How will SADC deal with the ‘bully’ South Africa in its endeavour to become an industrialised region? Staff Writer BAME PIET takes a closer look at the SADC Industrialisation Strategy (2015-63) and explores the challenges faced
The Southern African Development Community (SADC) has embarked on an ambitious path to transform into a manufacturing region instead of being consumer-driven. The 43-year plan will see regional member states trading among themselves, working on joint venture projects, freeing the movement of goods and people and converging with the African Union among other things.
At last week’s media familiarisation workshop, SADC brains tried to unpack the strategy stating that: “The central challenge facing Africa is how to transition from the commodity-dependent growth path in which African countries find themselves to value-adding, knowledge-intensive and industrialised economies”.
Monnane Monnane of the SADC Secretariat stated that the strategy emphasises pursuit of targeted and selected policies to create conditions for higher rates of investment by the public and private sectors to enable crucial sectors to prosper, particularly value-adding manufacturing.
He stated that industrialisation and regional integration will benefit from strong support for localisation and regional supplier development. He said the strategy will achieve substantial and sustained increases in income, employment and living standards.
He was confident that the strategy would move the region from factor-driven development phase to efficiency driven stage and ultimately move to innovation stage as a development continuum.
Monnane emphasised the need for political support and inclusiveness, as well as enhanced forms of industrial development in the form of upgraded Small Medium Enterprises, clusters and value chains at regional and international level. He added that building capacities and capabilities by availing skills, promoting entrepreneurship, and empowering learning institutions will play a role in achieving the strategy.
Infrastructure such as roads, ICT and well-developed financial systems are some of the key needs for the strategy to succeed, he said.
He advised the member-states to focus on value-chains, a practice adopted by regional blocs of developed countries such as the European Union. In value chain, there are many players who take part from the conception of a project to its end product where components are supplied by different companies operating in different countries.
One example is the production of heavy plant machinery, which usually involves many players in different countries supplying different components from electrical, mechanical, glass, tyres, and body parts.
“Value chains expand production possibilities and enhance cross-border utilisation of the natural and human resources. Participation can be regional or global, or both – either way is to maximise national and regional economic prosperity,” Monnane explained. Since the strategy anticipates international projects, he cautioned that the ball is on law and policy makers to ensure that there is good corporate governance in place by identifying entry points in value chains.
Some of the identified projects include Agro processing; Minerals beneficiation and downstream processing, pharmaceuticals; services and other consumer goods.
However, the possibility of litigation is always present in any form of joint venture project where one party has failed to honour the contractual obligations be it failing to deliver goods on time, or failure to produce goods as per specifications. The Secretariat staff were quick to point out that there are conflict resolution mechanisms put in place to take care of such eventualities. They were hopeful that any disputes in project partnerships will not escalate to a
Monnane stated that policies are essential for enhanced value chain participation, cluster development and deepening regional integration. “Deeper regional integration is essential for the fast and efficient connectivity that is a prerequisite for supply chain efficiency. Investment policy and financial and capital market integration are important for open investment regimes.”
He added that governments or member states should commit to the strategy institutionalising the role of the private sector, Think tanks, Universities, Centres of Excellence, and the media. Furthermore, establishing and strengthening of public institutions to guide and monitor the implementation of the strategy at national, regional and SADC Secretariat will be welcome.
The SADC Industrialisation Strategy was launched in August 2015 and it recognises that for trade liberalisation to contribute to sustainable and equitable development, and poverty reduction, it must be complimented by the requisite capacities to produce, and to trade effectively and efficiently.
The strategy is anchored on three pillars of: industrialisation as champion of economic and technological transformation; competitiveness as an active process to move from comparative advantage to competitive advantage; and regional integration and geography as the context for industrial development and economic strategy.
One of the issues that cropped up was that there are challenges in exporting goods to South Africa where they have put in place strict requirements that end up forcing companies to go and open factories in that country. It emerged that exporting pharmaceutical products, for example, is a very delicate activity that is time sensitive.
However, South African authorities have been accused of putting demands in place that are difficult for producers in other countries to achieve. One example was that they demand manufacturers to transport by air their products, whilst on the other hand, air transport is very expensive and with strict aviation regulations differing from one country to another.
Other challenges that the strategy is likely to face, is the mentality of South Africa as the regional economic powerhouse, which crushes any form of outside competition that threatens its companies that are spread across the SADC region and the continent.
South Africa’s strong trade union movement is likely to be hostile to any company that imports components from other countries instead of setting up a plant to manufacture such in the country.
South Africa has every reason to be a bully because it rubs shoulders with big economies such as Brazil, Russia, India and China through the BRICS trade agreement.
The country has infrastructure of First World standards and a population that can buy locally produced goods without having to rely on ‘small’ partners in the likes of Swaziland, Lesotho, Botswana and Namibia. The combined Gross Domestic Product and population of the aforementioned countries is not even half of that of SA, and therefore it will always be a tough challenge to be equal trading partners.
The strategic plan will also have to deal with an arrogant Botswana government, which does not welcome expatriates to work or open business in the country through its stringent security vetting process in the issuance of residence and work permits.