The policy of state intervention in the establishment and development of manufacturing industry in South Africa

• Main Author: Zarenda, Harry
• Format: Others
• Language: en
• Published: 2014
• Subjects: Manufacturing industries > South Africa; South Africa > Economic policy; Sustainable development > South Africa
• Online Access: http://hdl.handle.net/10539/15197

Since the initial research was begun on this dissertation, the role of intervention by the State in the economic affairs of a country has assumed renewed topicality. While much of the impetus for this interest in the subject can be related to the bicentennial anniversary of the appearance of 'The Wealth of Nations', the emergence of certain political and economic problems in the South African context has been responsible for the increased controversy in this country. While recognising that che field of state intervention in the South African economy is so widespread and its effects, in many cases, so indirect that detailed and objective analysis of every avenue of intervention is impossible within the confines of the present study, the researcher has attempted to analyse the effects of the State's policy of intervention (in the form of industrial protection) on industrial growth in South Africa. This has been done m an endeavour to relate how some of the current economic problems faced by the country can possibly be attributed to such policy. The method involved in the study consists initially of an attempt to justify economic intervention by the State. Applying this rationale to the policy of industrial protection in South Africa after the first quarter of this century, the conclusion that emerges, is that, although much of the initial arguments for protection were clouded by political considerations, there were several Important economic arguments for Industrial diversification that warranted the State protecting certain industries, It appears highly unlikely that secondary Industry in South Africa would have grown to the extent that it did, after the first quarter of this century, in the Absence of che tariff and other protective policies followed by the State, Similarly, it can be argued, that many of the problems that recently have manifested themselves would not have occurred were it not for the persistence and continuation of such policies beyond the initial period. Growth in secondary industry continued on a rapid basis until the nineteen sixties after which there was a levelling off and the economy began to suffer severe unemployment problems coupled with persistent deficits in the current account of the balance of payments. The study attempts to analyse these problems according to the type of protective policies pursued by the State during this period. The pattern of tariff protection in South Africa is analysed both on a historical basis, (according to various investigations into such policy over time) and on an effective basis (according to two recent attempts at this type of measurement that have recently become available), In addition, the study attempts to relate the predictions of some of the theoretical literature on effective protection and patterns of industrialisation to the South African situation. The broad conclusion that emerges is that the nature of protective policies in South Africa appears to have been such as to have induced a specific type of import substitution which although 'initially responsible for high levels of growth is presently proving restrictive, In addition, one can attribute the importation of vast amounts ef capital goods as well as the lack of exports ef manufactured goods to such policies, The major recommendation that emerges from the study is that, given the present situation in South Africa, a possible way for the country to recover from some of its present problems as regards unemployment and balance of payments difficulties is for the State to modify its protective policies. In addition, it is suggested that this modification be framed in such a way as to increase the level of tariff protection on more intermediate stages of the productive process. While this may encourage a greater amount of import substitution at these stages it may well induce local producers to substitute labour for capital and thus reduce the heavy reliance on imported capital goods that appears to be characterising local production. By encouraging the use of one of the country's most abundant resources, viz. labour, the country may yet develop a considerable comparative advantage that may facilitate exports of manufactured goods.