Industrial policies in South Africa: And why the policy process matter

Anders Ellegaard Jacobsen

Student thesis: Master thesis

Abstract

This thesis examines the potential for industrial policies to support the development of competitive industrial sectors in developing countries, and how the set-up of the policy processes can influence whether the approach of the industrial policy targets the relevant challenges and therefore lead to more successful outcomes. This is done by using two case studies from South Africa. In 1995 when the first democratically elected government came into power in South Africa, the local automotives sector and clothing- and textile sector faced a similar challenge of increasing their competitiveness in order to survive the liberalization of the domestic market. The government has since 1995 followed very different approaches in the industrial policies that were to support the effort of integrating the two sectors into the global economy. Where the Motor Industry Development Programme introduced incentives to attract FDI to the automotives sector, the government followed an Export-Oriented approach in order to integrate the clothing- and textiles into the global market. By 2011 the policies have had different outcomes. The automotives sector has developed through the influx of FDI, while the clothing- and textiles sector has declined drastically and struggle to compete on the global and local market against cheap Asian competitors. Hubert Schmitz’ theory on “four strategies for integrating into global economy” and Dani Rodrik’s claim that inclusive and well-structured policy processes are essential for effective industrial policies is the thesis’ theoretical framework. From this the thesis explains the rationale behind the applied industrial policies; evaluate their outcome; before analyzing how the interaction between the relevant stakeholders, government, industry actors and labor unions, have influenced the design of the industrial policy. Through an analysis based on interviews with industry representatives from the two sectors, scholars who follow the South African industrial policies closely and published research and reports on the subject I will argue that the policy processes have indeed played an important role in the relative success of the South African automotives sector and failure of the clothing- and textiles sector. The conclusions adds to the argument that industrial sectors in developing countries can potentially develop through industrial policies, if the relevant stakeholders are included in the policy process and have a similar vision for how the sector should progress.

EducationsMSc in International Business and Politics, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2012
Number of pages80