The competitive platform for industrial development in South Africa

Abstract

This competitiveness platform of South African manufacturing industries is investigated in this study. The various aspects that determine international competitiveness are studied and the strengths and weaknesses are established. The study also considers differences in competitiveness due to firm-size, and compares the competitiveness of the various provinces and the manufacturing sub-sectors. According to Porter (1998a:71) the competitive platform embraces all aspects relevant to competitiveness that enables firms to compete and industries to develop. The platform therefore includes all the relevant aspects of management, firm structure, conditions of input factors of production and demand conditions, while it utilises related and supporting businesses and institutions. This foundation includes government policies, the quality of human capital, level of technology and factors that enable firms to prosper and grow in future, amongst others. The study commenced with an investigation into the theory of industrial policy stressing the importance of competitiveness and the lowering of the marginal cost structures in an effort to develop local industries. The objectives of industrial policy were considered as well as the ways in which it can enhance competitiveness on firm-level. This was followed by studying Porter's approach to the competitive platform, drivers of competitiveness and the stages of competitive development. The practice of industrial policy was considered and specific attention was given to macroeconomic policies and the way it can influence industrial competitiveness, followed by a study of active and selective interventions and functional policies. The acquisition of technological capacity, education and training and the improvement of managerial practices to enhance competitiveness as well as the limitations of industrial policy, were considered These include the lack of clear objectives, inefficient information and lack of skills, inflexibility, the agency problems, sectional interest groups and corruption. Following this, the theory of industrial location was studied as the development of less developed regions is a significant problem in the South African spatial economy. The traditional factors of location were considered followed by a study of the modem explanations of the locational decisions of manufacturing firms . These factors focus on agglomeration and increasing returns, a specialised labour pool, specialised intermediate inputs, transport costs, historical factors, and knowledge and technological spill-overs. Then the regional development was examined, focusing

on practical factors and the product cycle model, stages in spatial development, and regional development through the development of transport infrastructure. This study put the emphasis on individual firms as it is in the first place firms that compete and not countries. The policy framework in which firms develop and prosper do however have a significant influence on firms as an important part of the competitive platform and the South African policies and strategies were therefore studied. Attention was given to the historical development of industrial policy in South Africa up to the acceptance of the Integrated Industrial Strategy in 2001 and the Integrated Manufacturing Strategy in 2002. The macroeconomic context for industrial development was considered followed by an overview of the GEAR strategy, Spatial Development Initiatives (SDis), Industrial Development Zones (IDZs) and competition policy. Finally, the industrial development policy of South Africa was studied in detail. An empirical investigation was conducted to establish the level of development of the South African industrial competitiveness platform. This part of the study first considered various studies done on South African competitiveness in the recent past. The provincial cluster potential was identified in the various provinces, linkages and competitiveness identified, and the local comparative advantages of the various regions and municipalities that can be derived from the Planning and Implementation Management Support System (PIMMS) database, researched. This gave a picture of the country's competitiveness on a national, provincial, regional, industrial and local level. Special attention was also given to the National Enterprise Survey and the World Bank Survey on the Greater Johannesburg Metropolitan Area, focusing especially on the obstacles to competitiveness. The core contribution of this study is an empirical analysis of a survey conducted during 2002 on the competitiveness platform of South African manufacturing firms. It was found that although manufacturing firms do not rate as very highly competitive, the results were better than was expected, especially with regard to their managerial proficiency, product quality and technological resources and expertise. This survey highlighted the reliability and quality of communication services, electrical supply, water and other utilities, which are rated very high by all respondents. The study revealed much detail, like the need for cold storage facilities that presents a problem to many manufacturers. Most firms experience a shortage of artisans and there exists a need for more training facilities, especially for vocational and industry related training. Respondents rated harbour and ocean freight facilities as failing. It was also seen that although distance from the sea presents a competitive disadvantage to landlocked provinces, firms near a long coastline do not gain competitive advantages from it. KwaZulu is the only province that enjoys some benefit from its harbours. The same applies to the province with large airports.

Poor perception of the government and the civil service was the strongest factor depressing competitiveness according to respondents. Manufacturers perceive civil servants as inefficient, the civil service as non co-operative and the government as incompetent. Industrial standards, workplace regulations and laws and environment protection legislation and guidelines are also seen as very costly and mostly lacking and unclear. Much have to be done to improve the image of the government and civil service. The main elements of the competitiveness platform in South Africa that present obstacles and impede industrial development can be summarised as: - Poor human capital

Especially low productivity, motivation and work ethic Insufficient vocational and industry related training facilities A shortage of artisans - Inefficient support services - Poor perception of the government - Inefficient and non co-operative civil service

A lack of government assistance, information, aid and incentives Political and policy instability - A poor technological platform in some industries like electronics - High costs, taxes and interest rates - Shortages of raw materials; and - Poor market demand. It was found that the competitiveness indices of large firms are higher than small firms for all sub-categories. Large firms produce better quality and are superior with regard to strategy, structure, management and the utilisation of related and supporting industries and institutions. The productivity index also correlated with firm size. The most competitive provinces are the North West, KwaZulu and Mpumalanga. Although Gauteng is the largest contributor to South Africa's GDP it is not the most competitive. The competitive platform of each province reveals its own set of problems but those stated above occur in all. The sub-sectors of the provincial competitiveness indices suggest an agenda for development. Finance, management and infrastructure deserve special attention in Gauteng, for example; local economy, internationalisation and people in North West, while the Western Cape has to focus on its local economy, business efficiency, internationalisation, infrastructure and human capital. Limpopo, Western Cape and the Northern Cape have the lowest productivity

indices and attention should be given to the development of human capital and science and technology in an effort to improve efficiency and productivity. When the competitiveness of ten major manufacturing sub-sectors was studied it was found that the competitiveness of the different sub-sectors is more or less equal. Food processing and transport equipment manufacturers seem the most competitive, but the others not much worse. An alarming aspect was the low level of technological proficiency, expertise and innovation in the science- and technology-based industries like chemicals and electronics. If South Africa is to survive in the new economy, its level of technological expertise, capabilities and capacity will have to be improved considerably.