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hat South Africa is relatively labour abundant compared to its trading partners, hence should be a net exporter of relatively labour intensive goods, empirical results failed to support this claim. Using South Africa’s trade data for 1980, 1990 and 2000, the factor content and commodity composition approaches have shown that South Africa is relatively capital abundant compared to its trading partners. These approaches even show a more surprising result as they revealed that South Africa is capital abundant relative to developed nations a result which does not conform to the HOV theory. Other than the over simplification of the HOV theory, empirical results may have concluded against the HOV theory mainly because South Africa’s labour is relatively more expensive compared to its trading partners. Due to high labour costs South Africa might be failing to enjoy the comparative advantages accruing from its abundant factor. An analysis of the capital-labour ratio and the skilled-unskilled ratio for the three periods under reveal showed that South Africa is increasing its use of capital and skilled factors. The increased use of these factors has been linked to trade liberalisation and increased trade, however one cannot conclude that trade liberalisation has induced a structural change in production towards capital intensive sectors as the country has always been capital intensive during the pre-apartheid era (with no trade liberalisation) and after apartheid with trade liberalisation. One might conclude that trade liberalisation and increased trade might have led to increased use of capital in most sectors rather than induced a structural change. Trade liberalisation might have actually contributed to the high labour costs in South Africa, as theory suggests that in the course of globalization, high-wage countries experience rising unemployment, especially of the lower-qualified.

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