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South Africa’s auto industry trade elasticity to economic performance in BRICS countries

South Africa’s automotive industry is a vital element in the country’s economy. This sector has been a strategically important sector in South Africa, and it is imperative to ensure not only the sustainability of the automotive sector in the country, but also the continued growth of the industry. This study addressed the determinants of South Africa’s automotive exports to BRICS countries. The main aim of the study is to examine South Africa’s automotive industry trade elasticity to economic performance in BRICS countries. An econometric assessment was done using different estimation techniques, namely Dynamic Panel Data General Method of Moments (GMM) on annual data from 2000 to 2016, quantile regression for the same period, and ANOVA analysis. This study used eight endogenous variables in explaining determinants of South African automotive export to BRICS countries. The results from the GMM technique suggested that only four variables out of eight variables were statistically significant, namely, automotive exports lagged once, corporate tax, research and development (R&D), and real exchange rates. Gross Domestic Product (GDP), Foreign Direct Investment (FDI), trade openness, and R&D all reduced automotive exports in South Africa. Quantile regression provided difference compared to the GMM dynamic panel data analysis. In the panel data analysis, corporate tax was positive, while in the quantile regression only Brazil’s corporate tax had a positive effect on South African automotive exports. FDI results in panel data GMM results were the same as quantile, while other variables results were not consistence with the dynamic panel data GMM results. The ANOVA results suggested that significant differences between BRICS countries impact on South Africa’s automotive exports. The findings indicate that South African automotive exports to BRICS have been proven to be elastic in four variables., namely, automotive exports lagged once, corporate tax, research and development (R&D), and real exchange rates. The South African automotive industry implemented policies such as the Motor Industry Development Programme (MIDP) and the Automotive Production and Development Programme (APDP); however, these policies failed to realise the targets set by the industry. On the policies regarding automotive exports in South Africa, it is equally important to pay attention to corporate tax in South Africa as well as in other BRICS countries. BRICS economies lack policy synchronisation, hence the adverse impact on South African automotive exports. South Africa’s BRICS counterparts are knowledge-driven economies. Developing a strong human base is required in the sector. In addition, there is a need for BRICS countries to have a free trade agreement (FTA) to enhance trade amongst member states. Having free trade could help to make BRICS economic integration more meaningful to BRICS countries and the region.

Full Name
Dr Babalwa Siswana