Tougher than the rest? The impact of COVID-19 on South African exporters

Abstract

Background: This article examined the performance of South African export-oriented firms during the coronavirus disease 2019 (COVID-19) pandemic. The study is conducted against the backdrop of an export sector which has grown in importance since South Africa came out of economic isolation in the early 1990s, an effect which has been amplified in the last decade given that the world economy has grown meaningfully faster than the domestic sector of the South African economy.

Objectives: Given the importance of the rising importance of the export sector, the performance of South African exporting firms is considered, given the observed resilience of export-oriented firms in developed and developing markets. Notably, the impacts of the COVID-19 pandemic challenged this resilience by disrupting export-oriented firms on the demand side and supply side in their home and foreign markets, potentially threatening network effects and diversification benefits, which have been traditional sources of resilience.

Method: Drawing on data for 1023 South African firms, regression analysis was used to assess the impacts of the pandemic on exporting firms relative to non-exporting firms. The study also considered various heterogeneous aspects of exporting firms to provide further insight on their resilience, including firm size, firm age, industry of operation and the nature of export relationships.

Results: Incorporating the above various factors, the study results show that export-oriented firms were significantly more vulnerable than non-exporting firms to the impacts of the COVID-19 pandemic.

Conclusion: The findings have important implications for policy. First, export-oriented firms are found to be more vulnerable to disruption than non-exporting firms. This is contrary to expectations and different to experiences in other markets. This finding highlights the importance of policy support to the export sector during periods of uncertainty. Second, the export sector’s contribution to the South African economy has grown meaningfully over the past three decades, underlining the importance of supporting a sector that experiences heightened vulnerability when crises strike.