KCG Lunch-time Seminar

Industrialization in the era of GVCs – A case study of the South African automotive industry — Tobias Wuttke

03 Jun 2022

12:00
-
13:00
Institut für Weltwirtschaft

Speaker

Tobias Wuttke (Roskilde University)

Abstract

There is a vibrant debate about how the global fragmentation of production influences the possibilities for export-led catch-up industrialization (à la East Asia) by developing countries today. It is generally emphasized that it has become easier for developing countries to export into world markets through the participation in global value chains (GVCs). In this paper, I discuss the case of the integration of South Africa into the automotive GVC over the last 25 years. Based on more than 50 semi-structured interviews with automotive assemblers, multinational component suppliers, locally owned component suppliers, and policymakers, as well as data from South African input-output tables, the paper argues that South Africa has enjoyed significant benefits from exporting into the automotive GVC, but it has not led to structural change and significant spillover effects to other industries. The automotive GVC’s governance structure, which is driven by powerful lead firm interests, undermines the building of domestic inter-industry linkages to automotive component manufacturing, local material production and local toolmaking. Industrial policy in South Africa was successful in attracting an export-oriented automotive industry to the country, despite the unfavourable geographical location. It, however, failed to foster the emergence of locally owned component firms with design and product development capabilities. An effort at developing a domestic electric car assembler failed because of a lack of coordination of policy. Overall, the industry operates as a large enclave with limited domestic backward linkages and without indigenous design and product development capabilities. By way of conclusion, the paper shows that this outcome is not unique to South Africa, but a predictable outcome of the governance dynamics of the automotive GVC, unless mitigated by determined and coordinated industrial policy.

Authors

Tobias Wuttke (Roskilde University) — Lindsay Whitfield (Roskilde University)

Room

Conference Room at the Kiel Institute for the World Economy and via Zoom

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