Throughout its development, trade has been regarded as a vital component of economic
growth and development. Both theoretical and empirical studies consider international trade
to be a major determinant of the growth of any economy. International trade in services has
been rising ever since trade in services was incorporated into international trade agreements
after the Uruguay Round of trade negotiations in 1994. This, coupled with the everimproving
state of technological innovation, has made services trade an important aspect of
the development agenda of most countries. However, just like any other endeavour,
offshoring of services has both opportunities as well as threats.
The study examines two research questions relating to the growth-enhancing impact of South
Africa’s exports and imports of services. Firstly, the study examines the contribution of
services exports to economic growth in South Africa. Secondly, the study determines the
impact that imported services has had on South Africa’s economic growth.
In spite of the global rise of trade in services, South Africa’s export of services accounts for
only 14 percent of total exports, while the import of services constitutes 20 percent of total
imports. Using quarterly time series data for the period 1980 to 2012, the study adopts the
ordinary least squares method to estimate the contribution of both exports and imports to
output expansion within an aggregation production function setup. The empirical results
show that the export of services influences influence South Africa’s economic growth
significantly in both the long-run and the short-run. While the relationship is positive in the
long-run, it is negative in the short-run. The results also indicate that the import of services
significantly and positively affects real output growth in both the long-run and the short-run.