by Joseph Ngwawi – SANF 15 no 14
The Southern African Development Community (SADC) is in the process of finalising a draft Regional Industrialization Strategy and Roadmap that provides the framework for major economic and technological transformations at the national and regional levels within the context of deepening regional integration.
The strategy and roadmap, whose drafting was spearheaded by a team of regional and national consultants appointed by the SADC Secretariat, aims to accelerate the growing momentum towards strengthening the comparative and competitive advantages of the economies of the region.
An interim report by the consultants was presented to the meetings of the Ministerial Task Force on Regional Economic Integration and the SADC Council of Ministers held in Harare, Zimbabwe in March.
“The development of the industrialization strategy commenced in December 2014, following completion of the preparatory phase which included resource mobilisation, preparations of terms of references and assembling experts,” SADC Executive Secretary Dr Stergomena Lawrence Tax said.
The interim report identifies industrialization, competitiveness and regional integration as three main pillars on which the strategy should be anchored.
The strategy will present concrete and innovative short-, medium- and long-term actions for the attainment of the objectives of the three pillars and will be aligned to the African Union’s Agenda 2063.
While there is no one size-fits-all prescription, the interim report proposes a wide range of industrial policy options that are available to the SADC region.
One of the options is the adoption of Special Economic Zones (SEZs).
“These are an attractive option where the logistics are favourable – proximity to markets, ports, modern infrastructure – and where funding is available,” the report said.
“They can form the basis for clustering, including value-chain creation, so that firms can exploit the benefits of external spinoffs such as being located close to input suppliers, repair shops and financial institutions.”
Industrial parks act as a magnet for new entrants and a base for clusters, while also attracting foreign direct investment.
However, the disadvantage is that firms cannot be forced to locate within SEZs and there will always be risks that incentives, such as tax breaks used to attract investors, will prove costly relative to the benefits obtained.
“Moreover, few SADC economies have the fiscal space to spend lavishly, either on investment in SEZs or capital grants,” the report said.
The draft strategy also calls for the promotion of domestic, regional and global value chains as one of the interventions that should be pursued by SADC in its efforts to industrialise.
The SADC region could benefit immensely from the experience of the Asian economies in the area of regional and global value chains.
Participation in value chains played a major role in the industrialisation of Asian economies and is, therefore, seen as a promising industrialisation path for the southern African region.
Starting with Japan in the late 20th century, Asia has been one of the regions that have exploited Global Value Chains (GVCs) successfully. GVCs can be credited for China’s rapid industrialisation while also contributing substantially to the Asian region’s rapid growth in incomes, output and employment.
The main Asian exporters rank highly in GVC participation because a large proportion of their exports are imported inputs (foreign value-added) and a similarly large number of their exports are intermediate goods that are used in exports for third countries.
Asian exports are, therefore, integrated in GVCs both upstream and downstream.
Promotion of value chains will enable SADC Member States to specialise in those productive processes and activities where they have competitive advantages.
Participation in regional and global value chains also promotes intra-regional trade and opens up access to technology and brand names while also accelerating export diversification and growth.
The report also advocates for a powerful case for SADC governments to invest in the collection of information and knowledge, and to make it readily available to actual and potential investors.
“This does not involve policymakers in picking winners but merely facilitating access to information to enable firms to diversify, expand or upgrade,” it said.
Governments can do this either by setting up their own Research and Development (R&D) institutions or “more likely providing financial support to existing research institutions, including universities and private sector R&D departments.”
The type of infrastructure – both hard and soft – required for diversification often changes as economies transform.
It has been noted that while major mining or energy firms may be willing and are able to finance essential infrastructure, this is seldom the case in manufacturing or services where governments will have to play a leading role.
The Secretariat and the consultants were directed by Council to revise the draft strategy and roadmap before its presentation for approval at an Extraordinary SADC Summit set for Harare on 29 April.
The Council agreed that in view of the primary focus on industrialization at the current stage of development in SADC, the industrialization strategy will be key in finalizing the Revised Regional Indicative Strategic Development Plan (RISDP).
As result, both processes of developing an industrialization strategy and the Revised RISDP should be done simultaneously and presented for approval to the Extraordinary Summit.
The proposed industrialisation strategy and roadmap will be implemented in three phases covering the three main pillars of industrialisation, competitiveness and regional integration.
The first phase would cover the remaining period of RISDP, which is expected to end in 2020.
The second phase, which is expected to cover 30 years, would consist of a period 2021-2050 while the final phase is proposed to run between 2051 and 2063, building up for the convergence with the African Union’s Agenda 2063.
The Agenda envisaged that by 2063 African countries will collectively converge into “an integrated, prosperous and peaceful Africa, driven by its own citizens and representing a dynamic force in the global arena”.
All regional economic communities on the continent are expected to orient their strategies and deploy resources towards this end.
The first phase will involve implementation of measures to transform the production base of the region as well as to raise the quality of human capital and labour productivity.
Proposed interventions during this phase will include modernisation of industry and support structures; measures to upgrade science, technology, engineering and research capabilities of Member States; skills development; institutional reforms; and adoption of conducive macroeconomic policies for industrial development.
It is envisaged that the SADC economy would move from factor-driven to efficiency-driven during the second phase.
Measures will focus on diversification and productivity of sectors and increasing competitiveness of the region.
This will involve the introduction of policies targeting agro-food processing industries; introduction of value-chains involving the agricultural sector; mineral beneficiation; pharmaceuticals; and transformation of Small and Medium Enterprises (SMEs).
Proposed specific interventions during this phase will include introduction of advanced technology in agro-food processing projects; development of agro-industrial clusters; promotion of regional value chains; prioritization of mineral beneficiation; development of mineral industrial clusters; support for mining SMEs; and access to finance.
Other proposed interventions are the prioritization of the pharmaceutical sector, including development of regional value chains in the industry.
During the third and final phase, the regional economy is envisaged to further transform, based on high levels of innovation and business sophistication.
This will necessitate increased investment in knowledge, development of unique skills, nurturing innovation as well as promoting competitiveness and deepening the entrepreneurial culture. – SADC Today
