Measuring South Africa’s long term terms of trade

Higher terms of trade (the prices of the goods and services exported relative to the prices of goods and services that imported) can make a country wealthier.  South Africa’s terms of trade have increased meaningfully since 2000, and this reflected increases in a variety of commodities South Africa exports (particularly for platinum group metals, iron ore and coal), not just gold. Alternative sources of estimates of South Africa’s terms of trade paint a similar picture.

Usually, such a strong increase in terms of trade would have a big positive impact on national income, increasing fiscal revenues and supporting economic growth. But as I showed in these previous posts, South Africa’s  export volumes have failed to increase to take advantage of this income windfall over recent decades.

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