Transcript Slide 1

The Development of an
Industrial Policy for Gauteng
Province
Seminar on Industrialisation and
sustainability in Gauteng:
contradiction or coherence?
1st March 2010
Presentation overview
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Conceptions of industrial policy
Approach taken on industrial policy and policy research
South Africa’s inherited industrial structure
Gauteng’s industrial structure, sector composition and trends
Input-output analysis
Further aspects to CSID’s input into the Gauteng Industrial
Strategy
 Identification of challenges to greater integration of supply
chain in Gauteng
 Spatial aspects of industrial structure and development –
industrial clusters
 Cross cutting issues
Conceptions of industrial policy
Conceptions of
Industrial Policy
Broad
‘Developmental State’
Narrow
‘Post Washington Consensus’
State to address
structural legacies
State to act as
supplement to market
Target Sectors;
Upgrade
Stable framework for
private sector
Our approach to industrial policy in Gauteng
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Industrial structure conceived as the totality of
activities around the production of output
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Industrial policy must be focused on structural
transformation and breaking the legacy of
Apartheid.
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Based upon a vision of an industrial structure that:
 facilitates the creation of decent and sustainable
employment for large numbers of skilled-, semi- and unskilled workers
 is diversified in terms of capital stock and value addition
 maximises linkages between sectors
Components of the research on
Industrial Structure in Gauteng
1.
2.
3.
4.
Analysis of sectoral trends in output,
investment, employment and value
added.
Input-output analysis.
Value chain analysis.
Spatial and cluster analysis
Share of sectoral net value of output in total manufacturing 19241976
Source: Feinstein 2005
1924/25
1948/49
1975/76
Food, beverages and tobacco
32.4
19
14.1
Textile, clothing, leather, footwear
10
15.2
10.4
Wood and furniture
6.9
6.4
3.2
Paper, printing and publishing
11.2
7.7
7.7
Other manufacturing
2.7
3.4
3.3
Total light industry
63.2
51.7
38.7
Chemicals and chemical products
12.1
9.5
11.4
Pottery, glass, other non-metallic minerals
7
6
5.3
Basic metals industries
8.9
17.6
13
Metal products and machinery
3.3
5
22.7
Transport equipment
Rubber products
5.3
0.2
7.8
2.4
7.2
1.7
Total heavy industry
36.8
48.4
61.3
Total manufacturing
100
100
100
Distribution of new investment across assets in private
corporate business enterprises 1990-2007
Source: Quantec 2009
300000
250000
R millions
200000
150000
100000
50000
0
Gross capital formation
Net acquisition of financial assets
Net capital formation
R millions (constant 2000 prices)
0
-20000
-40000
General government services
Business services
Finance and insurance
Other mining
Transport and storage
Communication
Wholesale and retail trade
Electricity, gas and steam
Basic chemicals
Non-metallic minerals
Medical, dental and veterinary…
Motor vehicles, parts and accessories
Building construction
Other manufacturing
Paper and paper products
Water supply
Excluding medical, dental and…
Civil engineering and other…
Other chemicals and man-made fibers
Catering and accommodation services
Wood and wood products
Food
Machinery and equipment
Printing, publishing and recorded…
Glass and glass products
Coal mining
Other producers
Metal products excluding machinery
Agriculture, forestry and fishing
Professional and scientific equipment
Plastic products
Television, radio and…
Leather and leather products
Tobacco
Rubber products
Furniture
Footwear
Other transport equipment
Wearing apparel
Textiles
Beverages
Basic non-ferrous metals
Coke and refined petroleum products
Basic iron and steel
Gold and uranium ore mining
Changes in capital stock across all economic sectors in SA between
2000 and 2008
Source: Quantec 2009
100000
80000
60000
40000
20000
Employment output ratio in primary, secondary and tertiary
sectors in SA 1990-2008 (including informal employment)
16
14
12
10
8
6
4
2
0
Primary sector
Source: Quantec 2009
Secondary sector
Tertiary sector
Output and gross value added in the primary, secondary and
tertiary sectors in Gauteng 1995-2008
R millions (2000 constant prices)
600000
500000
400000
300000
200000
100000
0
Primary sector
Secondary sector
Tertiary sector
Primary sector (gross value added)
Secondary sector (gross value added)
Tertiary sector (gross value added)
Source: Quantec 2009
Share of sectoral output in Gauteng 1995-2008
Source: Quantec 2009
Industry
1995
2000
2005
2008
Agriculture, forestry and fishing
1
1
0
0
Mining and quarrying
4
3
2
1
Primary sector total
4
3
2
2
Manufacturing
39
39
36
34
Electricity, gas and water
3
2
2
2
Construction
5
5
5
6
Secondary sector total
46
45
43
42
Wholesale and retail trade, catering and accommodation
12
12
12
12
Transport, storage and communication
6
9
9
10
Finance, insurance, real estate and business services
13
16
19
20
Community, social and personal services
2
2
3
3
General government
15
49
1
100
11
52
1
100
11
55
1
100
11
56
1
100
Tertiary sector total
Other producers
Total
Service sector rankings based on 2007 data
Output
Gross
domestic
investment
Value added Fixed capital Employment
per unit
per unit
per unit
output
output
output
Wholesale and retail
1
7
3
6
5
Catering and accommodation
services
8
6
8
5
2
General government
2
2
2
2
3
Business services
4
5
6
3
4
Finance an insurance
3
1
1
4
6
Communication
5
4
7
8
8
Transport and storage
6
3
5
1
7
Community, social and personal 7
services
8
4
7
1
Manufacturing sector rankings based on figures for 2007
Output
Gross
domestic
investment
Gross
domestic
investment
per unit
output
Value
added per
unit output
Fixed
capital per
unit output
Employment per
unit output
Food, beverages and tobacco
4
5
5
9
5
7
Textiles, clothing and leather
9
10
9
6
8
1
Wood and paper, publishing and printing
5
3
2
2
3
5
Petroleum products, chemicals, rubber and
plastic
1
1
3
7
2
10
Other non-metallic mineral products
8
4
1
5
1
2
Metals, metal products, machinery and
equipment
2
2
8
4
4
3
Electrical machinery and apparatus
7
8
10
3
10
9
Radio, TV, instruments, watches and clocks
10
9
7
8
9
6
Transport equipment
3
6
6
10
7
8
Furniture and other manufacturing
6
7
4
1
6
4
Input Output Analysis and Its Use
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IO analyses allows us to study the material interconnection
between sectors
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A sector with strong backward and forward linkages means that
increased demand for that sector has potentially strong
stimulating affects on output across the economy as a whole.
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We can identify potentially strategic economic sectors based on
the strength of their backward linkages.
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Further, input-output analysis can be used to assess the impact
from the expansion of a sector on economic factors other than
output. E.g. employment
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The calculation of employment multipliers allows us to identify
sectors with the highest potential stimulatory effects on
employment across the economy
The Multiplier Effect through Backward
linkages
The Impact of increase
in key sector output
on economy wide output
thanks to a capital
injection
Key Sector
The total backward linkage indicates the potential value of output in
backwardly linked industries That would be stimulated by a unit increase in
the value of final demand in that sector.
Total Backward Linkages, 2007
Transport equipment*
Wood & paper; publishing & printing*
Electrical machinery & apparatus*
Textiles, clothing & leather goods*
Construction
Food, bev & tobacco*
Petroleum products, chemicals, rubber & plastic*
Metals, metal products, machinery & equipment*
Radio, TV, instruments, watches & clocks*
Other non-metal mineral products*
Catering & accommodation
Furniture & other manufacturing*
Agriculture
Transport services
Communication
Electricity & water
Community, social & other personal services
Mining
Wholesale & retail trade
Business services
Finance & insurance
General government services
3.36
2.87
2.81
The total backward linkage
figure indicates the potential
value of output in
backwardly linked industries
that would be stimulated by
a unit increase in the value
of final demand in that
sector.
2.78
2.76
2.75
2.69
2.58
2.54
2.49
2.40
2.38
2.26
2.23
E.g. A R1million increase in
demand for
transport
equipment sector can
potentially induce a R3.36
million increase in output for
its input sectors
2.23
2.10
2.10
2.00
1.99
1.97
1.78
1.12
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
4.00
Total employment multipliers by subsector, 2007
Electricity & water
2.28
Communication
2.44
General government services
The employment multiplier
gives the number of jobs
that would potentially be
created in backwardly linked
sectors by a R1 million
increase in final demand in
the downstream sector.
2.91
Petroleum products, chemicals, rubber & plastic*
3.15
Mining
3.28
Finance & insurance
3.54
Furniture & other manufacturing*
3.72
Metals, metal products, machinery & equipment*
3.89
Radio, TV, instruments, watches & clocks*
3.92
Electrical machinery & apparatus*
4.07
Transport
4.17
Other non-metal mineral products*
4.18
Construction
4.38
Transport equipment*
4.40
Wood & paper; publishing & printing*
E.g. A R1million increase in
final demand for Electricity
and water output can
potentially generate 2.28
new jobs in Electricity and
Water’s input sectors.
5.03
Wholesale & retail trade
5.41
Food, bev & tobacco*
5.90
Business services
6.11
Textiles, clothing & leather goods*
6.12
Catering & accommodation
8.25
Agriculture
9.08
Community, social & other personal services
11.08
0.00
2.00
4.00
6.00
8.00
10.00
12.00
Employment Multiplier
Inward shift
Greater the size
of employment
multiplier
Labour
Intensity
Backward
Linkages
Size of
Employment
multiplier
Outward shift
Smaller the
size of
employment
multiplier
Bringing together output and
employment
low employment
multiplier and
strong backward
linkages
Total Backward linkage
4.5
4
High employment
multiplier and
strong backward
linkages
Mining
3.5
Transport equip
Wood & paper; publ &
print
Textiles, clothing &
Food, bev & tob leather
Communication
Other non -metal mineral
Transport prod
Catering & accomm
Electricity & water
Business services
Finance & insurance
Petrol products, chem,
rubber & plastic
3
2.5
2
1.5
Metals, metal products,
machinery & equip
Electrical machinery &
apparatus
Radio, TV, instruments,
watches & clocks
Furniture & other manufact
Construction
Govt services
1
Wholesale & retail trade
High employment
multiplier and weak
backward linkages
low employment
multiplier and weak
backward linkages
0.5
0
0
2
4
6
Total Employment multiplier
8
Subsectors that are possible ‘Key’
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Transport equipment
Wood & paper,
publishing &
printing
Textiles, clothing &
leather
Food, beverages &
tobacco
Other non-metal
mineral
Construction
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Metals, metal
products, machinery
& equipment*
Transport services*
Catering and
accommodation*
Electrical machinery
and apparatus*
Radio, TV,
instruments,
watches and clocks*
Furniture and other
manufactures*
Deepening the research on identifying key sectors (1)
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The research presented so far has been limited to desk research based on
available quantitative data.
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We have been able to identify sectors that could potentially be useful in
terms of achieving an integrated and dynamic economy.
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However, our purely quantitative account and does not take into account
the institutional and political economy contexts.
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We are currently working on a qualitative component to the understanding
of supply chain dynamics in order to better understand the extent of
integration across economic activities in Gauteng.
 Work based on previous studies on value chains in South Africa
 Stakeholder interviews
○ Industry associations
○ Government sector desks
○ Firms
Deepening the research on identifying key sectors (2)
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Spatial dimension to industrial structure and policy
 Spatial distribution of economic activities across the province
 Spatial distribution of where people live compared with areas of
high economic activity.
 Spatial distribution of firms and industry.
○ Geographical clustering
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Cross cutting issues
 Employment creation
 Technology, innovation and R&D
 Infrastructure
 Equity BEE/BBBEEE
 SMEs
 Green Strategy
Conclusions
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Our main contribution to this study has been our research
methodology that has been directly informed by our approach to
industrial policy and the understanding of industrial structure.
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We take a broad conception to industrial policy and emphasise
government support to strategic sectors and industries.
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These sectors must be viewed as connected with others, making
up a complex and integrated whole.
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Policies must therefore take into account not only the sector in
question but to also identify and mitigate constraints to the
development of upstream supplier industries and connected
services.