Trade and Poverty in South Africa: Lessons and Policy Recommendations

South Africa engaged in extensive tariff liberalisation during the 1990s with the aim of improving growth, employment and national welfare. However, the benefits of trade reform do not accrue automatically and equally to all households or communities and in some cases poverty and unemployment may rise. This paper reviews the research conducted for the South Africa Trade and Poverty Research Project under the Southern Africa Labour Development Unit. We find that trade liberalisation in South Africa is an important source of welfare gain for the economy as a whole and has contributed towards productivity gains at the enterprise level and lower costs of living for poor households. However, the effects are not uniform across households and industries: poor households are both winners and losers in the process. This makes it difficult to measure the net impact of liberalisation on the poor. While we argue that the net effect of liberalisation has been positive, tariff liberalisation alone is not sufficient to reduce unemployment and poverty especially amongst the unskilled and rural poor.