Investigating the effectiveness of manufacturing clusters on economic development in eThekwini Municipality.

Abstract

The existing industrial policy in South Africa centres on the economy on two levels: a sectorial and spatial level. The spatial level approaches economic development in specific geographic locations while the sectorial approach relates to the manner in which industrial programmes concentrate on specific sectors i.e. industrial clusters. This change in programmes from targeting specific industries to an emphasis on industrial clusters has complemented the change in focus to export promotion under trade policy. Industry clusters are considered as having the potential to increase manufacturing performance and can provide the basis for sustainable competitive advantage for economic regions. This thesis investigated whether clusters have had a positive impact on investment and consequently local economic growth in Durban. International experiences of both developed and developing countries illustrate the potential of clustering as a powerful strategy in increasing manufacturing performance and competitiveness. It can be concluded that manufacturing industry clusters in Durban benefit eThekwini local government. The major benefits and successes include securing markets, increased production capacity and productivity, increased turnover levels and revenues, job creation, increased research and development, proximity to suppliers and availability of an expert labour pool. In addition, better skills have been attracted to Durban, higher productivity levels and revenues, job creation and growth of company capacities, as well as a general growth of companies in the area have been recorded. However, study findings suggest that a significant number of these companies are fairly small and mainly in the clothing, textile and leather sector. The cluster inter-linkages are based on markets, competition and proximity of raw materials. Government support is through policy advocacy. Despite these benefits of manufacturing industry clustering, the cluster initiative experiences challenges related to cost of labour, limited innovation around research and development, increased competition and limited access to financial support. Physical infrastructure, financial support as well as partnerships and collaborations with institutions to enhance research, training and development of critical skills would enhance their productivity and profits. The study calls for strengthening of collaborative frameworks to reinforce clusters and stimulate growth of a different approach to labour regulation taking into cognisance the needs of both the small businesses and employees.