The 1990s witnessed the emergence of a considerable body of research making a case for placing more emphasis on interfirm co-operation, networks, regional collaboration and clusters. This paper first outlines the rhetoric of government policy, assessing how appropriate and effective it has been in its own terms. It then moves into a detailed discussion of the implementation of this policy agenda using the only two successful cases of clustering in South Africa known to the authors. The evolution of South Africa's post-apartheid industrial policy and the experiences of two well-functioning automotive clusters are used to throw some light on a central question: what is the role of government in fostering clustering in developing countries? Particular attention is paid to assessing the degree to which policy has come to recognise the importance of fostering inter-firm co-operation and encouraging social capital formation amongst key actors in specific regions.This examination is conducted using the tools outlined in the literature of inter-firm learning and networking approaches to fostering effective competitive responses by firms. It goes on to draw from the experience of two South African case studies of such networks operating - the Automotive Benchmarking Clubs and the Durban Automotive Cluster. It argues that despite some attempts to reposition the DTI, such processes to foster firm-based processes remain marginalised and generally under-appreciated.