
Tsedu
Industrial development achievements in Brics bloc countries provide useful lessons for SA. Plagued by many structural bottlenecks, the country is vigorously embracing industrial policy reforms to re-anchor industrial development efforts to revive the domestic industry and create employment.
Brics countries, as newly industrialised states from diverse political economies, may offer SA analytical learning prospects to enable it to modulate its multifaceted industrial reform agenda, given sectoral sequencing of its market and institutions.
Naturally, there is no single blueprint to industrialisation. Success depends on a range of factors, including the place of the country within the world economy, the invention and diffusion of new appropriate technology, and the policy space available to the government.
Government policy is also closely related to the dominant patterns of production, the sectoral composition, as well as the technology and skills involved. A range of policies may be appropriate for different countries at different times.
These can also serve to develop methodologies and models that trace both macro and micro dynamics of domestic industrial development.
Moreover, the nature of policies available to a developing country is conditioned by the policy space a country begins with and develops through a complex mix of policies. SA seeks to move away from an economy heavily reliant on raw material exploitation to an employment-creating industrialised country.
However, this is easier said than done as there are numerous industrial development challenges embedded within the economy, including an enormous infrastructure backlog in transport, energy, water and communications; a loss of skills; lengthy and costly processes to start and maintain a business; human resources development initiatives that are not always orientated towards key industrial sectors; and policies that may be broadly supportive of industrialisation but that mix with other policy initiatives that send contrary signals.
SA’s industrial economy is tightly coupled with those of the rest of the world and is therefore also deeply influenced by international factors. Over the past two decades significant trends in the refinement of global commodity chains have had a substantive effect on the performance of many SA industries.
The concentration of producer ownership has increased in the retail sector, which has assisted a small group of supermarket chains to expand their power over suppliers. Nonetheless, there is considerable scope for member countries to be a critical force in encouraging SA and other African countries to have productive investment predicated on demand created by the expanding African middle classes.
The focus of foreign direct investment should thus be on sectors of the economy that produce products and services consumed by most of the population, which should in turn lead to protected future demand. The pronounced impact of foreign and export competition is heightened when a domestic industry is weakened in some respects, such as high labour costs or deteriorating aspects of product quality.
SA also has a shortage of a skilled workforce, on an increasingly short- and long-term basis in both natural and social sciences, in the areas of engineering; research & development; product development, design and testing; product quality assurance; operational management; formulation of industrial strategies; and analysis of industrial performance.
Innovation and entrepreneurship offer promising ways out in many areas of engagement. Furthermore, to attract a critical mass of South Africans to study the subjects necessary to participate in these types of industry, we need a supportive environment where science and mathematics are popular and seen as useful and a priority in nurturing and retaining these skills. Development of the aforementioned sectors requires more inclusive strategies with strong governance to ensure that performance reaches those removed by apartheid.
Though SA needs to deepen its financial integration with Brics to finance its domestic infrastructure development and industrialisation drive, it will rely heavily on its own policy reforms and innovations, aided by knowledge exchange and best practices from Brics members and other countries, to create the right environment for the investment and technological innovation needed to foster economic growth and development.
SA will accomplish more if it (on a larger scale) can:
- Create an integrated industrial policy framework that promotes inclusive financing for the growth of the informal as well as the formal sector;
- Create an environment for public-private partnerships to fund and maintain infrastructure development, including foreign partners; and
- Through such public-private partnerships, ensure that technological innovation is incorporated that is suited to world-class exporters but at the same time, labour-intensive to promote employment growth.
Policy reforms need to reduce policy risk by facilitating start-ups and other business forms, reduce the costs and risks for private sector investment, and use trade and industrial policy to improve the competitiveness of local firms and promote self-sustaining growth. Special training programmes should be designed that combine classroom work, work-based learning, and improved education outputs from the formal education sector.
The aim of these programmes should be to address skill shortages and the creation of a workforce suited to the special skills that local firms require to grow or adopt new technology. At the informal sector level, skills development must be centred on the unemployed who require basic skills.
Given the development status of SA’s economic opportunities and challenges, these are continually evolving, necessitating the reconceptualisation of existing alliances and relations. In the current global economic environment, the country’s effort to re-industrialise is dependent on the development and sustenance of partnerships and alliances that are both transformative and complementary.
The economic foothold enjoyed by emerging economies, in addition to the complementarity of resources, provides a unique opportunity for the identification and development of significant trade and investment alliances. The future still looks bright in terms of the potential for alignment of SA and Brics industrialisation efforts for optimal socioeconomic gain.
SA straddles the realms of high-income industrialised, industrialising and developing economies, providing a multifaceted and complex domestic market offering a variety of economic and industrial opportunities. Moreover, the core tenets of SA’s industrial policy are directed at facilitating inclusive growth and addressing the historical social and economic disparities in SA society.
This is achieved through various government, fiscal and monetary incentives such as industrial grants, backing of the Industrial Development Corporation through the state-engineered bolstering of industrial development, and enhancing manufacturing, economic diversification and the establishment of strategic intergovernmental and public-private sector alliances with the state.
Therefore, the future is promising in terms of the prospects of Brics engagement and trade and investment within the bloc and with SA.
Tsedu is head of public policy think-tank the Institute of Foreign Affairs.
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