Plugging the infrastructure gap … Value chains key to driving Africa’s growth prospects

By Tiri Masawi

WINDHOEK – Most countries in the Southern African Development Community (SADC) have seen their plans to drive rapid economic growth and stimulate the manufacturing industry veering off course because of over-reliance on the extractive industry coupled with laxity in adopting value-addition programmes.

In addition, some countries have also continued to heavily rely on government as the main economic driver at the expense of private sector growth, which is a stimulant for employment creation.

This is despite the fact that most countries in the region have in the past adopted deliberate policies that encourage the creation of value chains through processing raw materials locally before exporting them to different markets.

Speaking at the inaugural African Economic Platform in the Seychelles last week, Prime Minister of Namibia, Saara Kuugongelwa-Amadhila – who has also served as the Minister for Finance in the past – reiterated that continued over-reliance on the mining sector – where resources are exported in their original form by most countries in Africa – has curtailed economic growth.

“We must be able to draw the greatest benefit from our raw material products by ensuring that primary resources are managed sustainably and used efficiently, and that downstream stages of processing and production in key areas, such as extractive industries, forestry and fishing, are optimised,” Kuugongelwa-Amadhila said.

She also added that, “Since the wide infrastructure gap in Africa is limiting national, regional and international trade, our governments must expand business access to social and economic infrastructure.  ‘Hard’ infrastructure, which includes transport, telecommunications, water, power systems, and fixed assets needed to provide education, health and sanitation; and ‘soft’ infrastructure, which includes legal and regulatory frameworks, payments clearance and settlement systems, financial intermediaries and capital markets, collateral registries, and skills development are prerequisites for business as much as for society.”

Need to grow private sector

According to Kuugongelwa-Amadhila, the key to addressing continued stunted economic growth in most economies in the region lies in creating value chains.

“The private sector still faces many obstacles in Africa. These include inadequate government regulation, restrictive policies, poor infrastructure (particularly in power and transport), severe skills shortages and mismatches between employers’ needs and available workers (particularly those just out of school), trade restrictions, tariff and non-tariff barriers to African exports, difficulties in obtaining medium- and long-term finance on affordable terms, and a large informal sector. Private sector growth in Africa has often been uneven, and exploitation of natural resources – the continent’s largest source of growth – has failed to create enough new jobs,” she said.

Chief among SADC leaders, who have previously emphasised the importance of the creation of value chains to enhance the locally produced raw materials and create employment have been Zimbabwean President Robert Mugabe, former Namibian President Dr Sam Nujoma, former South African President Thabo Mbeki and the late Zambian President Michael Sata.

Most of the countries in the SADC region have been growing at an average annual rate of between 3 and 4.5 percent in the past five years while rare cases have been recorded in Mozambique, which sustained just above 6 percent growth in 2015 before receding to 3.3 percent in 2016, thanks to the discovery of oil in that country.

Ironically, the region has an array of mineral resources ranging from gold, platinum, rare earth minerals, diamonds, uranium to cobalt – which are some of the most sought-after worldwide – but has failed to utilise the natural resources to foment their economies.

Research in the past has also shown that Zimbabwe and South Africa combined have the largest reserves of platinum, Namibia, and Botswana on another hand possess the world’s largest deposits of diamond while the Democratic Republic of Congo has all the mineral resources but these have not translated into a booming industry hub.

The Namibian Premier reckons that there is a need for most countries in the region to take a deliberate paradigm shift that will see the promotion of private sector participation in the mainstream economy in a bid to drive industrialisation.

Her sentiments come in the wake of a SADC meeting recently held in Swaziland to follow up on progress made towards driving the region towards an industrial hub.

Corroborating the idea of value chains and industrial growth was the Namibian minister responsible for economic planning, Tom Alweendo – who recently revealed to the media in his overview of the performance of that country’s economy that diversification is the most feasible answer to growth.

“Namibia faces a number of challenges in diversifying the economy and broadening economic opportunities. Equally, major production sectors such as mining, tourism, livestock and meat production, and fisheries are exposed to external economic and environmental shocks.

“It is in this context that in the soon to be launched NPD5, game changers that help in transforming the economy through industrialisation were introduced. In order to achieve economic transformation, we have to place strong emphasis on innovation, not only [in] technology, but also in terms of institutions, and revamping the education and training system to produce relevant skills for the future. Skills that improve our competitiveness and that will allow us to catch-up and compete with the developed economies,” Alweendo said.

He also added that, “There is a need to structurally transform the economy through industrialisation starting with adding more value to our natural resources such as minerals and fish. There is no reason why our fish, for example, cannot be processed in the country before their export. Of course, a key challenge is to develop products and processes that have high value in the global marketplace. But by producing a value-chain environment, our natural resources would receive value addition processes, benefiting the manufacturing sector. Public procurement system and the private sector procurement practices can make a meaningful contribution towards stimulating demand for local products, thus improving our manufacturing and creating and retaining jobs in the country.”

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