The nature and potential of industrial development within the Southern African Development Community (SADC) and the facilitating role of trade liberalisation and foreign direct investment in selected countries
- Authors: Mutambara, Tsitsi Effie
- Date: 2005
- Subjects: Southern African Development Community Investments, Foreign -- Africa, Southern Free trade -- Africa, Southern Economic development -- Africa, Southern Industrialization -- Africa, Southern Industrial policy -- Africa, Southern Africa, Southern -- Economic policy
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: vital:1071 , http://hdl.handle.net/10962/d1007732
- Description: To date the SADC region has managed to develop a manufacturing base but this base is still small as evidenced by its low contribution to GDP. For example, only three out of the fourteen SADC countries, viz. Mauritius, South Africa and Swaziland, had over 20 percent of their GDP originating from the manufacturing sector throughout the 1990s. Also to note is that while the manufacturing sector is quite diversified, the sector is dominated by industrial processes which are more of resource and labour-intensive in nature than those processes of scale-intensive, differentiated and science based in nature. TIle trade performance of the manufacturing sector supports these observations and as such the region is heavily dependent on imports for scale-intensive, differentiated and science based commodities. However, despite the fact that the region tends to focus more on resource- and labour-intensive manufacturing activities, products from these manufacturing activities are still significant components of manufactured goods imports into the region. Also to note is that since resource- and labour-intensive industries dominate manufacturing activities; these are the areas in which investment opportunities abound. For example, agro-based manufacturing presents most of the investment opportunities, with food processing presenting the majority of the investment opportunities followed by garments and textiles production. Mineral processing also presents significant investment opportunities. The analyses of the nature of the manufacturing sector also show that in a few SADC countries, viz. Mauritius, South Africa and Zimbabwe; scale-intensive, differentiated and science based industries also form a significant component of the industrial base implying more technologically complex manufacturing sectors. Since high technology and technologically complex manufacturing activities are limited, investment opportunities in these manufacturing sub-sectors are also limited to just a few countries However, with the SADC ITA in place, opportunities could arise for these limited technology-related manufacturing facilities to expand or engage in import substitution production so as to meet the demands of the growing regional market. It is also important to note that, while the region may not have as competitive advantage in these industries as in the resource- and labour-intensive industries, there is a need for the region to selectively identify and target such industries for priority development, a lesson SADC could learn from the East Asian NIC's took in their industrialisation strategy. The study also shows that the manufacturing sector has been a priority sector for both domestic and foreign investors. This has implications for industrial development because a strong and dynamic manufacturing sector would be developed, forming a sound basis for industrialisation as well as being able to effectively link and support all the other sectors of the economy. FDI could help the region to fully utilise the labour-intensive industries and use them as a stepping-stone to higher levels of industrial development. This is a lesson to SADC from the experiences of the East Asian NICs where while industrialisation was initiated by labour-intensive manufacturing, the countries were able to move into capital-intensive manufacturing due to FDI as it enabled the establishment of the industrial bases, thus leading to a rise in the share of manufactured exports. FDI could also help to develop the resource-intensive industries further by promoting further processing of raw materials into products of more value, thus propelling industrialisation through a resource-led industrial development programme as the current resource-intensive industries become fully utilised. The raw materials which occur in great abundance in the region's primary sector would have a ready market in the manufacturing sector where they would serve as inputs to the production of high value products. The currently smaller industrial base for scale-intensive products, differentiated and science-based manufactured products would benefit from the improved technological capabilities and managerial skills that result from FDI. Therefore, by impacting positively on manufacturing activities of both low and high MVA, FDI would thus have a facilitating role in establishing a more solid industrial base, broadening the current manufacturing base, and improving installed capacity utilisation. The study also shows that investment in productive capacity in the form of machinery and equipment is of great importance in the sampled SADC countries. Investment towards the acquisition of this capital is very important as this is directly relevant towards improving productive capacity. FDI could thus play a facilitating role by augmenting the current domestic investment in machinery and equipment. While the manufacturing sector within the region is still small and the current utilisation of installed industrial capacity is low, there is potential for further industrial growth. The current process to usher in the SADC Free Trade Area would have a facilitating role through various ways: viz. increasing the market size and enabling easier access through the reduction of tariff and non-tariff barriers, promoting regional competitiveness, improved utilisation of regional corridors, increasing opportunities for utilising identified intra-industry trade potentials, and providing opportunities for increased regional cross-border investment. Apart from the SADC FTA, the USA African Growth and Opportunity Act (AGOA) and the Cotonou Agreement will also motivate the identification and utilisation of existing and new potentials within the manufacturing sector in SADC. In order to improve the current nature of industries in the region, there is also a need to design and implement appropriate industrial policies and strategies. Such policies should consider the region's trade policies and the recently launched Regional Indicative Strategic Development Plan (RISDP) so as to complement them. The industrial policies should also address issues relating to industrial investment, technology and local technological capabilities development, human resources development, the structure and nature of industry, the competitiveness of industries, as well as facilitating the complementarities between the agricultural and manufacturing sectors. To this end therefore, instead of relying solely on individual national industrial policies, SADC is in the process of formulating a regional industrial policy and strategies which seek to promote and support sustainable industrial growth across the region, thus facilitating industrial development.
- Full Text:
- Date Issued: 2005
- Authors: Mutambara, Tsitsi Effie
- Date: 2005
- Subjects: Southern African Development Community Investments, Foreign -- Africa, Southern Free trade -- Africa, Southern Economic development -- Africa, Southern Industrialization -- Africa, Southern Industrial policy -- Africa, Southern Africa, Southern -- Economic policy
- Language: English
- Type: Thesis , Doctoral , PhD
- Identifier: vital:1071 , http://hdl.handle.net/10962/d1007732
- Description: To date the SADC region has managed to develop a manufacturing base but this base is still small as evidenced by its low contribution to GDP. For example, only three out of the fourteen SADC countries, viz. Mauritius, South Africa and Swaziland, had over 20 percent of their GDP originating from the manufacturing sector throughout the 1990s. Also to note is that while the manufacturing sector is quite diversified, the sector is dominated by industrial processes which are more of resource and labour-intensive in nature than those processes of scale-intensive, differentiated and science based in nature. TIle trade performance of the manufacturing sector supports these observations and as such the region is heavily dependent on imports for scale-intensive, differentiated and science based commodities. However, despite the fact that the region tends to focus more on resource- and labour-intensive manufacturing activities, products from these manufacturing activities are still significant components of manufactured goods imports into the region. Also to note is that since resource- and labour-intensive industries dominate manufacturing activities; these are the areas in which investment opportunities abound. For example, agro-based manufacturing presents most of the investment opportunities, with food processing presenting the majority of the investment opportunities followed by garments and textiles production. Mineral processing also presents significant investment opportunities. The analyses of the nature of the manufacturing sector also show that in a few SADC countries, viz. Mauritius, South Africa and Zimbabwe; scale-intensive, differentiated and science based industries also form a significant component of the industrial base implying more technologically complex manufacturing sectors. Since high technology and technologically complex manufacturing activities are limited, investment opportunities in these manufacturing sub-sectors are also limited to just a few countries However, with the SADC ITA in place, opportunities could arise for these limited technology-related manufacturing facilities to expand or engage in import substitution production so as to meet the demands of the growing regional market. It is also important to note that, while the region may not have as competitive advantage in these industries as in the resource- and labour-intensive industries, there is a need for the region to selectively identify and target such industries for priority development, a lesson SADC could learn from the East Asian NIC's took in their industrialisation strategy. The study also shows that the manufacturing sector has been a priority sector for both domestic and foreign investors. This has implications for industrial development because a strong and dynamic manufacturing sector would be developed, forming a sound basis for industrialisation as well as being able to effectively link and support all the other sectors of the economy. FDI could help the region to fully utilise the labour-intensive industries and use them as a stepping-stone to higher levels of industrial development. This is a lesson to SADC from the experiences of the East Asian NICs where while industrialisation was initiated by labour-intensive manufacturing, the countries were able to move into capital-intensive manufacturing due to FDI as it enabled the establishment of the industrial bases, thus leading to a rise in the share of manufactured exports. FDI could also help to develop the resource-intensive industries further by promoting further processing of raw materials into products of more value, thus propelling industrialisation through a resource-led industrial development programme as the current resource-intensive industries become fully utilised. The raw materials which occur in great abundance in the region's primary sector would have a ready market in the manufacturing sector where they would serve as inputs to the production of high value products. The currently smaller industrial base for scale-intensive products, differentiated and science-based manufactured products would benefit from the improved technological capabilities and managerial skills that result from FDI. Therefore, by impacting positively on manufacturing activities of both low and high MVA, FDI would thus have a facilitating role in establishing a more solid industrial base, broadening the current manufacturing base, and improving installed capacity utilisation. The study also shows that investment in productive capacity in the form of machinery and equipment is of great importance in the sampled SADC countries. Investment towards the acquisition of this capital is very important as this is directly relevant towards improving productive capacity. FDI could thus play a facilitating role by augmenting the current domestic investment in machinery and equipment. While the manufacturing sector within the region is still small and the current utilisation of installed industrial capacity is low, there is potential for further industrial growth. The current process to usher in the SADC Free Trade Area would have a facilitating role through various ways: viz. increasing the market size and enabling easier access through the reduction of tariff and non-tariff barriers, promoting regional competitiveness, improved utilisation of regional corridors, increasing opportunities for utilising identified intra-industry trade potentials, and providing opportunities for increased regional cross-border investment. Apart from the SADC FTA, the USA African Growth and Opportunity Act (AGOA) and the Cotonou Agreement will also motivate the identification and utilisation of existing and new potentials within the manufacturing sector in SADC. In order to improve the current nature of industries in the region, there is also a need to design and implement appropriate industrial policies and strategies. Such policies should consider the region's trade policies and the recently launched Regional Indicative Strategic Development Plan (RISDP) so as to complement them. The industrial policies should also address issues relating to industrial investment, technology and local technological capabilities development, human resources development, the structure and nature of industry, the competitiveness of industries, as well as facilitating the complementarities between the agricultural and manufacturing sectors. To this end therefore, instead of relying solely on individual national industrial policies, SADC is in the process of formulating a regional industrial policy and strategies which seek to promote and support sustainable industrial growth across the region, thus facilitating industrial development.
- Full Text:
- Date Issued: 2005
The nature of economic integration and co-operation within the South African region and a survey of economic benefits to member states
- Authors: Mutambara, Tsitsi Effie
- Date: 2001
- Subjects: Africa, Southern -- Economic integration , Southern African Development Community
- Language: English
- Type: Thesis , Masters , MA
- Identifier: vital:938 , http://hdl.handle.net/10962/d1002671 , Africa, Southern -- Economic integration , Southern African Development Community
- Description: The transformation of SADCC into the Southern African Development Community (SADC) has paved the way towards closer regional economic integration in southern Africa. The regional grouping no longer only focuses on sectoral cooperation, but is steadily moving towards increased cooperation in trade development and promotion, industrial development and the diversification of national economies, with the aim of increasing regional economic integration. A free trade area ranks second lowest in the steps towards the highest levels of economic integration. Thus, the signing of the SADC Trade Protocol, which serves to pave way for a SADC Free Trade Area, has initiated steps to facilitate and promote the formal economic integration of all countries in the southern African region. It has been noted that at various periods, the region has adopted a variety of approaches to integration. As such, the present study reviews the different approaches to integration, namely the market integration model, the neo-functional integration model, the development integration model and the theory of common markets. Since the essential question with which this thesis is concerned is whether, and to what extent, the benefits expected from SADC and SACU in terms of their aims and objectives have accrued to member states, an insight into the expected benefits arising from the application of each theoretical framework can help to facilitate an evaluation of the benefits which the countries have enjoyed from these two regional groupings. The thesis highlights that throughout the ten years during which the original SADCC was in place, it based its approach to regional integration on the neo-functional and development integration models, although the former tended to be more dominant. With the regional grouping transforming into SADC, the market integration model was adopted, even though the grouping still had features of the aforementioned approaches. The relevance of the three approaches can be seen in: (i) the continued importance of SADC's sectoral projects, particularly in the field of transport and communication: (ii) continued attempts to put in place a suitable regional) industrial development strategy and implement policies to attract foreign investment; and (iii) the signing of the SADCC Trade Protocol to facilitate the implementation of a free trade area. The thesis argues that member states have enjoyed considerable economic benefits from the SADC sectoral projects. However, in some cases, members have lost out on potential benefits as a result of projects failing to be implemented or completed, mainly due to inadequate funding. Further, delays and inefficiencies at some border posts constitute significant non-tariff barriers which could be a hindrance to intra-regional trade. Progress towards diversification of exports has been limited as the region still relies mostly on the export of the traditional agricultural and mineral raw materials. While all countries have made efforts to diversify their industrial bases, attempts at implementing a meaningful regional industrial development strategy have met with limited success. Intra-regional trade has been increasing over the years. Since the SADC Trade Protocol only came into effect in September 2000, the increased levels of trade integration in the region appear to have been a result of the bilateral trade agreements between countries, and the customs union between South Africa and Botswana, Lesotho, Namibia and Swaziland (BLNS), as well as the structural adjustment programmes and the significant growth experienced in some countries. Outstanding intra-regional trade volumes have been experienced within SACU. In trade terms, benefits have varied between member states, with the more powerful countries like South Africa, Zimbabwe and Mauritius experiencing substantial trade surpluses vis-a.-vis their trade, partners. Countries with bilateral preferential trade agreements have also benefited more due to increased access into each other's markets compared to those without or with bilateral trade agreements of an MFN nature. However, it is important to note that, despite the increase in trade integration in the region, southern Africa is still heavily dependent on the rest of the world for its export markets and as its source of imports. The study finds that intra-industry trade (IIT) exists within the region and, in a number of sectors, high IIT indices are recorded;--although some such sectors do not display significant trade - voIumes. The opening of the region through the implementation of the SADC FTA could promote the expansion of IIT .as-the free trade area )'Till create an enlarged regional market. As such, SADC could benefit from dynamic effects such as scale economies in production and marketing, with member states working on having complementary production structures so as to facilitate specialisation. The thesis argues that the potential for intra-regional trade expansion in the SADC FT A also exists bearing in mind trade complementarity between countries as well as revealed comparative advantages in different sectors. One of the benefits which have accrued to the region as a result of facilitating and promoting greater cooperation and deepening the integration process has been an expansion in cross border investment. The study finds that the 1990s witnessed a gradual increase in cross border investment to take advantage of investment opportunities in member states. South Africa has become the primary source of foreign direct investment flows to a number of SADC countries, with mergers and acquisitions being the dominant mode of its foreign direct investment. Cross border investment helps in supplementing low domestic savings, thus providing substantial parts of the shortfall in capital needed to finance economic growth and development. It can thus promote development in the industrial sector, transfer of capital, skills and technology, and development of infrastructure. Many SADC countries are unable to compete effectively due to lack of export supply capacity. The thesis suggests that capitalising on investment by South African firms could enhance local supply capabilities and raise export competitiveness. The study concludes that for market integration to succeed in the SADC region, the neofunctional and development integration approaches need to be actively pursued simultaneously, particularly with respect to infrastructural and industrial development.
- Full Text:
- Date Issued: 2001
- Authors: Mutambara, Tsitsi Effie
- Date: 2001
- Subjects: Africa, Southern -- Economic integration , Southern African Development Community
- Language: English
- Type: Thesis , Masters , MA
- Identifier: vital:938 , http://hdl.handle.net/10962/d1002671 , Africa, Southern -- Economic integration , Southern African Development Community
- Description: The transformation of SADCC into the Southern African Development Community (SADC) has paved the way towards closer regional economic integration in southern Africa. The regional grouping no longer only focuses on sectoral cooperation, but is steadily moving towards increased cooperation in trade development and promotion, industrial development and the diversification of national economies, with the aim of increasing regional economic integration. A free trade area ranks second lowest in the steps towards the highest levels of economic integration. Thus, the signing of the SADC Trade Protocol, which serves to pave way for a SADC Free Trade Area, has initiated steps to facilitate and promote the formal economic integration of all countries in the southern African region. It has been noted that at various periods, the region has adopted a variety of approaches to integration. As such, the present study reviews the different approaches to integration, namely the market integration model, the neo-functional integration model, the development integration model and the theory of common markets. Since the essential question with which this thesis is concerned is whether, and to what extent, the benefits expected from SADC and SACU in terms of their aims and objectives have accrued to member states, an insight into the expected benefits arising from the application of each theoretical framework can help to facilitate an evaluation of the benefits which the countries have enjoyed from these two regional groupings. The thesis highlights that throughout the ten years during which the original SADCC was in place, it based its approach to regional integration on the neo-functional and development integration models, although the former tended to be more dominant. With the regional grouping transforming into SADC, the market integration model was adopted, even though the grouping still had features of the aforementioned approaches. The relevance of the three approaches can be seen in: (i) the continued importance of SADC's sectoral projects, particularly in the field of transport and communication: (ii) continued attempts to put in place a suitable regional) industrial development strategy and implement policies to attract foreign investment; and (iii) the signing of the SADCC Trade Protocol to facilitate the implementation of a free trade area. The thesis argues that member states have enjoyed considerable economic benefits from the SADC sectoral projects. However, in some cases, members have lost out on potential benefits as a result of projects failing to be implemented or completed, mainly due to inadequate funding. Further, delays and inefficiencies at some border posts constitute significant non-tariff barriers which could be a hindrance to intra-regional trade. Progress towards diversification of exports has been limited as the region still relies mostly on the export of the traditional agricultural and mineral raw materials. While all countries have made efforts to diversify their industrial bases, attempts at implementing a meaningful regional industrial development strategy have met with limited success. Intra-regional trade has been increasing over the years. Since the SADC Trade Protocol only came into effect in September 2000, the increased levels of trade integration in the region appear to have been a result of the bilateral trade agreements between countries, and the customs union between South Africa and Botswana, Lesotho, Namibia and Swaziland (BLNS), as well as the structural adjustment programmes and the significant growth experienced in some countries. Outstanding intra-regional trade volumes have been experienced within SACU. In trade terms, benefits have varied between member states, with the more powerful countries like South Africa, Zimbabwe and Mauritius experiencing substantial trade surpluses vis-a.-vis their trade, partners. Countries with bilateral preferential trade agreements have also benefited more due to increased access into each other's markets compared to those without or with bilateral trade agreements of an MFN nature. However, it is important to note that, despite the increase in trade integration in the region, southern Africa is still heavily dependent on the rest of the world for its export markets and as its source of imports. The study finds that intra-industry trade (IIT) exists within the region and, in a number of sectors, high IIT indices are recorded;--although some such sectors do not display significant trade - voIumes. The opening of the region through the implementation of the SADC FTA could promote the expansion of IIT .as-the free trade area )'Till create an enlarged regional market. As such, SADC could benefit from dynamic effects such as scale economies in production and marketing, with member states working on having complementary production structures so as to facilitate specialisation. The thesis argues that the potential for intra-regional trade expansion in the SADC FT A also exists bearing in mind trade complementarity between countries as well as revealed comparative advantages in different sectors. One of the benefits which have accrued to the region as a result of facilitating and promoting greater cooperation and deepening the integration process has been an expansion in cross border investment. The study finds that the 1990s witnessed a gradual increase in cross border investment to take advantage of investment opportunities in member states. South Africa has become the primary source of foreign direct investment flows to a number of SADC countries, with mergers and acquisitions being the dominant mode of its foreign direct investment. Cross border investment helps in supplementing low domestic savings, thus providing substantial parts of the shortfall in capital needed to finance economic growth and development. It can thus promote development in the industrial sector, transfer of capital, skills and technology, and development of infrastructure. Many SADC countries are unable to compete effectively due to lack of export supply capacity. The thesis suggests that capitalising on investment by South African firms could enhance local supply capabilities and raise export competitiveness. The study concludes that for market integration to succeed in the SADC region, the neofunctional and development integration approaches need to be actively pursued simultaneously, particularly with respect to infrastructural and industrial development.
- Full Text:
- Date Issued: 2001
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