Research

Black Economic Empowerment (BEE) is a policy that aims to empower previously disadvantaged individuals and decrease racial economic inequality in South Africa. As the program puts reformation pressure on firms, it might strongly influence firm performance. This article examines how BEE affects turnover, profits, and labour productivity of firms listed on the Johannesburg Stock Exchange (JSE). We use an extensive dataset covering a major share of listed firms between 2004 and 2019. The analysis employs fixed-effects regressions and the system GMM approach to account for endogeneity. Subsample analyses are used to account for heterogeneity in BEE scores. Overall, we find that BEE tends to have a small positive impact on firms’ turnover, a positive but not robust impact on labour productivity, and no impact on profits. Larger JSE-listed firms drive the positive effect on turnover. We conclude that BEE had a slightly positive effect on large JSE firms in the best case but also did not harm JSE firms in the worst case. To increase the benefits of BEE, we propose that the policy should be further adapted to reduce the cost of compliance and focus on areas that enhance structural change in South African companies, like skills development.

Export diversification can be a driver of economic growth. Policies to diversify exports attempt to defy an existing comparative advantage in low-value-added goods to promote transformation. Many structural, general policy, and trade-related variables have been identified as important drivers of diversification. This article reviews the literature on the determinants of export diversification and applies Bayesian Model Averaging (BMA) to empirically tackle model uncertainty stemming from many possible determinants. It assesses the relevance and impact of up to 46 drivers of export diversification for up to 47 African countries and 123 trading partners from 1995 to 2018. It finds that African countries’ structural features are especially influential in determining export diversification, a potential explanation for Africa’s more concentrated export baskets compared to other world regions. Furthermore, trade policies, like tariffs and regional integration, are critical in promoting export diversification. These findings underscore the AfCFTA’s potential to foster export diversification across African economies. A diverse set of non-trade-related policy variables also significantly affect export diversification. Factors such as institutions, education, service sector, resource rents, financial development, FDI and exchange rate stability are relevant determinants in different settings. Moreover, the analysis shows that whom you trade with is also important for diversification, and that context-specific differences, such as specific regional integration contexts or type of commodity-dependence, matter. The results suggest that the goals to diversify exports at the extensive margin for structural change and the intensive margin to tackle volatility, seem often not achievable via the same policies.

While preferential trade agreements (PTAs) cover an increasing range of policy areas, little is known about the implications of this new emphasis on interactions with other trade-related policies. We approach this gap by examining the effectiveness of bilateral aid for trade (AfT) in promoting exports for recipient countries within deep North–South PTA relations. Using a structural gravity model for bilateral panel data of 29 OECD DAC countries and 144 developing countries from 2002 to 2015, we find that the marginal effect of AfT decreases as PTA policy areas expand. Further investigation of the underlying mechanisms suggests that the observed trade-off between PTA depth and AfT effectiveness may be due to compliance with the non-tariff provisions contained in deep PTAs. We find two lines of reasoning plausible. First, compliance efforts appear to consume large fractions of AfT, reducing its availability for potentially more effective projects. Second, since we also observe heterogeneity in interactions across donors, AfT provided by high-income PTA partners could well be used to redirect exports to third countries with comparatively fewer bilateral obligations. Provided that a core focus of AfT remains on strengthening international trade relations, including between donors and recipients, donor countries should therefore carefully weigh compliance costs to developing countries against the non-trade benefits of common deep PTAs, and accurately identify financial and technical assistance needs with their PTA partners.

Substantial tariff reductions and increased usage of non-tariff measures (NTMs) have been key dynamics of global trade policy in recent decades. We use highly disaggregated data on applied most favored nation tariffs, NTMs, and trade to investigate how International Monetary Fund (IMF) conditionality as a form of external pressure to reduce tariffs contributed to this dynamic in developing countries. Our results show that structural adjustment programs (SAPs) effectively lowered tariffs without increasing the usage of NTMs. A typical three-year program containing tariff conditionality decreased tariff rates in the range of 2.0 to 3.8 percentage points in total. Furthermore, IMF programs reduced NTM initializations significantly. We also show that tariff conditionality was more effective in initiating tariff cuts for countries without previous greater globalization efforts than being a “catalyst” for ongoing liberalization efforts. 

In several African regions, economic integration has successfully reduced tariff protection by freezing the opportunity to raise applied tariffs against fellow integration partners above those promised. We examine whether these regional tariff commitments have come at the expense of adverse side-effects on the prevalence of non-tariff trade barriers. Comparing the effects of applied tariff overhangs – the difference between MFN bound tariffs and effectively applied tariffs – towards all vis-à-vis African trading partners on SPS and TBT notifications of 35 African WTO members from 2001-2017, we find no general relationship between tariff overhangs and import regulation in our preferred model setting. Larger tariff overhangs specific to intra-African trade relations, however, increase the probability of SPS measures and TBT and thereby contrast with the common assumption of the former functioning as a flexible policy valve. We see the nature of Africa’s formal trade relations as an explanation for these findings. While regional tariff commitments have not only significantly moved African countries away from multilateral commitments, they have also sharply reduced their tariff policy space within Africa, thus seemingly leaving regulatory policy as one of the few legitimate options to level the playing field with the by far closest market competitors. 

In times of heightened uncertainty surrounding US trade policy, it is increasingly vital to secure a development-friendly approach toward African countries. They are among the most vulnerable to climate change, conflicts and pandemics, yet are also gaining geo-economic significance. Given the expiry of the US Generalized System of Preferences (GSP) in 2020 and the upcoming expiry of the African Growth and Opportunity Act (AGOA) in September 2025, Sub-Saharan African (SSA) countries urge policymakers to timely reauthorise and upgrade the non-reciprocal trade programme to improve market access to the US and ensure long-term support for sustainable development across the African continent. While the AGOA Renewal and Improvement Act of 2024 was introduced to Congress with bipartisan support, the election of Donald Trump and his “America First” approach have increased doubts about a swift extension of AGOA. This policy brief examines the potential effects of the expirations of GSP and AGOA using a multi-region Computable General Equilibrium (CGE) model. By simulating the shift from duty-free to Most Favoured Nation (MFN) treatment, we find the following: All in all, aggregated effects over all countries are rather muted while some specific countries face strong losses. Whereas bilateral exports of AGOA-eligible countries to the US decline by 3.7%, their total exports fall by only 0.1%, with real GDP remaining almost unaffected. Looking more closely, specific SSA countries would face high bilateral losses: The most substantial reduction of exports to the US occurs in Lesotho (-35%), Malawi (-25%) and Kenya (-16%), while welfare decline is the highest in Lesotho and Mauritius. The most affected sectors are sugar, wearing apparel, leather, dairy products, and beverages and tobacco. The limited aggregate effects of a loss in trade preferences are mainly driven by relatively weak ties of SSA to the US and rather low US MFN tariff rates. This highlights the limited effectiveness of the AGOA preference scheme, indicating that its renewal should go hand in hand with a comprehensive modernisation of the programme. While the AGOA Renewal and Improvement Act of 2024 acknowledges this, it still falls short of modernising the programme in some key areas. To ensure long-term benefits for SSA economies, we recommend:

• A swift reauthorisation for a longer period, incorporating continuation provisions to reduce future uncertainty.

• More transparent and predictable eligibility reviews, with a possibility of partial exclusion for non-compliance, would also help mitigate uncertainty.

• Expansion of rules of origin, which is crucial for stimulating intra-continental trade and enhancing value addition within SSA.

• Widening the programme’s scope by addressing, for example, digital trade, services, non-tariff measures, regulatory cooperation and investment facilitation.