South Africa’s exports to Zimbabwe: a gravity model analysis

This study sets out to explore South Africa’s exports to Zimbabwe as explained by the exchange rates, distance, the two countries’ GDPs and populations. The underlying international trade theories as well as relevant empirical literature are discussed in order to put the study into perspective. Panel data methodology was used to estimate respective gravity models per product category using the log linear specification of the Random effects model. The resultant regression parameters are elasticities. Distance being a proxy to transport costs and the exchange rates retard SA’s exports to Zimbabwe. The GDP of Zimbabwe is found to play a positive and significant role in determining SA’s export flows. The other variables had varying effects from one product category to another. The objectives of the research were threefold: firstly, to apply the gravity model to determine South Africa’s export potential to Zimbabwe; secondly, to determine the gap between the actual and potential flows of exports from South Africa to Zimbabwe and thirdly to apply the speed of convergence tests between the actual and the potential flows of SA’s exports to Zimbabwe. To estimate the gravity models for each product category the study used panel data on South Africa’s exports to SADC countries covering a period of eight years from 2009 when Zimbabwe dollarized to 2016. The parameters obtained were then simulated to provide the point estimates of potential export flows from South Africa to Zimbabwe for each product category. Simple point estimate comparisons between potential flows and the actual flows indicated that most of the product categories portrayed untapped potential; for example, 2017 point estimates showed unutilized potential in 14 product categories. The speed of convergence tests which provide a more efficient measure of expandable opportunities were then carried out between the actual and potential flows for each product category. The results of the speed of convergence tests indicated 10 product categories that presented unutilized potential for South Africa’s exports to Zimbabwe with product category C11 (Textiles and textile articles) at the top of the ranking. Thus the study established that there exists unutilized potential for SA’s exports in Zimbabwe in several product categories despite the prevailing economic hardships that the latter country is facing. Negotiating better bi-lateral trade arrangements specific to product categories; implementation of a one stop border control point and improved international marketing; product quality and disease control strategies are the policy recommendations that the study makes in order for untapped potential to be utilized to realize symbiotic benefits for the two nations