Trade Policy Reform and the Competitive Response in Kwazulu Natal Province, South Africa

World Development Vol. 27, No. 4, pp. 717±737, 1999 Ó 1999 Elsevier Science Ltd All rights reserved. Printed in Great Britain 0305-750X/99 $ ± see front matter

PII: S0305-750X(99)00024-8

Trade Policy Reform and the Competitive Response in Kwazulu Natal Province, South Africa RAPHAEL KAPLINSKY Institute of Development Studies, University of Sussex and Centrim, University of Brighton, Brighton, UK and MIKE MORRIS * University of Natal, Durban, South Africa Summary. Ð Like many other formerly protected economies, the liberalization of the

external trade regime has placed new competitive pressures on South African enterprises. Detailed research in over 130 enterprises in the KwaZulu-Natal (KZN) Province of South Africa shows the extent to which ®rms have been able to respond to these new competitive pressures and particularly on their ability to ``hear'' and to meet more demanding customers' requirements. Inevitably the response has been varied, but there are reasons to be concerned that the pace of adjustment has been suboptimal. This re¯ects imperfections in information markets, the challenges poses by the need for new social relations in production, and the limited implementation of new ``supply-sided'' policies designed to compensate ®rms for the reduction in protective barriers. Ó 1999 Elsevier Science Ltd. All rights reserved.

1. INTRODUCTION Recent decades have seen a signi®cant switch in the incentive system in many formerly protected economies. The changes have been particularly marked in relation to the foreign trade regime. Broadly speaking, less-developed countries (LDCs) can be grouped into two campsÐthose in which trade reform has been imposed by external agencies through various Structural Adjustment Programs (much of the Caribbean, sub-Saharan Africa and Latin America) and those in which the agenda for reform has been driven primarily by domestic interests (Chile and India). In those cases where trade policy reform has been rapid, there has generally been a signi®cant (although not always accurately measured) negative impact on output and employment. For example, during 1989±95, GDP fell by 23% in Eastern Europe and the Baltic States, and by 47% for the former Soviet Union (Financial Times, April 15, 1995). 717

As will be shown below, South Africa can be grouped with those countries in which trade policy reform has largely been the result of internal decision-making processes. But little is know about the impact of these reforms at the level of the ®rm, and consequently it has not been easy for policy-makers to assess the evolution of the industrial sector as the reforms

* This

paper is based on research undertaken in the KwaZulu-Natal Industrial Restructuring Project. The ®rm-level ®ndings cited are derived from the research work of Karen Harrison in the clothing sector, Kabelo Reid in the textiles sector, Justin Barnes in the auto assembly and components sector and Imraan Valodia on exports. For more detailed data, readers are directed to the references cited. We are indebted to the members of the Team, to John Bessant and Vishnu Padayachee and to two anonymous referees for comments on earlier drafts. Final revision accepted: 30 September 1998.

718

WORLD DEVELOPMENT

gather pace. In order to assess the likely outcome of this policy agenda, at least in the shortto medium-term, and the implications which this holds for policy, we have conducted a series of detailed industry-level studies in a number of sectors in the KwaZulu-Natal (KZN) province of South Africa, involving: Ðinterviews in the clothing sector with 93 producing ®rms (21 full manufacturers and 63 cut-make-andtrim, CMT, manufacturers) and buyers from the major retailers and design-houses.1 Ðinterviews in the auto and components sector, with the province's two major original equipment manufacturers (Toyota, which has the largest market share in South Africa and a South African ®rm, Bell Equipment manufacturing earthmoving equipment), and with 38 component suppliers accounting for more than 80% of the subsector's provincial output;2 in addition, we have also worked closely with three component ®rms in the framework of the KZN Industrial Restructuring Project. Ðinterviews with a sample of the province's largest textile producers, and detailed and repeated plant level investigation on four textiles-for-auto components ®rms.3

Although this research has been limited to KZN province, there is no reason to believe that it is unrepresentative of the problems of South African manufacturing industry at large.4 Our research has concentrated on trying to assess the impact of trade policy reform on these ®rms, by addressing the following six major issues (Section 3). First, given that these ®rms were nurtured in a highly protected environment, do they show the capacity to accurately assess the new market conditions in which they are now operating? Second, do these ®rms have the capacity to meet the requirements of increasingly demanding markets in which price competitiveness is only a minimum market-entry condition? Third, how do these ®rms perform in relation to the operating parameters of what has come to be called `World Class Manufacturing' and which appear to be necessary to satisfy the nonprice demands of contemporary global markets (Schonberger, 1986; Porter, 1990; Stalk and Hout, 1990)? Fourth, since global experience suggests that inter®rm linkages are a critical part of ®rmlevel competitiveness, how e€ective is systemic eciency in these sectors? Fifth, and here our evidence is only preliminary, to what extent is ®rm-level growth associated with export performance?5 Finally, to what extent are these ®rms embedded in a set of relationships with the national system of innovation (including

Business Associations) which is widely believed to be an important determinant of ®rm-level excellence? In the following section we brie¯y review the changing policy environment in South Africa to assess the extent to which new policy measures are beginning to address the needs of these ®rms. 2. THE CHANGING POLICY ENVIRONMENT6 The origins of protectionism in South Africa are to be found in the introduction of tari€s in the 1920s; these gradually spread to a number of sectors. They were supplemented by quantitative restrictions in the post-WWII period. Although limited export incentives were introduced during the 1970s, the bias in the trade regime remained overwhelmingly inward, despite the devaluation of the mid-1980s. As the 1970s and 1980s progressed, quantitative restrictions began to be reduced. Nevertheless, by the late 1980s, not only were 15% of imports still covered by quantitative controls, but South Africa was characterized by an extreme form of tari€ dispersion, the highest among 32 countries surveyed by the World Bank. The average e€ective rate of protection was estimated to be 70% in 1988, although actual collection rates were (as in most countries) somewhat below the declared tari€ schedules (Belli, Finger and Amparo, 1993). In the face of growing external debt, a number of steps were taken to compensate for this anti-export bias. Most signi®cant was the General Export Incentive System (GEIS) which was established in 1991 and which provided cash incentives for exports, the subsidy increasing with the degree of value added. In addition, speci®c schemes (a€ecting both the import and export regimes) were established for individual sectors, notably for clothing and automobiles, in which ®rms were provided, inter alia, with access to a complex set of importfor-export tari€ exemptions. But not only was GEIS extremely costly (the value of subsidies were approximately 0.5% of GDP), but it was also subject to fraud. Moreover, it was also GATT-illegal, and it was therefore phased out over a number of years, ®nally to be removed in 1998. As the 1990s `progressed', there have been a series of policy reforms which have begun to undermine the net inward bias of the trade re-

TRADE POLICY REFORM

gime. Quantitative restrictions were removed, and a ®ve-year program of tari€ reform was begun in 1995. This was targeted both at reducing the dispersion in tari€ rates and in reducing average e€ective rates of protection. What is signi®cant about this is that South Africa has set rates which are below those speci®ed in WTO agreements. This is true both for average sectoral rates (Table 1) and in speci®c sectors such as automobiles and clothing. Equally radical was the removal of GEIS subsidies, although the large (and unplanned) devaluation of 1996 compensated to some extent for this.7 In summary, therefore, after more than six decades of high levels of protection and a sharp inward bias to the trade regime, South Africa's industrial sector is experiencing a signi®cant change in its incentive system. Firms are increasingly having to cope with growing import competition. Given an average GDP growth rate of around 3%, many ®rms are now ®nding that to sustain growth, it is increasingly necessary to participate in global markets to compensate for the erosion of their domestic markets. Making the transition to World Class Manufacturing (WCM) is no longer a luxury; it is now a necessity for survival. In this respect, the challenge facing South Africa's industrial sector is no di€erent from that being experienced in a wide range of formerly protected economies. So, how do ®rms measure up in this regard? There are two components to this questionÐ what is their competitive trajectory, and how do they compare globally. What follows is largely an analysis of their trajectory as they make the transition from a heavily protected to an open trading environment, although we have also been able to generate some global comparators in key elements of their production performance.8 We are not presenting data on changes in corporate pro®tability during this process of transition. This is partly because a reliable set of data is not available, and partly Table 1. Projected average tari€s and GATT binding tari€s

Consumption goods Intermediate goods Capital goods All manufactures

1994

2002

GATT Binding

34 8 11 15

17 4 5 7

26 11 15 16

Source: IDC, cited in Jenkins and Siwisa (1997).

719

because rates of pro®tability are a€ected by macroeconomic incentives and thus are not easily connected in the short-run to the capacities of ®rms to respond to the new competitive environment emerging as a result of trade policy reforms. 3. FIRM LEVEL RESPONSES TO TRADE POLICY REFORM (a) The competitive challenge The experience of the clothing sector suggests that the change in the trade regime is having a signi®cant impact on the capacity of the ®rms to compete with imports, particularly at the lower end of the market. In the earlier, protected period, the industry covered the whole spectrum of domestic demand. But competition at the low end from low-wage Asian economies is forcing ®rms to specialize in the upper segments of the market. As can be seen from Figure 1 and Figure 2, producers in the lower segments of the markets (CD) were experiencing greater diculty in sustaining both growth and pro®tability than were their competitors operating in the upmarket (AB) fashion segments. The problem for clothing manufacturers is that buyers are more discriminating in what they require in the AB segment. In addition to keener pricing, which is now simply an orderqualifying market-entry requirement, greater emphasis is being placed on a large number of nonprice competitive factors such as: quality, delivery reliability, innovation, speed of response, ¯exibility of order o€take, and ®nancial soundness. This is illustrated in Figure 3 which reports the views of the largest nine retail chain buyers who were asked to rank on a scale of 1 to 5 (1 ˆ unimportant, 5 ˆ most important) the importance given to these eight competitive factors in the AB and CD segments of the markets.9 The higher the score, the more important each of these factors are thought to be. An alarming portent for the future of the South African clothing industry is that the retail chain buyers report that with the exception of payment terms, South African clothing manufacturers are not meeting these requirements (Figure 4). By contrast, in some important respects (for example, on price and delivery reliability), foreign suppliers are performing much more e€ectively.10 Disturbingly, most of the buyers of the retail chains saw little evidence that South African manufacturing

720

WORLD DEVELOPMENT

Figure 1. Pro®t performance in di€erent market segments in the apparel industry, 1994±96 (% of responding ®rms). Source: Harrison (1997).

®rms were responding to these changes, and consequently anticipated a substantial shift to o€shore sourcing of manufacturing (but not necessarily design) in the relatively near-term. Our own work with a number of divisions of one of South Africa's largest clothing conglomerates corroborates the slow pace in which clothing ®rms are moving to the ``rapid response'' strategies and cellular layouts which are increasingly dominant in this sector globally. If these clothing-sector speci®c trends are generalized across South African industry, the outlook looks bleak for the economy's ability

to provide employment and sustained income growth in the future. (b) The ability of ®rms to hear the market While import substituting industrialization (ISI) often allowed ®rms to develop considerable technological expertise, the protected environment in which they operated meant that in terms of strategic orientation ISI resulted in domestic ®rms directing themselves toward competing on restricted market criteria (principally price and product availability). This

Figure 2. Turnover performance in di€erent market segments in the apparel industry, 1994±96 (% of responding ®rms). Source: Harrison (1997).

TRADE POLICY REFORM

721

Figure 3. Requirements of retail buyers in di€erent market segments of apparel industry. Source: Harrison (1997).

Figure 4. Retail expectations versus ®rm performance in the AB segment of the apparel market. Source: Harrison (1997).

orientation is increasingly at variance with the complex, volatile and segmented markets which are emerging in LDCs as consumers are o€ered imported substitutes. The more demanding nature of these markets in South Africa has already been shown in relation to the clothing sector, but they are also to be felt in the auto sector (see below). The question is whether, given this history of supply-pushed production,

®rms are adept at ``hearing'' the demands from these changing markets. Auto component suppliers and their customers in the automobile industry were asked to rank the importance of nine key product characteristics on a scale of 1 (unimportant) to 5 (extremely important). The characteristics were: quality; price; delivery reliability; conformity to standards; packaging; ¯exibility; in-

722

WORLD DEVELOPMENT

novative capacity; ®nancial stability; and credit facilities.11 Component ®rms were asked to assess what they thought their customers wanted, and how they actually performed on each of these scores. Then their customers were asked to determine how important each of these supplier-characteristics were to them (the buyers) and how their suppliers actually performed. This comparison was undertaken both with ®rst- and second-tier suppliers. Comparing these two sets of responses (Figure 5 and Figure 6) provides an insight into how well suppliers are hearing what their customers want and what their customers think of their capabilities. Again, as in the case of Figure 3, the higher the score, the more important this factor was judged to be.

Component ®rms believe they are hearing their markets correctly and hence rank their own performance levels as being relatively close to their market requirements (Figure 5). But, when buyers are asked to rate the performance of their own suppliers in the value chain, the gap between customer demand and domestic supplier performance is signi®cantly greater (Figure 6). This divergence is particularly large in relation to quality, price, delivery reliability and conformance to standards. The inability of ®rms to hear their markets and adjust accordingly to the demands of international competitiveness is all the more signi®cant when the performance of their foreign competitors is factored in (Figure 7). Here it appears as if foreign ®rms are better able to meet the re-

Figure 5. Customer demand and supplier performance levels in the KZN auto and components industry: the view of the suppliers. Source: Barnes (1997a).

Figure 6. Customer demand and supplier performance levels in KZN auto and components industry: the view of the buyers. Source: Barnes (1997a).

TRADE POLICY REFORM

723

Figure 7. Foreign vs. domestic supplier performance levels in the KZN auto and components industry: the view of the buyers. Source: Barnes (1997a).

quirements of buyers, and it is not surprising therefore, that, as soon as the ability to import eased up in 1995, the number of foreign suppliers per component ®rm jumped markedly (Table 2) from just under 4.5 in 1995 to just over 6.5 in 1996. Once again, as in the case of the clothing sector, the portents for the domestically oriented industry are not good, but in this sector the primary challenge is not just in relation to price competitiveness, but also in regard to innovative capacity, quality, packaging, conformity to standards and delivery reliability. There is some evidence to suggest that those ®rms which export have, through their contacts with more demanding customers, learned to hear their markets more e€ectively than have those ®rms which focus on the domestic market. This is suggested by a comparison between ®rms operating in di€erent product markets. Four ®rms exclusively serve the after-market (for spares) and are signi®cantly more outward-

Table 2. Average number of foreign suppliers per auto component ®rm Year

Average number

1990 1991 1992 1993 1994 1995 1996

4.3 4.3 4.5 4.3 4.4 4.3 6.4

Source: Barnes (1997a).

focused than are those which serve the OEMs and mixed market demands. Two of these four after-market suppliers export more than 50% of output, and the other two between 10% and 20% of their output; this places them as signi®cant outward-oriented outliers in the sample. In their case, the gap between what the domestic buyers want, and how these perform is smaller for the outward-oriented ®rms than for those with a predominantly inward focus (Barnes, 1997b). (c) Manufacturing e€ectiveness within the ®rm The ability of ®rms to hear markets e€ectively, represents only partÐalbeit a critical partÐof the restructuring agenda in an open economy. Firms have then to learn how to adjust their manufacturing operations to meet the needs of their ®nal customers, and this requires appropriate changes in their internal manufacturing organization. In our analysis of the auto-component and clothing sectors the internal eciency of operations was measured in terms of a number of indicators which are widely used in the benchmarking of ®rm-performance, not just in the auto industry but in a range of industries (Table 3).12 Our ®ndings (only partially reported here due to space constraints) show a mixed and nuanced situation. Taking ®rm inventory levels as a key indicator, the clothing sector in KZN exhibits high levels of inventory with no improvement over the past three years. In contrast the auto components sector in the province also shows high levels of inventory, but with an improving trend over the past three years

724

WORLD DEVELOPMENT

Table 3. Indicators of internal manufacturing e€ectiveness Measure of e€ectiveness

What the measure indicates

Inventories (incoming materials, work-in-progress and ®nished goods) Defects Throughput time (time taken for materials to pass through the plants) Lead times (time taken to satisfy customer requirements) Batch and lot sizes Actual vs. necessary distance traveled The percentage of value adding versus non-value adding activity Absenteeism rates and types and extent of training Suggestions (number and implementation)

Work-¯ow, layout and work-organization

(Figure 8). Nevertheless the auto components industry's inventory performance is poor by international standards. The average holding of inventories in KZN component ®rms (60 days in 1996) compares unfavorably with the 1.5 days ®gure for the best Japanese component suppliers and the average of the worst European ®rms (less than 20 days) in 1989 (Nishiguchi, cited in Jones, 1990). Similarly, although defect rates have fallen in recent years, they remain high by international standards (Figure 9).13 The performance of the

Quality procedures and work-organization Layout and work-organization Business organization, factory layout and inventory procedures Flexibility and work-¯ow Optimality of plant layout Layout and work organization Work organization and industrial relations Work organization and industrial relations

clothing sector in relation to defects is even worse, and no change is evident over the three years during 1994±96 (Figure 10). The one positive indicator for the clothing industry is that cut-make-and-trim (CMT) ®rms in the AB market, which is where the real potential for growth lies, have a signi®cantly lower defect rate than ®rms in the other markets (Figure 11).14 The signi®cant decline in average order sizes (by 40%) received by CMT clothing manufacturers from 1994 to 1996 indicates that they

Figure 8. Average days of inventory in the KZN auto and component ®rms, 1994±96. Source: Barnes (1997a).

TRADE POLICY REFORM

725

Figure 9. Average defect rates (%) in the KZN auto and component ®rms, 1994±96. Source: Barnes (1997a).

Figure 10. Average defect rates (%) in the KZN apparel ®rms, 1994±96. Source: Harrison (1997).

were having to respond to changing markets which were demanding greater ¯exibility (Figure 12). If these ®rms were hearing their markets correctly and making the commensurate internal changes that are required, this would have been re¯ected in a decrease in bundle sizes which would have dropped throughput time signi®cantly.15 Bundle sizes however have remained constant as has throughput time over the three-year period.16

A concrete example of how changing market requirements which are not met by changing production organization can increase production costs can be drawn from the auto-textiles sector. The principle customer of one supplier, an automotive assembler, was increasingly demanding product diversity, re¯ecting the change in demand which it was experiencing from its ®nal customers. Ten years ago the supplier produced only six product types,

726

WORLD DEVELOPMENT

Figure 11. Average defect rates (%) in the KZN apparel ®rms by markets. Source: Harrison (1997).

Figure 12. Average order size in KZN apparel ®rms, 1994±96. Source: Harrison (1997).

whereas in 1997 it was producing over 200 product types. The problem was that the supplier had geared its internal organization to meet the needs of a customer requiring undifferentiated components, and was consequently struggling with the ¯exibility requirements now being placed on it. With this trend toward producing new products with di€erent speci®-

cations the production process became increasingly complex and unmanageable, a problem which could only be solved by moving from a functional to a cellular layout, and reorienting inventory control, product procedures and work organization (Kaplinsky, 1994; Womack and Jones, 1996). But, in common with most South African component ®rms (and indeed,

TRADE POLICY REFORM

also ®rms in other sectors as the example of the clothing sector shows), the ®rm continued to meet the demand for product diversity with a production system geared toward product standardisation. Thus, as product diversity increased, wasted distance and time grew. The distance actually covered by materials during the course of production rose from 13% to 177% above the minimum necessary distance as production was switched from standard to di€erentiated products (Reid, 1997). Finally, there is the question of human resources, arguably the single most important element of medium- and long-term competitiveness. South African ®rms perform very poorly in this regard and there is a high level of apathy regarding training within the clothing industry. Most ®rms believe that their labor force is adequately skilled and that there is no need for training. The government has tried to encourage upgrading of labor skills by requiring ®rms in the clothing industry to spend 4% of their wage budget on training in order to qualify for accessing Duty Credit Certi®cates (which provide an import-for-export dutydrawback scheme). But this seems to have had little impact, since 90% of CMT ®rms and 65% of full manufacturers reported that there had been no change in their focus on training. Only 4.3% of CMT ®rms, for example, believed that low productivity could be solved by new approaches towards training and/or work organization. Furthermore the Clothing Industry Training Board is not heavily used by ®rms in the clothing industryÐonly 6% of CMTs and 15% of full manufacturers used the CIBT. Of the remaining ®rms, 69% of CMTs used inhouse training and 25% did not train at all; while 52% of full manufacturers used in-house training, 28 o€ered no training at all. Only a small number of ®rms (7.7% of CMTs and 10.7% of full manufacturers) saw the bene®t of

727

training as producing multi skilled workers. The perceived bene®ts of training were primarily linked to labor productivity but not to multiskilling. This is principally because there are so few production changes at the ®rm level that ¯exibility was not seen as an issue. Finally, neither absenteeism nor labor turnover have fallen in recent years and their rates are signi®cantly higher in the low-value CD markets where ®rm growth and pro®tability are more tenuous (compare Figures 1 and 2 with Table 4). In the case of Bell Equipment, one of South Africa's most successful exporting ®rms (accounting for 13% of global production of articulated dumptrucks), 30% of the labor force is functionally illiterate and although the company has begun a program of adult basic education, this represents a mere 0.73% of turnover. Labor relations are strained, with the company still feeling the legacy of the struggle against Apartheid, and middle management was obstructive toward change. Consequently, attitudes on the shop-¯oor remained entrenched. For example, Bell instituted a continuous improvement program which involved group meetings in ``home-zones'' twice a week for 15 min, and a suggestion scheme. There was some moderate success with the suggestion schemeÐwith 364 successful suggestions since 1990Ðbut most of these arose from the nonblack labor force. When the (newly-appointed black) HR manager attended one of these home-zone meetings, the discussion was in Afrikaans, and the black workers observed to him privately that they had not understood any of the proceedings! Black workers also observed that the previous racism of white junior management has been made even more complex by the insecurity which these relatively untrained white South Africans felt in the New South Africa.

Table 4. Labor absenteeism and turnover in clothing sector (percent p.a.) Labor turnover (% p.a.) All clothing ®rms 1994 1995 1996

9.2 9.3 12.1

Source: Compiled from Harrison (1997).

Clothing ®rms in CD market segment 22.3 22.5 27

Labour absenteeism (% p.a.) All clothing ®rms

Clothing ®rms in CD market segment

6.5 6.8 7.2

10.8 11.4 12.7

728

WORLD DEVELOPMENT

Figure 13. Rates of absenteeism in KZN and world class auto and components ®rms. Source: Barnes (1997a).

In the auto components sector, the average level of expenditure on training as a percentage of turnover was only 0.7%, and 22% of ®rms had no training budget at all. Two-thirds of those ®rms which did provide training o€ered this on an on-the-job-training basis, with little evidence of systematic programs of multiskilling or the use of problem-solving tools or Statistical Process Control. It is striking that the levels of absenteeism in this sectorÐa good indication of management's ability to get ``buyin'' from its labor forceÐare very high by global standards. As can be seen from Figure 13, absenteeism was much higher than even the poor performers in a sample of 18 auto components suppliers and ®ve times greater than the sample of ``World Class Firms'' (Andersen Consulting, 1992). It is notable that these absenteeism rates are not dissimilar to those in the clothing sector (Table 4). Therefore, if we read this summary of the various elements of ®rm-level performance with the list of criteria in Table 3, there is cause for considerable concern. The need to restructure internal operations considerably in the face of growing competitive pressures seems to be re¯ected in patterns of production which are largely unchanged from the protection-era, and which are some distance away from the global frontier. But what of the ability of ®rms to link e€ectively with their suppliers in an attempt to achieve systemic competitiveness?

(d) Manufacturing e€ectiveness and the relationship between ®rms On its own, intra®rm reorganization only meets part of the restructuring challenge. The ability of a ®rm to lower inventory levels is, for example, contingent upon suppliers being able to deliver frequently, reliably and in small lot sizes. Similarly, the ability to shrink time-tomarket depends upon the capacity of suppliers to cooperate with end-users in product design. Supplier failure in respect of any of these factors will almost certainly prevent sustainable progress from being made. As a consequence of these challenges, leading ®rms have become increasingly important in promoting systemic eciency. Gere and Korzeniewicz distinguish between two forms of value chain upgrading by leading ®rms, those promoted by buyers (for example in the clothing sector) and those promoted by major producers (for example, in the auto sector) (Gere and Korzeniewicz, 1994). These challenges to promote supply-chain management (SCM) are as important in the industrialized countries as they are in LDCs (Humphrey, Kaplinsky and Saraph, 1998). One proxy for measuring the extent of SCM in a particular industry, is the measurement of delivery frequenciesÐthe more frequent the deliveries, the closer the industry is operating to JIT procedures. As shown in Figure 14, the ®ve major suppliers to each of the 35 auto compo-

TRADE POLICY REFORM

729

Figure 14. Delivery frequency of the major component suppliers to each of the 35 sampled auto and component ®rms. Source: Barnes (1997a).

nents ®rms are not operating according to JIT principles, with over three-quarters of all deliveries on a weekly or less frequent basis. This compares poorly with global competitors. For example, only 20% of American component ®rms, and 16% of Japanese component ®rms were delivering products weekly or less frequently in 1990 and 1982 respectively (Womack, Jones and Roos, 1990). The KZN auto industry has a major advantage in that the dominant assembler in the province has recognized the critical importance of SCM and its inability to drive through its own internal changes towards WCM without improving the performance of its suppliers; in this it is ful®lling the ``producer upgrading'' role identi®ed by Gere and Korzeniewicz, 1994. It has therefore begun to develop a supplier support program for its key domestic suppliers. The e€ect of this is not yet measurable, although interviews suggest that where the assembler does not drive SCM, it becomes dicult for component suppliers to improve the competitiveness of the production pipeline in which they are situated. SCM procedures are less well-developed in the KZN clothing sector. Although power lies heavily at the distribution end of the pipeline, with the exception of only one large chain store, supply-chain management does not appear to be a high priority to these ®nal users. Indeed, there seems to be an active attempt on the part

of most retailers to discourage feelings of mutual dependency. Nearly two-thirds of CMTs never visit their customers and those that do visit, do so simply to collect orders or negotiate delivery dates or price. When ®rms report that they are ``consulting with suppliers or customers,'' this primarily refers to ®nding out whether the ®rm has capacity for the order rather than how it is actually produced. Hence, it is not surprising that ®rms report that instead of customers focusing on supply-chain development, if suppliers do not meet their requirements they are dropped at short notice rather than helped to upgrade operations. With one exception (Woolworths, which formerly had an equity link and currently has a technology link with Marks and Spencer, a progressive UK clothing retailer), there is little evidence of any of the major retailers playing a governance function in value chain upgrading, behavior which is mirrored by South African furniture retailing ®rms (Manning and Kaplinsky, 1997). (e) Common problems, joint action and social embeddedness Supply-chain managementÐwhether by large scale buyers or producersÐis one way of ensuring systemic eciency. But another important (and not necessarily exclusive) mechanism is collaboration between ®rms which

730

WORLD DEVELOPMENT

produce similar products and which confront similar diculties. This collaboration may be on a bilateral ®rm-to-®rm basis or through associations of a number of ®rms, sometimes in formally constituted business associations. In many environments, joint action between geographically clustered ®rms plays a signi®cant role in promoting industrial competitiveness, both in industrialised countries (Piore and Sabel, 1984; Best, 1990) and in LDCs (Nadvi and Schmitz, 1994). In many cases, however, geographical clustering is not necessarily associated with joint action and in the case of Brazilian shoe exporters (Schmitz, 1995) and Pakistani surgical instruments exporters (Nadvi, 1996), the degree of collective action was directly correlated with the nature of competition in ®nal product markets. There is evidence of extensive geographical clustering in the textile industry (Table 5). Not just does the province account for 36% of national production (itself a form of clustering), but within the province, clustering is evident in particular subsectors. For example, 23 out of 42 spinning, weaving and ®nishing plants are in two towns, and all eight tent and canvas plants operate in close proximity; 11 out of 12 Hammarsdale textile ®rms are in the same subsector (the spinning, weaving and ®nishing of nonwool fabrics). But this clustering is not complemented by joint action by these textile ®rms.

For example, Hammarsdale shows the most distinct pattern of clustering in the province, yet only two of the 11 ®rms, when interviewed, saw the clustering of activity in the locality as being bene®cial (Reid, 1997). A similar pattern was found in the auto components sector, where two regional subclusters were identi®ed (Westmead±Pinetown±New Germany and the southern Durban industrial basin), but there was virtually no evidence of ®rms collaborating to meet similar problems or to share expertise or orders. The explanations for this failure to participate in joint action lie in the realm of the social embeddedness of institutions in the region (see below) and the lack of trust between ®rms. Although locality should be an advantage in this respect, South African ®rms are dominated by high levels of mistrust and ®rms appear loathe to share information, or technical or human resource expertise with one another. Instead, they tend to see other auto component ®rms as adversaries rather than potential partners, bene®ting foreign ®rms entering the domestic market. Despite the fact that small auto component ®rms have most to gain from the development of these relations of trust, they appeared to be no more likely to collaborate with other producers in the acquisition of inputs and services or in marketing than the larger ®rms.

Table 5. The distribution of textile activity (®rms) by subsector and locality Activity Wool scouring and combing Dyeing and ®nishing Spinning, weaving, ®nishing of nonwool fab Soft furnishings (binding and embroidery) Bags and sacks Tents, sails and canvas Auto textiles Knitting and hosiery Carpets and rugs Cordage, rope and twine Linoleum and coated fab. Pressed felt, padding and upholstery ®lling Spinning, weaving and ®nishing of wool fab. Total

DBN

Hammersdale

Isithebe

2 1 5

0 0 11

0 0 7

0 0 4

0 0 1

0 0 2

0 1 12

10

0

0

2

0

3

1

1 8 3 8 5 4 1 4

0 0 0 1 0 0 0 0

2 0 0 2 1 0 0 0

0 0 0 1 0 0 0 0

0 0 0 5 0 0 0 0

1 0 1 0 1 0 0 0

0 0 2 0 2 0 3 1

0

1

0

0

0

1

3

52

13

12

7

6

9

27

Source: Reid (1997); Runduny (1996).

Ladysmith Newcastle Pietermaritz- Pinetown burg

TRADE POLICY REFORM

The role played by business associations is closely associated with this weak fabric of cooperation and trust. In both the auto components and clothing sectors, the trajectory of the sectoral business associations closely re¯ects South Africa's ISI growth path of the previous decades. Its principle focus was to facilitate lobbying and the development of sectoral interests, and the level of protection was largely determined at the end-user level. Thus, in the province's clothing sector this led to the dominance of large full manufacturers in the NCMA; and in the national auto sector the assemblers (through NAAMSA) dominate the components sector (through NAACAM).17 The liberalization of the trade regime over the last few years has meant that the various institutions (government and parastatal, business associations, private consultants and trade unions) have had to adjust themselves to playing a fundamentally di€erent role, but with little success. Existing institutional structures are struggling to adapt to the new demands placed upon them due to their previous culture and strategic orientation. In addition, they have insuciently trained human resources capable of dealing with issues of industrial restructuring. For example, although regional business associations mouth the need to move away from lobbying, they have little experience of playing an industrial restructuring and development role for their constituencies. In the clothing sector for example, 57% of full manufacturers perceive the role of the NCMA as being of a purely lobbying nature, while 37% of the cut-make-and-trim manufacturers (CMTs) do not believe that the NCMA is representative of their interests. Trade unions are committed to extending the current national process of negotiation and participation in the restructuring of manufacturing industry to new institutional forms at the regional and local level, but they are still in¯uenced by a culture of adversarial struggle. Moreover, despite the fact that during the period of opposition to Apartheid, the leadership of the trade unions played a critically important role, they currently have few resources to commit to nonfactory bargaining issues. This is because after the transition, many of these individuals (including the current Minister of Trade and Industry) were absorbed into government, leaving the trade unions with an inexperienced leadership. Our very limited attempts to assist the unions in the auto and

731

clothing sectors with capacity-building have been received with enthusiasm but very little practical follow-up. It is patently clear that, notwithstanding their genuine desire to participate in the restructuring process, the serious capacity limitations in the region (even more than at the national level) inhibit their ability to increase that capacity. Little is known of the operations of the private consultancy sector which is crucial to the successful implementation of the government's new ``supply-side measures.''18 But very few of the sampled ®rms in the clothing, components or textile sectors had any links with providers of restructuring services. In the auto components sector many ®rms appear to bring in consultants only for the attainment of ocial standards accreditation, but this has little impact on the way in which their production systems are organized.19 Moreover, none of our researchers recorded signi®cant links with scienti®c institutions, or with universities. There seem to be some tenuous links with the Council of Scienti®c and Industrial Research (CSIR) in Pretoria when minor technical assistance is occasionally sought to overcome product quality problems. But these are not substantive and are invariably on an ad hoc rather than an ongoing basis. These institutions are not seen as partners integral to developing their own organizational and technical capacity.

4. CONCLUSIONS Some of the lessons highlighted from the regional KwaZulu-Natal experience are generic to South African manufacturing industry as a whole and therefore pertinent to industrial policy formulation and implementation in general, viz.: Юrms appear to display weaknesses in hearing markets, taking account of segmentation and the importance of nonprice competitive factors, and consequently reorienting business strategies; Ðfew ®rms have adapted intra®rm production organization to meet the new market demands arising out of trade liberalization; Ðalthough the largest auto assembler is beginning to take action to improve value chain eciency, hitherto there have been few signs of large ®rms assisting the upgrading of smaller suppliers, or of the coordination of logistics, production, or design along the chain Ðthere is also little sign of ®rms with common interests joining to achieve common aimsÐon a bilateral basis, on a restricted multilateral basis or through

732

WORLD DEVELOPMENT

business associations (which still re¯ect the trajectory of ISI); Юrms display weak links with supportive institutions in either the national or the regional systems of innovation.

In addition to the above generic ®ndings there are other conclusions speci®c to particular industries. In general we have observed very di€erent trajectories among the clothing, textiles and auto components sectors. It is only the latter which shows signs of beginning to measure up to the challenges of international competition, and this is almost certainly due to pressure being exerted on suppliers by two very demanding customers (Toyota in particular, and to a lesser extent, Bell Equipment, Ltd.). But the same demanding pressures of the buyers simultaneously represent a threat to South African component suppliers, since in many cases assemblers are procuring on a global basis (even though the component may be produced locally). In the case of KZN, Toyota has hitherto been reluctant to include South African component suppliers in its international sourcing networks, unlike in the Eastern Cape region of South Africa where Mercedes-Benz, Delta (linked to General Motors) and Volkswagen have facilitated exports by their component suppliers.20 It is important to recognize however, that there are pockets of innovation in KZN manufacturing industry. The most notable of these is the case of Bell Equipment Ltd., which not only exports forestry and cane-cutting equipment, but now accounts for 13% of global production of articulated dump-trucks (Kaplinsky and Mhlongo, 1997). But even in the auto components sectors, some ®rms are experiencing growing exports. Before 1990, all but one of the sampled auto component ®rms produced solely for the domestic market. By 1996, however, eight ®rms were exporting some

of their outputÐsix of these exported less than 20% of turnover, one ®rm between 20% and 30% and the ®nal ®rm between 30% and 40%. As Table 6 indicates, this has allowed these exporting ®rms to grow relatively rapidly. Moreover, participation in external markets is an important potential source of learning. Although the evidence that this mechanism for transferring technology operates e€ectively is not strong, the eight exporting ®rms devote a larger share of sales to research and development (R&D) than did the locally oriented ®rms (2.55 versus 0.95%) (Valodia, 1997). Despite these pockets of dynamism however, the picture is not a positive one. The trade balance de®cit in autos and components is growing rapidly (Valodia, 1997), and there has been extensive job loss in the clothing and shoe sectors in the province as imports have grown. In the face of this outcome, and in the evident face of signi®cant market failure, the portents for the future might appear to be bleak. This conclusion is reinforced by the gloomy results of two business studies assessing South Africa's managerial competitiveness internationally. The International Institute for Management Development's World Competitiveness Yearbook ranks South Africa as the ®fth weakest contender out of 46 countries. Only Russia, Poland, Columbia and Venezuela fared worse. This ranking is assigned on the basis of an analysis of the countries's statistics, but also signi®cantly, on an opinion survey of more than 4000 business executives. (Financial Mail, March 1, 1998). Perhaps more surprisingly, and worryingly, South Africa fares badly in a similar study devoted solely to competitiveness within Africa. The Africa Competitiveness Report ranks South Africa only seventh overall out of 23 African countries, after Mauritius, Tunisia, Botswana, Namibia, Morocco and Egypt. (Financial Mail, March 3, 1998).

Table 6. Comparison between 8 exporting and 24 nonexporting auto component ®rms Average sales (R'000) Exporters 1991 1992 1993 1994 1995 Ratio, 1995/1991

60,372 67,734 78,803 92,117 116,045 1.92

Source: Calculated from Valodia (1997).

Non-exporters 53,477 57,219 58,025 65,774 76,148 1.42

Average employment Exporters 464 480 491 557 650 1.40

Non-exporters 238 231 220 222 229 0.96

TRADE POLICY REFORM

Before too bleak a picture is drawn from the ®rm-based evidence presented above, however, a number of quali®cations need to be born in mind. First, there is clearly marked di€erentiation between ®rms within sectors. The tail within the auto component sector is very long, and detailed benchmarking studies currently being undertaken reveal that some ®rms are managing to make the transition to international competitiveness reasonably successfully. Furthermore di€erentiation between regions within South Africa should also be recognized. Data collected in a recent national survey of key auto component ®rms conducted by the KZNIRP in the ®rst half of 1998 quite clearly show major di€erentiation between regions, as well as major improvement on certain competitiveness indices (Barnes and Kaplinsky, 1998). Finally, the data presented above were collected in 1996 and demonstrate quite clearly the lack of international competitiveness at the onset of the process of adjusting to trade liberalization. Whether this state of a€airs prevails is the key question in¯uencing the sustainability of income growth in the future. What then explains this lack of competitiveness of the ®rms presented above? As we have seen, an analysis of performance at the level of the ®rm shows the negative side. At the heart of our explanations at the level of the ®rm lies the legacy of import substituting industrialization and the old Fordist production methods which still exert a major in¯uence on ®rm behavior (despite the fact that in many respects protected ISI also allowed for the development of signi®cant local capabilities in locally owned ®rms). But the ISI culture encouraged ®rms to spread their production and provide for a multiplicity of marketsÐe.g., auto component ®rms would produce for automotive as well as nonautomotive markets and would produce a very wide range of components for a very wide range of model types. In the process ®rms sacri®ced core competency for the gains which come from specialisation. When faced with the new demands from the automotive sector for major improvements in quality, ¯exibility, conformance to standards and so on, many ®rms carried on trying to accommodate the variety of their customers on the same production base. The result was a major increase in production complexity and a reliance on special production runs to meet speci®c customer demands, with concomitant negative implications for inventory levels, ¯exibility and eciency.

733

Faced with the new internationally competitive environment ®rms simply grafted new competitive demands onto old production systems and forms of work organization. A salient example is derived from two ®rms recently benchmarked where the companies managed to make major improvements in meeting their customers demands for new improved quality. They did so by expanding end-of-line inspection and reworking activities but at the expense of rapidly escalating internal reject rates with concomitant knock- on e€ects on price. Customer returns for two sample parts were 292 and 667 parts per million whilst the internal reject rates for these same parts were 15,400 and 78,800 parts per million respectively. Instead of re-organising the production process to build in quality at source and hence being able to meet the new demands for increased quality standards as well as reducing price, they viewed quality as a di€erent ®rm activity and hence only achieved customer satisfaction at the expense of price (KwaZulu-Natal Benchmarking Club Newsletter, 1998). Finally, ISI protected ®rms from internationally competitive management systems and reinforced static Fordist forms of management di€erentiation which allowed for clear distinctions between various line function responsibilities. The result is that in many ®rms there exists a ``silo'' like mentality within management (Barnes, 1998). For example, quality managers have a clear understanding of their line function responsibilities but have a far less clear understanding of how quality impacts on other line function responsibilities, and hence how to build in quality at source. There is a distinct irony at play in top management stressing the importance of human resource developmentÐin particular the need to build multiskilling and ¯exibility in the labor forceÐ while ignoring the need for similar processes to occur with respect to middle management. The ``silo'' e€ect means that many white middle managers feel insecure and incompetent to meet the new demands of international competitiveness. They can clearly see that they are no longer racially protected, feel vulnerable in the face of the trend toward black recruitment, and have little idea of what skills they are supposed to acquire in the new era. Furthermore they feel highly threatened by the possibility of a ¯attening of the managerial structure. This undermines attempts by ®rms to become more internationally competitive.

734

WORLD DEVELOPMENT

The ability of ®rms to become more internationally competitive is constrained by both their awareness of the need to restructure and by the resources at their disposal. With respect to their awareness, pressures in ®nal product markets are beginning to ®lter through to management in supplying ®rms. But they can after all only respond and operate within the terms and resources of the ®rm. Hence they are to a large extent reliant on external support. This is essentially the role of government and industrial policy. Here South African government interventions have had a mixed impact in assisting ®rms to adjust to the new international environment. Sanctions and the period of isolation had both positive and negative e€ects on manufacturing industry. Clearly sanctions was an important political contributor to the process of democratic transition. But it also acted to shelter South African manufacturing industry for much longer than similar middle-level developing countries from the e€ects of globalisation and trade liberalization.21 Import substituting industrialisation prevailed for much longer than could have been expected, and ®rms were locked into an economic climate and culture still dominated by protectionist trade regimes. Instead of the luxury of slowly grappling with new industrial policies and gradually introducing trade liberalization, on coming to power in 1994 the new South African government adopted a policy of rapid trade policy reform designed to break the power of old import-substituting and rent-seeking industrial class. One of its ®rst economic acts was to negotiate a new trade regime with the World Trade Organization which involved the removal of nontari€ barriers, and a reduction in both the level and dispersion of import tari€s. Compounding the problem for industry, the negotiations with the WTO forced the removal of the export subsidies which had been an important driver of growing manufactured exports from the late 1980s. Following on these WTO negotiations other trade-related issues have occupied the resources of the Department of Trade and Industry. The energies of the department have been focused on the free-trade negotiations with the European Union, as well as in the creation of a new Southern African trade bloc. Thus, the new government was faced on the one hand with the desire (and international pressure) for trade policy reform and on the other with a manufacturing industry locked

into a culture of dependence on demand side measures and government protection. It had to accommodate the former and rapidly shake up the latter. In order to achieve this government policy was based on a twofold strategyÐon the one hand, rapidly reducing protection against international trade competition through liberalization and according with WTO regulations, and on the other hand introducing supply-side measures to assist manufacturing industry to become more competitive and export oriented. It was believed that ®rms needed to be shaken out of their protectionist, uncompetitive frameworks through trade induced crisis; and then provided with the means to be more competitive with state supported supply-side measures designed to assist them to restructure production processes. The intention was to walk equally on the two legs of major trade policy reform and bolster industrial policy. One side of this policy equation dominated. It proved to be far easier to remove demandside measures than to put in place e€ective supply-side measures. The former simply demanded legislation to be implemented; the latter required institution-building, new management structures, a new institutional culture among civil servants previously adept in dealing with lobbying demands for protection, but unskilled in assisting ®rms in production reorganization. The former requires clerical skills, the latter a serious knowledge of production and work organization. The weakness of the inherited white-dominated civil service precluded the development of e€ective supply-side measures, and the ``sunset'' clause which ruledout the sweeping away of this civil service cadre in the post-Apartheid era meant that the incoming government had to proceed with inadequate skills and experience. Thus while there is now an impressive edi®ce of supply-side measures on the statute-book (Hirsch, 1997), by early 1998 little of this had been implemented. The result is that ®rms have tended to feel the icy, chilling winds of trade liberalization much more than the warm, soothing breeze of supportive supply-side measures. Hence in the short term they have to ®nd their own way in keeping a¯oat and struggling to become internationally competitive. Instead of a policy consisting of two equal partsÐtrade reform coupled with industrial policyÐSouth African manufacturing industry has witnessed the phenomenon of trade policy dominating industrial policy. Under these conditions, the future of South African manufacturing industry lies in

TRADE POLICY REFORM

the ability of ®rms to marshal other resources to become more internationally competitive and the capacity of the government to ®nd

735

ways of ®nally implementing its fairly comprehensively designed industrial policy.

NOTES 1. This research was conducted by Harrison, 1997. 2. This research on the automobile assembly and component sectorsits was conducted by Barnes (1997a, b). For Bell Equipment, see Kaplinsky and Mhlongo (1997). 3. This research was conducted by Reid, 1997. 4. This is not to say that there are no regional patterns in industrialization or that there is no need for regionally focused industrial policyÐsee Kaplinsky and Morris (1997). 5. This research was conducted by Valodia, 1997. 6. For more detail, see Bell (1993); Belli, Finger and Amparo (1993); Jo€e et al. (1995); Jenkins and Siwisa (1997). 7. The nominal devaluation during 1996 was 21.9% and the real e€ective exchange rate depreciation was 15% (South African Reserve Bank Bulletin, March 1997, p. 17). 8. A detailed international benchmarking exercise will be the subject of the next phase of the KZN Industrial Restructuring Project. 9. The choice of these factors resulted from a pilot survey with buyers. It is signi®cant that the factors speci®ed are not identical to those considered to be important in the auto assembly and components sectors (see below). 10. This problem will be compounded when foreignowned retailers enter the South African market; they are likely to be even more demanding of nonprice features than are the locally based retailers (Kaplinsky and Manning, 1998). 11. These criteria were chosen after a search of the global literature on the auto components sector and after discussions with the major South African component buyers.

12. For an elaboration of these criteria, see Bessant (1991) and Kaplinsky (1994). 13. For example one KZN auto component manufacturer which is a leading performer on the quality front prides itself on a defect rate of ``640 parts per billion'' (0.064 parts per thousand). This performance is significantly short of the 0.015 per thousand level achieved by leading component ®rms in Japan and Europe (Andersen Consulting, 1992). 14. Cut-make-and-trim clothing ®rms cut and assemble clothes to the designs of sourcing ®rms; they are distinguished from full manufacturers who have their own design capabilities. 15. Bundle sizes refer to the numbers of identical components passed between work-points. The smaller this number, the more ¯exible the ®rm's production capacity. 16. The larger the bundle size, the longer work-inprogress takes to progress through the plant and the longer the throughput time in production. 17. NCMA is the Natal Clothing Manufacturers Association, NAAMSA is the National Association of Automotive Manufacturers of South Africa, NAACAM is the National Association of Automotive Component and Allied Manufacturers. 18. These policy measures are designed to aid enterprise restructuring and to substitute for the ``demand side'' protection and export subsidies of the old industrial policy regime (see Section 2). 19. ISO9000 certi®cation only requires ®rms to document the activities during production; they do not require ®rms to change their procedures to increase manufacturing eciency. 20. South Africa operates what is e€ectively a foreign exchange balancing incentive regime, allowing auto assemblers to import an amount roughly equal to the value of their own exports, or the exports of their component suppliers. While the three Eastern Cape ®rms take direct advantage of their component suppliers

736

WORLD DEVELOPMENT

import-credits, Toyota prefers to buy-in import credits at a discount on the open market from component ®rms.

21. For the case of Brazil, see Humphrey and Salerno (1998).

REFERENCES Andersen Consulting (1992) The lean enterprise benchmarking project. Andersen Consulting. Cardi€ Business School, Cardi€. Barnes, J. (1997a) Market and ®rm performance levels: The state of the automotive industry in KwaZuluNatal. KwaZulu-Natal's Industrial Restructuring Project, Mimeo, CentreCenter for Social and Development Studies, University of Natal, Durban. Barnes, J. (1997b) Facing up to the global challenge: the state of KwaZulu-Natal's automotive components industry. CSDS Research Report No. 11, Centre for Social and Development Studies, University of Natal, Durban. Barnes, J. (1998) An investigation into middle management's understanding of international competitiveness in the KwaZulu-Natal manufacturing sector. CSDS Research Report No 12, Center for Social and Development Studies, University of Natal, Durban. Barnes, J. and Kaplinsky, R. (1998) Restructuring and Liberalization, Round 2. Mimeo, Institute of Development Studies, University of Sussex, Brighton. Bell, T. (1993) Should South Africa further liberalise its foreign trade? In State and Market in Post Apartheid South Africa, ed. M. Lipton and C. Simkins. Witwatersrand University Press, Johannesburg. Belli, P., Finger, M. and Ballivian Amparo, A. (1993) South Africa: Review of trade policy issues. Informal Discussion Papers on Aspects of the Economy of South Africa Paper No. 4, Southern Africa Department, World Bank, Washington. Bessant, J. (1991) Managing Advanced Manufacturing Technology. Basil Blackwell, London. Best, M. H. (1990) The New Competition. Polity Press, Oxford. Gere, G. and Korzeniewicz, M. eds. (1994) Commodity Chains and Global Capitalism, Prager, London. Harrison, K. (1997) Migrate, innovate or evaporate: A KwaZulu-Natal clothing industry study. Draft Report, KwaZulu-Natal Industrial Restructuring Project, Mimeo, Center for Social and Development Studies, University of Natal, Durban. Hirsch, A. (1997) Industrial strategy in South Africa: A review. 1997 TIPS Annual Forum, Trade and Industry Policy Secretariat, Johannesburg. Humphrey, J., Kaplinsky, R. and Saraph, P. (1998) Corporate Restructuring: Crompton Greaves and the Challenge Of GlobalisationGlobalization. Sage Publications Ltd., New Delhi. Humphrey, J. and Salerno, M. (1998) Globalisation and assembler-supplier relations: Brazil and India. Mimeo, Institute of Development Studies, University of Sussex, Brighton. Jenkins, C. and Siwisa, N. Overview of trade policy in South Africa. 1997 TIPS Annual Forum, Trade and Industry Policy Secretariat, Johannesburg.

Jo€e, A., Kaplan, D. E., Kaplinsky R. and Lewis, D. (1995) Improving Manufacturing Performance: The Report of the ISP, University of Cape Town Press, Cape Town. Jones, D. T. (1990) Beyond the toyota production system: The era of lean production. Paper for the 5th International Operations Management Association Conference on Manufacturing Strategy, Warwick, 26-27 June . Kaplinsky, R. (1994) Easternisation: The Spread of Japanese Management Techniques to Developing Countries. Frank Cass, London. Kaplinsky, R. and Mhlongo, E. (1997) Infant industries and industrial policy: A lesson from South Africa. Transformation 34. Kaplinsky, R. and Morris, M. (1997) The formulation and implementation of industrial policy in South Africa: A view from the edge. Trade and Industrial Policy Secretariat, 1997 Annual Forum. Trade and Industrial Policy Secretariat, Mulderdrift. Kaplinsky, R. and Manning, C. (1998) Concentration, competition policy and the role of small and medium sized enterprises in South Africa's industrial development. Journal of Development Studies 35 (1), 139-161. KwaZulu-Natal Benchmarking Club Newsletter. (April 1998). Manning, C. and Kaplinsky, R. (1997) Concentration, competitions policy and the role of SMEs in South Africa's industrial development. Mimeo, Institute of Development Studies, University of Sussex, Brighton. Nadvi, K. and Schmitz, H. (1994) Industrial clusters in less developed countries: Review of experiences and research agenda. IDS Discussion Paper No. 339. Institute of Development Studies, University of Sussex, Brighton. Nadvi, K. (1996) Small ®rms and industrial districts in Pakistan. D. Phil Dissertation. University of Sussex, Brighton. Piore, M. J. and Sabel, C. F. (1984) The Second Industrial Divide: Possibilities for Prosperity. Basic Books, New York. Porter, M. E. (1990) The Competitive Advantage of Nations. Macmillan, London. Reid, K. (1997) The nature of decentralisaion in Ladysmith & Ezakheni: An assessment of how incentives and globalisation have impacted on the viability of textile industrial activity in Ladysmith. Master dissertation, School of Development Studies, University of Natal, South Africa. Schonberger, R. J. (1986) World Class Manufacturing: The Lessons of Simplicity Applied. The Free Press, New York. Schmitz, H. (1995) Small shoemakers and fordist giants: Tales of a supercluster. World Development 23 (1), 928.

TRADE POLICY REFORM Stalk, G. Jr. and Hout, T. M. (1990) Competing Against Time: How Time-Based Competition is Reshaping Global Markets. The Free Press, New York. Valodia, I. (1997) Exporting and learning - evidence in the South African automobile components industry. Trade and Industrial Policy Secretariat, 1997 Annual Forum. Trade and Industrial Policy Secretariat, Muldersdrift.

737

Womack, J. P, and Jones, D. T. (1996) Lean Thinking. Simon and Schuster, New York. Womack, J. P., Jones, D. T. and Roos, D. (1990) The Machine That Changed The World. Rawson Associates, New York.