Industrial Decentralization in South Africa (Review Article)

• DOI: http://doi.org/10.1111/j.1813-6982.1974.tb00395.x
• Published date: 01 June 1974
• Author: ANNE E. RATCLIFFE
• Date: 01 June 1974

Industrial Decentralization in South Africa

(Review Article)

ANNE E. RATCLIFFE*(1)

AS STATE INTERVENTION In industrial location has grown, so the subject of regional economics has expanded and become

increasingly analytical. At the International Economic Association Conference on Backward Areas in Advanced Countries, held in

1967, E. M. Hoover recalled his words of twenty years previously:

Although governments have a large stake in the results of locational development, and a correspondingly heavy responsibility for

influencing it in socially desirable directions, few governments have ever followed any coherent policy in regard to location.*(2)

Recently, works on regional analysis have proliferated, sometimes stimulating and sometimes provoked by government action

regarding industrial location. Two publications *(3) by Professor R. T. Bell provide a much-needed and penetrating analysis of the

objectives, instruments, and achievements of South African policy towards the location of industry and the development of

economically backward regions.

Since both the theory and practice of regional policy are evolving, there is naturally the danger that an author who stops to reflect

and analyse may find himself out of touch with the most recent thought and events. Bell's article, which originated as a paper

delivered to the Economic Society of South Africa's biennial conference in October 1973, is much more than an addendum to his

book, which is derived from his Ph.D. thesis. The article does of course contain more recent empirical information. But its analysis

is defter and more incisive, and the discussion of policy implications is paradoxically ampler in the 30-page article than in the

250-page book. This

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must very largely result from the long hiatus between the completion of the study on which the book was based and its eventual

publication. During the interval between the completion of the thesis (in 1968, according to the preface) and its revision for

publication, there appeared, in addition to a great number of specialist articles, a number of new and comprehensive works on

regional economics. The book was up-dated to take into consideration developments in South African (but not foreign) policy

towards industrial decentralization until 1970; but its theoretical chapters ignored the newer textbooks and general studies, and so

are sometimes unnecessarily cumbersome, while the references to comparative experience in other countries are deficient. A

number of these later works are cited in Bell's article.

Synopsis of Argument

The Concentration of Industrial Location

The argument of the book will be set forward briefly. Whether measured in terms of sales (gross output), net output (value added),

or employment, secondary industry in South Africa is overwhelmingly concentrated in four large urban centres, which together

account for some four-fifths of all industry. The Southern Transvaal conurbation accounts for nearly half of the country's industrial

output and employment, the three largest coastal metropolitan areas producing somewhat less in total. Some writers, for example L.

P. McCrystal *(4), have argued that the social costs of expansion of industry in these four industrial concentrations exceed the

private costs, and that government action to promote industrial decentralization is thus appropriate. Bell considers this argument

unproven both on theoretical grounds and on the empirical evidence available. The policy of industrial decentralization to

particular areas can and does serve non-economic objectives. Of the variety of economic and social objectives which could be

secured by a policy of industrial decentralization, the dominant objective in South Africa is the satisfaction of the locational

preferences of the electorate in respect of the total population. This objective can only be secured at a substantial cost in loss of

real output. The availability of plentiful labour at rates much below those prevailing in the main urban industrial centres has not

attracted industrialists to areas of surplus labour; further inducements have thus had to be offered. Bell has devised an ingenious

scale (which will be discussed later) by which to measure the increasing marginal costs of industrial diversion

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to locations not preferred by industrialists. He calculated also the cost-reducing effect of the special inducements offered in

development areas, using a variety of assumptions about costs, turnover, depreciation, etc. Since he shows excess costs to be high

and to rise rapidly, and the offsetting inducements to be small by comparison, he was easily able to account for the limited success

of industrial decentralization policy to date.

Creation of Employment

Bell discusses the results of decentralization policy first in terms of the criteria used by the Permanent Committee for the Location

of Industry (since 1971 renamed the Decentralisation Board), and demonstrates that the actual increase in employment overstates

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