Channels of and Constraints to Technology Absorption
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as 90 percent in this sector, which reflects the local competencies in the sector. In the past, important links with Mintek and universities led to close collaboration with industry to develop technology. A decline is now perceived in the local competencies available, however, because of the large number of skilled professionals moving abroad (especially to Australia) from the sector, which has in turn led to a decline in the research competencies in the local universities. These declines could imply that South Africa’s capital goods sector is possibly losing its global competitiveness to countries such as Australia that continue to increase their competencies in the sector.
South Africa: Chemical Sector Globally, the chemical industry is characterized by three distinct features: it is technology intensive, capital intensive, and reliant to a large extent on high-quality inputs (because of its sophisticated value-adding chain). The South African chemical industry was initially developed to provide a source of synthetic fuel for mining, later branching into chemical feedstocks and intermediates. Although this specialized industry proved particularly important before 1994, the isolationism and protected environment enabled production at low productivity levels. Isolated from international competition and burdened with high raw material prices because of the cost of producing oil from coal and associated substantial import tariffs, locally processed goods were not competitive in the export market. With the end of isolationism, the industry has been forced to rapidly restructure and improve competitiveness. Currently the South African chemical sector is the largest in Africa and contributes about 5 percent to South Africa’s GDP and 25 percent to its manufacturing sales.8 The sector is reasonably diverse and is generally divided into four broad categories: base chemicals (including the petrochemical building blocks and inorganic chemicals); intermediate chemicals (ammonia, waxes, solvents, phenols, tars, plastics, and rubbers); chemical end products (processable plastics, paints, explosives, and fertilizers); and specialty chemical end products (pharmaceuticals, agrochemicals, biochemicals, and additives). The industry is a substantial contributor to South Africa’s manufactured exports, comprising 17 percent of total manufactured exports (table 2A.7 in annex 2A). The top export destinations in 2009, shown in table 2A.8 in annex 2A, were Zimbabwe (15 percent), the United Kingdom (13 percent), and Mozambique (10 percent). However, the