Pulp and Paper Sector
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An Industrial Strategy for the Pulp and Paper Sector Lael Bethlehem ARCHIV 103411 y Project IDRC LW. AN INDUSTRIAL STRATEGY FOR THE PULP AND PAPER SECTOR Lad Bethlehem Industrial Strategy Project Development Policy Research Unit School of Economics University of Cape Town 1994 .c2(.J UCT Press (Pty) Ltd Universityof Cape Town Private Bag Rondebosch 7700 South Africa All rights are reserved. No part of this publicationmay be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without prior permissionof the publisher. Cover illustration: Taken from Gavin Young's sculpture, "Hoerrikwagga", standing near Jameson Hall on the University of Cape Town campus. Typesetting: Kira Low Cover design: Karren Visser Printed and bound by Creda Press Copyright: Industrial Strategy Project First published: 1994 ISBN: 0-7992-1574-0 EDITORIAL COMMENT This report is one of a series produced by the Industrial Strategy Project. The ISP has its origins in the Economic Trends Research Group, a collective of economists and other social scientists convened by the Congress of South AfricanTrade Unionsin 1986. COSATU, under attack for its support for sanctions, initially asked these researchers to examine the impact of enforced isolation on the South African economy. It soon became clear that sanctions were a small aspect of the problems besetting the South African economy, and the work of the Economic Trends Research Group expandedinto a full-blown analysis of South Africa's economic crisis. The poor performance ofSouth Africa's manufacturing sector loomedlarge in the litany of problems bedeviling the South African economy. The 1980s had been, in economic terms, something of a lost decade. The manufacturing sector was particularlyconspicuous by its inability to createjobs, and to producecommodities that satisfiedthe divergentrequirements of the domestic and international markets. A range of factors contributed to this malaise - apartheid's impact on the skills profile ofthe workforce, repressive and outmoded industrial relations systems and work organisation, a highly concentrated industrial structure and a concomitantly weak and repressed SME and micro-enterprise sector, and a highly inward oriented trade regime, were the most obvious sources of the crisis in manufacturing. However, the solutions were less obvious than the problems, and in 1990, again at COSATU's initiation, the ISP was conceived. From the outset, the political environment ensured that the ISP would not be an ordinary researchproject. The unbanning ofthe ANC and the certainty ofthe immediate accessionto power of COSATU's political ally, coupled with the union federation's increasingly direct role in policy formulation, ensured that the ISP focus closely on policy, contributing to the developmentof the industrial policy that would address the poor performance of South African manufacturing. To this end, the ISP engageda range of researchers with the purpose of undertaking detailed examinations of the key sub-sectors of South African manufacturing. The fruits of the ISP are to be found in the reports, such as this one, most of which are to be published by the UCT Press. The authors of the reports were assigned, generally for a period of 14 months, to the study ofa particularsector. The researchers were requiredto study the local sector and the factors promoting and restraining its development. They were required to assess its prospectsin the light of the likely global trajectory ofthe industry. Detailed examinationof local firms were complemented by international visits that enabledthe researchers to consult with international experts and visit factories to enable them to situate South African firms in a comparative perspective. In addition to the sectoral studies, the ISP also engaged researchers to examine key cross-cutting issues. Those selected for study were human resource development and industrial relations, technology development, market and ownership structures, trade performance and policies, and regional industrial strategies. Industrial policy is not a plan easily contained between the covers of a single document. It is a process, aprocess of engagement betweenthe key industrial stakeholders. South Africa's peculiar transition has given concrete expressionto this credo, with the tripartite National Economic Forum and the various sectoral task groups the key institutions and processes within which an evolving industrial policy is being developed. COSATU has played the leading role in this process. The ISP has, in turn, made a significant contribution to COSATU's capacities. It has done this by constant dialogue between the ISP and the COSATU leadership, and by atraineeship programme which saw a numberof union leaders seconded to the ISP for its duration. In addition the research process has engaged a range of key actors. Individual researchers have engaged with union and business leaders and experts within government. The ISP was punctuated by a series of intensive workshop attended by the researchers, COSATU and ANC leaders, and other local and international experts.The work-in-progress was thoroughly discussed and critiqued at these workshops and it is appropriate to see each report as owing a great deal to the ISP collective. A number of researchers are continuing their work from within the industry task forces, the unions, and the structures of the new government. The ISP itself is moving into a second phase, takingup questions still unanswered, re-examining conclusions ofthe first phase and continuing the unending process of developing industrial policy. It is in this spirit that these reports should be read: they are not final plans, but simply attempts to start a vital process, one that will of necessity be taken forward by all of the major industry participants. The Industrial Strategy Project was funded by generous grants from the Humanistisch Instituut Voor Ontwikkelingssamenwerking (HIVOS) of The Netherlands, the International Development Research Centre (IDRC), Ottawa, Canada, and the Olof Palme International Centre of Sweden. We benefittednot only from the financial resources of these institutions, but also from the wide-ranging experience of their staff members and their deep and abiding commitment to a democratic and prosperous South Africa. Avril Joffe David Kaplan David Lewis Raphael Kaplinsky ISP Co-Directors Development Policy Research Unit University of Cape Town FOREWORD In the late eighties COSATU commissioned a group of economists to prepare a report analysing the impact of sanctions on the South African economy. We commissioned this — work in response to criticismin the media and elsewherethat held us through our support — for sanctions responsible for the sorry state of the South African economy, including the miserable conditions of our members and others whose interests and aspirations we represented. The researchrevealed that the crisis ofthe SouthAfrican economy was rootedin the policies of the apartheidera and our commission to the economists was transfonnedinto a full-scale critique of the economics of apartheid. A key consequence of the failures of apartheid's social and economic policies was its unproductive manufacturing sector. It was unable to produce basic goods of a suitablequality and at an affordable price;it was unable to produce goods that successfully penetrated international markets; it relied on low paid, poorly trained workers, and harsh, authoritarian shop floor supervision; above all, it proved incapable of generating desperatelyneeded employment. Whilemanufacturing's contribution to the global economy escalated, South Africa relied increasingly on its natural resource base and the cheap labour that mined and farmed it. Appreciation of these problems inspired COSATU to request its research collective to undertake research in support of our attempt to formulate a new industrial policy. This request flowered into the Industrial Strategy Project whose output is representedin these reports. The researchprocess has been characterised by considerable dialogue between COSATLJ, its affiliates and the researchers. We have learnt much from this interaction; we are confident that wehave taught the researchers much. Howeverthis work is the output of anindependent research collective. As is to be expectedin an arms length relationshipof this kind, we do not agree with every line of each report, we do not accept every recommendation. But with regard to its major findings, we do agree that there is a real potential for building an efficient manufacturing base, rooted in well paid, productive workers. Above all we believe, and this is endorsedby the ISP, that an independent trade union movement actively and aggressively pursuing its interests is not merely compatible with rapid and sustainable industrial — development,p' it is a precondition. John Gomomo President,Congress of South African Trade Unions Acknowledgements Over the last 15 months 1 have discovered that developing an analysis of a large industrial sector is no easy task. In fact my progress in this research is perhaps best captured in the following excerpt from a popular magazine: The director's PA gave me a thin—lippedsmile, strode towards the flip chart and motionedfor me to be seated. 'This is where you are', she announced, pointing to the lowest point on her squiggle. 'You don't know what you don't know. When you've familiarised yourselfwith these,' she added, pointingto a pile