Comparative advantage and competitiveness of main industries in the north-eastern region of South Africa: application of location quotient and shift-share techniques.

Abstract

It is important for policy makers to know where main industries are regionally concentrated. This allows investors to take carefully calculated risks on opportunities and for development policy makers to prudently provide the right economic development direction and properly implement strategies for the regional and/or national development. The primary objective of this paper is to provide an empirical investigation of the geographic concentration of the main industries in South Africa by means of comparing four selected provinces. This paper focuses on two economic base techniques, namely the location quotient and shift-share analysis that both seek to examine industrial advantages (disadvantages), structure and competitiveness. The key findings indicate that the comparative advantage declined in different industries. A worrying industry is mining in Mpumalanga and Limpopo provinces, where there is a remarkable decline in LQs and, thus, these industries need intensive care. In terms of shiftshare analysis, regional competitiveness factors were the largest positive contributor in two industries in KwaZulu Natal, three in Gauteng and Mpumalanga and four in Limpopo province. Considering the state of employment in the primary sector (agriculture and mining), the results suggest that policy makers should keep accelerating the construction of large and medium sized industrial enterprises, promoting and encouraging the development of secondary industry, and actively enhance the development of the tertiary industry in the north-eastern region of South Africa.