The Role of Export Diversification on Economic Growth in South Africa

The paper examined “the role of export diversification on economic growth in South Africa”. The study used annual time series secondary data for the period covering 1980 to 2010 and employed a Vector Error Correction Model to determine the effects of export diversification and possible factors that affect it on economic growth. Possible factors that affect export diversification considered as independent variables in this study include gross capital formation, human capital, real effective exchange rate and trade openness. Results of the study reveal that export diversification and trade openness are positively related to economic growth while real effective exchange rate, capital formation and human capital have negative long run relationships with economic growth. The study recommends the continual implementation of trade liberalisation by the South African government. The South African government is also encouraged promote the production of a diversified export basket through subsidisation and promotion of innovation and production of new products. DOI: 10.5901/mjss.2014.v5n9p70