A sci­en­tific so­lu­tion to op­ti­mise trade de­ci­sion-mak­ing

A sci­en­tific model can now help govern­ment and the pri­vate sec­tor iden­tify po­ten­tial ex­port op­por­tu­ni­ties in dif­fer­ent mar­kets across the world, in a mat­ter of min­utes.

Finweek English Edition - - THE WEEK - Ed­i­to­rial@fin­week.co.za

po­ten­tial ex­porters can now iden­tify com­mer­cial op­por­tu­ni­ties us­ing a sci­en­tific model de­vel­oped by the Trade and Devel­op­ment (TRADE) re­search en­tity at North-West Univer­sity’s (NWU’s) Potchef­stroom cam­pus. Used by both govern­ment and the pri­vate sec­tor, the De­ci­sion Sup­port Model (DSM) was first de­vel­oped by Prof. Ludo Cuyvers of the Univer­sity of An­twerp for Bel­gium. Over the past 10 years, the model was adapted for the South African econ­omy, in­clud­ing prov­inces, sec­tors and in­di­vid­ual ex­porters, ex­plains Prof. Wilma Viviers, di­rec­tor of TRADE and World Trade Or­gan­i­sa­tion (WTO) chair.

It is a “gold mine” of pro­vid­ing re­sults and in­sights on is­sues such as ex­port pro­mo­tion, devel­op­ment, in­vest­ment and trade fa­cil­i­ta­tion, Viviers says. She ex­plains that the model is set up in a way that al­lows ques­tions to be asked, such as: “Where can I ex­port apri­cots to? Or bot­tled min­eral wa­ter?”

The an­swers are based on a va­ri­ety of “key, well­re­searched pieces of in­for­ma­tion” that in­di­cate where re­al­is­tic ex­port po­ten­tial for cer­tain prod­ucts ex­ists. The ac­tual out­comes of the model are pro­vided in a very user-friendly soft­ware tool. Re­search that would take months to com­plete can now be ex­tracted from the re­sults in a few min­utes, she says.

The model aims to link the client base to rel­e­vant ex­port op­por­tu­ni­ties, ex­plains Viviers. For ex­am­ple, if you want to ex­port tyres, you will plug in the prod­uct code or de­scrip­tion for tyres in the tool. The re­sults will in­di­cate the rel­e­vant mar­kets for tyres, as well as other coun­try com­peti­tors. “Dis­cov­er­ing un­usual, or not so ob­vi­ous, sus­pects are what make the re­sults in­ter­est­ing,” she adds.

The ap­proach can also in­di­cate why a spe­cific prod­uct-mar­ket com­bi­na­tion is not suit­able. This will al­low de­ci­sion­mak­ers to choose al­ter­na­tive, lower risk prod­uct-mar­ket com­bi­na­tions, says Viviers. Or if they still want to pur­sue a par­tic­u­lar prod­uct-mar­ket com­bi­na­tion, it in­forms de­ci­sion-mak­ers of what chal­lenges to pre­pare for. Some com­pa­nies think they should ex­port to cer­tain coun­tries purely given the eco­nomic size and growth rate of cer­tain mar­kets. “It’s not only size that counts,” says Viviers. The DSM ap­proach uses spe­cific cri­te­ria to mea­sure the vi­a­bil­ity of ex­port­ing a prod­uct into a spec­i­fied tar­get mar­ket from a given “home” coun­try.

Some of the in­for­ma­tion that the model con­sid­ers in­cludes pop­u­la­tion size, GDP growth in the short term and long term, po­lit­i­cal and com­mer­cial risk, lo­gis­ti­cal costs and trade bar­ri­ers, among other fac­tors.

It also shows re­sults for prod­ucts that aren’t nec­es­sar­ily cur­rently pro­duced by a “home” coun­try. “Many ap­proaches or mod­els only look at ex­ist­ing ex­ports,” says Viviers. View­ing re­sults, pol­i­cy­mak­ers and busi­nesses can see where and what the de­mand is and di­ver­sify their ex­ports ac­cord­ingly. There are also plans to in­cor­po­rate in­ter­na­tion­ally traded ser­vices, as op­posed to only prod­ucts, as ser­vices make up around 70% of SA’s GDP, says Viviers. “Ex­ports are so cru­cial for SA’s econ­omy, for its re­cov­ery and job cre­ation,” she adds.

How it started

While train­ing ex­porters as part of the Small En­ter­prise Devel­op­ment Agency’s (Seda) ex­porters’ ori­en­ta­tion pro­gramme in 2007, Viviers re­alised that South Africa’s na­tional ex­port strat­egy “ex­pressed a dire need” for a sci­en­tific way to iden­tify ex­port op­por­tu­ni­ties. At the time she met Cuyvers and de­cided to ap­ply the DSM to South Africa, she tells fin­week.

Due to trade re­stric­tions in some tar­get mar­kets lim­it­ing mar­ket ac­cess for some sup­ply­ing coun­tries, the model is use­ful in point­ing out the “low-hang­ing fruit” for po­ten­tial ex­porters to cap­i­talise on, ex­plains Viviers.

De­vel­op­ing the ap­proach and mod­el­ling it to its cur­rent state was a lengthy process, tak­ing seven years and pro­duc­ing seven mas­ter’s de­grees and seven PhDs for the par­tic­i­pants. “And it’s still a work in process as new as­pects keep com­ing to the fore,” she adds.

As a re­sult of the de­mand to ap­ply the model for in­dus­try and pol­i­cy­mak­ing, a spin-off com­pany, TRADE Re­search Ad­vi­sory, has been es­tab­lished by NWU in col­lab­o­ra­tion with a pri­vate sec­tor part­ner to as­sist clients, says Viviers. These clients in­clude govern­ment de­part­ments, specif­i­cally the de­part­ment of trade and in­dus­try and the de­part­ment of agri­cul­ture, sev­eral prov­inces and ex­porters’ or­gan­i­sa­tions. Pri­vate sec­tor clients in­clude mem­bers of the steel, agri­cul­ture and man­u­fac­tur­ing in­dus­tries.

The ap­proach has also been used to iden­tify ex­port op­por­tu­ni­ties for other coun­tries such as Bel­gium, Thai­land and the Nether­lands. Botswana has re­cently com­mis­sioned TRADE to con­struct a model for the coun­try. TRADE is look­ing to ap­ply the ap­proach to more coun­tries in the SADC re­gion, es­pe­cially with the po­ten­tial of es­tab­lish­ing pos­si­ble re­gional value chains to make the South­ern African re­gion more com­pet­i­tive, adds Viviers.

The ap­proach uses spe­cific cri­te­ria to mea­sure the vi­a­bil­ity of ex­port­ing a prod­uct into a spec­i­fied tar­get mar­ket from a given “home” coun­try.

Prof. Wilma Viviers Di­rec­tor of TRADE at North-West Univer­sity and chair of WTO

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