The impact of regional integration in Africa: the case of South Africa and Botswana
- Authors: Letsatsi, Paseka C
- Date: 2012
- Subjects: Regional economics , Economic development , Trade blocs
- Language: English
- Type: Thesis , Masters , MPhil
- Identifier: vital:8235 , http://hdl.handle.net/10948/d1010176 , Regional economics , Economic development , Trade blocs
- Description: Regional integration can refer to the trade unification between different states by partial or full abolition of customs tariffs on trade taking place within the borders of each state. This is meant in turn to lead to lower prices for distributors and consumers (as no customs duties are paid within the integrated area) and the goal is to increase trade. (Economic integration,1950, p66) According to Mattli (1999, p.42), the analysis of the first problem takes the decision to adopt an integration treaty as a given, and is primarily concerned with identifying the condition under which the process of integration is likely to succeed or to fail. Implementation of an agreement by heads of states to tie the economies of their countries closer together entails a lengthy process of establishing common roles, regulations, and policies that are either based on specific treaty provisions or derived from general principles and objectives written into the integration agreement. Regional integration can be applied for varying forms of economic co-ordination or co-operation amongst different neighbouring states, there will however always be different political agendas in the process. If there is a treaty amongst member states, this treaty has to be enforced or it may result in the development of differences. “In order to address national priorities through regional action most member states had been allocated the responsibility of co-ordinating one or more sectors. This involved proposing sector policies, strategies and priorities, and processing projects for inclusion in the sectoral programme, monitoring progress and reporting to the council of Ministers”. (Department of International Relations & Co-operation, Republic of South Africa). Richard Baldwin, Daniel Cohen, Andre Sapir and Anthony Venables argue that, using the same basic model as Bond and Sypropoulos (1996a), they consider trigger strategies such that initially there is inter-bloc free trade supported by the threat of perpetual trade war if any party breaks the agreement. Regional integration can be understood as the process of providing common rules, regulation, and policies for a region. Regional integration is defined as a process that allows member states to have access to each other’s markets on a voluntary basis and at various degrees. Economic, political, social and cultural benefits are realised from this interaction. (Lee MC, 1999, p30) Regional integration can be seen as co-operation in a broader context but can also be an important framework, through programmes within each regional bloc. According to (Keet ,2005,p22) since the birth of democratic South Africa, regional co-operation is also seen – in addition to the broader African aims-to be an important framework, through programmes within the Southern African Development Community (SADC), within which to address the gross imbalances created both within and between the economies of the region. Regional integration has become a way of assisting the emerging economies to be able to use their proximity to align their economies with the core for economic development. According to (Hamdok, 1998, p34) the effective implementation of regional integration is founded on an enabling environment that promotes accountability, transparency and respect for the rule of law. Also a strong institutional framework at the regional and national levels is fundamental to streamline regional agreements into national policies. In addition, the establishment of effective transnational implementation tools provide opportunities to push reforms conducive to good governance at the regional level. A clear demonstration of this can be observed in effective? legal systems and the need for a regional framework and related judicial institutions to provide an improved regional environment for private development. Integration always provides space for member states to assist in the development of other member states and which have a common economic approach to development. This is done in order to ensure that there are incentives for all member states as compared to those who are outside the bloc. As evidenced in the case of Europe, economic integration helps create a homogenous space and, to some extent, equalises living conditions and if all other regional blocs follow this process the benefit becomes greater. These appear to be prerequisites for a dialogue on the harmonisation of political stands. Indeed, an economic space that is physically integrated; where goods and services move speedily and smoothly; where, besides, the mobility of factors (manpower, capital, energy and inputs) are not subjected to hindrances; where, finally, microeconomic policies are harmonised, is likely to offer equal opportunities to all. Such a high degree of economic integration is not sustainable without a policy dialogue on issues that, at first, may not fall squarely under the rubrics of economic field; peace and security, defense, diplomacy etc. (Blayo N, 1998, P.5) The process of regional co-operation within the Southern African Development Community (SADC) started in in 1980 through the formation of the Co-ordinating Conference which was later changed to SADC IN 1992. Even though it is clear that the South African government played a dominant role because of its apartheid policies, the basic condition was to start the process of integration and open the process of economic co-operation within the region. The Governments of the Republic of South Africa, the Republic of Botswana, the Kingdom of Lesotho and the Kingdom of Swaziland- being desirous of maintaining the free interchange of goods between their countries and of applying the same tariffs and trade regulations to goods imported from outside the common customs area as hereinafter defined; “Recognising that the Customs Agreement on 29 June 1910 as amended from time to time , requires modification to provide for the continuance of the customs union arrangements in the changed circumstances on a basis designed to ensure the continued economic development of the customs union area as a whole, and to ensure in particular that these arrangements encourage the development of the less advanced members of the customs union and the diversification of their economies, and afford to all parties equitable benefits arising from trade among themselves and other countries”.(Government Notice, R 3914,p1). Even though there’s an acknowledgement that under the difficult conditions during apartheid, there was a need for the region to develop a common approach towards development and sustainable growth in the Southern African region. All countries in the region had to co-operate for long term sustainable economic growth, peace and security. “In 1980, the Southern African Development Co-ordination Conference (SADCC) was established with the major objectives of decreasing economic dependence on the apartheid regime and fostering regional development. The strategy adopted for meeting these objectives was regional development and co-operation. In 1992 SADCC was reborn, as the Southern African Development Community (SADC). The member states decided the time had come to move the region towards the creation of one regional market”. (Lee MC, 1999, p1) “Through the establishment of the Southern African Customs Union (SACU) the Southern African region has managed under difficult conditions of economic inequalities to standardise the trade links amongst member states, although there is still more to be done in the region to achieve shared goals of development. The Southern African Customs Union (SACU) links the trade, regimes of Botswana, Lesotho, Namibia, South Africa and Swaziland.
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- Date Issued: 2012
Benchmark value chain clusters, agglomeration economies and dynamic externalities : an intergrated approach to regional economic development
- Authors: Zeelie, Eben Johannes
- Date: 2009
- Subjects: Industrial clusters , Regional economics , Regional economic disparities , Economic development , Regional planning
- Language: English
- Type: Thesis , Doctoral , DBA
- Identifier: vital:8594 , http://hdl.handle.net/10948/1086 , Industrial clusters , Regional economics , Regional economic disparities , Economic development , Regional planning
- Description: From the broad overview of the cluster literature, the proposition emerges that the manipulation of regional economic structural and cluster factor conditions within a geographically proximate region can translate into sustainable regional economic growth outcomes. As a first step in exploring this research, a theoretical framework for the conceptualisation of industry clusters was established and a methodological framework applied to statistically identify major manufacturing value chain clusters in the Eastern Cape Province. This methodology combines a strength-of-linkage measure for all pairs of supply and use sectors (as revealed in the systematic analysis of intermediate purchasing and sales patterns in the South African Final Supply and Use Tables: 2002) with the application of Ward’s hierarchical cluster algorithm to map the national benchmark value chain clusters in the South African national economy. The ensuing national value chain benchmark cluster framework was then transposed to the Eastern Cape Province to reveal cluster concentrations and gaps that exist in the value chain clusters in the province. The methodology applied in this study provides an objective and clear perspective of inter-industry linkages in the South African economy and produces more detailed and evenly distributed clusters than traditional cluster identification methodologies. Secondary linkages were determined for each of the twenty-six core value chain clusters to depict the diversity of sectors linked to the respective core clusters. In transposing the national benchmark value chain cluster framework onto the Eastern Cape Province economy, a number of distinct advantages emerge. Firstly, it reveals gaps in value chain cluster groupings that may be filled through industry recruiting or regional business development strategies. However, not all industries absent from value chain clusters in the region are equally attractive for recruitment. Henceforth, the number of direct and indirect linkages to industries absent from the Eastern Cape Province serves as a measure of their relative attractiveness when considering their recruitment into the region. vi The benchmark value chain cluster framework alone does not explain which agglomeration externalities are generated and exploited within each cluster, but it served as the overarching framework for the remainder of the research. Accordingly, the value chain cluster framework was applied to evidence whether specialisation, competition or diversity (represented by MAR, Porter and Jacobs economies respectively) is the operative mechanism in generating cluster growth in the Eastern Cape Province. Since agglomeration externalities are not directly observable, construct-valid indicators for the various externalities, as well as appropriate mechanisms to empirically assess the statistical relevance of MAR-, Porter and Jacobs economies in stimulating cluster growth, were established. This thesis added to agglomeration literature by disaggregating the standard measure of diversity externalities into two unique diversity indicators, namely supply diversity (SDiv) and use diversity (UDiv). The SDiv- and UDiv coefficients measure the degree to which a value chain cluster’s supplying/user sectoral mix at provincial level differs from that of the cluster grouping at the national level. This distinction between supply-and use diversity developed in this study firstly provides a clearer insight into the relative regional presence of supplying- and using sectors to the various value chain clusters, and secondly, serves as a useful mechanism to regional policymakers in identifying industries that may be targeted for investment into a region. Therefore, by separating the diversity into its two components, a clear distinction can be drawn between the impact of supplying- and using sectors on value chain cluster growth in a particular region. From a narrow perspective, the empirical findings validate both the Marshall Arrow Romer- (small positive impact of regional cluster concentration) and the Jacobs theory (significant positive impact of cluster supply- and use diversity on cluster growth), while it invalidates Porter’s theory (no correlation between competition and cluster performance). The positive effect size recorded between the level of value chain cluster concentration and differential growth indicates that policy makers in the Eastern Cape Province will be well advised to direct growth interventions towards larger concentrated clusters, than towards smaller, incipient value chain clusters. Additionally, vii the effectiveness of targeted inward FDI to the Eastern Cape Province may be raised by evaluating the economic impact against current value chain cluster structure, as well as the effect on the supply- and use diversities of existing value chain clusters in the province. This thesis has also illustrated that value chain clusters that are concentrated in the region, show a positive effect size with the level of supply diversity in the region. Conversely, value chain clusters that reflect high levels of competitiveness record a positive effect size with use diversity. Policy interventions aimed at raising the performance of value chain clusters typified by smaller players in a competitive environment, should therefore consider raising the respective levels of use diversity in the region. This research awakens the proposition that a reliance on a serendipitous approach to generate dynamic externalities is not sufficient, and that certain factor conditions favour the transfer of tacit knowledge between cluster members. Accordingly, this research empirically explored whether statistically significant relationships can be detected between the common cluster elements, or factor conditions, that serve as conduits for the transfer of dynamic externalities and value chain cluster growth in the Eastern Cape Province. The findings indicate that linkages with knowledge generating institutions in the Eastern Cape Province do, albeit to a relatively small extent, have an impact on value chain cluster growth, and validates the assertion that cognitive enhancing institutions contribute to cluster growth. The importance of backward and forward linkages in nurturing regional growth is signified by the moderate effect size recorded by the level of vertical linkages and total value chain cluster growth. Similarly, a moderate effect size was recorded between the level of horizontal linkages and value chain cluster growth, which shows that cooperation amongst competing firms do stimulate cluster and regional growth in the Eastern Cape Province and affirms the proposition that inter-firm linkages on both vertical- and horizontal levels stimulate cluster growth. An expectation was that the institutional framework conditions would have a significant impact on value chain cluster growth in the Eastern Cape Province. However, the empirical findings reflect that the institutional framework conditions have no statistical impact on value chain cluster growth. The study also found a moderate, positive effect size between value chain cluster size (number of employees) and growth, which shows viii that size matters in regional growth. In other words, in contrast to their European counterparts, the larger the number of employees per value chain cluster, the greater the impact on value chain cluster growth in the Eastern Cape Province.
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- Date Issued: 2009