A new Centre for Development and Enterprise (CDE) report argues that the South African government’s policy of localisation is locking the country “into the wrong path” of rising protection and rising inefficiency.
Published following an expert roundtable, the report outlines what it calls the “seven sins of localisation”, including:
- a policymaking process that is neither transparent nor evidence-based;
- the imposition of conditionalities that pose a threat to investment;
- a strategy of import substitution that is biased against exports;
- reduction of competition, owing to a restriction on imports;
- constraining innovation by excluding foreign know how;
- threatening trade relations by forced localisation that may violate international obligations; and
- locking the country into an industrialisation path that relies on protection and facilitates rent-seeking behaviour.
The report comes as the Department of Trade, Industry and Competition (dtic) continues to prioritise localisation as a central pillar in South Africa’s industrial policy and amid growing concern over what some are describing as the country’s premature deindustrialisation.
Government has responded with a series of initiatives, including a 2021 approach to the social partners represented in the National Economic Development and Labour Council with a call for a 20% reduction in nonfuel imports over a five-year period.
In addition, the dtic has for some time been working across various sectors, from steel and automotive to renewable energy and clothing, to develop masterplans aimed at identifying opportunities for local industrial development.