The Influence Of Psychic Distance On Exporters To Sub-Saharan Africa

Abstract

South Africa’s economic growth rate of less than 6% per annum is not sufficient to decrease the unemployment rate. Exporting creates an opportunity to grow the economy and small and medium enterprises are seen as having the biggest opportunities in the future. South African exports to Sub-Saharan Africa are underperforming economists’ estimates because of its close proximity to South Africa and vast opportunities open to South African companies. Psychic distance is the perception of differences in business and cultural issues that impede a firm from exporting to a market. This research explores the influence of psychic distance on the low exports to Sub-Saharan African countries. It was proposed that low exports to Sub-Saharan African countries were caused by the fact that the majority of businesses in South Africa are white-owned and would therefore show an inclination to export to western countries of Europe and North America. Black firms would therefore show an inclination to trade with Sub-Saharan African countries due to a similar cultural background. Questionnaires were sent electronically to a sample of business owners and managers taken from the Bureau of Market Research and the National African Chamber of commerce. A total of 114 responses were received from different provinces of South Africa. The results confirmed that perceptions of the Sub-Saharan African market differed between black and white business managers. However, it was found that black managers perceived the Sub-Saharan African cultures to be more different to their culture as compared to white managers. This was contrary to expectation. i Data showed that although black companies export much less than their white counterparts, a larger portion of their exports go to Sub-Saharan Africa. This could not be attributed to psychic distance because their perceptions of the Sub-Saharan African market could not confirm this. In conclusion, black firms tend to export to Sub-Saharan African countries even though their perceptions of Sub-Saharan African countries are worse than that of their white counterparts. It was recommended that for South Africa to grow exports to Sub-Saharan Africa in line with the Nepad initiative, more focus should be placed to develop black exporters