Importing and Firm Export Performance: New Evidence from South Africa

Abstract

This article uses firm-level data from company income tax and customs declarations from South Africa to analyse the complementary relationship between direct access to imported intermediate inputs and firm exports in the manufacturing industry. There are two main findings. The first is on firm heterogeneity, showing that firms that import and export consistently demonstrate premiums in terms of productivity, employment, wages and capital intensity in production compared to firms that do not trade, or only export or import. The second supports the hypothesis that importing raises exports, especially if inputs are sourced from advanced economies. JEL Classification: F14, D24, F61

Exchange rates and firm export performance in South Africa

“…Looking at the importer-exporter relationship in Table 1, we note that a stable share (67 per cent to 68 per cent) of exporters are direct importers of goods. The high share is close to the 71 per cent found by Edwards et al (2018), who restrict the sample to manufacturing producers. They also find that importer-exporter firms are larger in terms of export value, product range, and destination coverage.…”

“…This relationship highlights a tension for firms linking into global value chains. Access to imported intermediate inputs raises productivity and export performance (Edwards et al 2018), but it reduces the export volume sensitivity of these firms to exchange rate movements.…”

“…They find that firm export performance is strongly associated with firms' productivity and their use of imported intermediate imports. Similarly, Edwards et al (2016Edwards et al ( , 2018 find that almost half of the South African manufacturing firms that directly export also import intermediate inputs. These exporter-importers are larger and more productive, pay higher wages, employ more workers, and are more successful in terms of exporting a greater value and number of goods to multiple destinations.…”

“…Edwards and Lawrence (2008) use industry-level data to reveal the sensitivity of exports, particularly of non-commodity-based goods, to import tariffs on intermediate inputs. Edwards et al (2018) show how access to imported inputs enhances South African manufacturing firms' export performance, measured in terms of export value and export variety (destination-product combinations). In this paper, we provide further insight into how changes in import costs, driven through exchange rate movements, affect export performance at the firm level.…”

“…The CIT is a rich source of data including information on sales and cost of sales. However, the merging of the transaction data with the income tax data results in a substantial loss of observations due to failed mappings (see Edwards et al 2018). For this study, our interest is to be as comprehensive as possible in the coverage of manufactured good exports.…”