Growth and Strategies of Large and Leading Firms - Metals, Machinery and Equipment Sector Assessment

41 Pages Posted: 7 Aug 2017 Last revised: 10 Aug 2017

See all articles by Jason Bell

Jason Bell

Centre for Competition, Regulation & Economic Development (CCRED)

Nicholas Nhundu

Centre for Competition, Regulation & Economic Development (CCRED)

Anthea Paelo

Centre for Competition, Regulation & Economic Development (CCRED)

Mmamoletji Thosago

Centre for Competition, Regulation & Economic Development (CCRED)

Thando Vilakazi

Centre for Competition, Regulation & Economic Development (CCRED)

Date Written: July 1, 2017

Abstract

The strategies and investments of large firms can impact the growth and industrial development trajectory of economies. In the context of South Africa’s deindustrialisation and the current policy direction towards growing the manufacturing sector, this study assesses the investments and strategies of large firms in the metals, machinery and equipment sector, one of the largest contributors to GDP and exports and a key producer of inputs into downstream economic activities. These investments are assessed to understand the companies’ strategies in terms of investments made (and not made), to inform the development of appropriate policy levers and incentives to enhance industrial development. The study considered 25 listed firms in the metals, machinery and equipment sector from 2011 to 2016, considering the location of those investments, and the rationale for these investments given by the companies.

Three main cross-cutting observations arise from the analysis. The first is that there is a significant number of mergers and acquisitions, and consolidation in the sector in the period considered. Based on the available data, there is a relatively even distribution between mergers taking place within South Africa and those involving acquisitions of companies outside of Africa. The second theme is that there are ‘pockets of excellence’ where firms are investing in developing capabilities and technologies that can drive development and industrialisation. This marks an important area for policy consideration, whereby measures to support continued investment and upgrading of capabilities would be of significant value in terms of enabling the companies to sustain operations. Third, firms continue to face challenges in terms of sustaining their operations in the context of low investment, low downstream demand (including a decline in government projects), and a challenging cost environment which can limit further growth.

Keywords: metals, machinery and equipment sector, investments, trends, strategies, South Africa

JEL Classification: D21, L2, L3, O14, 025

Suggested Citation

Bell, Jason and Nhundu, Nicholas and Paelo, Anthea and Thosago, Mmamoletji and Vilakazi, Thando, Growth and Strategies of Large and Leading Firms - Metals, Machinery and Equipment Sector Assessment (July 1, 2017). CCRED Working Paper No. 18/2017, Available at SSRN: https://ssrn.com/abstract=3013675 or http://dx.doi.org/10.2139/ssrn.3013675

Jason Bell (Contact Author)

Centre for Competition, Regulation & Economic Development (CCRED) ( email )

5 Sturdee Ave
Johannesburg, GP, 2196
South Africa

Nicholas Nhundu

Centre for Competition, Regulation & Economic Development (CCRED) ( email )

5 Sturdee Ave
Johannesburg, GP, 2196
South Africa

Anthea Paelo

Centre for Competition, Regulation & Economic Development (CCRED) ( email )

5 Sturdee Ave
Johannesburg, GP, 2196
South Africa

Mmamoletji Thosago

Centre for Competition, Regulation & Economic Development (CCRED) ( email )

5 Sturdee Ave
Johannesburg, GP, 2196
South Africa

Thando Vilakazi

Centre for Competition, Regulation & Economic Development (CCRED) ( email )

6 Sturdee Ave
Johannesburg, GP, 2196
South Africa

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