GROWING REGIONAL POTENTIAL

Southern Africa as a region has great economic potential

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Southern Africa as a region has great economic potential based on both the potential for domestic production and regional and international trade.

South Africa needs faster export growth to propel economic growth and job creation, and what better way to achieve this goal than by promoting deeper regional trade integration with the 15 countries that make up the SADC region. According to a World Bank report (The Economic Update on South Africa: Focus on Export Competitiveness), South Africa’s export goods are mainly highly sophisticated, capital-intensive goods that are produced by highly skilled workers: “While this offers opportunities for upgrading and moving up the value ladder, trading in these products means that the dominant export companies are underutilising South Africa’s large pool of low-skilled labour, thus, failing to create enough jobs to make the export sector a major contributor to employment growth and poverty reduction.”

The report points to the recent emergence of sub-Saharan Africa as the main destination for South Africa’s non-mineral exports, overtaking Europe as the main trading partner. While the African market is still too small to drive overall export growth, with stronger trade relationships come the right conditions for the emergence of ‘Factory Southern Africa,’ a regional value chain of production that could feed into global production networks.Before this, however, the region still needs to tackle the regional issues of access to finance, the prevalence of corruption and red tape, insufficient human capital and a lack of physical infrastructure, as these are the top inhibiting factors to doing business in the SADC region.The Ease of Doing Business Index produced by the World Bank ranks 190 economies, ranging from 1 (best-performing economy) to 190 (worst-performing economy). A high ranking indicates that the regulatory environment is more conducive to start operating a company in a particular country.

The Doing Business Index sheds light on how easy or difficult it is for a local entrepreneur to open and run a small to medium-size business when complying with relevant regulations. It measures and tracks changes in regulations affecting 11 areas in the life cycle of a business: starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts, resolving insolvency and labour market regulation.In the SADC region, the index and its development underline the findings of the Global Competitiveness Report. In categories such as ‘getting credit’, ‘trading across borders’ and ‘starting a business’, SADC countries—on average—continue to perform poorly.Among the decisions reported to have been made at a South African cabinet meeting in April this year was confirmation that the country would be hosting the 37th Ordinary Southern African Development Community (SADC) Summit of Heads of State and Government in August. The theme of this summit will be ‘Partnering with the Private Sector in Developing Industry and Regional Value Chains.

The April 26 cabinet meeting emphasised the need to address critical factors to implement and achieve SADC's Industrial Strategy and Action Plan. At the meeting, it was agreed that South Africa would utilise its position as Chair of the SADC to strategically advance the country's national interests as outlined in the National Development Plan and to strengthen regional economic opportunities and security-related matters. Reinforcing this message, Finance Minister, Malusi Gigaba told a Black Business Council breakfast roundtable on the fringes of the World Economic Forum in Durban that Africa must mobilise domestic savings and capital markets to invest in deals on the continent. “Africans must not expect others to invest in what we ourselves are not ready to invest in. Our capital resources may be limited, but they are not insignificant. We need to mobilise our domestic savings and capital markets to invest in deals on the continent,” said Gigaba.

South Africa is well aware that increasing trade on the continent and fostering partnerships with African partners can lead to poverty alleviation, increased trade flows, industrial development and subsequent creation of more jobs, which is all key to the economic development of Africa.Already, South Africa’s Transnet (the biggest freight operator on the African continent) is pursuing commercial opportunities in a number of African countries. To this end, Public Enterprises Minister, Lynne Brown recently highlighted that “if we can address Africa’s logistics infrastructure deficit, we can change the quality of lives of all Africans”. Meanwhile, research by PwC shows that 91% of CEOs in Africa are confident about future growth, the highest level of confidence since 2012. As a result, a large proportion of company chief executives across the continent is confident about their companies’ growth prospects in the medium term.

 

 

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