A View on the Development of the South African Steel Industry and its Government's Roles in that Sector

Abstract

It is said that the South African Government had played important roles in the manufacturing sector through industrial decentralization policy, import substitution policy, and export promotion policy with high political motivation since the 1920's. Those government interventions, however, should be reconsidered under the new GATT/WTO agreement. South Africa must reduce the levels of protection and terminate export subsidies. Thus, improvement of industrial competitiveness would be a major challenge facing democratized South Africa.
The steel industry is one of South Africa's most export oriented industries, which has strong international competitiveness. This industry has strong forward linkage effects with downstream industries as well. But few books describe its developmental processes from the economic point of view.
Therefore, this paper attempts to evaluate the effectiveness of government's industrial policy for the development of the steel industry, in particular, in terms of successful policy shift from import substitution to export orientation. This paper also tries to examine the direction of the new steel policy in the post-apartheid era based on the author's survey in summer, 1995 and 1996.
It is found that the steel industry has firmly reflected the needs of the government at various times. Although government obviously affected its development, the author doubts the effectiveness of the past policies. Firstly, some external factors, beside that of the government's, seemed to influence export increases. Secondly, it created an oligopolistic situation in the domestic market, preventing the development of downstream industries. Finally, lack of training for African workers especially, caused low labor productivity and reduced the number of African workers in the 1980's.
The new South African government has two types of steel policies, namely that of supply-side measure and cluster study. It would be said that the government still has a role in creating more jobs and an environment which facilitates the manufacturing sector as a whole