16 August 2014

Southern Africa: A Rallying Call for Industrial Development

Victoria Falls — It is no longer a secret that Africa is one of the fastest growing economies in the world. In fact, the continent has recorded impressive growth rates in the past few years.

Latest figures by the United Nations indicate that the continent registered growth of about four percent in 2013. The projected growth for 2014 is expected to be 4.7 percent.

However, there is a worrying trend that Africa's economic growth is failing to stimulate socio-economic development and create employment.

To address the situation, the SADC Executive Secretary, Dr Stergomena Lawrence Tax, has urged the continent to put in place vibrant industrialization and socio-economic policies that allow countries to diversify their economies and utilize local resources through comprehensive value-addition.

"It is worrisome to note that the impressive growth story of Africa in the last decade has not translated into economic diversification, commensurate jobs or faster social development," Dr Tax told the SADC Council of Ministers meeting in the resort town of Victoria Falls, Zimbabwe ahead of the SADC Heads of State and Government Summit on 17-18 August.

She said most economies in southern Africa and the rest of the continent are characterized by high dependence on agricultural, mineral and other natural resource-based commodity production and exports, with little value-addition and limited forward and backward linkages to other sectors of the economy.

"The key challenge for SADC countries is how to design and implement effective policies to promote industrialization and economic transformation."

She said the main objective of enhancing productive and industrial competitiveness is to achieve the development of a competitive and diversified regional industrial base that optimally utilizes local resources through comprehensive value-addition.

"The challenge of industrialization of the SADC region is to transform from a small undiversified and low technology manufacturing sector to a more diversified and medium-to-high technology levels of manufacturing for domestic consumption in the region through intra-SADC trade and export to global markets," Dr Tax said.

"In the context of SADC, this can be achieved through collective focus on building the industrial capacity necessary to produce higher value goods for trade internally, within the SADC region and globally."

The executive secretary noted that despite some gains in manufacturing, the continent is yet to reverse the rapid "de-industrialization that has defined its structural change in recent decades."

"In 1980-2010, its share of manufacturing in aggregate output declined from more than 12 percent to around 11 percent."

This is sharp contrast with the experience of East Asia, where output has remained at more than 31 percent, with labour-intensive industries driving the high and sustained growth that has helped lift a number of its citizens out of poverty.

"Results of a statistical analysis shows that although during the period 1995-2005 African countries caught up with East Asian countries in terms of economic growth rate, the gap between Africa and East Asia has been widening."

Dr Tax said in response to this, the region has developed a SADC Industrial Development Policy Framework.

Adopted in 2012, the policy framework identifies key intervention areas such as development of sector-specific strategies for regional value-chain development, as well as promotion of industrial upgrading through innovation, technology transfer and research and development.

Other interventions are measures to improve standards, technical regulations and industrial infrastructure; development and upgrading of skills to drive industrialization; and development of a mechanism for industrial financing, as well as provision of infrastructure for industrial development and promotion of cross-border and foreign direct investment.

On the general economic situation in the region, Dr Tax said the average real Gross Domestic Product (GDP) growth in southern Africa has marginally increased from 4.8 percent in 2012 to 4.9 percent the following year.

She revealed that the average inflation rate for southern Africa stood at 7.1 percent in 2013 while the savings ratio stood at 17.7 percent of GDP during the same period.

"With regard to investment, the region recorded 27.7 percent of GDP in 2013, which was a 0.4 percent improvement over 2012 level."

"The global competitiveness index 2013-14 indicates that the SADC region is making progress in improving the business environment and competitiveness in general."

Dr Tax said the general socio-political environment in SADC is stable, urging the region to consolidate the peace since stability is a critical factor towards socio-economic development.

The 34th SADC Summit, whose theme is "SADC Strategy for Economic Transformation: Leveraging the Region's Diverse Resources for Sustainable Economic and Social Development through Beneficiation and Value Addition," opened on 8 August, and will end on 18 August after SADC leaders meet to discuss strategies on how to deepen integration.

Zimbabwean President Robert Mugabe becomes the SADC chair at this Summit for the coming year, taking over from his Malawian counterpart, President Peter Mutharika.

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