How is the South African state promoting investiments that increase local content in the production of automobiles? : a critical evaluation of investment promotion and industrial policy (1994-2014)

M.Com in Development Theory & Policy, University of the WitwatersrandSouth Africa’s industrial policy is fundamentally aimed at transforming the domestic economy into a labour-intensive growth path in order to create jobs (the dti, 2013a, p. 10). In pursuit of this aim the industrial policy takes a transversal approach to promote particular types of economic activity or particular economic sectors (the dti, 2013a, pp. 15-17; Zalk, 2014, p. 335). Using the case of the automotive sector, this study analyses the role played by the state and how institutional aspects of the industrial policy and investment promotion affected policymaking and the outcomes. The findings were that, due to incoherent institutional support and informational asymmetry, industrial policy has supported export growth in spite of the continued dependence on imports; and did not support employment, because it was biased towards OEMs and did not differentiate between the different categories of components according to job-creation potential. Institutional aspects of industrial policy-making and implementation then – not the ownership power of multinational corporations – has entrenched unequal power relations within the automotive value-chain, which undermines the broader socio-economic goals of industrial policy. Hence, due to both the policy measures and the institutional design South Africa’s industrial policy has not been oriented towards more labour-absorbing activities, especially in the impact on local components manufacturing. The result has been growth in exports with limited integration of local producers into the global value-chains of multinational OEMs, except in the case of vertically integrated multinational component producers, at the expense of local value-addition and job-creation.MT201