Industrialisation Approaches: SADC & South Africa - Dominant Predator or Potential Partner? Nigel Gwynne-Evans Nov 15
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1 Industrialisation Approaches: SADC & South Africa - Dominant Predator or Potential Partner? Nigel Gwynne-Evans Nov 15
2 Context: Highly unequal trade: 2014 SADC: R275b: R68b (+ R55b Nig) Intra-regional trade low: 15% Reflecting high degree of commodity dependence De-industrialisation (17.6% - 13%: ) Fast growth in tertiary/services sectors. SADC Industrial Strategy adopted in April.
3
4 SADC Industrial strategy: Core tenets Linked to AU s agenda 2063 Structural transformation based on industrialisation, modernisation, industrial upgrading and industrialisation Overcoming the binding constraints 3 core pillars: Industrialisation as champion From comparative to competitive advantage Regional integration
5 SADC industrial Strat (cont) Focus on diversification/ industrial restructuring 3 prioritised growth sectors: Mining, agriculture and pharmaceuticals Key will be the sequencing of interventions Reversing de-industrialisation Implementation of Industrial Upgrading and Modernisation Programme National Industrial centres of excellence programme. Action plan about to be developed to be completed end March 2016.
6 Critique of the SADC strategy Overall sound concepts and eclectic approach is pragmatic. But operationally devil is in the detail! Ignores regional-political realities of SA/ SADC relationships Under-estimates sovereign self-interest. Impact of sticky borders, logistical costs. Exports still highly concentrated: Top 10 85% Under-estimates cost of doing business How to pay for proposed interventions?
7 Operational considerations a view from below. 1. Building state capacity 2. Public/ private relationships 3. Critical fundamentals Logistics, infra-structure, skills. 4. Core sectoral priorities Agriculture/agri-processing Mining Oil and gas Construction/ urban opportunities Power
8 1. Building State capacity Critical factor in good IP Lessons from the East! Marked lack of capacity across most SADC states to implement consistent IP. Need strong partnerships across the region to build strong state capacity Building of strong sectoral teams vital.
9 2. Engaging the private sector Need to engage with the private sector in a pragmatic manner in developing good IP Use of non-competitive industry fora: Building relationships with domestic industry associations, clusters, forums. Can assist in avoiding monopolistic capture of the state by individual private sector interests. Assists in prioritising public investment and support in building the right conditions, and improving the business climate.
10 3. Critical infra-structure fundamentals Clear that power, water, urban infrastructure are central to the ability to grow. Create conditions to move projects quickly and cleanly, bringing in the private sector REIPP process in SA a good example. Skills use industry fora to guide skills priorities. Focus on key areas of capability eg. SA s Marine oil and gas academy.
11 4.1 Key sectoral priorities: Agric/processing Fundamental in terms of a quick win. Focus on building infra-structure to facilitate the market (packing sheds, rural markets, coldchain facilities, centralised buying facilities, SPS testing facilities etc). Opportunity to build VC s into the retail chains. Focus both on key commodities and on products that offer high productivity, high export opportunities.
12 4.2 Mining & Oil and Gas Extractivist driven part of global VC s Limited development of local suppliers and service providers. Need to drive local content provisions, focused on more holistic, systemic approach to building capacity. Requires firm state hand to ensure localisation.
13 4.3 Construction and urbanisation opportunities High number of opportunities in the construction and opportunities related to the roll-out of housing and urban infra-structure. Strengthen local procurement rules for state infrastructure (hospitals, schools, state buildings etc), and put in place stronger LC rules for foreign investment (offices, retail, tourism etc. infrastructure). Identify new opportunities in demand-side management, sustainable housing, renewable energy etc.
14 4.4 Power infra-structure Will be a massive roll-out of power-related infra-structure over the next 10 years (hydro, gas to power; renewable energy etc). Understand elements of the VC in which local suppliers can get involved. Work regionally to specialise in aspects of the supply chain.
15 South Africa Predator or partner Dominant across much of SSA in terms of telecommunications, banking, retail, media. Africa now SA s largest market for manufactured goods >50% of exports. But SA companies not co-ordinating with the SA gov going it alone. No SA inc. Missing out on the benefits of more focused interventions involving SA business and the SA government As a result, SA companies viewed as predatory, rather than as partners.
16 A new approach: Partnership driven - An example from the retail sector SA retailers dominate the SADC retail space. Few backward linkages into local market suppliers, due to lack of capacity to meet the required standards. SA retailers seen as predatory not sustainable. Working on a new approach, where the SA government, domestic government, donors and retailers commit to building up local suppliers, and investing in the required enabling infra-structure Encouraging specialisation in most competitive products and commodities not just for the domestic market, but for the regional and ultimately export markets.
17 Thank you.
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