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7/31/2019 319 Symposium Paper
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The Impact of the Economic Crisis on
Agricultural Trade: the Case of South Africas
Fruit and Wine Exports
Authors:
Mr. Ernst Idsardi
Agricultural Economist, North-West University, Potchefstroom, South Africa
Tel: +27 (0)18 299 2484 / +27 (0)79 139 3339 Fax: +27 (0)18 299 1544
E-mail: ernst.idsardi@nwu.ac.za
Dr. Philippus Christoffel Cloete
Agricultural Economist, North-West University, Potchefstroom, South Africa
Prof. Herman Daniel van Schalkwyk
Campus Rector, North-West University, Potchefstroom, South Africa
Paper presented at the 21st Annual Symposium and Forum of
The International Food and Agribusiness Management Association (IFAMA)
June 20 23, 2011
Frankfurt, Germany
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Abstract
The recent global economic crisis resulted in a significant drop in global trade including the
trade in agricultural and food products. This poses the question to what extend this and
previous economic recessions have had an effect on the various global trade flows of food
products. An understanding of this connection will assist exporters in their marketing
management in case of future recessions.
Few studies have looked specifically at the long-term relationship between a nations volume of
agricultural & food trade and the economic performance of its export partners. Against the
background of the recent economic crisis, this study analyses the causal relationship between
export flows of selected fresh fruits and wine from South Africa and the economic demand
capacity in the respective importing countries for the last 27 years.
Keywords: economic crisis, exports, fruit, wine, South Africa
1. IntroductionThe consequences of the global economic crisis have been manifold. In 2009, global trade has
experienced the sharpest drop in seventy years with a contraction of 12 percent in volume and
23 percent in value (WTO, 2010). Especially trade in iron, steel, manufacturers, industrial
machinery and automotives was affected severely (WTO, 2010).
The global agricultural sector has shown some resilience in this regard and has not been
affected so severely as some of the other economic sectors. The rationale behind this is that
the demand for agricultural and food products is regarded as relatively income inelastic, thus
less vulnerable to shocks in price and income (OECD-FAO, 2009). Despite this, the impact on
global agricultural trade was manifested in a decline in agricultural trade of three percent in the
total volume and 13 percent in total value in 2009 (EC, 2010). This decline in trade was
experienced after several years of consecutive growth. The most important causes for this are
the weaker demand due to the economic slowdown in import markets, currency appreciation
as well as the depressed prices for agricultural commodities (EC, 2010).
For South Africa, the effects of the economic crisis on agricultural and food exports seem to berelatively small. In 2008, the growth in the value of South Africas agricultural and food exports
was a surprising 48 percent but this growth has flattened with a mere increase of 1.9 percent in
2009 and even a small drop of 0.5 percent in 2010. From this stems the question to what
extend South Africas agricultural exports is determined by the overall economic performance
of its import markets. This link is especially of importance for South Africas export of fresh
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produce and wine, which comprises the most important agricultural export products. The total
exports of fresh fruit1
Understanding the long-term causal relationship between exports and demand-side capacity
will provide valuable insights into the fruit and wine sectors vulnerability and adjustment to
past and current economic shocks. Hence, this study will attempt to reveal a competitive edge
with regards to the linkage between South Africas exports of fruit and wine and the economic
performance in export markets against the background of the recent global economic crisis.
and wine accounted for 42.5 percent of South Africas total agricultural &
food exports in 2010 (DTI, 2011). Especially, the exports of fresh fruits such as oranges, table
grapes and apples have earned valuable foreign currency for many decades and will therefore
be, besides wine, the focus of this study.
The objectives of the study comprise of the following:
1. To provide an overview of the long-term export performance of South Africas apple, orange,
table grape and wine sector in selected export markets
2. Estimate the impact of the economic performance of the respective export markets on the
export flows of selected agricultural and food products from South Africa.
2. Approach2.1 Data
Time-series data on South Africas apple, orange, table grapes and wine export volumes and
values were used to identify long-term trade relationships and analyse long-term export
performance of the selected fresh products over the last 27 years. A brief analysis of the
economic performance in terms of export prices is also included in the study. The availability of
detailed historical international trade data is limited, therefore 1984 was chosen as the base
year for the analysis, as detailed trade data in quantities is available from that year onwards2
In order to estimate the econometric relationship between the exports of South Africa and the
economic performance of importing countries, a selection was made of export markets with a
long-term and continuous trade relationship with South Africa. Thus, only countries with a
.
1Classified according to HS Chapter 08
2The international trade data up to 2000 was sourced from the National Bureau of Economic Research (NBER) and
specified at the four-digit level of the SITC Rev. 2 classification. See also: http://nber.org/data. Trade date after
2000 was sourced from the UN Comtrade database.
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significant share in South Africas fruit and wine exports in the period from 1984 to 2010 were
selected for the analysis.
Table 1 provides an overview of the selected export markets per product, as well as an
indication of their respective economic performance and the average export unit price realised
by South Africa on those markets.
Table 1: Overview of historic trading partners of South Africas exports of fresh produce
Product Main export markets
in the period 1984-
2010
Share in SA
exports:
1984 -2010
Average SA export
unit price
(USD / Kg. or l.)
Average economic
growth:
1984-2010
Number of
recessions:
1984-2010
Table grapes
(SITC 0575)
UK
Germany
22.0%
21.7%
1.85
2.43
2.3%
1.9%
2
3
Oranges
(SITC 0571*)UK
Saudi Arabia
The Netherlands
14.4%
11.1%
10.6%
0.60
0.39
0.57
2.3%
2.8%
2.5%
3
3
1Apples
(SITC 0574)
UK
Germany
France
The Netherlands
35.4%
11.7%
5.5%
5.2%
0.87
0.83
0.89
0.89
2.3%
1.9%
1.9%
2.5%
2
3
2
1
Wine
(SITC 1121)
UK 33.6% 1.50 2.3% 2
The Netherlands 12.7% 1.61 2.5% 1
Germany 12.1% 2.07 1.9% 3
Japan 1.4% 1.77 2.0% 4
Note: * includes mandarins and tangerines
Sources: NBER, UN Comtrade, IMF (2010).
Data on the Gross Domestic Product (GDP) for the selected export partners was sourced from
the International Monetary Fund (IMF). In this study, the GDP is used as a proxy for demand
capacity3
Non-stationarity is a common problem with time-series of economic- and trade data and may
cause a spurious regression. Therefore, graphical analysis, correlogram analysis and the Im,
Pesaran & Shin (IPS) unit root test were subsequently applied to the dataset to check for
. Its hypothesised that an increase in a countrys GDP will result in an increase in
consumer income and subsequently an increase in demand for consumables, de facto including
imports of food, of that respective country. However, in line with the theory of demand
elasticity of food products, it is assumed that a contraction in GDP will lead to a relative smaller
decline in the demand for fresh produce & wine vice versa.
3Note that private consumption is generally the largest component of GDP (expenditure approach) and is
therefore used as a reflection of consumer income which will subsequently effect demand capacity.
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stationarity. Non-stationarity (i.e. unit root) was detected for all the datasets and therefore the
variables were transformed by differencing in order to make the time series stationary.
2.2 Methodology
The goal of the analysis is not to explain trade but rather the long-term effects of an importing
countrys economic performance on South Africas export flows of selected fresh produce and
wine; hence, a regression model was applied. The estimation is limited to only a few countries
and the analysis focuses on the impact of the economic performance of importers on trade
flows. A model for each of the four investigated products was specified as follows:
() = + 1() + (1)
Where SAExp is the quantity in tonnes or hectolitres exported by South Africa in year t, to
countryjand ImpGDP is the Gross Domestic Product in year tof country iin national currency
at constant prices. The regression was estimated in the log linear form to determine the
elasticity between export flows and the economic performance of the importer.
As the analysis uses a panel data framework, the F-test was applied to determine the
poolability of the individual datasets (i.e. whether the data is heterogeneous or homogeneous).
This test concluded that the time series dataset of each country is not poolable and that
country-specific individual effects should be considered in the specification of the regression
models. Egger (2002) and Martinesz-Zarzoso and Nowak-Lehmann (2003) argue that the FixedEffect Model (FEM) is the appropriate model for the analysis of trade flows between an ex-ante
preselected group of countries4
. As this is the case, this study applies the FEM for the
estimation procedure. Since all the variables in the FEM are time variant, the four models can
be estimated in one stage.
3. Results3.1 Long-term export performance
This section discusses the results of the first objective, and thus provides an overview of the
long-term export performance of the selected agricultural products. Firstly, to assist the
4The Hausman test was also applied and the results indicated that the null should not be rejected, which implies
no significant differences between fixed and random effects in all four models.
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interpretation of the results a short historic perspective is provided regarding South Africas
exports of agricultural and food products over the last decades.
The international sanctions that were put in place by many countries in the mid and late 1980s
against the Apartheid regime did not result in lower levels of overall exports of South Africa
towards. Total export volumes rose by 26 percent between 1985 and 1989, although the terms
of trade suffered (Waldmeier, 1997). The export flows under investigation in this study were
not directly affects by these sanctions as only the USA and Canada did enforce import bans on
agricultural products from South Africa in the 80s (Kaempfer, 1989). In the 1990s the
agricultural sector was subject to a number of political reforms leading to a deregulation of the
market and trade reforms. This has created both internal and external pressures and spurred
the sector to become more competitive and supply its output to new global markets (OECD,
2006). This has resulted in considerable increases in diversification and volumes of agricultural
products exported by South Africa over the last 15 years.
o Table grapes
South Africa showed an average growth in total table grape exports of 6.9 percent in the period
1984 to 2009. This was well above the global average of 5.5 percent in the same period. With
respect to the recent global economic crises; South Africas exports of table grapes showed a
negative growth rate of -8.9 percent in 2008. However, exports picked up with growth rates of
3.6 percent (below average) in 2009 and 10.7 percent in 2010.
In Figure 1 the trends in table grape exports to South Africas main export markets, the UK andGermany, for the period 1984 to 2010 is shown. The figure also marks the economic recessions
per importer, i.e. a negative growth of GDP, in the respective period. The figure shows that the
exports of table grapes to the UK and Germany showed an increasing trend with average
annual growth rates of 4.5 and 3.7 percent respectively in the period 1984 to 2010. Over time
other importers such as The Netherlands, Russia, Hong Kong, the United Arab Emirates and
Malaysia also became important export destinations for South African table grape exports.
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Figure 1: Trends in South Africas table grape exports to its main export markets (1984-2010)
Source: NBER, UN Comtrade, IMF (2011).
In light of the recent global economic crisis, Table 2 provides a more comprehensive historic
overview of the respective recessions over the last 27 years in the UK and Germany and the
trend in the exports of table grapes to those markets. From the table it seems that the exports
of table grapes are more resilient to economic recessions in Germany. The trends in South
Africas export unit price (USD / Kg.) for table grapes, which can be used as a proxy for
profitability, only decreased in two of the six recession periods (see the last column of Table 2).
Further analysis of the relationship between export profitability and economic performance of
the importing country shows that theres exists a very weak and statistical insignificant negative
correlation between the two (see Table 7 in Appendix I).
Table 2: Recessions in export markets and trends in South Africas table grape exports
Recessions Contraction of
GDP
Trend in quantities of table
grapes exported by SA to the
respective market
Trend in SAs export
unit price
United Kingdom - 1991 -1.4% -1.7% -7.7%
Germany 1993 -0.8% -14.2% 21.8%
Germany 2003 -0.2% 8.5% 27.7%
United Kingdom - 2008 -0.1% -0.7% 7.3%
Germany - 2009 -5.3% 4.1% 4.4%
United Kingdom 2009 -4.4% -11.9% -8.2%
Source: Own calculations based on IMF, NBER and UN Comtrade data (2010).
0
10000
20000
30000
40000
50000
60000
70000
80000
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Tonnrs
Exports to the UK Exports to Germany
X Recession
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o Oranges
South Africa showed an average annual growth of 2.2 percent and total increase of 463 percent
in the exports of oranges in the period 1984 to 2009. Compared to the average annual increase
of 4.4 percent globally and a total increase of world trade in oranges of 168 percent, this is an
excellent performance. The global trade in oranges was not affected negatively during the
recent global recession. This is illustrated by a 7.4 percent increase in global quantities exported
in 2008 and a remarkable 17.4 percent increase in 2009. However, the quantities of oranges
exported by South Africa to the world dropped by 43.7 percent in 2008 and 12.2 percent in
2009. In 2010 South Africa showed a significant recovery of 21.9 percent.
Figure 2 provides an illustration of the long-term trends in quantities of oranges exported to
South Africas traditional export markets for this product, namely the UK, Saudi Arabia and the
Netherlands. Exports to all of these markers showed an upward trend in the depicted period.
The figure also marks the economic recessions for each export market for the period 1984 to2010. Over time other export destinations such as Russia, the United Arab Emirates, the US and
Honk Kong have gained importance, this has resulted in a somewhat sideways trend of exports
to the UK and Saudi Arabia. Exports to the Netherlands however, has only gained momentum
from the late nineties.
Figure 2: Trends in South Africas exports of oranges to its main export markets (1984-2010)
Source: NBER, UN Comtrade, IMF (2011).
0
50000
100000
150000
200000
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Tonnes
Exports to the UK Exports to Saudi Arabia Exports to the Netherlands X Recession
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Table 2 provides an overview of the economic recessions that occurred in South Africas main
export markets for oranges in the period from 1984 to 2010. Both the UK and Saudi Arabia
faced three recessions in the depicted period. However, contrasting to expectations, not all
instances of negative GDP growth in an export market have resulted in a decrease of South
Africas exports of oranges to the respective market. Even so, a relative small recession in SaudiArabia in 1999 was parallel to a relative large drop in imports of oranges from South Africa by
that country in the same year. Nevertheless, this causality between the economic performance
of an export partner and imports from South Africa is further analysed in the next section.
The trends in South Africas export unit price (USD / Kg.) for oranges, which can be used as a
proxy for profitability, decreased in six of the seven recession periods (see the last column of
Table 3). Further analysis of the relationship between export profitability of oranges and
economic performance of the importing country reveals that theres exists a very weak and
statistically insignificant correlation between the two (see Table 8 in Appendix I).
Table 3: Recessions in export markets and trends in South Africas exports of oranges
Recessions Contraction of
GDP
Trend in quantities of oranges
exported by SA to the respective
market
Trend in SAs
export unit price
Saudi Arabia - 1985 -4.3% -4.7% -5.9%
Saudi Arabia 1987 -4.0% -5.2% -33.3%
United Kingdom - 1991 -1.4% 12.5% -1.7%
Saudi Arabia 1999 -0.7% -33.6% 40.2%
United Kingdom 2008 -0.1% 21.7% -24.9%
Netherlands 2009 -3.9% -14.5% -2.0%
United Kingdom 2009 -4.9% -1.8% -17.6%
Source: Own calculations based on IMF, NBER and UN Comtrade data (2011).
o Apples
South Africa showed a moderate average annual increase of 2.2 percent in the quantities of
apples exported in the period 1984 to 2009. The total increase in global trade of apples
between 1984 and 2009 was 215 percent were South Africa only recorded a total increase of
22.3 percent in apple exports. Global trade in apples was affected moderately during the recent
global economic crises. Trade in apples increased with 1.9 percent in 2008 but dropped with 3.1
percent in 2009 globally. A similar trend for South Africas exports of apples; a 4.7 percent
(above average) increase in 2008 followed by a significant drop in exports of 11.1 percent in
2009. In 2010 exports picked up again with an increase of 6.9 percent.
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Figure 3 shows the long-term trend in quantities of apples exported by South Africa to its main
export partners, namely the UK, France, the Netherlands, and Germany in the period 1984 to
2010. The UK was and is by far the most important export market for South African apples.
Exports to this country as well as to the Netherlands showed an upward trend over the last 25
years, in contrast to the exports of oranges to France and Germany which were on the decline.Apart from these four traditional markets, other export destinations such as Malaysia, the
United Arab Emirates, have gained momentum over time. Figure 3 furthermore marks the
various economic recessions in the respective export markets between 1984 and 2010.
Figure 3: Trends in South Africas exports of apples to its main export markets (1984-2010)
Source: NBER, UN Comtrade, IMF (2011).
Table 4 provides an overview of the economic recessions in the traditional export markets for
South African apples in the last 27 years. In five of the nine investigated recession periods didSouth Africa experience an expected decline in the exports of oranges to the respective market.
Hence, a more in-depth analysis in the relationship between South Africas exports of oranges
and the economic performance of the export market is required and provided in the next
section.
0
20000
40000
60000
80000
100000
120000
19
84
19
85
19
86
19
87
19
88
19
89
19
90
19
91
19
92
19
93
19
94
19
95
19
96
19
97
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
Tonnes
Exports to the UK Exports to France
Exports to the Netherlands Exports to Germany
X Recession
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The trends in South Africas export unit price (USD / Kg.) for apples, which can be used as a
proxy for profitability, decreased in eight of the nine recession periods (see the last column in
Table 4). Further analysis of the relationship between export profitability of apples and
economic performance of the importing country shows that theres exists a very weak,
statistical insignificant and negative correlation between the two (see Table 9 in Appendix I).
Table 4: Recessions in export markets and trends in South Africas exports of apples
Recessions Contraction of
GDP
Trend in quantities of apples
exported by SA to the respective
market
Trend in SAs
export unit price
United Kingdom - 1991 -1.4% 65.4% 59.0%
France 1993 -0.8% 209.7% -49.4%
Germany - 1993 -0.8% -45.9% -45.9%
Germany 2003 -0.2% 13.6% -2.0%
United Kingdom 2008 -0.1% 10.2% -0.8%France 2009 -2.5% -16.5% -5.8%
The Netherlands 2009 -3.9% -31.4% -9.8%
Germany 2009 -4.7% -23.5% -19.0%
United Kingdom 2009 -4.9% -7.8% -7.7%
Source: Own calculations based on IMF, NBER and UN Comtrade data (2011).
o Wine
South Africas total wine export showed a staggering increase of 7170 percent in the period
from 1984 to 2010. The average annual increase was 22.4 percent in that same period. Global
trade in wine decreased with 21.5 percent in that same period, thus South Africa performed
very well in comparison. During the recent global economic crisis the global trade in wine
increased slightly with 0.7 percent in 2008 but fell with 5.1 and 57.1 percent in 2009 and 2010
respectively. In that same period wine exports by South Africa dropped with 13.5, 0.7 and 8.7
percent in 2008, 2009 and 2010 respectively. Hence, it seems that the trade in wine was
negatively affected by the latest economic crisis.
Figure 4 shows the long-term trend in South Africas exports of wine to its main export markets,
namely the UK, the Netherlands, Germany, and Japan. The UK was by far the most importantexport destination for South African wines in the last 27 years. From the Figure it is evident that
wine exports were relatively low in the 1980s and the beginning of the 1990s and increased
considerably from the mid 1990s onwards. Apart from these four traditional markets, South
African wines are increasingly being exported to markets such as Sweden, Denmark and the
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USA. Figure 4 also marks the economic recessions in the respective importing countries in the
period 1984 to 2010.
Figure 3: Trends in South Africas exports of wine to its main export markets (1984-2010)
Source: NBER, UN Comtrade, IMF (2011).
An overview of the various recessions in South Africas export markets for wine products is
provided in Table 5. In only three of these eleven recession periods did South Africa experience
a decrease in wine exports to the respective market. The next section will investigate this
relationship further. The profitability in the export markets, proxied by the export unit price
(USD / ltr.), is provided in the last column. In seven out of the eleven recession periods did this
unit price show a decreasing trend. Further analysis of the relationship between export
profitability of wine and economic performance of the importing country revealed that there
exists a very weak, statistically insignificant and negative correlation between the two (see
Table 10 in Appendix I).
0
20000
40000
60000
80000
100000
120000
140000
1984
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
Tonnes
Exports to the UK Exports to the Netherlands
Exports to Germany Exports to Japan
X Recession
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Table 5: Recessions in export markets and trends in South Africas exports of wines
Recessions Contraction of
GDP
Trend in quantities of wine
exported by SA to the respective
market
Trend in SAs
export unit price
UK 1991 -1.4% 36.1% 11.7%
Germany 1993 -0.8% 20.4% -8.0%Japan 1998 -2.0% 77.4% 3.3%
Japan 1999 -0.1% -41.5% -37.8%
Germany - 2003 -0.2% 17.5% 32.2%
UK - 2008 -0.1% 14.1% -6.3%
Japan 2008 -1.2% -70.8% 165.9%
UK - 2009 -4.9% 11.2% -9.5%
Germany - 2009 -4.7% 6.2% -14.1%
The Netherlands 2009 -3.9% -1.3% -6.8%
Japan 2009 -6.3% 146.1% -34.4%
Source: Own calculations based on IMF, NBER and UN Comtrade data (2011).
3.2 Regression Analysis
The second objective of this study is to estimate the impact of the economic performance of
the importers country on the respective export flows of South Africa. In Table 6 the estimation
results of the Fixed Effects Model (FEM) for table grapes, oranges, apples and wine is depicted.
From the table it is evident that in none of the four models the coefficients for the importers
GDP was found to be a significant determinant of South Africas export flows of table, grapes,
apples, oranges, apples and wine. The overall goodness of fit of the four models, reflected by
their respective adjusted R Square, also indicates that the models do not explain the variation
in the respective export volumes to a sufficient extend. The country-specific effects, as
determined by the FEM, will not be discussed as these were not to be found significant.
Table 6: Estimation results of the Fixed Effects Model
Table Grapes Oranges Apples Wine
Coeff. Prob. Coeff. Prob. Coeff. Prob. Coeff. Prob.
C -0.002 0.976 -0.049 0.646 -0.086 0.468 0.146 0.008
DIMPDGP 0.681 0.697 4.526 0.139 2.820 0.508 0.621 0.729
Adj R -0.031 -0.007 -0.031 -0.037
Periods included 26 26 26 26
Cross sections 2 3 4 4
Source: Own calculations in Eviews
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4. Conclusions4.1 Export flows and the economic performance of importers
The initial graphical analysis of the long-term relationship between South Africas exports of
selected fruit products as well as wines, and the economic performance of traditional importingcountries indicated mixed results. Looking specifically at the different recession periods in the
last 27 years in the various export markets it occurs that in 17 out of the total 33 cases South
Africas export volume of the investigated products did decrease. Especially, the exports of
oranges and table grapes seem to be negatively affected by economic recessions in their
traditional export markets.
During the latest global economic crisis of 2008 and 2009, all of the investigated export
partners experienced a contraction of their economies in either one or both years. South
Africas total exports did decrease in 2008 for three of the four products (except for apples) and
similarly in 2009 (except for table grapes). Especially wine experienced a large drop in total
volumes exported in 2008, 2009, and even 2010. However, the analysis in section 3.1 revealed
that the export performance of each of the selected products differed considerably amongst its
traditional export markets during the latest economic crisis. Thus explicit conclusions cannot be
drawn from this initial analysis apart from the fact that recessions in the past did not per se
have a negative impact on the export volumes of table grapes, oranges, apples and wine.
The analysis in section 3.1 also looked at the correlation between the profitability (measured
by the export unit price) and the economic performance (measured by GDP growth) for table
grapes, oranges, apples and wine in each of their respective export markets. Although exportprices of the selected products decreased in almost all of the investigated export markets
during the latest economic crisis, no significant correlation was found on the long-run.
The analysis of the causal relationship between the economic performance of an export partner
and the respective export flows of South Africa was statistically tested by applying a panel data
regression analysis. It was hypothesised that such a relationship exists but that it should be
weak due to the relative income inelastic demand for food products. Hence, a decrease in
disposable income of consumers in (traditional) export market does not results in a relative
similar decrease in demanded volumes for table grapes, oranges, apples and wine from South
Africa. Furthermore, since wine is a more high-value product it was expected that its demand
would be more income elastic.
From the econometric analysis it can be concluded that there exists no significant long-run
relationship between the growth and decline of an importers GDP and the variation in South
Africas exports of table grapes, oranges, apples and wine to those markets. Thus the export
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demand for South African fruit and wine is determined by factors other than economic
performance i.e. changes in income. These outcomes will provide an incentive for further
research on the variations in South Africas export flows of food as well as income elasticities
for food products in South Africas main export markets.
4.2 Management implications
The analysis in this study is conducted from a demand perspective. Hence, further analysis of
the overall effects of an economic crisis on the fruit and wine sector will also have to take input
effects into consideration as prices for intermediaries such as fertilisers and agricultural
machinery may change due to contractions in the global economy. As his study focuses on the
marketing-side, it will assist exporters in the South African fruit and wine sector in crafting
strategies around future recessions in export markets.
Therefore the management implications of the relationship between fruit & wine exports and
the economic performance of export partners are summed up below:
o Economic growth in South Africas traditional export markets will not per se lead to more
demand, thus a focus on taste, quality, price and competitiveness of relative homogeneous
products such as table grapes, oranges, apples and wine is of decisive importance to
maintain demand at all times.
o A recession in a South African export market will not per se lead to less demand for table
grapes, oranges, apples and wine; thus production planning and marketing programs of an
exporter should take account of this.o Apart from exogenous exchange rate effects, the market-profitability of the exports of
table grapes, oranges, apples and wine is not significantly affected by the economic
performance of importing countries. In other words, the export prices of exports to a
country that is in an economic recession do not per se decrease or increase. Hence, the
financial planning of an exporter should take cognisance of this.
o There exists no difference between fresh fruit commodities (e.g. table grapes, oranges,
apples) and high-value, processed fruit products (e.g. wine) with regards to their respective
causal relationship between exported volumes and an importers economic performance.
Hence, diversifying the export basket of an exporter with agricultural commodities as apro-active strategy to tackle economic downturn in an export market is not necessary.
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5. References
DTI (2011) Department of Trade and Industry: South African Trade Statistics Database
[Internet]. Available from: http://apps.thedti.gov.za/econdb/raportt/defaultrap.asp Accessed in
April 2011
EC (2010). EU Agricultural Trade: Back on Track?Monitoring Agri-trade Policy, No. 01-10, June
2010. European Commission (EC), Brussels
Egger, P. (2000). A note on the Proper Econometric Specification of the Gravity Equation.
Economics Letters, Vol. 66 (2000), P. 25 - 31.
IMF (2011) World Economic Outlook Database [Internet]. Available from:
http://www.imf.org/external/ns/cs.aspx?id=28 Accessed in April 2011
Kaempfer, W.H. & Lowenberg A.D. (1989) Sanctioning South Africa: The Politics behind the
Policies. Cato Journal Vol. 8, No. 3, P. 713 - 727
Martinez-Zarzoso, I. & Nowak-Lehmann, F. (2003). Augmented Gravity Model: an Empirical
Application to MERCOSUR-European Union Trade Flows. Journal of Applied Economics, Vol. 6
No.2, P. 291 - 316.
NBER (2011) World Trade Flows: 1962 2000 [Internet]. Available from
http://cid.econ.ucdavis.edu/ Accessed in April 2011
OECD (2006)Agricultural Policy Reform in South Africa. Policy Brief April 2006, Organisation for
Economic Cooperation and Development (OECD), Paris
OECD-FAO (2009). Agricultural Outlook 2009 2018. Joint publication of the Organisation for
Economic Cooperation and Development (OECD) & Food and Agriculture Organisation of the
United Nations (FAO). OECD Publishing, Paris
UN Comtrade (2011) Commodity Trade Statistics Database of the UN [Internet]. Available from:
http://comtrade.un.org Accessed in April 2011.
Waldmeier, P. (1997)Anatomy of a Miracle: the End of Apartheid. W.W. Norton, New York, USA
WTO (2010) World trade 2009, Prospects for 2010. Press release 598, 26 March 2010. World
Trade Organisation, Geneva
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APPENDIX I
Relationship between the changes in the importers GDP and the export unit price
Table 7: Pearson correlation analysis for the export unit price of table grapes and the importers GDP
Change in
importers GDP
Change in
export unit price
Change in importers GDP Pearson Correlation 1 -.114
Sig. (2-tailed) .416
N 53 53
Change in export unit price Pearson Correlation -.114 1
Sig. (2-tailed) .416
N 53 53
Table 8: Pearson correlation analysis for the export unit price of oranges and the importers GDP
Change in
importers GDP
Change in
export unit price
Change in importers GDP Pearson Correlation 1 .140
Sig. (2-tailed) .214
N 80 80
Change in export unit price Pearson Correlation .140 1
Sig. (2-tailed) .214
N 80 80
Table 9: Pearson correlation analysis for the export unit price of apples and the importers GDP
Change in
importers GDP
Change in
export unit price
Change in importers GDP Pearson Correlation 1 -.047
Sig. (2-tailed) .633
N 107 107
Change in export unit price Pearson Correlation -.047 1
Sig. (2-tailed) .633
N 107 107
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Table 10: Pearson correlation analysis for the export unit price of wine and the importers GDP
Change in
export unit price
Change in
importers GDP
Change in export unit price Pearson Correlation 1 -.054
Sig. (2-tailed) .582
N 107 107
Change in importers GDP Pearson Correlation -.054 1
Sig. (2-tailed) .582
N 107 107
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