Trade and industrial policy in South Africa

The future direction of South African industrial policy is the subject of vigorous and healthy debate. The outcome is important for the country's economic development. This study is an attempt to contribute to these discussions through an overview of and some questions about the economic impacts of South Africa's post apartheid trade and industrial policy. It comprises two main parts. These parts can be read independently.

The first part reviews some key themes in international policy discussions and draws lessons from the recent experiences of other developing countries. The second and largest part of the report reviews South Africa's industrial policy over the past decade. While not comprehensive, the range of policies examined is sufficient to dismiss the claim made by some that South Africa has not had an industrial policy. In fact, whether by intention or not, South Africa has experimented with a very wide range of policies that have had a direct impact on the path and success of its industrial development.

This review raises some serious questions about the economic impacts of South Africa's industrial policies and of some future alternatives that are now under discussion. Despite the intensity of and broad interest in the debate, there appears to have been very little serious economic analysis of past policies or of future plans. Basic assumptions about the effectiveness of sector-specific interventions, for instance, appear to be poorly founded. Many policies have impacts that are at variance with stated intentions. International experience is drawn upon with great selectivity to support particular views about preferred policy directions.

The real questions facing South Africa are not whether South Africa does or should have an industrial policy. They are not about whether there should be more or less government intervention. The most important questions are pragmatic and not ideological they are about what works and does not work in South Africa and why.