An Industrial Strategy for the Motor Vehicle Assembly and Component Sector Anthony Black ARCHIV 113599 jy Project IDRO - Li1. AN INDUSTRIAL S TRA TEGY FOR THE MOTOR VEHICLE ASSEMBLY AND COMPONENTSECTORS Anthony Black Industrial Strategy Project Development Policy Research Unit School of Economics University of Cape Town 1994 I UCT] rNEsJ / UCT Press(Pty) Ltd Universityof Cape Town PrivateBag Rondebosch 7700 SouthAfrica All rights are reserved.No part of this publicationmay be reproduced, stored in a retrieval system, or transmittedin any form or by any means, electronic, mechanical, photocopying, icording or otherwise, without priorpermission of thepublisher. Cover illustration: Taken from Gavin Young's sculpture, "Hoerrikwagga", standing near JamesonHall on the University of Cape Towncampus. Typesetting: Hayley Viljoen Coverdesign: KarrenVisser Printed and bound by CredaPress Copyright: IndustrialStrategy Project First published: 1994 ISBN: 0-7992-1575-9 EDITORIAL COMMENT This report is one ofa seriesproduced by the Industrial StrategyProject. The ISP has its origins in the Economic Trends Research Group, a collective of economists and other social scientists convenedby the Congress of South African Trade Unions in 1986. COSATU, under attack for its support for sanctions, initially asked these researchers to examinethe impact ofenforced 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 expanded into a full-blown analysis of South Africa's economiccrisis. The poor performance of South Africa's manufacturing sector loomed large 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 particularly conspicuous by its inability to create jobs, and to produce commodities that satisfied the divergent requirements pf the domestic and international markets. A range of factors contributed to this malaise — apartheid'simpact on the skills profile of the 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 orientedtrade 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 research project. The unbanning of the ANC and the certainty of the immediate accession to power of COSATU's political ally, coupled with the union federation's increasingly direct role in policy formulation, ensuredthat the ISP focus closely on policy, contributing to the development ofthe industrial policy that would address the poor performanceof South African manufacturing. To this end, the ISP engaged a range of researchers with the purpose of undertakingdetailed examinations of the key sub-sectors of SouthAfrican 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 of a particular sector. The researchers were required to study the local sector and the factors promoting and restraining its development. They were required to assess its prospects in the light ofthe likely global trajectory of the industry. Detailed examination of local firms were complemented by international visits that enabled the 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, technologydevelopment, market and ownership structures, trade performance and policies,and regional industrial strategies. Industrialpolicy is not a plan easily containedbetween the covers of a single document. It is a process, a process of engagement between the key industrial stakeholders. South Africa's peculiar transition has given concrete expression to this credo, with the tripartite National EconomicForum and the varioussectoral task groups the key institutionsand processes within which an evolving industrial policy is being developed. COSATUhas 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 constantdialogue between the ISP and the COSATU leadership, and by a traineeship programme which saw a number of union leaders seconded to the ISP for its duration. In additionthe research process has engaged a range of key actors. Individualresearchers have engaged with union and business leaders and experts within government. The ISP was punctuatedby a series of intensive workshop attendedby the researchers, COSATU and ANC leaders, and other local and international experts. The work-in-progress was thoroughly discussed and critiquedat these workshops and it is appropriateto 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, taking up questions still unanswered, re-examining conclusions of the first phase and continuingthe unending process of developing industrial policy. It is in this spirit that these reports shouldbe read: they are not final plans, but simply attempts to start a vital process, one that will of necessity be taken forward by all ofthe major industry participants. The IndustrialStrategy Project was fundedby 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 benefitted not only from the financial resources of these institutions, but also from the wide-ranging experience of their staff members and their deep and abiding commitmentto a democraticand prosperous South Africa. Avril Joffe David Kaplan David Lewis Raphael Kaplinsky ISP Co-Directors Development Policy ResearchUnit University of Cape Town FOREWORD In the late eighties COSATIJ commissioned a group of economists to prepare a report analysing the impact of sanctions on the South Africaneconomy. We commissionedthis work in response to criticism in the media and elsewhere that 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 research revealed that the crisis of the South Africaneconomy was rooted in the policies of the apartheidera and our commission to the economists was transformed into a full-scale critique ofthe economics ofapartheid. A key consequence ofthe failures of apartheid's social and economic policies was its unproductive manufacturing sector. It was unable to produce basic goods ofa suitablequality and at an affordable price; it was unable to produce goods that successfullypenetrated international markets; it relied on low paid, poorly trained workers, and harsh, authoritarian shop floor supervision; above all, it proved incapable of generating desperately needed employment. While manufacturing'scontribution 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 COSATtJ to request its research collective to undertakeresearch in support of our attempt to formulate a new industrial policy. This request floweredinto the Industrial StrategyProject whose output is representedin these reports. The research process has been characterised by considerable dialogue between COSATU, its affiliates and the researchers. We have learnt much from this interaction;we are confident that we have taught the researchers much. However this work is the output of an independent research collective. As is to be expectedin an arms length relationshipof this kind, we do not agree with every line ofeach 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, productiveworkers. Above all we believe, and this is endorsed by the ISP, that an independent trade union movement actively and aggressively pursuing its interests is not merely compatible with rapid and sustainable industrial development — it is a precondition. John Gomomo President,Congress of SouthAfrican Trade Unions Acknowledgements Many people have given freely of their time and assisted in the course oftills project. I am grateful to all those from automotive companies, industry federations, unions, consulting firms, research institutions and other organisations who granted interviews or assisted with information. I have also had useful discussions with members and participants in the Motor Industry Task Group especially on policy questions. I benefitted enormously also from inputs by colleagues on the Industrial