Sources of output growth in the countries of the Common Monetary Area and provinces of South Africa

Abstract

This paper aims to decompose the sources of growth in economies in the Southern African region’s Common Monetary Area and in the provinces of South Africa. Decomposition results for the Common Monetary Area reveal that the growth of aggregate and sectoral gross domestic product is driven by input, without increasing efficiency in production or benefiting from technological progress, which is unsustainable. Negative technical change implies that countries are unable to reap the benefits from shifts in technology. Countries experiencing input-driven growth in the secondary sector, such as Namibia and Eswatini, have the potential to achieve growth through efficiency improvements and by adopting technology. Output growth in the provinces of South Africa is negatively contributed by changes in technical efficiency, which suggests that policy makers should raise growth further by emphasizing improvements in efficiency in these provinces.