Annual Forum Papers

Industrial Restructuring in South Africa: The Perspective from Government

  • Year: 1998
  • Author(s): Stephen Hanival; Alan Hirsch

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:

  • Growth;
  • Employment; and
  • Redistribution.

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.