Channels of and Constraints to Technology Absorption
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changeovers. The mean age of capital equipment for both types was over seven years, and operational reliability was fairly low (in terms of supplier and customer deliveries and production downtime). This situation was compounded by high turnover rates of 19.1 percent for the Taiwanese and 12.8 percent for the South African firms. These high turnover rates reduce the incentive to provide training, further worsening the skill shortage. Constraints on enhancing technological competencies. As with investment in human capital, process and product innovation have been limited. Since their inception, only two Taiwanese firms and one South African firm have conducted any product innovation. The same statistics are true for process innovation, with the South African firm’s investment being the only one that consisted of more than general machinery upgrading. The firms attributed this fact to their value-chain configuration: Lesotho merely functions as a basic manufacturing site for innovation originating at the headquarters. Skill shortage. The skill shortage in Lesotho is particularly onerous for technology absorption. Nine of the 10 firms struggled to find skilled labor and highlighted the very basic level of instruction at the Lesotho training schools for machinists. Although all claimed to conduct internal training, total spending on training is low: 0.38 percent of total remuneration for Taiwanese firms, and 1.03 percent for South African firms. As seen in figure 2.5, this expenditure is much lower than in neighboring South Africa. Furthermore, the Taiwanese firms employ almost no Lesotho citizens in management positions. Although top management in the South African firms is still predominantly South African, they do employ more Lesotho citizens in middle- and lower-management levels. Other barriers to increased investment in technology absorption. The interviewed firms cited a number of specific barriers to further investment, notably logistics (customs and land shipment costs of imported materials from the East), start-up finance, and a severe shortage of skills. The South African firms were predominantly concerned about skills, however, and the Taiwanese about costs. This distinction between the two types of firms has important implications for technology absorption. South African–owned firms take skill development and operational upgrading more seriously because these are a condition for the transfer of more work from their South African to their Lesotho operations. In contrast,