employed Generalized Least Square (GLS) Model which estimated the effect of European Union (EU) product standards and the harmonized EU product standard (EU_ISO). Data used for the analysis were from year 2011 to 2022, and were sourced from WIT-TRAINS, and WDI. The results revealed that the distance and common language were positive and significantly affects countries ceramic (ED_CER) export diversification (P = 0.000; 0.001). However, the effect of distance on ceramic (ED_CER) was stronger than its effect on sugar & confectionary (ED_SUC).  This implies that the farther away the countries are from each other, the larger the export basket and that export diversifications are not only driven by standards requirements but by language and distance. The EU standard positively affected both sugar & confectionary and ceramic export diversification (P = 0.941; P = 0.638). This indicates that a one per cent increase in the EU product standard results into 0.9 and 0.6 per cent increase in sugar & confectionary and ceramic export diversification. The result also revealed that the EU standards that are harmonized with ISO standards are positive (P = 0.465) on South Africa’s sugar & confectionary export diversification.  The study concludes that South Africa’s export diversification and the harmonization of the EU to international standards acts have beneficial factors even when the overall impact of product standards was positive but insignificant. The study recommends that the development of infrastructure should be given importance as it leads to reduction in transaction cost (distance) of trade.