The political economy of industrial policy – the case of improving manufacturing through localisation

Abstract

The scope of the study is defined within the field of development economics specifically focusing on localisation industrial policy aimed at stimulating manufacturing. The primary objective of this paper is to deepen understanding of the link between economic development and localisation of the manufacturing value chain. Through analysis and examination, this research delves into debates surrounding South Africa's adoption of a localisation policy as an instrument for increasing domestic output levels. The study also investigated factors contributing to South Africa’s de-industrialisation and declining manufacturing capacity. Through conversational semi-structured interviews, the researcher gained insights into the challenges facing manufacturing and the feasibility of localisation. According to the findings of the study, the manufacturing sector faces significant obstacles to localisation, including manufacturing costs, policy instruments, poor infrastructure and logistics networks, and inadequate demand. Both global and domestic factors have had an impact on the manufacturing sector dynamics. Significantly enough for the successful implementation of localisation policies will be the political will and support. The research findings highlight the need for the implementation of effective monitoring and evaluation systems to improve policy execution. If implemented well, localisation will not only foster industrial development but may also promote an inclusive economy.