South Africa is the second largest economy in Africa (after Nigeria) and one of the most industrialised countries in the African continent, ranked as an upper middle income economy by the World Bank. It is also the second largest military spender in Sub-Saharan Africa, and has the most developed arms industry on the subcontinent, with a range of capabilities and has seen considerable change since the end of the ‘apartheid’ regime that was in place over the period 1948-1994. This paper provides an overview of the evolution of the industry and an analysis of the present nature of the industry and its performance and behaviour.
Rents, Power and Governance in Global Value Chains
This paper addresses the generation of rents and the distribution of gains in the global operations of governed Global Value Chains (GVCs) and seeks to provide an architecture for analysing the governance of GVCs. It distinguishes between four sets of rent (gifts of nature; innovation rents; exogenously defined rents; and market power) and three spheres of governance (setting the rules - “legislative governance”; implementing the rules - “executive governance”; and monitoring rules and sanctioning malfeasance - “judicial governance”). The exercise of governance power in GVCs over the generation, protection and appropriation of rents is considered though the lens of four sets of key GVC stakeholders – the corporate sector, civil society organisations, the nation state and supranational institutions. This general analysis is given flesh through three case studies – food-safety standards in GVCs; taxation policies and competition policies. In these sectors, the corporate sector is generally much more effective in governing rent generation and appropriation in the global operations of GVCs than are the three sets of non-corporate stakeholders. From this observation we offer an hypothesis that the capacity of non-corporate stakeholders to govern GVCs is contingent upon the extent to which this coincides with the interest of the corporate sector. However, as noted, this balance of power between private and non-corporate actors is a contested terrain and dynamic in nature.
Many low-income countries (LICs) are integrated into apparel global value chains (GVCs) through foreign direct investment (FDI). This is also the case in Lesotho, which developed into the largest Sub-Sahara African (SSA) apparel exporter to the US under the African Growth and Opportunity Act (AGOA). More recently, a new apparel export market opportunity has emerged in Lesotho, that of the regional market of South Africa. The two export markets, the US and South Africa, are supplied by different types of FDI firms, affiliates of largely Taiwanese transnational producers and of South African manufacturers that are incorporated into distinct value chains. This paper assesses the implications for upgrading integration into these two value chains in Lesotho, the first value chain characterized by Taiwanese investment and feeding into the US market under AGOA and the second characterized by South African investment and feeding into the South African market. These value chains differ with regard to ownership patterns, end markets, export products, governance structures and firm set-up, investors’ motivations and perceptions on the main challenges. These different characteristics have crucial impacts on upgrading possibilities, including functional, process and ‘local’ upgrading. Thus, from the perspective of upgrading and sustainability, ownership patterns, local embeddedness and market diversification matter. The emergence of South Africa as an alternative end market and the different value chain dynamics operating in the South African retailer-governed value chain open up new opportunities away from those of the AGOA-/Taiwanese-dominated value chain.
Over the past decade, several Sub-Saharan African (SSA) countries have developed or expanded export-oriented apparel industries in the context of the Multi-Fibre Arrangement (MFA) quotas and preferential market access, most importantly under the African Growth and Opportunity Act (AGOA). Madagascar is different to the other main SSA low-income country (LIC) apparel exporters – Kenya, Lesotho and Swaziland – given its more diverse end markets and ownership structures and the political instability that led to the loss of AGOA status at the end of 2009. This paper assesses the development of Madagascar’s export-oriented apparel industry and economic and social upgrading dynamics in particular in the context of the AGOA loss. It identifies four types of firms and value chains that differ with regard to ownership patterns, end markets and, most importantly, ‘local embeddedness’, with important implications for both economic upgrading dynamics and possibilities and the sustainability of the industry. The paper concludes that, despite the contraction in the export-oriented apparel industry post-AGOA, Madagascar is still a more successful apparel producer in terms of economic upgrading than the other main apparel-exporting LICs in SSA. The key to this trajectory lies in the differentiation of global value chain (GVC) relationships, local embeddedness and export diversification.