An empirical analysis of challenges of implementing AfCFTA on South Africa’s trade in the SADC region: evidence using the PPML Estimation Technique

Abstract

Intra-SADC trade has not met the target that was set by the African Continental Trade Agreement (AfCFTA) of achieving 22% by the year 2022 due to a myriad of various trade-related challenges. This present study aims to compare the results of using a Poisson Maximum Likelihood Estimator (PPML) with Random Effects (RE), Fixed Effects (FE), and an Ordinary Least Squares (POLS) model on a balanced panel of select eight Southern African Development Community (SADC) members that trade with South Africa over the period 2010-2022. The paper empirically examines how South Africa’s overlapping Regional Economic Community (REC) membership affects bilateral trade. Also, the examination of how the impact of distance between South Africa and its trading partners impacts bilateral trade. The study findings are that PPML provides more robust results than other estimation techniques in estimating the gravity model for a balanced micro panel. From the PPML results, distance has a significant negative impact at a 5% level on bilateral exports from South Africa which implies that SADC countries that are relatively far in terms of distance from South Africa and landlocked tend to experience a relative fall in exports from South Africa.  However, multiple REC membership has a positive and significant impact of 1% level of significance on bilateral trade contrary to the negative relationship that was expected. The study recommends the speedy conclusion of outstanding AfCFTA issues for member states to effectively benefit from the economies that economic geography presents.

Keywords: {'name': 'AfCFTA, PPML, South Africa, SADC, Intra-Trade'}

Authors & affiliations

Ngonidzashe Chiranga
Affiliation not supplied

Teboho J. Mosikari
Affiliation not supplied

Mulatu F. Zerihun
Affiliation not supplied

Deposited references

Supplied references, not a list of publications citing this article.

Abdullah, H., Sahudin, Z., & Bahrudin, N. Z. (2022). Short Guides to Static Panel Data Regression Model Estimator. Asian Journal of Accounting and Finance, 4(4), 1-6.

Adedeji, G. D., & Ahuru, R. R. (2016). Foreign direct investment and economic growth in developing countries: panel estimation for sub-Saharan African countries. International Journal of Development and Management Review, 11(1), 39-50.

DOI: 10.1080/13504851.2019.1682112

DOI: 10.1257/000282803321455214

DOI: 10.1080/02589001.2020.1775184

Babu, J. O., Abala, D., & Mbithi, M. (2022). Effect of Transport Infrastructure and Institutions on Inter-Regional Trade in Sub-Saharan Africa. African Journal of Economic Review, 10(2), 152-165.

DOI: 10.4236/tel.2022.121009

DOI: 10.4236/tel.2022.121009

DOI: 10.1080/02681102.2013.832128

DOI: 10.1007/s11135-018-0802-x

Brons, L. (2017). On Free Trade Ideology. Academia.13(4),1-9.

DOI: 10.1080/17421770902834327

DOI: 10.22437/ppd.v9i5.13937

DOI: 10.1002/9781119504641

Eric, E., Sama, M., & Cletus, D. (2020). The Determinants of Bilateral Trade within the CEMAC Bloc: Evidence Using the Augmented Gravity Model and the PPML Estimation Technique. Journal of Economics and Sustainable Development, 2222-1700.

DOI: 10.4102/jef.v15i1.779

DOI: 10.2991/jat.k.211122.001

DOI: 10.2139/ssrn.3799611

DOI: 10.1007/s11079-018-9519-7

Gondwe, C. H. (1985). Dependency, economic integration and development in developing areas: the cases of EAC, ECOWAS and SADCC.

Greene, W. H. (2003). Econometric analysis: Pearson Education India.

DOI: 10.1016/0014-2921(91)90153-A

DOI: 10.25295/fsecon.915001

Hosny, A. S. (2013). Theories of economic integration: A survey of the economic and political literature. International Journal of economy, management and social sciences, 2(5), 133-155.

Ilham, R. N., Sinta, I., & Sinurat, M. (2022). The Effect Of Technical Analysis On Cryptocurrency Investment Returns With The 5 (Five) Highest Market Capitalizations In Indonesia. Jurnal Ekonomi, 11(02), 1022-1035.

Inotai, A. (1991). Regional integration among developing countries, revisited (Vol. 643): World Bank Publications.

KADOZI, E., & Raissa, M. K. Trade Openness and Economic Growth in Rwanda.

DOI: 10.1080/23322039.2018.1482662

DOI: 10.5296/rae.v13i1.18468

DOI: 10.35935/tax/24.4233

DOI: 10.1111/obes.12283

DOI: 10.1111/ecoj.12286

DOI: 10.2139/ssrn.3469430

Marinov, E. A third dimension in assessing economic integration? OEFSE,1-11.

Marinov, E. (2014). Economic integration theories and the developing countries.

DOI: 10.48165/sajssh.2020.1306

DOI: 10.1016/j.econmod.2020.12.011

Mussa, B. M., Ramakrishna, G., & ECSU, A. A. (2018). Impact of Trade Costs on Export Performance of Ethiopia–A PPML Panel Gravity Equation Approach. Ethiopian Economics and Ethiopian Strategy S (ESSP) of, 162.

DOI: 10.1596/1813-9450-4790

DOI: 10.1017/S0021855320000194

DOI: 10.4236/ojps.2022.123019

Olayiwola, W. (2020). Governing the Interface between the African Continental Free Trade Area and Regional Economic Communities Free Trade Areas: Issues, Opportunities and Challenges. Opportunities and Challenges.

DOI: 10.1007/s10290-021-00421-6

DOI: 10.1016/j.heliyon.2021.e06996

DOI: 10.1080/1331677X.2018.1561320

DOI: 10.1111/1467-8268.12359

Parshotam, A. (2018). Can the African Continental Free Trade Area offer a new beginning for trade in Africa?

Pasara, M. T., & Dunga, S. H. (2020a). Trade Creation And Diversion Effects In The Tripartite Region: A Gravity Approach. International Journal Of Economics And Finance, 12(2).

Pasara, M. T., & Dunga, S. H. (2020b). Who wins and who loses under the AfCFTA? A simulation analysis across ECOWAS countries. International Journal Of Economics And Finance, 12(2).

Raihan, S. (2012). SAFTA and the South Asian countries: Quantitative assessments of potential implications.

Rueda-Junquera, F. (2006). European Integration Model: Lessons for the Central American Common Market. Jean Monnet/Robert Schuman Paper Series Vol. 6 No. 4 February 2006.

DOI: 10.23941/ejpe.v5i2.105

DOI: 10.1002/bsd2.157

DOI: 10.1162/rest.88.4.641

DOI: 10.1016/j.retrec.2016.08.006

DOI: 10.1111/twec.13365

DOI: 10.31920/2050-4306/2022/11n2a5

Wanyonyi, R., & Chemnyongoi, H. J. (2020). Estimating the economic effect of the African Continental Free Trade Area on COMESA region. COMESA. Retrieved on April, 10, 2022.

Yabu, B. (2014). Intra-SADC Trade in Goods and Services (Including Assessing the Condition for the Dynamism of Intra-regional Trade). Report for the Bank of Tanzania.

DOI: 10.1016/j.econlet.2012.08.032

Zerihun, M. F. (2014). Essays on the proposed monetary integration in the Southern African development community. University of Pretoria.