South Africa has a peculiar industrial structure given its factor endowments:
production is capital intensive in sectors and concentrated in capital intensive sectors despite an abundance of unskilled labour. Part of the reason for this phenomenon lies in the development process of South African industry: it grew around the mining sector and its core sectors remain close to the minerals endowment up until today.
A possible explanation for this path dependent development is the existence of forward and backward linkages between sectors that drive
industrial development. We use an SVAR approach with realistic identification assumptions from input-output relations 'following a paper by
Abeysinghe and Forbes (2005)' to estimate the effect of linkages between sectors on sectoral growth performance.