Interrogating the impact of industrial clustering on firm-level employment growth : a case study of the Durban Automotive Cluster (DAC).

Abstract

More than a decade since the democratic transition in 1994, South Africa still grapples with incredibly high levels of unemployment. An underperforming manufacturing sector has hampered economic growth and job creation in a country with a large pool of low and semi-skilled labour. In response to these challenges the South African government has initiated a guiding framework (NIPF) and action plan (IPAP) spearheaded by a sectoral and geographic focus to place the country on a more labour-intensive industrial growth path. Given this context, it is instructive to note that industrial clustering has been identified as critical to the sustainable development of industry in both developed and developing economies. Whilst the role of industrial clustering in assisting industrial development is well documented, this paper aims to further interrogate the impact of industrial clustering on another critical developmental issue, employment. Using the Durban Automotive Cluster (DAC) as a case study, the primary objective of this research is to interrogate the impact of industrial clustering on firm-level employment. A mixed-method methodology is utilised in the study, collecting both primary and secondary data from face-to-face interviews conducted with nineteen firm-level representatives and two DAC representatives. The research findings and analysis conclude that on average, the impact of the DAC on firm-level employment is positive, although largely indirect. In particular, small or firms with low degrees of production-related technological intensity on their production perceive the impact of the DAC on their firm-level employment most positively. The majority of member firms believe the DAC has either helped sustain or in some cases grow their firms’ employment levels. The only variable that has had a more positive impact on firm-level employment is the MIDP, with labour market policies perceived to have had the most negative impact on employment. The study suggests that greater communication between the DAC and local and national governments to ensure each stakeholder’s objectives are better aligned to ensure growth of the industry (to stimulate job creation). This process will not be simple and will depend heavily on the country’s ability to address critical macro-constraints that the study has shown to hinder employment growth amongst the DAC firms. Whilst the findings relate specifically to the automotive industry in KwaZulu-Natal, the relevance of the findings extends well beyond the automotive sector. The study provides key lessons for South Africa’s sectoral and geographically focused industrial policy focus that aims to achieve industrial development and employment growth in South Africa.