Globalization and the death of the local firm? The automobile components sector in south Africa

As in the case of many developing countries, South African industry is facing a new competitive environment as trade barriers fall. This involves both the need to enter external markets and to cope with new entrants in the domestic market. In the case of the South African automobile assembly industry, responding to this new global environment has increasingly meant that domestic subsidiaries are being integrated into the global strategic operations of their parent companies. This is increasingly leading them to the foreign sourcing of components, in part because of perverse and unintended consequences of the Motor Industry Development Plan. Where local production of components is involved, there is decreasing space for locally-owned component suppliers and almost no space for component suppliers using local technology. South African component suppliers are thus increasingly being relegated to highly competitive niches in mature technologies in external after-markets, making them vulnerable to exchange rates.