Document: South Africa: Automotive Cluster (Macroeconomics of Competitiveness)
South Africa is one of the most advanced countries in Africa, with a strong mining cluster and a significant domestic market. In manufacturing, the automotive cluster is the most important and successful, with firms operating along all levels of the value chain. Major
international automobile manufacturers are at the center of South Africa’s export oriented auto cluster, and their presence has spawned the creation of supporting suppliers. South Africa is an exporter of auto components, particularly catalytic converters and leather upholstery.
However, the auto cluster faces intense competition from a global industry whose center of gravity is increasingly shifting to emerging markets. Other emerging market auto clusters like those of Mexico and Thailand enjoy advantages of lower costs and greater proximity to major export markets. In order to compete, South Africa must address its competitive weaknesses.
As economic isolation and protection began to wind down after apartheid, the government helped the auto cluster adjust to international competition through the support of the Motor Industry Development Program (MIDP). South Africa is now at a crossroads as MIDP comes to an end. It still must address weaknesses in regards to labour market rigidity and unrest, lack of skilled technicians, low levels of R&D, and insufficient supplier depth.