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Importance of Industrial Clusters and Inter-industry Linkages for Regional Policy in the Gauteng City-Region

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The Changing Space Economy of City-Regions

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Abstract

This chapter investigates industrial clusters as building blocks of the Gauteng economy. As economic clusters are regarded as critical masses that are spatially concentrated, are somehow related, and impact one another as a result of their complementarities or similarities, such clusters reflect synergies between industries, suppliers and the public sector. The competitive advantages of such clusters are driven by agglomeration economies that ensure that firms benefit through availability of intermediate resources, relative lower costs of inputs, and increased multifactor productivity of management innovation, labour and capital inputs, for example. By applying principal component analysis to the Gauteng Social Accounting Matrix (GSAM), we identify six key industrial clusters for the Gauteng region. We further highlight inter-industry linkages within the dominant service clusters in the regional economy by means of a multiplicative decomposition model, the structural path analysis (SPA). These clusters are dominated by the Services and Trade cluster, which by itself, provided 68.5% of Gauteng’s regional employment, and contributed 55.9% to GVA, in 2015. These results will assist the relevant decision-makers in formulating and implementing appropriate strategies for economic growth and employment creation, leading to sustainable economic development in the Gauteng regional economy.

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Notes

  1. 1.

    For a complete review of current DTI financial incentives, see https://www.thedti.gov.za/financial_assistance/financial_assistance.

  2. 2.

    Adjusted to reflect the organization of the 2006 Gauteng Social Accounting Matrix. Source: Thorbecke and Jung (1996).

  3. 3.

    The ‘use’ matrix represents intermediate parts—commodity inputs by industries. The ‘make’ matrix maps industries producing commodities—industries by commodities.

  4. 4.

    The government sector and the three industrial sectors mentioned above that did not belong to any cluster contributed the difference to the regional employment of 5,248,019 jobs and regional GVA of 964,018 million Rand.

  5. 5.

    Regional formal and informal employment not placed in any cluster, including in government and the three industrial sectors, is 3,832,611 and 1,415,408 jobs, respectively.

  6. 6.

    Percentages in parentheses represent employment in percent of total regional employment, including formal and informal employment.

  7. 7.

    Figures 4.4, 4.5, and 4.6 were created with NodeXL (http://nodexl.codeplex.com).

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Acknowledgements

We thank the two anonymous reviewers for their useful comments on the earlier draft of this chapter.

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Authors and Affiliations

  1. School of Planning, University of Cincinnati, Cincinnati, OH, USA

    Rainer vom Hofe

  2. University of the Witwatersrand, Gauteng City-Region Observatory (GCRO), a partnership between the University of Johannesburg, the University of the Witwatersrand, Johannesburg, the Gauteng Provincial Government and organized local government, Private Bag 3, WITS, 2050, Johannesburg, South Africa

    Koech Cheruiyot

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  1. Rainer vom Hofe
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Correspondence to Koech Cheruiyot .

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  1. University of the Witwatersrand, Gauteng City-Region Observatory, a partnership between the University of Johannesburg, The University of the Witwatersrand, the Gauteng Provincial Government and organized local government, Johannesburg, South Africa

    Koech Cheruiyot

Annexure

Annexure

Table 4.5 A conceptual Social Accounting Matrix (SAM)
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Hofe, R.v., Cheruiyot, K. (2018). Importance of Industrial Clusters and Inter-industry Linkages for Regional Policy in the Gauteng City-Region. In: Cheruiyot, K. (eds) The Changing Space Economy of City-Regions. GeoJournal Library(). Springer, Cham. https://doi.org/10.1007/978-3-319-67483-4_4

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