This paper makes use of a comparative SAM analysis to examine structural shifts in the real economy of South Africa spanning the period from the mid ’90s to the end of the 2000s. This period represents the post-sanctions period when the economy was opened to trade and re-investment took place in many sectors. The changes were significant – South Africa made a bold offer to the WTO; the SACU agreement was renegotiated; the SADC Trade Protocol was concluded; and very importantly, there was significant reform of domestic policy. One of the main drivers of these structural shifts is trade liberalisation, which although it was able to positively impact export growth and diversification, has been unable to reduce inequality or alleviate unemployment.

The paper identifies the following major shifts: the decline of the secondary sector and the rise of the tertiary sector; higher skill labour groups have benefitted whereas lower skilled groups have lost out; leakages have increased through imports, capital outflows and unproductive taxes; the traded sector has seen increasing import penetration and declining export intensity – contrary to the goals of export-led policy; the economy has become less dynamic; and expenditure multipliers have fallen in net terms.

Given these structural shifts in the South African economy, trade and industrial policy should be re-evaluated for their effectiveness. In particular, the subset of sectors targeted by industrial policy should be re-assessed.

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