The impact of trade liberalisation on South African agricultural productivity

This study attempts to examine the empirical relationship between trade and Total Factor Producitvity (TFP) in the agricultural sector using both cross-sectional (across nine agricultural commodities) and time-series analysis. The Error Correction Model of Ordinary Least Square (OLS) results from the cross-sectional analysis confirm that export shares and capital formation were significant and postivly related; whereas, import shares and real exchange rate were found to be negatively related. However, the net effect of export and import shares was positive implies that trade liberalisation causes productivity gains, The findings from the time-series analysis followed in the same direction as the cross-sectional results, indicating a robust relationship between a TFP, degree of openness, and capital formation. Debt was found to be inversely related, this implies that agricultural industries/farmers lack debt management skills.