An analysis of the impact of the motor industry development programme (MIDP) on the development of the South African motor vehicle industry.
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Date
2001
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Abstract
The study aims to research the performance of past and present motor industry
policy in South Africa - with special reference to Phase VI of the local content
programme and the Motor Industry Development programme (MIDP) - in the
light of the domestic macroeconomic environment and global developments in
the world automotive industry. The overall objective of this dissertation is to
contribute to the debate on motor industry policy which concerns what future
policy would be appropriate for the development of a viable and competitive
motor vehicle industry. Thus this study is primarily policy-oriented, and the
empirical analysis produced deals with important developments in the local
motor and component industries and attempts to examine key variables to
establish the likely impact of industry-specific policy changes - both past and
future.
The method of investigation involves the study of relevant theoretical literature
regarding domestic automotive policy, and considers policies of low-volume
automobile producing economies, especially Australia, Philippines, India and
Malaysia. Also, empirical data of various sub-sectors of manufacturing in South
Africa were examined and compared to the motor vehicle sector in order to
determine the extent to which the macroeconomic state of the domestic
economy as distinct from automotive policy might explain the performance of
the South African motor industry.
The dissertation presents a review of the local content programme of motor
industry policy in South Africa since the early 1960s. It examines the claim that
import-substituting policy in the motor industry actually had a negative impact
on the country's balance of payments. The study finds questionable whether
local content policy contributed significantly to the large net foreign exchange
usage by the motor industry in real terms. There is evidence that increases in
the nominal industry trade deficit can largely be explained by the weakening of
the Rand, especially during the mid-1980s.
Also, empirical data was used to make an examination of the performance of
automotive exports under Phase VI and the MIDP in the context of economy-wide
trade liberalization. It was found that exports of automotive products grew
significantly under both Phase VI and the MIDP in real Rand terms. Thus, it
seems probable that industry-specific policy played a major role in the strong
export performance of the sector since the late 1980s through to the 1990s.
The study then reviews the revised version of the impact of the MIDP and
considers the future of the industry. The state of the domestic macroeconomic
environment and globalization of the international automobile industry, including
the influence of Transnational Corporations' (TNCs') strategies, will undoubtedly
determine the future direction of South Africa's automotive sector. In the short to
medium term, we might expect an increase in imported vehicles and some
rationalization of the industry. Over the longer term, the possibility of fewer
OEMs and component suppliers, and automotive exports are likely to rise as
trade and the inflow of foreign investment accelerates due to foreign
collaboration and global competition.
A simple theoretical model applicable to the South African automotive industry
attempts to show the welfare implications of a protective automotive regime
(similar to Phase VI) and compares it with that of a more liberal (tariffs-only)
automotive regime that may be considered as a likely policy-option for South
Africa post-MIDP. The theoretical analysis indicates that the tariffs-only policy is
superior to that of a more protective regime in that static efficiency losses are
lower. However, the dynamic effects of such policy changes and of possible
TNC responses to them, which are referred to in the previous paragraph, are
not included in this simple model.
Description
Thesis (M.Com.)-University of Durban-Westville, 2001.
Keywords
Automobile industry and trade--Government policy--South Africa., Automobile industry and trade--South Africa., Industrial policy--South Africa., Theses--Economics.