Section 1 examines South Africa's comparative industrial performance over approximately the last two decades – manufacturing value added (MVA), manufactured exports in aggregate and exports of dynamic manufactured products, and industrial structure. Two “equity dimensions” of this performance that feature strongly in government's objectives for manufacturing are then outlined – namely manufacturing employment and remuneration and the geographical spread of manufacturing.
Section 2 examines the policies effected by the dti to promote the development of industry. These include the policies and supports that are available to all firms and the supports that are for selected sectors, namely autos and auto components and clothing and textiles.
Section 3 advances some broad proposals that could enhance the institutional and organisational capacity to support industrial and business growth and development.
The small and medium enterprise (SME) sector in South Africa has been the focus of attention since the first democratic elections in 1994. Not only does the sector offer the opportunity to enhance entrepreneurship amongst previously disadvantaged communities in South Africa, but it is also seen as one that has the ability to absorb relatively more labour per unit of output than large scale enterprises. One possible reason for the relatively higher labour absorption of the SME sector is that they pay relatively lower wages per worker.
In order to investigate whether this is indeed the case and whether this has resulted in relatively better performance by the SME sector in the manufacturing industry, we present data that offer a breakdown of key economic variables (value added, employment, wage bill, etc.) in the manufacturing industry by four size groups of enterprises: small (employing 1-19 workers); medium (employing 20-49 workers); large (employing 50-199 workers); and very large (employing more than 200 workers).
The data are presented for four points in time, spread over the period 1971-1996. Although the results are not as accurate as they might have been if we had time series of annual data, the analysis of the changes over the discrete time intervals gives us some idea of the economic performance of the different size groups of firms.
We start with a discussion of the data set in Section 1. Section 2 gives the broad descriptive picture of the role of SMEs in the industrial structure of South Africa and its changes over time. Finally, in Section 3 we turn to an analysis of the wage-employment trends in the different size groups of firms, based on the decomposition model developed by Mazumdar (2000), which has been used in an earlier paper for the South African manufacturing sector as a whole (Mazumdar and van Seventer 2002).
Section 1: Data
While a previous analysis of real wage decomposition for South Africa made use of an extensive industry database consisting of 30-year trends on an annual basis covering about 46 industries in the South African economy, this database is not endowed by a size class distinction. For our purposes here, we have to settle for less perfect data, recently made available in an unpublished format by Ntsika (1999). Although Ntsika has tried to cover all sectors in an attempt to bring size class differences in the South African economy to the surface, we limit our analysis to the manufacturing industry. The data shown in Table 1 are, according to Ntsika (1999), drawn from various issues of the Stats South Africa Statistical Yearbook. This cannot be correct as the last Stats South Africa Yearbook was published in 1995, while the more recent South African Statistics 2000 publication - which resembles the Statistical Yearbooks very closely - does not offer size class information. More likely, the information shown in the next table is drawn directly from the manufacturing census publications for the relevant years, which suggests that several other manufacturing census, such as the one for 1985, were not employed.
It should also be noted that the data shown in Table 1 are reported in 1995 constant prices, while the original manufacturing census is only reported in current prices. This means that an implicit deflator must have been employed; which one, however, is not clear. The other issue to note is that, probably as a result of employing a sub-industry specific deflator, the data set is no longer consistent. This can be attested in the last five rows of the table, where we sum the individual entries of each sub-industry for each size class and subtract the manufacturing totals shown at the top of the table. In the last row, it can be seen that even for the sum of all size classes, the sub-industries do not sum to total manufacturing.
Since we do not know what deflator Ntsika has employed, we use the TIPS South African Standardised Industry Database (see www.tips.org.za) to construct a deflator for the relevant years and relevant sub-industries in order to arrive at current values. Since it is unlikely that our deflator is the same as the one used by Ntsika, value added and wages and salaries at current prices also turned out to be inconsistent. We enforce consistency with the South African Standardised Industry Database by employing the biproportionality method (see Miller and Blair, 1985: 276-294) to a matrix consisting of size class dimensions per sub-industry for each year in two rounds.
Starting with the variables in constant 1995 prices, we let the sub-industry totals add up to the relevant counterparts of the South African Standardised Industry Database, while maintaining as much as possible Ntsika's proportions across sub-industries and across size classes. We then apply the South African Standardised Industry Database deflators to reconstruct values at current prices, followed by another round of the biproportionality method. The end result is a set of value added and wages and salaries data points for the four selected years in current and constant prices (see Table 1).
The paper first outlines the history of industrial and trade policy in the industry. It highlights the significance of the transition from import-substitution policies to export promotion policies. It then provides an analytic exposition of the welfare costs and benefits of the current export complementation programme. We find that:
Developments in the automotive industry have received considerable positive publicity over the last few years. Firstly, and most importantly, this is a consequence of rapid export expansion, initially of components, but latterly also of vehicles. Recently, for example, Toyota announced a R3.5 billion investment programme partly to provide for the export of Corollas to Australia. In April, Ford announced that they had invested R1 billion in their Eastern Cape engine plant and would be massively expanding production as the sole world supplier of the 1.3 litre RoCam engine.
A second positive development is that the automotive sector has been the recipient of considerable foreign investment including substantial fixed investment in assembly plants and component production. This has been at a time of weak market demand, falling import duties and the abolition of local content requirements. Thirdly, productivity has improved rapidly and there is substantial evidence of improvement in a range of benchmarks such as quality and operational shopfloor efficiency (Barnes and Kaplinsky, 2001). In June, for instance, the Pretoria BMW plant received the highest quality rating of any plant in the BMW group. Fourthly, employment has remained relatively stable under difficult circumstances. Relative to the rest of the manufacturing sector, the automotive industry's share of sales, value added and investment have all increased over the period 1993-2001. On the whole it appears that the industry has weathered import liberalisation rather well.
The above developments have been strongly influenced by the Motor Industry Development Programme (MIDP). As a result, the MIDP is frequently cited as a successful example of trade and industrial policy and even as an example for other sectors to follow. But rapid export growth does not, in itself, signify success as exports have been strongly supported by sector specific policy measures. The objective of this paper is to probe these developments in greater depth by examining the process of international integration under the MIDP in some detail, focusing on the export experience and its effects at the sub-sector and firm level. The paper also attempts to draw some conclusions as to the broader implications for trade and industrial policy.
The government's Integrated Manufacturing Strategy identifies competitiveness as its primary focus, and value-matrices as the framework within which to assess manufacturing performance. This paper addresses these issues through two main components. The first is a review of interpretations of competitiveness and its determinants. The second is an assessment of South African manufacturing performance in a comparative context. This makes reference to recent studies of manufacturing sub-sectors, and draws comparisons with the performance of other developing countries. Drawing on the analysis, implications are discussed for the government's industrial policy framework and the use of a value matrix methodology.
The Government of South Africa apparently is clear about its goals for the reform of public enterprises. In his 2001 Budget Speech (RSA, 2001a, p.1), the Minister of Public Enterprises explains ?restructuring? as the generic term taken to represent the set of strategies employed by the state to ensure that public enterprises in South Africa are efficient, effective, and powerful engines of socio-economic development.Restructuring aims to maximize the contribution that these state assets can make to de- velopment through the integration of public, private and social capital and expertise.
The post-apartheid government of South Africa inherited over 300 state- owned enterprises [SOEs], with four of the firms accounting for 86 percent of aggregate turnover, 94 percent of total income, 77 percent of all employment, and 91 percent of the total assets of these enterprises. These key enterprises, as they are collectively described in the Government's Policy Framework Paper, are in telecommunications (Telkom), energy (Eskom), transportation (Transnet), and defense (Denel). None of these firms are slated for outright privatization in the near future. The debate is joined around the wisdom of the Government?s model of reform, its so called matrix of options.
At the end of the 1960s, after a half century of rapid industrialisation, South Africa had a relatively advanced and diversified manufacturing sector. By the standards of today's advanced industrial countries, which feature in Gerschenkron's (1952) seminal analysis, South Africa was a very late industrialiser, but it was a very much earlier industrialiser than those East Asian countries which have been the stars of the manufacturing growth firmament since the 1960s.
Since the early 1970s, however, South Africa's manufacturing growth performance has deteriorated greatly, and has been especially poor since the early 1980s. This is the central fact which any account of South Afric an manufacturing in the period 1970-2000 must seek to explain.
An account of how South Africa industrialised in the decades before 1970 is necessary for understanding subsequent developments, and the forces which dislodged South Africa from its earlier, robust growth trajectory. Section 2 thus provides a short description of the main features of South African industrial development from the eve of the First World War through to the beginning of the 1970s. Section 3 deals with developments during the 1970s, a decade notable for the great gold-led commodity price boom which began in 1972; and Section 4 with the period from the early 1980s through to the late 1990s, during which manufacturing output stagnated and employment declined. In the light of the discussion in earlier sections, Section 5 considers some further perspectives on the problems of South African manufacturing over the past thirty years, and their implications for the future sectoral growth path of the economy.
In most industrialised economies, service sectors do not only show high growth rates of output and employment : they also go through dramatic changes with respect to use of technology, innovation, and regulatory frameworks. Service sector performance becomes more and more important for the competitiveness of national economies. However, not all services grow at the same pace, and the growth of the sector as a whole is accompanied by changes in its structural configuration. These changes are due to driving forces which affect some sectors more than others. In recent years the most influential driving forces have been the following:
This paper will illustrate the dynamics of service sectors in Europe with special emphasis on Germany. In the first part, some statistical evidence about service sector dynamics will be presented. In the second part, the impact of three of
the main driving forces1, a new division of labour between sectors, introduction of information technology in services, and regulation on service sector development will be discussed. The third part will focus on the process of deregulation and re-regulation of the German telecommunication sector as an example of service market regulation in the case of transition from monopoly to competition. Finally, some conclusions will be drawn with respect to service policies and regulation.
This paper examines the gender dimensions of the growth in informal and flexible work in South Africa and the government's policy response to this. The paper outlines the growth in informal and flexible work practices, and as illustrative examples, analyses how trade and industrial policies and labour market policies are impacting on the growth informal and flexible work. It is argued that the South African government's trade and industrial policies are shifting the economy onto a path of capital intensification. Allied to this, firms are undergoing a process of extensive restructuring. These developments are further promoting the growth of flexibilization and informalization, and thereby disadvantaging women. The paper demonstrates that whilst government offers a vast package of support measures to large business, its policy is largely irrelevant to the survivalist segment of small business, where most women in the informal economy are to be found. The picture for labour policy is more diverse. Aspects of the labour legislation are promoting the growth of a dual labour market, whilst there seems to be some tightening up of practices aimed at by-passing aspects of the protection provided to workers.
A major policy issue for many developing countries is to foster further integration into the world economy. This note discusses the role competition policy can play in the context of efforts to promote the restructuring the economy, focusing in particular on the relationship with industrial and trade policy and on the potential role of international agreements and cooperation (both multilateral and regional).
The paper is structured as follows. Section I defines terms and discusses the relationship between trade, competition and industrial policies. Section II provides an overview of the “basics” of competition policy, drawing some implications for “best practice” from cross - country experience. Section III discusses the role a competition authority can play in the process of economic transformation, emphasizing its potential as an instrument to promote transparency and assist policymakers and civil society in assessing the effects of government policy. Section IV discusses one particularly important dimension of the interface between trade and competition policy¾ensuring that the competitive effects of instruments of contingent protection of the type allowed by the WTO are considered by policymakers. Section V briefly reviews options for international cooperation in the area of competition policy. Section VI concludes. An appendix provides a illustration of the types of indicators that might be compiled to monitor developments in the “state of competition” in the economy, using data for Slovakia for concreteness.
The Department of Trade & Industry (DTI) is tasked with ensuring that the broad objectives of the RDP and GEAR, in terms of industrial restructuring, export and investment facilitation, as well as job creation and redistribution, are met. The Department has thus put in place a set of programmes and policies aimed at achieving the three central objectives of the RDP and GEAR:
Many of the programmes and policies designed by the DTI represent a major departure from the policy framework used by the previous government. The previous government was primarily concerned with ensuring that South Africa was self-sufficient for political and strategic reasons. Consequently, domestic industry was protected by high tariff barriers, the exchange rate was allowed to appreciate (thus discouraging manufactured exports) and assistance to industry took the form of demand-side interventions.
As GEAR makes clear, this policy framework is no longer relevant in the global economy of the 1990s.
The previous policy framework failed to create a dynamic manufactured goods sector and clearly was not capable of creating sufficient jobs to make a meaningful impact on unemployment. In addition, some of the programmes pursued under this particular brand of policy intervention were not compatible with the rules-based trading environment which is an essential part of today's global economy. The DTI acknowledged the shortcomings of previous policies and has put in place a set of coherent and integrated policies and programmes which are World Trade Organisation (WTO)-friendly and which will create the kinds of competitive, outward-oriented manufacturing sectors referred to in GEAR. The purpose of this document is to highlight these industrial policies and programmes and the context within which they have been developed.
The first section of the report thus details the economic context within which the DTI operates. This section provides a brief historical overview of economic development in South Africa as well as an analysis of the major trends in the manufacturing sector and its sub-sectors. Section two highlights some of the main characteristics of the manufacturing sector and describes the context in which the industrial strategy pursued by the Department was developed. This section thus also describes the main components of Government's industrial policy. Section three provides a detailed description of each of the policies which form part of South Africa's industrial policy 'menu'. These policies are each justified both in theoretical terms and in terms of international experience regarding their use. Thereafter each policy is discussed in historical terms and a brief analysis of the impact of the policy is provided. Finally, an analysis of the macro-economic environment within which industrial development is to occur is presented in appendix one.
Following the debt crisis of the 1980s a large number of developing countries, particularly in Latin America and Africa, and to a lesser extent in Asia, have undergone what have been termed as ‘Structural Adjustment Programmes’. A certain degree of orthodoxy has developed around these programmes although clear evidence on either their success or failure is still inadequate and widely debated. Most of these programmes advocate a rapid opening of hitherto protected economies; substantial degrees of deregulation to free the private sector from government interference; restructuring of the government budget to reduce fiscal deficits, often through the cessation of subsidies to different parts of the economy; movement towards privatisation of public enterprises and, increasingly, greater involvement of the private sector in infrastructure provision. Lately, there has also been growing recognition of the importance of simultaneous action on social sectors, in particular the delivery of services such as education, health and nutrition, and directed measures for alleviating the suffering of those most affected by structural adjustment policies. This set of measures are generally covered by the term ‘social safety net’. Typically, although the ideal direction of policy action is known there is less advice on how such action is to be taken and what is the appropriate sequencing of actions affecting different parts of the economy. There has also been a debate on how fast or slow the pace of structural change should be.
This paper looks at some of the relevant and critical issues facing the South African government in devising an industrial policy. It provides an overview of some of the key theoretical issues in industrial policy and looks at some of the critical choices facing South Africa with reference to the international experiences. The paper refers to areas where the industrial policy debate in South Africa requires more attention specifically around ways of increasing physical investment, issues of market structure, and the need for better economic co-ordination.