Lynda Loxton reports on the union-backed research=20 project that has moulded the new government’s=20 industrial policy
The South African government should not ape Korea in=20 the 1960s by trying to intervene to help carefully=20 chosen “winning sectors” of the economy. This is one of=20 the conclusions of a detailed study of South African=20
The study, the result of four years of extensive=20 research, was unveiled in Cape Town this week by Trade=20 and Industry Minister Trevor Manuel.
The Industrial Strategy Project’s (ISP) Improving=20 Manufacturing Performance in South Africa and about 15=20 sectoral studies provide an in-depth analysis of what,=20 in the face of dwindling commodity prices, has to=20 become the powerhouse of the economy — industry.
The ISP has its origins in the Economic Trends Research=20 Group, a collective of economists and social scientists=20 convened by the Congress of South African Trade Unions=20 (Cosatu) in 1986 to examine the impact of enforced=20 isolation on the economy. It soon became clear,=20 however, that sanctions were a small aspect of the=20 problems besetting the economy, and the work of the=20 group grew into a full-blown analysis of South Africa’s=20 economic crisis.
It concluded that the 1980s had been, in economic=20 terms, something of a lost decade. The manufacturing=20 sector had been particularly conspicuous by its=20 inability to create jobs, and produce commodities that=20 satisfied the divergent requirements of the domestic=20 and international markets.
Because the solutions were less obvious than the=20 problems, Cosatu in 1990 supported the creation of the=20 ISP. With the rise to power of the African National=20 Congress the ISP became instrumental in shaping the=20 industrial policies of the new government. Of the 17=20 researchers involved in the project, eight are now in=20 senior positions in the government.
One of the main conclusions of the studies is that=20 industrial policy should be developed and implemented=20 by all stakeholders — business, labour and government=20 — rather than being a fixed blueprint from the=20
The main problems facing industry are lack of=20 competitiveness, lack of attention to skills training – – particularly multi-skilling — and poor work=20 organisation. This is reflected in weak export=20 performance, poor productivity and the fact that=20 industry has not been able to provide enough new jobs=20 to mop up at least some unemployment in a meaningful=20
According to ISP researchers Dave Lewis and Dave=20 Kaplan, this is particularly disturbing in a world=20 where manufacturing and related services account for a=20 growing share of world trade. In addition,=20 manufacturing output and employment are increasingly=20 underpinning the technological, managerial and=20 organisational dynamism of successful economies.
“This is not a world in which one wants to reproduce,=20 let alone intensify, a reliance on mineral exports,”=20 Kaplan said.
The ISP said that South African industry was unusually=20 diverse, which had two key policy-related implications.
“Because of our diversity we need not, and should not,=20 be in the business of picking winning sectors. Unlike=20 Korea in the 1960s, we are not aiming at starting=20 entire manufacturing sectors from scratch and then=20 attempting to direct resources at those that we think=20 have the best chance of succeeding.
“Of course choices will be made: the RDP will generate=20 demand in the building supplies and, hopefully,=20 consumer goods sectors; and the greater beneficiation=20 of our mineral resources is an obvious choice. But we=20 do have developed building supplies and consumer goods=20 sectors and considerable experience in a range of=20 mineral beneficiation processes.
“The role of policy is to strengthen the overarching=20 environment and the underlying capabilities such that=20 firms can become international market leaders.=20 Industrial policy should also be aimed at promoting=20 greater specialisation, which will require a much more=20 open relationship with international markets and=20 stronger competition policy.
The ISP has identified two characteristic South African=20 firm types.
“The first is the minority of firms at, or close to,=20 the world frontier. The second is the majority of=20 laggards. The task of policy is to infuse the laggards=20 with the dynamism of the market leaders. Again, a=20 reformed trade and competition policy is necessary but=20 insufficient. If simply left to sink or swim, too many=20 firms risk sinking when, with a modicum of assistance,=20 they may survive to be world-class producers.”
That assistance should not take the form of subsidies,=20 but should rather be steps to strengthen industry in=20 terms of technology, skills, financial services and=20 productivity. And that is where all stakeholders must=20 roll up their sleeves and get involved in making sure=20 industry works.