Annual Forum Papers

Unlocking Value in the 'New Economy': The Implications of B2B E-Commerce for South African Apparel and Automotive Component Firms

  • Year: 2001
  • Organisation: University of Natal, Durban
  • Publication Author(s): Sagren Moodley;Mike Morris;Justin Barnes

The 'new economy' remains an ambiguous concept which means different things to different people (see, for example, Cohen et al. 2000; OECD, 2000a, b; Shapiro and Varian, 1999). We argue that the notion of a 'new economy' is closely tied to the economic transformations which are powered by the development and diffusion of information and communication technologies (ICTs), the rise of knowledge-based productivity and competitiveness, and the increasing dominance of global value chains incorporating global networks of capital, production and trade. The major factors spearheading the new information economy are modern microelectronics-based information technology, deregulation, privatisation, and liberalisation of trade and investment (Dicken, 1998; Gereffi, 2001). The notion of the new economy is thus firmly anchored in the new ideological environment that resulted from the collapse of statism, the crisis of welfarism and the contradictions of the developmental state (Held et al., 1999). The new economy originated mainly in the United States, but is spreading rapidly into Europe, Japan, Asia Pacific and in selected developing countries (Schiller, 1999).

The key point that needs to be emphasised is that organisational learning, knowledge management, digital networking and information processing are critical elements for firms operating in the new economy (Tuomi, 1999). According to Castells (2000: 77), the productivity and competitiveness of firms 'fundamentally depend on their capacity to generate, process, and apply efficiently knowledge-based information'. Ecommerce and the global networked business model are the archetypical expressions of the new economy (Castells, 2000; Hartman, Sifonis and Kador, 2000). It is important to remember, however, that the growth and development of the new economy has been highly uneven both within and between countries. The networking logic is based on asymmetrical interdependency, and is exclusionary locking out those individuals, groups, regions, sectors and countries lacking the required knowledge intensive skills and capacities. Moreover, the new economy is not about soft landings and smooth growth, rather it is about a structural shift in the global economy heralding transformation, risk and disruption for developing economies.

In South Africa, the critical importance of e-commerce and online electronic linkages in shaping the performance of domestic enterprises in the global, networked economy has recently come under the policymaking spotlight (Department of Communication, 2000; Department of Trade and Industry, 2001; Kaplan, 2000). This is not surprising since, in the new economy, ICTs play an increasingly important role in innovation, profit margins, output performance, value-added, employment creation and investment (Baily and Lawrence, 2001; ILO, 2001; OECD, 2000a, b). The South African development challenge is indeed a formidable one: high structural unemployment (39.5%); a sluggish economic growth rate (an average of only 2.1% annually between 1996-99; well below the population growth rate); large scale brain drain with the flight of knowledge intensive skills for Australasia, North America and Europe; high levels of poverty in the black population (53% of individuals fall below the poverty line of R301.70 per adult equivalent);2 and high inequality (a Gini coefficient of 0.593) (Harsch, 2001;; Woolard and Leibbrandt, 1999; World Bank, 2000).3 The challenge is one of how to promote and sustain development in such an environment. The DTI (2001), for example, argues that South Africa needs to follow an ICT-enabled, knowledge-based industrial development trajectory in order to achieve steady high rates of economic growth and structural change in the domestic economic system.