Research Section-the dti Decision Support Model 14 March 2019 Global Export Workshop GGDA:Sandton

Content 1. Introduction 2. Challenges facing international Trade 3. Insight about the DSM Trade tool 4. Methodologies in developing DSM Trade Tool 5. Filtering process for DSM Trade Tool 6. Using examples from DSM tool to explore export opportunities in SADC by products and markets 7. Closure

Introduction Most export strategies revolve around the issues of: Which regions/countries are worth pursuing and spending money on? Which export opportunities should we focus our attention on, given the constraints of time, money, manpower and/or expertise? As a results the dti found a scientific solution called Decision support model (DSM) ( NWU Potchefstroom ) The original DSM was developed in Belgium in 1995 by Prof Ludo Cuyvers and colleagues and since 2007 the model has been refined and updated for South Africa’s circumstances. The model identifies export opportunities and new opportunities

Challenges when thinking about the market Nature of international trade expose to “overload” of information. International country risk: commercial and political Market size and growth trends Market concentration. Market access barriers: Tariffs and non-tariff barriers Transport logistics costs and time, etc

DSM methodology in a nutshell The DSM uses a sequential filtering process (4 filters) that eliminates less promising export opportunities, and show the most potential

DSM methodology- the filtering process Filter 1.1: Operational and commercial risk. Overall country risk scores (Sovereign rating) Commercial payment risk (Ability of companies to pay or default) Filter 1.2: Macro-economic size and growth. GDP (Economic size) GDP/Capita (Welfare distribution) GDP growth (Economic Growth) Filter 2: Import size and growth. Imports as proxy for market size Import growth in the short and long term Filter 3.1: Import market concentration. (Herfindahl-Hirshmann Index) Filter 3.2: Import market accessibility. Trade cost as a proxy Tariffs, shipping cost & time, domestic cost to import & time Filter 4: Export opportunities in terms of Comparative Advantage Trade Advantage

SA total Trade with SADC

Example: SA Trade with SADC SA exports to SADC have been increasing and reached R135 billion in 2016 from R 80 billion in 2012. SA imports from SADC are lower compared to exports in 2016 and reported a value of R106 billion. Therefore the we have a positive trade balance with SADC of R29 billion in 2016.

Export opportunities in SADC countries The export opportunities in the SADC countries are estimated at R100 bn. Angola, Tanzania and Mozambique are leading countries in SADC which show high export opportunities. Botswana, Swaziland and Lesotho are countries that reveal least of export opportunities in SADC. Country No Total`Untapped` potential (Bn)Currency: [ZAR] Total 62410 100 Angola 4591 27 Tanzania 4517 15 Mozambique 4530 12 DRC 4267 9 Mauritius 4532 8 Zambia 4515 7 Madagascar 4257 5 Zimbabwe 4540 4,6 Malawi 4191 3, Namibia 4740 2,9 Seychelles 3865 2,7 Botswana 4763 1, Swaziland 4601 0.8 Lesotho 4501 0.6

Focusing on exporting to a SADC Market (e.g. Angola)

Top 5 exports opportunities by products in Angola Dredgers (some boat) top the list of export opportunities in Angola, with the amount valued at R1 bn in 2016. South Africa’s exports of this product to Angola were valued at R2 mn in 2016. Parts suitable for use with boring /sinking machinery is the second leading product in terms of demand in Angola, valued at R551 mn in 2016. South Africa exported R13 mn of this product to Angola in 2016.

Top exporters of Dredgers into Angola South Korea is the top supplier of Dredgers into Angolan market with export share of 92%, followed by Congo 5% per cent and Singapore 3.5%. South Africa is small supplier of this product, its export share is 0.033% per cent into the Angolan market. For South Africa to increase its export share it requires to use the Offensive market strategy, Whereby it promotes awareness through communication with exporters and commercial diplomats, selected exporters participating in general trade missions and trade fairs in the US , and further facilitates financial support that encourages exports into the market.

Top export opportunities by products in SADC

Top 5 export opportunities by products in SADC Medicaments consisting of mixed/unmixed products for therapeutic/prophylactic top the list of export opportunities by products in SADC valued at R2 bn. South Africa exported R678 mn of this product in 2016. Cobalt oxides & hydroxides; commercial cobalt oxides is the second products that shows high demand by SADC. South Africa only exported R14 mn into SADC in 2016. Floating/submersible drilling/ platforms is the third largest products demanded by SADC showing export opportunities valued at R1.1 bn. South Africa is a small exporter of this product into SADC & its value was R21 mn in 2016.

Top export opportunities of Medicaments by SADC countries In SADC, about 22% export opportunities of Medicaments are in Tanzania valued at R529 million. South Africa only exported about R14 thousand in 2016. Mozambique account for approximately 16% of the total export opportunities in SADC for Medicaments valued at R388 mn and South Africa only supplied R4 thousand of this product into Mozambique in 2016. DRC is ranked third in SADC countries with high demand of Medicaments valued R378 mn.

Top suppliers of medicaments in Tanzania In 2016, India was the top supplier of medicaments in Tanzania with an export share of 54%, second was Kenya (14%), then France (11.6%). South Africa is a small supplier of this product into Tanzania, its export share is 0.0004% per cent. Tanzania is not a highly concentrated market for supply of medicaments. For South Africa to increase its export share it requires to use the offensive market strategy to gain more export shares also taking advantage that Tanzania is in SADC region.

Sibusiso Bhila Sbhila@thedti.gov.za 012 394 5847 or THANK YOU Sibusiso Bhila Sbhila@thedti.gov.za 012 394 5847 or Zukiswa Gilimani ZGilimani@thedti.gov.za 012 394 1303