Industrial incentives

The manufacturing sector has performed poorly and employment has fallen sharply. Policy has tended to push manufacturing onto a more capital-intensive trajectory. Paradoxically, South Africa’s actual (or ‘revealed’) comparative advantage has come to be in relatively capital-intensive products. In contrast, labour-intensive sub-sectors have performed poorly. In a context of high structural unemployment, industrial policy should focus more on supporting employment-intensive growth by subsidising labour and training rather than capital investment, electricity and infrastructure for capital-intensive firms.