Strategic analysis in the context of South African economic development.
Van Rooyen, Wade.
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The South African Department of Trade and Industry administers supply side incentive programmes aimed at promoting industrial development. This report presents a strategic analysis of the Chief Directorate: Manufacturing Development, and the Small Medium Manufacturing Development Program (SMMDP), in the context of South African Economic Development. Principles of corporate strategic theory are applied to analyse the SMMDP, a key element of government's basket of supply side measures. The programme has been implemented under the direction of the Board for Manufacturing Development whose objective is "To promote manufacturing Growth by way of incentives or concessions with regard to requirements within the framework of the economic policy of the republic." The success of the SMMDP is measured by the extent to which it accomplished the objectives of Wealth Creation, Employment Creation, Development of Entrepreneurship, Promoting the Utilisation of Raw Materials, Ensuring the Long Term Sustainability of Projects Receiving Incentives, Creating Opportunities for the Introduction of New and Advanced Skills into South Africa, and Facilitating International Competitiveness. Its effectiveness is hindered by policy conditions embodied in the SMMDP. Policy requirements that are within the Board for Manufacturing Development's control, ranked in order of severity are: Plant and Machinery, Equity, Turnover, and Human Resources. The requirement that has the highest frequency of non-compliance and the greatest effect is the Plant and Machinery requirement. Since this requirement has no bearing on the achievement of objectives and is only in place for the board's convenience, it should be removed from the programme. A strategy that focuses on clusters of industry that produce high numbers of employment relative to the investment made would be better suited to the objective of employment creation. Employment creation can also be more easily achieved if the Board allows the use of second-generation machinery. Insufficient correlation between the Board for Manufacturing Development's strategy and that of the labour authorities negate the positive effects of incentives on employment creation. The strategy was acceptable to the stakeholders at the time of implementation, but since many of the intended outcomes did not materialise, a post implementation assessment does not find the strategy acceptable. In assessing the feasibility of the strategy, the resources and competencies of the Chief Directorate: Manufacturing Development are considered. Many industrialists loose incentives due to the exclusion of expansion projects from the scope of the SMMDP. However, since the exclusion is due to lack of resources, the strategy cannot be feasible if expansions are included within the scope of the programme. Although the SMMDP has failed to achieve most of it's objectives, the overriding objective of the Board for Manufacturing Development, is the creation of wealth. The programme has achieved this requirement, in spite of its failures, and should therefore not be considered a total failure. The study recommends that: • The Plant and Machinery requirement be removed from the SMMDP. • The equity ratio is re-evaluated to produce a more desirable outcome. • The Board for Manufacturing Development employ's a bird's eye economic approach to stimulate growth in industries that will produce the most favourable economic outcomes. In other words, blanket incentives should be traded for specific incentivisation. • Expansions are included in the scope of industrial incentives. • The Board for Manufacturing Development adopts a transparent approach so that industry and government may work together to produce favourable economic outcomes.