The policy of state intervention in the establishment and development of manufacturing industry in South Africa
Date
2014-08-18
Authors
Zarenda, Harry
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Abstract
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.