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DTI Economic Research Advisory Network (ERAN)
First Annual Conference 2016, East London, South
Africa
Creating multiple supporting sectors in singlesector mining towns: An alternative to increasing
manufacturing exports and promoting trade
Presented by
Kamogelo Motshidi
Presentation outline
• Introduction
• Influence of industrial policy on industrial
development
• International competitiveness
• Impasses in industrial development
• Export diversification
• Case Study
• Conclusion
INTRODUCTION
• Manufacturing sector plays a vital role in
economy because it stimulates growth in
other industries, and is a significant
contributor to employment creation and
economic growth
• Repurposing single-sector towns, such as
mining towns
• Leverage from existing social and physical
infrastructure found in mining towns
• Increase exports and promote export
diversification
• The analysis of repurposing mining towns has
been analysed primarily from the perspective of
urban planning, and environmental affairs, with
minimal analysis being provided from the
perspective of economics, trade in particular
• SA can leverage from its existing comparative
advantage in mining
INFLUENCE OF INDUSTRIAL POLICY ON
INDUSTRIAL DEVELOPMENT
• “Industry is probably seen, domestically, principally
as a generator of jobs, maybe also as a source of
government revenue, but not much more. Its
capacity to shape the sort of economy a nation has and therefore its capacity to shape the sort of people
we are and the lives we lead - is probably not
considered too often….the reality is that you can
change a country when you change its industry and
trade policy” . – Peter Varghese Secretary,
Department of Foreign Affairs and Trade, Australia
Effects of trade policies
• Need to address trade inefficiencies
• Quantitative instruments used
• Secondary and tertiary economic sectors have
overtaken the primary sector in terms of the
structure of the economy (the tertiary sector
is 67.6% of the economy) has led to a decline
in employment in labour-intensive work
INTERNATIONAL COMPETITIVENESS
• Focus on manufacturing
• Becoming internationally competitive and
self-sustained
• Crux is the creating employment
opportunities, particularly for a low to semiskilled workforce
• Need to transform mining towns
Lewis Dual Sector Model
• Theoretically explains labour transition from one
sector to another
• Some assumptions:
– Surplus of unproductive labour in a traditional sector
– Excess labour will be attracted to the manufacturing
sector
– Workers no longer in traditional sector would be
attracted by the higher wages in the manufacturing
sector
– Fixed wage levels
– Profits are reinvested into sector
Lewis Dual Sector Model (cont’d)
• Criticisms
– Profits from the industry may not necessarily be
reinvested into the sector
– Transitioning labour from one sector to another is
not as simple or straightforward as the model
implies
– Wage levels will not always be fixed as the model
assumes
IMPASSES IN INDUSTRIAL DEVELOPMENT
•
•
•
•
Tough international competition
Poor trade and weak industrial development
Poor job creation in labour-absorbing industries
Insufficient investment in value-adding initiatives
and manufacturing
• Labour force composition
• Private sector uncertainty regarding government
policies and regulation (SA ranked 117/140 in
terms of government regulation by WEF Global
Competitiveness Report)
EXPORT DIVERSIFICATION
• SA only makes use of 20% of its potential export relationships
(World Bank)
Graphic: SA Chamber of Mines
CASE STUDY: ZHAOYUAN CITY, CHINA
• Key Chinese gold mining destination
• Economic reform through Deng Xiaoping
encouraging market allocation through
export-led growth to encourage investment in
light manufacturing
• Later reinvesting in more technologically
advanced production
Case study: Zhaoyuan City, China:
5 Supporting Industries
1) Gold mining and gold further processing
industry
2) Rubber tyre and tyre material industry
3) Electronic material industry
4) Machinery manufacturing industry
5) Foodstuffs industry
Area now generates US$172 million in income
CONCLUSION
• Need to maximise potential benefits
• Assess the implications of town and sector
transformation
• Promote competitiveness
• Carve a new niche
• Sector prioritisation: expand or introduce
different international markets
• Institutional economics
THANK YOU