Industrial policy, technology and the future of automotive manufacturing in South Africa

Abstract

Using selective industrial policy, South Africa succeeded in re-integrating its previously protected automotive manufacturing industry into the global value chain. In the period 1995 to 2006, the industry experienced significant growth in both vehicle production and exports. Despite these successes, the future of automotive manufacturing in South Africa, as in most other developing countries, is not certain without continued government incentives. The paper presents an assessment of South Africa's automotive industry support model in terms of sustaining domestic manufacturing, using a qualitative system dynamics model. A key finding is that the industrial policy did not sufficiently take into account systemic interdependencies and feedback effects within the industry that influence intended outcomes. Technology and innovation were not given prominence in the policy formulation and implementation process. It is concluded that to put South Africa's automotive manufacturing industry on a sustainable growth path, the selective industrial policy has to be complemented with a technology policy.