Developmental potential of the aerospace industry: the case of South Africa

The high-tech nature of the aerospace industry suggests that the industry might hold the potential to support the development of key capabilities which can drive economic growth in developing countries. However, which economic activities within the aerospace industry countries hoping to develop economically should target (if any) is not clear. The recently developed input-output product space (IO-PS) analysis approach (developed for use in the minerals industry) promises to provide guidance in this respect, as it aims to identify strategic commodities that best support capability building in a country. This study thus evaluates the use of this approach to guide industrial policy in developing countries interested in the aerospace industry. In particular, the aerospace value chain is mapped using international trade codes and product space metrics are calculated for each of the identified product categories. This is then followed by a simulation to determine optimal developmental paths in the industry for the case of South Africa. The results from this analysis are compared to the existing policy of the South African government in this industry. This enables case specific recommendations as well as general observations regarding the aerospace industry as a springboard for industrial development.)