Identifying industrial clusters for competitiveness : policy implications for economic development in the North West Province of South Africa
Firm competitiveness is no longer an industry-specific or regional phenomenon, but it has evolved to have global impacts. The increase in intensity of regional and international competition, ineffectiveness of regional development policies and models has led to the focus on regional economic development. In particular, a focus on industrial cluster promotion, both in developed and developing countries has proliferated owing to their increased success as a sustainable source of economic growth and development. Industrial clusters are a geographically proximate group of inter-connected companies and associated institutions in a particular field, linked by commonalities and complementarities. In addition to industrial cluster formation, firms can also maintain competitiveness through internationalisation. Internationalisation ensures that firms are able to serve many markets from existing manufacturing bases without having to establish production plants in other markets. It reduces the over dependence on domestic markets and business risks associated with dependence on one market. This study identified industrial clusters for the North West Province (NWP) of South Africa using the Structural Path Analysis (SPA) method, as a strategy to enhance firm competitiveness. It contributes to the methods to identify industrial clusters by applying the Power of Pull (PoP) method to prioritise the number of clusters for the NWP. The ten identified industrial clusters and their respective PoP rankings were (i) communication; (ii) real estate; (iii) grain mill, bakery and animal feed products; (iv) building and other construction; (v) basic metal products; (vi) other food products; (vii) agriculture; (viii) non-metallic mineral products; (ix) trade; and (x) dairy products. This study identified the most important centres, in terms of the most contributions to output, employment and profit at the local municipal level across all the ten identified clusters. These centres were Madibeng, Rustenburg, City of Matlosana, Mafikeng and Ditsobotla. This indicates that efforts to stimulate cluster formation in this sector should be focused in these regions. This study also determined whether any association exists between the identified industrial clusters' products and services and the realistic export opportunities according to the DSM for products and the DSM for services. Four of the six product clusters were found to have REOs according to the DSM for products, namely grain mill, bakery and animal feeds products, agriculture, non-metallic mineral products and the basic metal products clusters. In terms of services, only two service clusters, namely communication and building and other construction services clusters, were found to have with REOs according to the DSM for services. This study further demonstrated the effects of industrial cluster formation on the regional economy, using social accounting matrix (SAM) multipliers. SAM multiplier analysis was used to demonstrate the output, employment, employment income and gross domestic product (GDP) supported by cluster formation for the NWP. The supported activity for the agriculture and trade clusters was less than the actual activity. The following clusters' supported activity was greater than the actual activity; communication; real estate; grain mill, bakery and animal feed products; building and other construction; basic metal products; other food products; non-metallic mineral products; and dairy products. The identified industrial clusters' REOs were explored further to provide more details on the products or services identified as having REOs. In addition, the countries to which the identified REOs (products and services) can be exported were discussed. In terms of product clusters identified to have REOs, the export potential values, cell classifications and market accessibility index scores were discussed. In terms of the service clusters identified as having REOs, countries, market access, market openness, import demand and cell classifications were discussed.