Africa’s automotive industry growth (1995-2004)

South Africa has been has been giving investment and export-based incentives to the automotive industry as a means of supporting the industry attain global competitiveness. Whereas industry investment, production and exports have increased in the period 1995 to 2004, employment and sourcing of domestic components have lagged behind general industry growth. Industry trade balance has deteriorated over the same period; moreover, investment in Research and Development (R&D) activities, as an indicator for future competitiveness remains insignificant. The paper argues that the offer of investment and export-based incentives to the automotive industry is a necessary but not a sufficient condition for making the industry competitive in the long-term. The industry support model does not take into account internal interrelationships, and interdependencies among industry sectors critical to understanding industry behaviour. Processes underlying industry performance are also omitted in the model. Using a system dynamics qualitative model, the paper shows how a system dynamics approach provides means of incorporating effects of systemic factors and processes, active within the industry, in understanding how government incentives are influencing industry performance. The system dynamics approach provides some understanding onto potential sources of the uneven industry performance. In bringing to the fore key processes underlying industry performance, the approach opens up opportunity for policy intervention to target processes that are critical in determining industry outcomes. System dynamics provides useful means of aligning the long-term industry objective of competitiveness with current policy intervention