Globalization and local development: The Sedibeng steel industry in South Africa

Seminar date: 
17 April 2008
Speaker(s): Lennard van Vuren and Wynand Grobler, both from the Department of Economics, North-West University, South Africa, and Wim Pelupessy, from the Institute of Development Studies (IVO), Tilburg University, the Netherlands.

The initiative by the Sedibeng District Municipality to investigate the potential development of secondary industry through the -promotion of clusters in the local economy is a response to its slow growth, limited structural change and high unemployment and poverty levels since 1994. This is related to the prevalence of resource-based economic activities by large capital-intensive firms with limited backward and forward linkages in the local economy over almost 5,000 km2 in the southern part of Gauteng Province.
The situation is extremely serious for the regional black townships where unemployment rates are over 60%. However, clusters may be embedded in the overall dynamics of global commodity or value chains. This is the case for the steel, metal and other activities related to the global Arcelor Mittal Steel Company, which dominates the local productive capacity. The possibilities for establishing and upgrading local clusters of SMMEs depend on the income generation and distribution dynamics of this producer-driven chain.
With 70% of the flat steel and 74% of long steel products from Sedibeng plants destined for the rest of South Africa, there appears to be ample space for ´export´ substitution. Technologically, there are also more downstream than upstream opportunities for the region and promising areas for final product manufacturing can be found in the building and construction, machine and equipment, and pipe and tube sectors. Nevertheless, existing skills shortages may present serious restrictions in this development.

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