Quantifying risk in the South African Customs Union

Abstract

Most of the risk literature provides evidence on the impact of individual risk events on trade from the perspective of North–North (N–N) and North–South (N–S) regional trade blocs. Given the numerous risks facing South–South (S–S) regional trade agreements (RTAs), there is a need for a framework that will identify and quantify the risk in an S–S trade bloc. Such a framework should present a more holistic approach to risk identification, assessment, and management. The analysis has to explore interdependencies and spill-over effects between events that initiate impact flows between otherwise unrelated events. The Southern African Customs Union (SACU), with a good mixture of lower- and upper-middle-income countries, was used as a case study in this paper. The more developed countries, i.e. South Africa, Botswana, and Namibia, had the least risk and the risk indices of the more developed countries in the bloc also show a downward trend over time.