Trade integration and firm performance: Evidence from South Africa

Can access to imported machinery help South African firms grow? And does greater use of machinery necessarily mean fewer jobs? This presentaion draws on research from the Southern Africa – Towards Inclusive Economic Development (SA-TIED) programme to explore how closer trade ties with China relate to business performance, employment and wages in South Africa.

The presentation was delieverd by Megan Shongwe, Ashley Gandy, Aimable Nsabimana and Michael Kilumelume. They used linked firm-level tax and customs data from 2009 to 2019, the study tracks changes in imports, production and labour outcomes around the 2013 South Africa–China Strategic Trade Agreement.

The findings suggest that increased sourcing of capital goods from China was associated with firms using more capital relative to labour. This shift coincided with gains in sales and value added, without evidence of an overall decline in employment among the firms studied. Business expansion may therefore have offset the potential displacement of workers by machinery. However, some trends began before the agreement, so the findings do not establish that it alone caused these changes.