South African agriculture and world market changes

Abstract

South Africa's trading relationships have been dominated by changes in the gold price over the last decade and the opening up of the economy since the mid-1990s. With the increasing liberalisation of the economy such changes in trade relations have substantial implications. This paper reports results from a CGE model that is used to simulate the effects of reduction in the world price of gold and increases in world prices for agricultural commodities. The result demonstrate the extent to which the agricultural sector is integrated into the economy of South Africa and thus susceptible to fluctuations in the exchange rate and changes in trade policy. In particular the results quantify the implications for income distribution deriving from changes in trade relations and hence indicate the extent to which reductions in measured inequality may be influenced by trade policies.