» Projects: Sub Saharan Africa

Cotton-to-Garment, Automotive Components, and Construction Equipment Sectors

The integrated value chain analysis (IVCA) showed that government programs in South Africa were initially effective as a catalyst for growth by attracting foreign investments and increasing local value added production. However, prolonged reliance on government incentive schemes has contributed to the creation of overprotected industries where economic activity of an entire sector is driven by, and is dependent on, these incentive schemes that threaten to undermine the long-term competitiveness of strategic sectors in South Africa. The analyses examined the long-term competitiveness and sustainability of Black Economic Empowerment programs in light of these incentive schemes. In addition, the IVCA quantified the impact of the:
  • High cost of input material;
  • Poor human resource base;
  • Lack of investments in the indigenization of technology and know-how; and
  • Absence of coordination between provincial and national policies and how this undermines the competitiveness of these strategic sectors in South Africa.

Monopolistic production of steel and iron in South Africa resulted in consistently higher prices for locally produced versus international commodities: 30% and 50% respectively. As a result, for example, the final cost to produce a centrifugal pump in South Africa is about $373/unit. On average, the cost to procure a similar pump from India is approximately 38% less, or about $230/unit. Thus, protective policies and market inefficiencies undermine the competitiveness of enterprises in South Africa.