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Regional Industrialization and Integration in Southern Africa - Reporting from TIPS Annual Forum

The white-painted cluster of traditional style buildings might suggest that this was a farm on the South African veldt. Not so however—it was Trade and Industrial Policy Strategies (TIPS) Annual Forum held on 14-15 July 2015 at the University of Witwatersrand, a high-level gathering of economists from the Southern African region joining in discussion with some specialists from key South African government departments (Trade and Industry and National Treasury), as well as international academics largely brought together by UNU-WIDER. 

Rethinking in policy terms needed for increasing regional trade

Proceedings were opened by South Africa’s Minister of Trade and Industry, Rob Davies, who gave an authoritative overview from the perspective of the South African government of some of the challenges facing the country and the region. As the TRALAC paper presented by William Mwanza makes clear, the regional challenge has at least three elements: market integration; industrial development; infrastructure development. 

Some of the concerns of the conference—addressed by Saul Levin in this interview—can be well understood against the background of the diagnosis performed by the National Planning Commission (headed by South Africa’s former Minister of Finance, Trevor Manuel) in developing the National Development Plan 2030. The NDP2030 focuses on eradicating poverty and decreasing inequality. The World Bank has stressed that the South African government is reaching the limits of what can be done through taxation and redistribution.

Renewable energy sources are key in the new industrial model

UNU-WIDER was showcasing some of the many strands of work being developed to study the region, with an emphasis of regional economic development, and also Africa’s energy futures. 

South Africa’s industrial model in the past had been built upon strong resource endowments, as well as cheap and plentiful supplies of labour and energy—coal and electricity, above all. In a globalized world, this model is challenged on every front. 

The UNU-WIDER project on energy futures is highly relevant. Africa has a huge pent-up demand for modern energy. Infrastructure investment lasts for decades, so decisions taken now will have effects till 2050 and beyond. Development and climate change goals can be met together; secure, reliable and cheap supplies of renewables—such as hydropower, wind, and solar energy—can meet the needs of both of these goals to a significant degree. 

Johannes Gebretsadik presented a promising model showing how the combination of wind and hydropower in the Zambezi Basin could overcome many of the shortcomings of intermittent generation by wind alone. In effect, the approach is to use the hydropower as a battery storing energy until it is needed. His research also deals with the intermittency arguments which are often deployed against solar and wind power. 

Amy Rose used her presentation to explain regional power pools and their advantages. The potential of a Southern African power pool to exploit river basins in the region is huge, particularly the various phases of the Inga scheme. According to Channing Arndt and other researchers the potential capacity of the Grand Inga Dam is almost equal to South Africa’s total generation capacity in 2005. Increasingly, the challenges are seen as those of political economy, co-operation between governments, rather than technical issues. 

Bruno Merven and colleagues presented evidence to suggest that a carbon tax and relaxing import regulations for energy could provide an inexpensive way to reduce South Africa’s projected CO2 emissions significantly by importing electricity from hydropower from the region. There would be no cost to growth, but could be a 1% reduction in employment as Merven and his colleagues suggest in their research. This exemplifies the political trade-offs which have to be addressed as any loss, however slight, in employment represents a real cost against another key policy objective—raising employment levels.

Development of the manufacturing industries and wage concerns

Ben Turok, who redrafted the ‘economy’ section of the Freedom Charter 60 years ago, addressed issues from the mining sector, and what is holding the country back given its rich mineral endowment. He sees a key task for all sides (government, private sector, unions) to develop flexible mechanisms in full acceptance of the mixed economy structure to allow manufacturing to develop. China has been able to do this—can South Africa show comparable flexibility?

Black and McLennan addressed the question of the car manufacturing industry in sub-Saharan Africa, and how the continent’s rising demand will be met. Given South Africa’s established role in the auto industry, it is an issue of great importance for the future because—as Argentina and Australia have shown—it is quite possible for a fledging car industry to grow to a certain size, but ultimately fail to consolidate.

Newman and Ashton provided detailed examination of manufacturing in the Gauteng region, describing in detail the deindustrialization in other than mining energy complex (MEC) areas, such as leather, wool, paper, and printing. These are precisely the type of industries where one would hope to see growth. But as Ben Fine argues, since 1995 it is precisely manufacturing not related to the MEC which has suffered most, when it should be an employment and wealth generator. 

Dave Kaplan in his closing remarks raised a provocative issue. Citing Justin Lin’s argument that many Chinese manufacturing jobs would be up for grabs in the future, Kaplan suggested that Lin’s figure of 85 million may be too high, whether it would be better for South Africa to capture a percentage of these jobs in special export-processing zones. Surely it is better to employ people, he argued, even at relatively low wages, than pay them (even less) through public works programmes, but as a demand on government spending. 

Better together – the role for regional integration in growth

UNU-WIDER research in the project Regional Growth and Development in Southern Africa is consolidating understanding of regional integration in important ways. Two papers presented at the conference, both authored by Fessehaie et al. of CCRED (watch a video interview with her), investigate national trends in Zambia and sectoral considerations on specialized mining equipment. Other issues being researched by UNU-WIDER teams include the animal feed to poultry value chain, regional supermarket chains and their strategies and road transportation.

The TIPS Annual Forum provided an excellent opportunity to present some of the early output, and discuss the work with the research community in the Southern African region.