The Potential Impact of International Trade and Investment Sanctions on the South African Economy

Abstract

The purpose of this paper is to clarify the theory of international economic sanctions and to provide estimates of the short-run economic impact on South Africa of externally imposed reductions in the imports and capital flows into that country. Several theories of how sanctions "work" are examined, and they are shown to be not all equally plausible and not all consistent with each other. A macroeconomic picture of South Africa's "dependence" is drawn, and the economy's point of vulnerability in the short run is seen to be in its capacity to import, not in exports or capital flows. Finally, a static linear programming model of the South African economy is constructed. This model estimates that small sanctions would have small impace--i.e. if imports were reduced by less than one-fourth, GDP would be cut by only about one-half as large a percentage as imports. Larger import reductions cause ever greater damage. And if imports were cut in half, not only would GDP be seriously reduced but massive unemployment and relocation of white labor would occur.