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This is a response to the question of what set of policies are required for successful industrialisation in South Africa. The approach is focused on how the institutional, economic and policy challenges related to industrial development. Therefore, the paper argues that policies intended to successful establish industrialisation South Africa need to address the sectorial bias, the fact that mining sector success was based on the sector’s exploitation of cheap labour through the system of migrant labour, and establish self-sufficiency that can allow for economic linkages within the economy without exclusion of certain sectors and population groups. This includes coherent support by the state in labour-intensive sectors to establish competitiveness of our labour-
intensive industries. But more importantly this includes sensitivity to previously and currently marginalised groups such as women and children.
In addition the state needs an extensive industrial policy that is coherently supported by trade policy in order to promote labour-intensive production and industrial growth. This requires an understanding of how liberalisation or protection is needed, and within which sectors and for how long. In addition, this requires co-ordinated effort by the state and not just government or business. Moreover, policy regime coherence and reciprocal control mechanisms are vitally important in order to minimise state failure and promote developmental market functioning.
Lastly, I argued that the state needs to restrain financial capital, which would reduce profitability in the financial sector, making other sectors more profitable in order to stimulate investment in those sectors. However this is a highly contentious area of policy because of the power of embedded interests within the state. But this is not something that cannot be negotiated piecemeal and despite the many examples of success and failure there are things the state will only learn through experience.
Titre original
Policies for South Africa's Industrialisation by Siya Biniza
This is a response to the question of what set of policies are required for successful industrialisation in South Africa. The approach is focused on how the institutional, economic and policy challenges related to industrial development. Therefore, the paper argues that policies intended to successful establish industrialisation South Africa need to address the sectorial bias, the fact that mining sector success was based on the sector’s exploitation of cheap labour through the system of migrant labour, and establish self-sufficiency that can allow for economic linkages within the economy without exclusion of certain sectors and population groups. This includes coherent support by the state in labour-intensive sectors to establish competitiveness of our labour-
intensive industries. But more importantly this includes sensitivity to previously and currently marginalised groups such as women and children.
In addition the state needs an extensive industrial policy that is coherently supported by trade policy in order to promote labour-intensive production and industrial growth. This requires an understanding of how liberalisation or protection is needed, and within which sectors and for how long. In addition, this requires co-ordinated effort by the state and not just government or business. Moreover, policy regime coherence and reciprocal control mechanisms are vitally important in order to minimise state failure and promote developmental market functioning.
Lastly, I argued that the state needs to restrain financial capital, which would reduce profitability in the financial sector, making other sectors more profitable in order to stimulate investment in those sectors. However this is a highly contentious area of policy because of the power of embedded interests within the state. But this is not something that cannot be negotiated piecemeal and despite the many examples of success and failure there are things the state will only learn through experience.
This is a response to the question of what set of policies are required for successful industrialisation in South Africa. The approach is focused on how the institutional, economic and policy challenges related to industrial development. Therefore, the paper argues that policies intended to successful establish industrialisation South Africa need to address the sectorial bias, the fact that mining sector success was based on the sector’s exploitation of cheap labour through the system of migrant labour, and establish self-sufficiency that can allow for economic linkages within the economy without exclusion of certain sectors and population groups. This includes coherent support by the state in labour-intensive sectors to establish competitiveness of our labour-
intensive industries. But more importantly this includes sensitivity to previously and currently marginalised groups such as women and children.
In addition the state needs an extensive industrial policy that is coherently supported by trade policy in order to promote labour-intensive production and industrial growth. This requires an understanding of how liberalisation or protection is needed, and within which sectors and for how long. In addition, this requires co-ordinated effort by the state and not just government or business. Moreover, policy regime coherence and reciprocal control mechanisms are vitally important in order to minimise state failure and promote developmental market functioning.
Lastly, I argued that the state needs to restrain financial capital, which would reduce profitability in the financial sector, making other sectors more profitable in order to stimulate investment in those sectors. However this is a highly contentious area of policy because of the power of embedded interests within the state. But this is not something that cannot be negotiated piecemeal and despite the many examples of success and failure there are things the state will only learn through experience.
Historically industrialisation is seen as an important process that both incentivised and allowed the European expansion and the spread of capitalism (Boahen, 1987). And economically, structural theories of development view industrialisation as a process that will enable economic freedom for post-colonial countries, which are seen as underdeveloped and structurally dependent on industrialised countries because of their integration into global capital; thus is argued as the only way to transform post-colonial economies to overcome structural inequalities of global capitalism which keep post-colonial countries underdeveloped (Hunt, 1989). Therefore the successful implementation of the industrialisation process is important for South Africa. The South African economy has been criticised for industrially coherent linkages between its economic sectors because of what the Mineral Energy Complex which has prohibited industrial growth and the development of other industries unrelated to energy and minerals extraction (Fine & Rustomjee, 1996); and in more recent years the economy has been caught in a prolonged era of low growth, and growth without job creation where there has been remarkable growth, which has led to deindustrialisation and unemployment (Mohamed, 2011). Thus, this essay is a response to the complicated question of what set of policies are necessary for successful industrialisation in South Africa. Firstly, I would like to explain what I understand by the South African state. I understand the state in Gramscian way. What that is that the state, or South Africa, is more than just government and its institutions, agencies and enterprises; therefore the state is the nexus of power in society and this includes both government and civil society (Gramsci, 2006). Therefore, my idea of state power is based on a dialectical relationship between civil society and political society (Gramsci, 2006). Practically, this is observable in the separation of
1 Corporate Strategy and Industrial Development Research Programme, University of the Witwatersrand, Johannesburg, South Africa and masters fellow at the Public Affairs Research Institute and Economic Research South Africa.
siyadumab@pari.org.za | siyaduma.biniza@students.wits.ac.za Scribd | Linkedin powers between the parliament which is closer to civil society and the judiciary which is between parliament and government (Gramsci, 2006). Civil society is the place of ideology, socialisation, and hegemony because civil society is also an environment of inequality despite the liberal view that civilians are all equal; and political society is the state institutions and machinery of government (Gramsci, 2006). In this paper, I take civil society to include what has been characterised as capital or business, i.e. corporations that are owned by individuals who are part of civil society. So as mentioned, the state is the nexus of power, which can also be understood as the dominant forces that result from dialectical relationship between civil society and political society. But of course this divide is not very distinct as some individuals may straddle across civil and political society. For example, a firms decision to cut wages could result in collective action by the workers to resist this through legislation which is then enforced by various state institutions this is essentially what makes the state. I use this conception of the state because a Weberian conception sometimes obscures the reality of what happens in governance. The Weberian conception of the state often leads to policy recommendations which implicitly assume that economic outcomes depend solely on political will and policy. This obscures the very complex processes which take place in order to achieve the goals of a policy. Policy outcomes depend on more than just political will to pass legislation and policies. All this shows is that successful industrialisation and development requires a high degree of co-ordination (Zalk, 2013) which exceeds political will and the right set of policy. Moreover, the Weberian conceptualisation of the state often leads to selective consideration of what matter and of course what matters is the result of the dialectic relationship within the state, i.e. state power. Therefore I use the Gramscian conceptualisation of the state because it offers a rich and neutral analysis. Thus, in my conceptualisation of the state co-ordination between government and civil society is co-ordination within the state. This means that recommendations will not be restricted to policy in the conventional sense, but rather institutionalising new ways to mediate state power in pursuit of certain economic outcomes. By institutionalise I mean creating new rules that govern behaviour amongst individuals within society (Goetz, 2006). Secondly, the idea that industrialisation requires co-ordination assumes a common goal. Now, as already introduced, industrialisation is not strictly the end but also a means to other ends. Industrialisation as an end means that the state would target a specific level of industrial development, for example a percentage share of industrial exports, which is then pursued as an end goal. Industrialisation as means stems from the understanding that industrialisation can be a process that leads to economic freedom for post-colonial countries because many of these countries are seen as underdeveloped and structurally dependent on industrialised countries since they not industrialised (Ake, 1981; Hunt, 1989). That means that industrial is associated with growth which is an integral part of development (Todaro & Smith, 2003).Thirdly, since industrialisation can be instrumentally useful as argued above, we can now unpack what industrialisation should entail in South Africa. This will allow us to understand the criteria for successful industrialisation. Background and Context: Sectorial Biases of the MEC The South African economy is chaallenged by high unemployment and inequality. Dealing with these two challenges is an explicit focus of most economic planning by the post- Apartheid government; from the Growth, Employment and Redistribution (GEAR) macroeconomic package to the most recent National Development Plan. Moreover, the governments perspective is that full employment cannot be attained unless South Africa can deal with the situation of fewer manufacturing jobs and increasing jobs in services such as retail, personal services, security, domestic services and office-cleaning which all have low productivity and slow wage-growth (National Planning Commission, 2011). In sum, South Africa faces some persistent and structural economic challenges which have locked the country in a vicious cycle of low employment growth and the worst socioeconomic inequality globally. Hence the various attempts to promote pro-poor and employment-creating economic growth since sustainable economic growth and development are challenged by inequality and high unemployment in the country (Patel, 2011). Pro-poor economic growth here simply means economic growth that can benefit the poor by reducing poverty and inequality. This can be achieved through increased employment opportunities and higher wages (Mohamed, 2012). But this requires heavy investment. Therefore, various government ministries have embarked on policies to stimulate investment and create labour-absorbing economic growth. However, the South African economy has been criticised for lacking economic linkages between its sectors due to something called the Mineral Energy Complex (MEC). The MEC has prohibited the development of other industries unrelated to energy and minerals extraction (Fine & Rustomjee, 1996); this has had a lasting impact and in more recent years the economy has been caught in a prolonged era of low growth, and growth without job creation where there has been remarkable growth leading to deindustrialisation and unemployment (Mohamed, 2011). The MEC is a concept coined by Fine and Rustomjee (1996) who argue that this characterisation best describes the South African economy because the Apartheid regimes policies supported mining and energy sectors which allowed for the development of heavy industry, upstream processing of minerals and industries linked to these two sectors at the expense of industries. As a result of complex struggle between English and Afrikaner capital South Africas industrial structure was formed by state support for activities of the mining and energy whilst excluding black South Africans who were exploited through the system of migrant labour that maintained steady supply of cheap labour; which is sharp departure from the state-market dichotomy of liberal economics (Fine & Rustomjee, 1996; Mohamed, 2012; Bonner, et al., 1993). There are two outcomes of this history that I wish to highlight. Firstly the industrial development of South Africa has become biased against other labour- intensive economic sectors. And the development of mining and energy were not based on the efficient use of labour or industrial efficiency, instead the development of mining and energy was based on the states ability to secure cheap labour through its system of racist policies that allowed institutionalisation of cheap migrant labour to support mining; meanwhile energy was a beneficiary of state support through subsidies as well (Bonner, et al., 1993; Wolpe, 1972). Its important to understand that the bias here is institutional and economic. By institutional I mean it has redistributed power in favour of certain segments of civil society. And, partly as a result of this, the sectoral bias has throttled the development of skills and learning which are integrally important for industrialisation (Amsden, 2001) and the development of comparative advantage. This is the first element that should be taken into account in constructing policies industrialisation in South Africa. In other words, policies that intend to successful establish industrialisation South Africa need to address the sectorial bias, the fact that mining sector success was based on the sectors exploitation of cheap labour through the system of migrant labour, and establish self-sufficiency that can allow for economic linkages within the economy without exclusion of certain sectors and population groups. The Implications of Liberalisation and Financialisation The other outcome is related to the impact of neoliberalism and financialisation on industrialisation. Although South Africa has formally instituted an industrial policy since 2007 (Zalk, 2013) the policy environment has favoured neoliberal policies and market- orientated economics in South Africa. This has had a negative impact on achieving industrial policy objective; and in my view this is due to the challenges related to the Weberian conception on the state and coordination of the state (in a Gramscian sense of the state). Generally, there are two dealing with issues of policy coherence and state co-ordination through trade and industrial policy. On the one approach trade policy is seen as sufficient as industrial policy and often this approach recommends trade liberalisation in order for countries to gain from their comparative advantage. In other words trade liberalisation is the only things countries need to do in order to stimulate industrialisation, which will be determined by the relative factor endowments or comparative advantage of that country (Leamer, 1995). On the other hand, trade policy is seen as being insufficient on its own and often this approach recommends a coherent industrial policy that complements or is support by trade policy (Rodriguez & Rodrik, 2000). Industrial policy is meant to assist in developing value-added production and exports in order to benefit labour through employment and society in general. The big difficulty in understanding and analysing trade policy in South Africa is that there is a split between the ideology and policy in practice. This split presents itself in the strong industrial policy language of the strategic direction of the Department of Trade and Industry (DTI) and the seemingly irreversible strong commitments towards trade liberalisation that reached height during era of the GEAR macroeconomic package. Therefore ideologically, South Africa has taken the latter of the two approaches described above and the strategic direction has been driven by an understanding that trade policy needs to support or at least be coherent with the countrys industrial policy, Industrial Policy Action Plan (IPAP). This stance is clearly expressed in the dti Medium-Term Strategic Plan 2011-2014 which states a strategic commitment to establish mutually-beneficial regional and global relations, to advance South Africas trade, industrial policy and economic development objectives (DTI, 2011, p. 19). However, on the other hand, the policy environment has favoured neoliberal policies and market-orientated economics in South Africa which is underpinned by the former of the two approaches described above. Government has embarked on a piecemeal removal of all regulatory restraints on international capital flows and trade which was intended to attract foreign investment (Vickers, 2002). South Africas liberalisation began in the 1970s but really culminated in the strong liberalisation direction in the 1990s. South Africas trade liberalisation was based on the premise that increased competition from imports would be an impetus for improved efficiency which would result in higher exports from domestic producers of competing industrial or manufactured goods. Therefore the main thrust behind trade liberalisation was the pursuit of greater manufacturing competitiveness as a means of creating growth and employment (Rangasamy & Harmse, 2005). But this was not achieved. Instead, trade liberalisation had the impact of restructuring the composition of labour and production in the economy (Edwards & Behar, 2006). The South African governments commitment to trade liberalisation and global competitiveness pressures meant that many domestic firms had to restructure through right-sizing and downsizing which led to large-scale job losses (Satgar, 2012, p. 47). More importantly labour-intensive import- substitution industries suffered the most whilst export-led industries failed to create job due to a shift towards capital-intensity in order to retain competitiveness (Satgar, 2012). This has had dire impacts on South Africa in terms of its employment because the country has an abundance of unskilled labour which would mean its competitiveness is in labour-intensive production. However, trade liberalisation has had a negative impact since South Africa could not maintain its competitiveness in labour-intensive production and instead had to succumb to international pressure and shift towards capital-intensive production to retain competitiveness (Rangasamy & Harmse, 2005). This inability to compete globally is closely related to the sector bias the developed through the MEC. The ability to resist international competition and promote competitiveness of labour- intensive production requires industrial policy in order to promote the development of sectors involved in labour-intensive production and overcome the sector biases resulting from the MEC. This case shows the clear insufficiency of trade policy as industrial policy which shows the gap that requires industrial policy and coherent trade policy. In addition the issue of industrial growth in relation to trade and global integration does not necessitate blanket liberalisation or protectionism, this is a false dichotomy; instead the question should be about the degree of liberalisation or protection, within which sectors and for how long. Moreover, industrial policy should not be treated as separate from trade policy despite their dubious separate treatment in liberal economics discourse (Deraniyagala & Fine, 2001). Although financialisation is a complex concept, for the purposes of this essay, it will sufficient to define it as the phenomenon where increases in financial accumulation do not result in more real investment because the additional finance is directed towards financial speculation as opposed to being invested in production (Ashman, et al., 2011b). Moreover, the short-term profits of financial speculation entice productive capital to speculate with its surplus earnings instead of reinvesting it (Ashman, et al., 2011b). This change did not simply occur as a result in the profit-maximisation matrix of firms decision-making. Instead this is the result of changes in the environmental constraints as embodied by economic policies governing the rules of domestic and international finance; as well as the behavioural of capital as embodied by the corporate governance of firms. Economic policies governing the rules of domestic and international finance are important in defining the relation between finance and the real economy. This is because the policies define what and how finance can be utilised which determines the relation between finance and the real economy, thus determining the structure of accumulation. For example, the policies of international financial institutions such as the International Monetary Fund (IMF), which promoted the deregulation of trade and finance, were forcibly imposed on debtor nations which determined the economic reality in those countries to a large extent (Hudson, 1998). Although South Africa was not an IMF debtor nation, domestic examples of this are macroeconomic policies such as GEAR which also promoted the same kind of policies within South Africa resulting in jobless economic growth (Mohamed, 2011; Satgar, 2012). Therefore, finance policies are important in determining what finance is spent on and where finance can be spent, thus determining the structure of accumulation in the economy. Another motivation for the process of liberation was to decrease the cost of investment for foreign capital, which was assumed to be sufficient to promote investment (Zalk, 2013). However this was not enough to promote investment, instead the neoliberal policies have led to the process of financialisation which has strengthened the economic and political influence of finance in the South Africa economy. Furthermore, although finance has contributed towards economic growth in South Africa, this growth has not created sufficient employment opportunities because of the rising dominance of financial capitalism and financialisation (Mohamed, 2011). Hence there has been a growing preoccupation with labour-absorbing growth in attempt to redirect the macroeconomic trajectory, which came as a criticism of GEARs neoliberal policies that promoted finance-led economic growth (Habbard, 2010). In addition, these domestic policy reforms have affected corporate governance through the deregulation of finance which has enabled shareholder-value-type models of corporate governance that have also contributed towards the dominance of finance capital. Corporate governance is important because the aggregate financial actions of firms also define the reality of accumulation in the economy. Firms either invest in physical capital, in favour of industrial capital, or they invest in financial speculation which favours finance capitalism. Given the importance of corporate governance, South African firms have shifted towards shareholder-value-type corporate governance which has resulted in rentier-type investment and less real economic activity. Shareholder-value-type corporate governance models are underpinned by the idea that, in order to maximise the efficiency of resource allocation in firms, the interests of managers and shareholders need to be aligned through remuneration in the form of stocks and share options (Newman, 2012). Therefore driven by the pursuit of shareholder value, many firms have focused on specialising in core business, selling off assets and shutting down operations that do not contribute to shareholder value nor form part of the core business (McKenzie & Pons-Vignon, 2012). The pursuit of shareholder value has thus led to firms increasing their financial capital by buying back company shares in order increase stock prices, reducing real investment and industrial capital in order to distribute financial gains as dividends and acquiring of other firms that contribute towards narrowed-down operations of the core business (Newman, 2012). And South African firms have increasingly pursued shareholder value which is another characteristic of South Africas financialisation. The implications of neoliberalism and financialisation in South Africa are that there has been a decline in real investment and this is an integral part of industrialisation because it requires investment. In more recent years the economy has been caught in a prolonged era of low growth, and growth without job creation where there has been remarkable growth, which has led to deindustrialisation and unemployment. Therefore there is a need to create policies to require a certain rate of real investment from firms annual turnovers and this can be done through pooling of funds for rigorously regulated real investment by the state or in the form of compulsory growth in real capital accumulation and employment targets for firms realising profits within South Africa. Also, due to the liberal policy environment following South Africa neoliberalisation, there was rampant capital flight which saw significant mining interest relist their companies abroad (Mohamed, 2010; Ashman, et al., 2011b). The foreign listing of domestic firms which continued to have their South African business as core operations means that significant mining interests are now characterised as foreign direct investment (FDI). But this mode of FDI has not contributed to any technological or skills transfer nor have they contributed towards additional capital accumulation or new employment opportunities (Mohamed, 2010). Coupled with this, market-seeking mergers and acquisitions (M&As) which have limited and even negligible direct impact on employment have been the dominant mode of FDI in South Africa (Biniza, 2013). Besides the limited impact that FDI has had in creating employment in South Africa; FDI has been criticised for crowding out domestic investment especially in dairy, pharmaceuticals, steel, and electric and electronics sectors (Vickers, 2002). This crowding-out has had a negative impact on employment by forcing domestic producers to downsize and shed jobs. Therefore, in order to balance capital flight, South Africa has embarked on neoliberal policies in attempt to stimulate FDI (Ashman, et al., 2011a; Zalk, 2013). But this has attracted portfolio investment instead of FDI leading to the further financialisation in the economy. This represents future possible risks for the South African economy given the volatility and speculative nature of portfolio investment. Portfolio investment is short-term and involves the transfer of capital for securities, stocks and bonds which primarily concerns financial markets (CUTS, 2003). On the other hand FDI involves acquisition or creation of real assets in a foreign country, instead of financial assets. Hence FDI is often seen as conducive towards sustainable economic growth because of its non-liquid nature, as opposed to portfolio investment which is volatile and highly liquid thus usually referred to as hot-money (Sidorov, 2011; Mohamed, 2008). However, the implications here have different nuances to the case of domestic finance, where the challenge is capital flight or insufficient real investment, the case in international finance is insufficient kind of investment. The implication is that, because of the predominant mode of FDI, more volumes of FDI are insufficient to alleviate unemployment and inequality. This will continually be the case unless South Africa is able to attract efficiency-seeking FDI. In this regard the Motor Industry Development Programme (MIDP) is an exemplary case with marketed success in investment promotion. The MIDP is a system of export incentives designed for domestic car and components producers which enables substantial employment to about 33 000 workers in car production and 47 000 in components and tyre production (Vickers, 2002). The MIDPs success offers invaluable lessons because the MIDP has succeeded in attracting export- orientated FDI which has had the most significant direct impact on employment by providing new opportunities and operations that have integrated domestic producers into global supply chains (Thomas, et al., 2006; Vickers, 2002). However, there are some challenges which relate to sustainability of the practice of off-setting local content with exports under a regime of phasing down domestic tariff protection (Black, 2001; Zalk, 2013). The Need for Coherent Co-ordination of Industrial and Trade Policy Part of the challenge of the MIDP is related to co-ordination on policy. The outcome of the import-export complementation was meant to stimulate competitiveness and promote exports but mainly foreign owned firms with links to vehicle manufacturers instead of traditional component producers dominated exports; as a result there was low investment and low domestic market integration (Black, 2001). And those traditional component producers who could export, a majority of exports was in peripheral components. The result of state interventions to promote efficiency and exports are seemingly incoherent. This is because, the set of import-export complementation made it easier for firms to import vehicles and export peripheral components instead of investing in local production of core components and steadily increase vehicle exports (Black, 2001). Therefore, the big lessoned to be learned is that policy design needs to pay meticulous attention to the implication of policies in order to ensure coherence of the industrial policy regime with intended economic outcomes (Zalk, 2013). Moreover, there is a need implement dynamic reciprocal control mechanisms between the state and recipients of state support in order to minimise state failure (Amsden, 2001). In addition the successes of MIDP are challenged by the domestic institutional make-up which attract M&As and portfolio investment as opposed to the most impactful modes of FDI. This has resulted in increased foreign ownership (Black, 2001); in an environment with no capital controls which exposes South Africa to great risk which could be mitigated through capital controls (Palma, 2000). Therefore I would recommend that South Africa place certain policies in place in order to restrain financial capital, which would reduce profitability in the financial sector, making other sectors more profitable in order to stimulate investment in those sectors. But this is a very precarious route since the impact of capital controls on FDI depends on external factors which cannot be controlled. This suggests that this will be something that South Africa will have to learn through experience. Moreover, capital controls pose an economic conundrum for South Africa. On the one hand, financial regulation reduces profitability of the financial sector and its competitiveness which dis-incentivises portfolio investment and that is a good thing in relation to reducing speculative capital in South Africa. But on the other this would mean that South Africa would not be able to mitigate its capital flight and repatriation of profits which could lead to a deficit of payments which is potentially something harmful. However, with enough will and experience an efficient balance could be attained. There are valuable lessons to be learned from the MIDP as discussed above. In conclusion, I have argued that the set of policies required for successful industrialisation in South Africa need to address the sectorial bias resulting the minerals-energy complex and ensure the establishment of self-sufficiency that can allow for economic linkages within the economy without exclusion of certain sectors and population groups. This includes coherent support by the state in labour-intensive sectors to establish competitiveness of our labour- intensive industries. But more importantly this includes sensitivity to previously and currently marginalised groups such as women and children. The process of neoliberalisation has affected governance by reducing the extent and powers of the state, thus redefining the bounds of what is private and public without any consideration of the impact of this economic transformation on gender relations (Brodie, 1994). The institutions of neoclassical economics obscure the gendered aspect of economic life and wage labour; especially those associated with the experience of economic transformation such as the class-differentiated experience of women in core countries as opposed to the men (Brodie, 1994); and the impact of changes in demand for labour on women developing countries who are often exploited to maintain lower labour costs (Rai, 1996). Under these circumstances role of the state has been to facilitate the exploitation of women in third world countries by multinational corporations (Brodie, 1994, p. 50). Therefore, the state should allow the replacement of historically black male migrant labour with female labour by obscuring the gendered impacts of economic change and not being sensitive to the struggles of women and children. In addition, I argued that the state needs an extensive industrial policy that is coherently supported by trade policy in order to promote labour-intensive production and industrial growth. This requires an understanding of how liberalisation or protection is needed, and within which sectors and for how long. In addition, this requires co-ordinated effort by the state and not just government or business. Moreover, policy regime coherence and reciprocal control mechanisms are vitally important in order to minimise state failure and promote developmental market functioning. I have also argued that the state needs to curb the behavioural tendencies of shareholder value pursuit through a mandatory rate of real investment based on firms annual turnovers and this can be done through pooling of funds for rigorously regulated real investment by the state or in the form of compulsory growth in real capital accumulation and employment targets for firms realising profits within South Africa. Lastly, I argued that the state needs to restrain financial capital, which would reduce profitability in the financial sector, making other sectors more profitable in order to stimulate investment in those sectors. However this is a highly contentious area of policy because of the power of embedded interests within the state. But this is not something that cannot be negotiated piecemeal and despite the many examples of success and failure there are things the state will only learn through experience. And I as previously state this is not the solution or a complete solution; instead this should be understood as possible response amongst many possible responses to the question of industrialisation in South Africa. Thus, South Africa can cross the river of persistent unemployment and inequality by feeling for stones, such as the right combination of policies, to build strong foundations for the bridge across.
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