Sadc out to accelerate industrialisation

Oliver Kazunga

Senior Business Reporter

THE Southern African Development Community (SADC) has recommended several interventions, among them increased investment in research and development, which member states must implement to accelerate industrialisation and grow exports.

Members came up with the SADC Industrialisation Strategy and Roadmap in 2015, amid concerns that the region was exporting unfinished or semi-processed products, depriving economies in the region of export revenues, employment opportunities and infrastructure development, among other benefits.

The roadmap seeks to grow manufactured exports to at least 50 percent of total shipments from the region by 2030, from less than 20 percent presently, and to grow the share of intermediate products in the global market.

Through industrialisation, the bloc seeks to drive faster economic growth and create employment while also tapping into broader markets presented by initiatives such as the African Continental Free Trade Area (AfCFTA).

The AfCFTA agreement was operationalised in January 2021 to promote economic integration across the continent by eliminating tariffs on 90 percent of goods traded between member states over 10 years.

Zimbabwe last week hosted the SADC Industrialisation Week (SIW), which included an investment conference, in Harare under the theme “Promoting Innovation to unlock Opportunities for Sustainable Economic Growth and Development: Towards an Industrialised SADC”.

Delegates noted key priority areas requiring attention and action from member states.

It was agreed that individual countries should create an enabling investment climate in their jurisdictions to attract and promote the growth and development of enterprises across all economic sectors.

The trading bloc says this can be achieved through simplifying regulatory frameworks, reducing bureaucratic hurdles and improving infrastructure to attract domestic and foreign direct investment.

Speaking at a meeting during the SIW, SADC Secretariat programmes officer for science, technology and innovation Mr Reaboka Morakabi said, on the basis of the data provided by member states, little resources were being set aside in the national budgets to support institutions involved in research and development programmes.

“What is key here is also the amount of resources that the governments are giving to the institutions that are involved in science, technology and innovation (STI) within the member states. This indicator is a problem because we have got clear feedback from the member states as to how much they fund from their national budgets to the institutions that are championing STI.

“We need to have that indicator so that we will be able to say STI can drive industrialisation because we have put in resources there. Without the resources, then the industrialisation objective is just a talk show.

“We still need to improve as a region to meet the industrialisation objective,” he said.

During the SIW, delegates highlighted the need for domestic resource mobilisation from pension and sovereign wealth funds and other public-private partnerships (PPPs), particularly those that support STI projects.

SADC comprises 16 countries — Angola, Zimbabwe, Zambia, the Democratic Republic of Congo (DRC), Malawi, Mozambique, South Africa, Lesotho, Eswatini, Botswana, Namibia, Madagascar, Mauritius, Comoros, Seychelles and Tanzania.

“The PPPs established in STI are only available in the DRC, Malawi, South Africa and Tanzania out of the 16 member states.

“The number of PPP agreements on sharing private science, technology and innovation infrastructure; I have indicated to you from that national innovation system diagram that the universities, the governments and industry have to work together and strengthen those linkages.

“When we look at this since we got these reports from member states, it tells you that we (SADC) have very weak national innovation systems,” said Mr Morakabi.

At present, he said, none of the countries had met the 1 percent threshold on gross domestic expenditure to support research and development initiatives to drive the industrialisation agenda, and thus it was critical for member states to improve on their investments in research and development programmes.

“Angola was supposed to meet the 1 percent of gross domestic expenditure on research and development but that country was presently at 0,07 percent; Botswana (0,46 percent); the DRC (0,43 percent); Eswatini (0,32 percent); Lesotho, there is missing data; Madagascar (0,01 percent); Malawi (0,17 percent); while data is missing for Mauritius and Mozambique.

“Namibia is at 0,34 percent; Seychelles (0,4 percent); while South Africa was at 0,61 percent and has gone down from 0,8 percent before the Covid-19 pandemic.

“We have Zambia and Tanzania at 0,36 percent and then the data is missing for Zimbabwe also,” he said.

The Confederation of Zimbabwe Industries (CZI), a representative body of the local manufacturing sector during the SIW, said there was an urgent need to formalise and operationalise the SADC regional development fund to propel the industrialisation agenda.

“There is an urgent need to formalise and operationalise the SADC regional development fund to propel the industrialisation agenda in the region, as well as leveraging on regional integration to facilitate cross-border investment, trade and financial flows, and integrating regional value chains into global value chains, collaborating with the private sector to develop and implement infrastructure projects and other key initiatives.

“Additionally, there is a need to repurpose our education systems to bridge the technology gap and current global trends and enable the SADC region to be more competitive,” said CZI chief executive officer Mrs Sekai Kuvarika when reading out some of the agreed resolutions.

She said at the just-ended industrialisation week, it was resolved that the bloc should create awareness on investment opportunities within the region and facilitate information sharing among member states, while reducing investment barriers by harmonising investment regulations, simplifying administrative procedures and promoting investment facilitation centres.

“The following points were observed by the forum: creating incentives for diaspora investment, providing investment facilitation services, and promoting diaspora-focused investment funds, promoting financial inclusion, reducing remittance costs and channelling remittances into productive investments, as well as establishing platforms for engagement between diaspora communities and SADC member states, and supporting diaspora associations,” said Mrs Kuvarika.

The forum also called for co-financing of energy infrastructure projects to support the industrialisation agenda in the region.

In recent years, the region has been reeling under acute electricity supply constraints due to lack of investments in new power generation projects.

SADC still faces significant challenges in energy development and usage. The SADC Regional Infrastructure Development Master Plan Assessment Report of 2019 highlights several issues. These include the fact that only 32 percent of rural areas in the region have access to power. The region also falls behind the rest of Africa in terms of access to electricity.

Electricity shortage has constrained the region since 2007. Although this was expected to be corrected by 2019, projects intended to address the shortage lag behind the deadline due to lack of funding.

The bloc also agreed on the need for start-up legislation, policies and strategies to foster international funding.

Commenting on the SADC industrialisation agenda after a plenary session on Thursday, a partner at accounting firm Baker Tilly Capital, Mr Pritchard Mhako, said: “While we are talking of industrialisation in Southern Africa, we are not moving at the right pace. Pre-Covid, we were contributing two percent of the world’s manufacturing output and post-Covid, that percentage has shrunk to 1 percent.

“SADC, with regard to innovation and entrepreneurship, as well as start-ups, has lagged so much behind . . . There is start-up funding or venture capital funding that has been going into Africa. Much of that funding has been going into four countries primarily and the reason it has been going into those four countries (is) all four countries have start-up Acts.

“Kenya has a start-up Act, Egypt and Nigeria have start-up Acts, South Africa has a start-up Act and outside South Africa in the Southern African region, there has not been much activity going on.”

Recommendations were also made on the need for SADC to develop more robust infrastructure and regulatory frameworks, making special economic zones (SEZs) more attractive to foreign and domestic investors.

Calls were also made for political will to collaborate on the creation of integrated cross-border SEZs that focus on value addition and beneficiation of natural resources extracted from the region.

In his presentation during the SIW, officially opened by President Mnangagwa on Wednesday, SADC Secretariat Executive Secretary Mr Elias Makgosi said member states should craft policies and regulations that propel industrialisation.

“A deliberate focus must be made on the creation of and support to market access for those businesses and universities pursuing and leading the industrialisation effort; real and meaningful access to matters is the oxygen that businesses need to survive and also to achieve scale; without it, they will suffocate and perish,” he said.