Annual Forum Papers

The Export 'Success' of the Motor Industry Development Programme and the Implications for Trade and Industrial Policy

  • Year: 2002
  • Author(s): Anthony Black
  • Countries and Regions: South Africa

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.