South Africa's current industrial policy focuses on the economy at two levels: a sectoral and spatial level. The former relates to the manner in which industrial policy
is concentrating on particular sectors i.e. industrial clusters. This shift in industrial policy from targeting individual industries to an emphasis on industrial clusters, has complemented the change in focus to export promotion under trade policy.Furthermore, there has been increasing recognition of the need to improve industry performance and competitiveness in order to successfulJy implement export growth.
Industry clusters are considered as having the potential to increase manufacturing performance and can provide the basis for sustainable competitive advantage for nations. Consequently the concept of industry clusters was introduced in South Africa in 1997. Because industry clusters are relatively new in South Africa, most of the
cluster initiatives in various sectors of the economy are in their early stages of development. Nevertheless, some are already showing signs of potential success in increasing competitiveness in particular sectors. 
This thesis uses Porter's "diamond" framework apprdach to investigate whether clustering has improved the manufacturing performance of the motor industry in the
Eastern Cape. International experience from both developed and developing countries will illustrate the potential of clustering as a powerful strategy in increasing manufacturing performance and consequently competitiveness. Ultimately this should lead to long-term economic development, especialJy if government adopts clusterbased
economic development policies.
Information from a survey conducted on both the motor vehicle assemblers and component suppliers is used in this study. The findings reveal that it is mainly the motor vehicle assemblers who have experienced some improvements in
manufacturing performance. The components sector on the other hand has not experienced any such improvements.
This thesis concludes with the recommendation that it is important to develop cluster policy as a broader and dynamic vie\\" of competition. The main emphasis under such
policy would be a move from targeting particular industries and providing subsidies towards focusing attention to all clusters in the economy. To effectively apply such a policy requires the repositioning of national, local and provincial government in order to become more involved in regional development issues. Moreover, the various
levels of government need to incorporate cluster policy into their competitive strategies.