A new growth path for South African industrialisation: An input-output analysis

Abstract

This paper looks at the way in which the structure of the economy has been built through the economic policies of the Apartheid government and reinforced in the first sixteen years of democracy. It is argued that previous growth paths have resulted in an industrial structure that systematically excludesthe majority in engaging in economic activities, particularly in terms of waged labour. We discuss what is meant by the New Growth Path under the current consensus and relate this to Hirschman‟s (1958) theory of linkage based economic development, and the need for a change in approach to industrial policy and the need for focussed sector targeting. Having argued that the achievement of the NGP depends upon the restructuring of the economy towards increased labour intensity and greater interconnectedness between industries, we apply Hirschman‟s linkage theory through input-output analysis in order to identify potential „key‟ sectors on the basis of strong forward and backward linkages to other industries. In addition, the potential impact of sector expansion on trade and employment through the calculation of employment and export multipliers. The quantitative analysis presented in this paper constitutes a first step in a deeper study that will further take into account the implications of sectoral expansion on imported inputs. This is an extremely important issue given the size of South Africa‟s current account deficit