SADC drives industrialization
Business
The Southern African Development Community (SADC) 37th Ordinary SADC Summit held last week in Pretoria South Africa has placed industrialization at the top of the regional block action plan in order to realize growth amongst economies of member states.
When accepting the SADC chairmanship from Swaziland, President of South Africa, Jacob Zuma assured SADC head of governments that his country would push the region’s industrialization agenda. Zuma said that the International Monetary Fund (IMF) in its regional economic outlook for Sub-Saharan Africa has forecasted a modest rebound in aggregate growth of 2.6 percent in 2017 saying SADC countries would need to work together to realize integrated economic rebound.
“The economies of the countries in the region continue to be under severe economic difficulty owing to the 2008 global financial crisis and the accompanied decline in global demand for commodities,” he observed. The new SADC Chair also noted that the rising public debt brought about mainly by the budget deficit makes it difficult for SADC economies to finance regional industrial projects like the much needed infrastructure.
Zuma also borrowed from the global economic outlook and projections that uncertainties persist as major players in the world economy were inward looking with evidence of some taking a policy stance which could be characterized as push backs on globalization. “It is therefore imperative that the region focuses inwardly,” he said. President Zuma also reiterated that African economies were small by global standards thus it was imperative for a collective response through regional integration in order to realize structural transformation of SADC economies. “The region cannot continue to be suppliers of primary products in global value chains while remaining with low levels of domestic production with economies that are very vulnerable to global shocks.”
Zuma further highlighted the summit theme “Partnering with the Private Sector in Developing Industry and Regional Value Chains’ saying it intended to promote momentum and continuity in the region’s collective aspiration towards regional sustainable economic development and industrialization. Deliberating on the SADC Industrialization Strategy which was adopted under the chairmanship of Zimbabwe in 2015 Zuma said the implementation of the strategy would ensure successful transformation of regional economies from the commodity dependent growth path to production induced growths. “This will not only raise the living standards of our people but also facilitate the rapid catch-up of the SADC countries with industrialized and developed countries.”
He added that the key activities during South Africa’s Chair-ship will be the development of a high impact Annual Operation Plan with targeted interventions and public policy tools to foster the development of regional value-chains in agro-processing, pharmaceuticals and mineral beneficiation. “We will promote a Member State driven process through the Industrial Development Forum to facilitate the identification of cross-border projects that will strengthen regional value-chains and contribute to the development of the region.”
Zuma also told SADC head of states that as a contribution towards capacity building, South Africa will introduce a new programme to develop capacity in industrial policy making and implementation for senior officials in the SADC region. He also noted Infrastructure as the key driver of industrialization. Zuma lamented the lack of funding for development of bankable projects. “Infrastructure investment is a catalyst to economic transformation and industrial development we therefore, need to leverage infrastructure spent to fast track the process of structural transformation in our economy,” he said.
SADC INDUSTRILIZATION STRATEGY
Inter boarder trade within the SADC region is still very low and its sitting at just above 17 %, this results in very low returns SADC member state solicits from doing business within the region. This is because of among other reasons the fact that most of SADC countries still depend on mineral revenue to sustain their economies, minerals which are sold overseas. As for other sectors like agriculture South Africa’s economy is dominant over other SADC economies. It is under this back drop SADC member states through their head of governments adopted a rigorous industrialization plan in 2014 and approved the proposed undertaking at the Extra-Ordinary Summit in Harare, Zimbabwe in April 2015.
The SADC Industrialization Strategy was birthed after a realization that despite persistent efforts to boost Trade within the region through the SADC Free Trade Area, the value of intra-SADC Trade still remained low making Industrialization a priority at global, regional and national levels. The Industrialization Strategy was developed as an inclusive long-term modernization and economic transformation scheme that enables substantive and sustained rising of living standards; intensifying structural change and engendering a rapid catch up of the SADC countries with industrializing and developed countries. It is anchored on three interdependent and mutually supportive strategic pillars – industrialization as champion of economic transformation; enhancing competitiveness; and deeper regional integration.
PROGRESS OF THE STRATEGY IMPLEMENTATION
SADC member states are currently engaging their trade stakeholders, the private sector and businesses in an effort to collect views and exchange ideas towards the implementation of the strategy. Recently Botswana which houses the SADC headquarters hosted the SADC Coasted Action Plan Workshop as a build-up undertaking to the SADC head of states meetings. When officially opening the workshop Permanent Secretary in the Ministry of Investment, Trade and Industry, Ms. Peggy O. Serame, said the workshop was aimed at sensitizing stakeholders on the SADC Industrialization Action Plan which intends to guide the Implementation of the SADC Industrialization Strategy and Road Map of 2015 – 2030 and to determine the Indicative National Public Coordination costs of the Industrialization Process.
Serame said the strategy was developed taking into consideration what was already happening at Africa level, she highlighted that SADC countries have different abilities in the manufacturing sector depending on resources available at the respective countries. The strategy also appreciates technology and digital migration as a key factor to realizing the industrialized SADC region. Currently SADC countries are moving towards a techno-based manufacturing sector and industries. To meet the competitive global world in the manufacturing and commodities trade space SADC intends to fast track their transformation of members states to knowledge based, export led and consequently diversified economies. Again at the workshop the importance of private sector investment and full participation was highlighted.
Dr Monnana Monnana from the SADC secretariat had told gatherers that the objective of the Industrialization strategy was to use technology in catching up with developed economies; Dr Monnana said it was high time SADC countries moved away from depending on other countries from different regions for commodities and day to day goods. “We have to devise collective ways in which we SADC can become sustainable as an intraregional trade space, knowledge will increasingly become very important as we transform our region and develop our economies,” he said.
All SADC member states penned authorization to the Industrialization strategy and thus it is expected that all countries will implement and observe all the guidelines outlined in the road map in order to realize more diversified, industrialized SADC economies with significant intraregional trade revenue. It is envisioned that by 2063, the SADC region will be fully transformed and will be an important player in the continental and global landscape, premised on the three growth phases. Trade and Finance Ministers also met at last week’s summit to deliberate and further come up with action plans to ensure the implementation of the strategy.
Business
Botswana ranks most attractive for investment in mining
The Canadian research entity, Fraser Institute has ranked Botswana as the most attractive country for investment in mining in Africa.
In a new survey the entity assessed mineral endowments and mining related policies for 62 mining jurisdictions including Botswana.
The entity noted that in addition to mineral potential for mining jurisdictions, policy factors examined during the survey include uncertainty concerning the administration of current regulations, environmental regulations, regulatory duplication, the legal system & taxation regime, uncertainty concerning protected areas, disputed land claims, infrastructure, socio-economic & community development conditions, trade barriers, political stability, labor regulations, quality of the geological database, security, as well as labor & skills availability.
According to the survey Botswana is the highest ranked jurisdiction in Africa and the second-highest in the world for investment in mining, as a result of its favorable mining policy when compared to other jurisdictions. The survey report noted that Botswana increased its score in policy perception index and added that the score reflects decreased concerns over uncertainty concerning protected areas infrastructure, political stability, labor regulations & employment agreements. “Botswana is also the most attractive jurisdiction in Africa and top 10 in the world when considering policy and mineral potential. With the exception of Botswana, policy scores decreased in all African jurisdictions featured in the survey report.
The survey shows that Morocco is the second most attractive jurisdiction in Africa both for investment and when only policies are considered. However, Morocco’s policy perception index score decreased by almost 18 points and globally the country ranks 17th out of 62 mining jurisdictions this year, dropping out of the top 10 jurisdictions after ranking 2nd out of 84 jurisdictions in 2021 in terms of policy. The survey report noted that investors recently expressed increased concerns over the uncertainty of administration and enforcement of existing regulations, labor regulations & employment agreements, uncertainty concerning disputed land claims, socio economic agreements, community development conditions and trade barriers in the country.
The top jurisdiction in the world for investment in mining is Nevada, which moved up from 3rd place in 2021. At 100, Nevada has the highest policy perception index score this year, displacing the Republic of Ireland as the most attractive jurisdiction in terms of policy. Botswana ranked 31st last year, climbed 29 spots and now ranks 2nd. South Australia ranks 3rd, entering the top 10 jurisdictions in terms of policy after ranking 16th in 2021. Along with Nevada, Botswana, and South Australia, the top 10 ranked jurisdictions based on policy perception index scores are Utah, Newfoundland & Labrador, Alberta, Arizona, New Brunswick, Colorado, and Western Australia. “Nevada ranked first this year with the highest PPI score of 100. Botswana took the second spot held by Morocco. The top 10 ranked jurisdictions are Nevada, Botswana, South Australia, Utah, Newfoundland & Labrador, Alberta, Arizona, New Brunswick, Colorado, and Western Australia. The United States is the region with the greatest number of jurisdictions (4) in the top 10 followed by Canada (3), Australia (2), and Africa (1).”
In the survey report Fraser Institute noted that this year, Angola, Ivory Coast, Mozambique, South Sudan, and Zambia received enough responses to be included in the report. Eight African jurisdictions are ranked in the global bottom 10. Out of 62 mining jurisdictions, Zimbabwe ranks (62nd), Mozambique (61st), South Sudan (60th), Angola (59th), Zambia (58th), South Africa (57th), Democratic Republic of Congo (55th), and Tanzania (53rd). Zimbabwe has consistently ranked amongst the bottom 10 and has held that position for the previous nine years, according to the institute.
The institute noted that considering both policy and mineral potential Zimbabwe ranks the least attractive jurisdiction in the world for investment. “This year, Mozambique, South Sudan, Angola, and Zambia joined Zimbabwe as among the least attractive jurisdictions. Also in the bottom 10 are South Africa, China, Democratic Republic of Congo (DRC), Papua New Guinea, and Tanzania. Zimbabwe, China, Democratic Republic of Congo, and South Africa were all in the bottom 10 jurisdictions last year. The 10 least attractive jurisdictions for investment based on policy perception index rankings are; (starting with the worst) Zimbabwe, Guinea (Conakry), Mozambique, China, Angola, Papua New Guinea, Democratic Republic of Congo (DRC), Nunavut, Mongolia, and South Africa.”
The Fraser Institute on annual basis conducts an annual survey of mining and exploration companies to assess how mineral endowments and public policy factors affect exploration investment.
Over half of the respondents who participated in the recent survey (57 percent) are either the company President or vice-president, and 25 percent are either managers or senior managers. The companies that participated in the survey reported exploration spending of US$1.9 billion in 2022, according to the institute. The institute indicated that as part of the survey, questionnaires were sent to managers and executives around the world in companies involved in mining exploration, development, and other related activities, to assess their perceptions about various public policies that might affect mining investment.
The institute noted that the purpose of the survey is to create a report card that governments can use to improve their mining-related public policy in order to attract investment in their mining sector to better their economic productivity and employment.
The institute noted that while geologic and economic evaluations are always requirements for exploration, in today’s globally competitive economy where mining companies may be examining properties located on different continents, a region’s policy climate has taken on increased importance in attracting and winning investment. “The Policy Perception Index or PPI provides a comprehensive assessment of the attractiveness of mining policies in a jurisdiction, and can serve as a report card to governments on how attractive their policies are from the point of view of an exploration manager.”
Business
Inflation drops to 7.9 percent in April
Botswana’s inflation rate dropped to 7.9 percent in April 2023, a 2.0 percentage drop 9.9 percent in March 2023, Statistics Botswana’s consumer price index reported on Monday.
The main contributors to the annual inflation rate in April 2023 were Transport (2.7 percent), Food & Non-Alcoholic Beverages (2.2 percent), and Miscellaneous Goods & Services (0.9 percent).
The inflation rates for regions between March 2023 and April 2023 indicated a decline of 2.3 percentage points for Cities & Towns’, from 9.9 percent in March to 7.6 percent in April.
The Urban Villages’ inflation rate registered a drop of 1.8 percentage points, from 9.7 percent in March to 7.9 percent in April, whereas the Rural Villages’ inflation rate was 8.6 percent in April 2023, recording a decrease of 1.8 percentage points from the March rate of 10.4 percent.
The national Consumer Price Index realised a rise of 1.1 percent, from 128.2 in March 2023 to 129.7 in April 2023. The Cities & Towns index was 129.7 in April 2023, recording a growth of 1.2 percent from 128.2 in March.
The Urban Villages index registered an increase of 1.2 percent from 128.4 to 130.0 during the period under review, whilst the Rural Villages index rose by 0.9 percent from 127.9 in March to 129.0 in April 2023.
Four (4) group indices recorded changes of at least 1.0 percent between March and April 2023, specially; Miscellaneous Goods & Services (5.5 percent), Alcoholic Beverages & Tobacco (1.8 percent), Food & Non-Alcoholic Beverage (1.2 percent), and Recreation & Culture (1.2 percent).
The Miscellaneous Goods & Services group index registered an Increase of 5.5 percent, from 125.5 in March to 132.5 in April 2023. The rise was largely due to a growth in the constituent section indices of Insurance (11.2 percent) and Personal Care (2.1 percent).
The Alcoholic Beverages & Tobacco group index rose by 1.8 percent, from 126.5 in March 2023 to 128.7 in April 2023. The increase was owing to the rise in the constituent section indices of Alcoholic Beverages (1.9 percent) and Tobacco (1.1 percent).
The Food & Non-Alcoholic Beverages group index increased by 1.2 percent, from 136.6 in March to 138.2 in April 2023. The rise in the Food group index was attributed to the increases of; Vegetables (3.9 percent), Fish (Fresh, Chilled & Frozen) (1.7 percent), Coffee, Tea & Cocoa (1.5 percent), Milk, Cheese & Milk Products (1.5 percent) Fruits (1.4 percent) Meat (Fresh, Chilled & Frozen) (1.1 percent), Mineral Waters, Soft Drinks, Fruits & Vegetables Juices (1.1 percent) and Food Not Elsewhere Classified (1.0 percent).
The Recreation & Culture group index registered a growth of 1.2 percent, from 108.9 in March to 110.2 in April 2023. The rise was owed to the general increase in the constituent section indices, particularly; Recreational & Cultural Services (8.2 percent).
The All-Tradeables index recorded an increase of 0.9 percent in April 2023, from 134.2 in March 2023 to 135.4. The Non-Tradeables Index went up by 1.5 percent, from 120.1 in March to 121.8 in April 2023. The Domestic Tradeables Index moved from 131.8 in March to 133.3 in April 2023, registering a rise of 1.1 percent.
The Imported Tradeables Index realised a growth of 0.8 percent over the two periods, from 135.0 in March to 136.2 in April 2023. The All-Tradeables inflation rate was 10.3 percent in April 2023, registering a drop of 2.4 percentage points from the March 2023 rate of 12.7 percent.
The Imported Tradeables inflation rate went down by 3.1 percentage points from 12.4 percent in March to 9.3 percent in April 2023. The Non-Tradeables inflation was 4.6 percent in April 2023, a decline of 1.4 percentage points from the March 2023 rate of 6.0 percent. The Domestic Tradeables inflation rate registered a drop of 0.3 of a percentage point, from 13.4 percent in March to 13.1 percent in April 2023.
The Trimmed Mean Core inflation rate went down by 2.1 percentage points, from 9.2 percent in March 2023 to 7.1 percent in April 2023. The Core Inflation rate (excluding administered prices) was 8.3 percent in April 2023, a decrease of 0.6 of a percentage point from the March 2023 rate of 8.9 percent.
Business
IMF warns of GDP decline in Sub Saharan Africa
A new report by International Monetary Fund (IMF) has warned that countries in Sub Saharan Africa including Botswana could record significant losses in Gross Domestic Product (GDP) as a result rising geo-political tensions among major economies in global trade.
Recent trends show that there is a deepening fragmentation in global economy, following US-led NATO war against Russia in Ukraine and trade war between US and China.
According to some local trade analysts the fragmentation of global economy leading to competing (US/EU bloc and China bloc could result with Sub Saharan Africa losing markets for some of its export commodities. The trade analysts noted that US & China are failing to implement an agreement, intended to stop the trade war and address some of the US fundamental concerns that instigated the war. USD34 billion worth of Chinese goods intended for the US market reportedly expired in July 2022 while US President Joe Biden administration was still reviewing import tariffs while another USD16 billion worth of goods expired in August, and a third batch of goods worth approximately USD100 billion expired in September. The analysts indicated that as a result of the trade war, the manufacturing sector at the US and China could lower production of goods, resulting with subdued demand for exports of raw materials and other commodities such as minerals from Botswana and other Sub Saharan countries.
In its April 2023 regional economic outlook report titled, “Geo-economic Fragmentation: Sub-Saharan Africa Caught between the Fault Lines” IMF indicated that recent data shows that rising geo-political tensions among major economies is intensifying economic and financial fragmentation in the global economy. The IMF cautioned that countries in Sub Saharan Africa could lose the most as a result of fragmented world.
The IMF stated that while countries in Sub-Saharan region benefited from increased global integration during the last two decades, the emergence of geo-economic fragmentation has exposed potential downsides. “Sub-Saharan Africa has benefited from the expansion of economic ties over the past two decades. The region has formed new economic ties with non-traditional partners in the past two decades. Riding on the tailwinds of China’s globalization since the early 2000s, the value of exports from Sub-Saharan Africa to China increased tenfold over this period, largely driven by oil exports, according IMF adding that China has also emerged as an important source of external financing. The US and EU still supply most of the region’s foreign direct investment (FDI) stock, with China accounting for only 6 percent of it as of end-2020, according to IMF.
IMF stated that overall, the expansion and diversification of economic linkages with the major global economies benefited the region. “The region’s trade openness measured as imports plus exports as share of GDP doubled from 20 percent of GDP before 2000 to about 40 percent. This doubling, together with buoyant commodity prices, among other factors, contributed to the growth take-off during this period, boosting living standards and development.”
IMF noted that overall, sub-Saharan Africa is now almost equally connected with traditionally dominant (US and EU) and newly emerging (China, India, among others) partners and warned that the downside of increased economic integration is that sub-Saharan Africa has become more susceptible to global shocks. “Sub-Saharan Africa stands to lose the most in a severely fragmented world compared to other regions. In the severe scenario of a world fully split into two isolated trading blocs, sub-Saharan Africa would be hit especially hard because it would lose access to a large share of current trade partners. About half of the region’s value of current international trade would be affected in a scenario in which the world is split into two trading blocs: one centered on the US and the EU (US/EU bloc) and the other centered on China.”
IMF indicated that under a severe “geo-economic fragmentation” scenario, trade flows would adjust over time. “But as the region loses access to key export markets and experiences higher import prices, the median sub-Saharan African country would be expected to experience a permanent decline of 4 percent of real GDP after 10 years. Estimated losses are smaller than the losses during the COVID-19 pandemic but larger than those during the global financial crisis.”
IMF warned that disruptions to capital flows and technology transfer could bring additional losses. “Separately from the trade simulation results, in a world where countries were to cut off their capital flow ties with either bloc consistent with the preceding severe scenario, the region could lose about $10 billion of Foreign Direct Investment (FDI) and official development assistance inflows, equivalent to about half a percent of GDP a year, based on an average 2017–19 estimate. In the long run, trade restrictions and a reduction in FDI could also hinder much needed export-led growth and technology transfers.”
IMF meanwhile said not all is bleak as some milder scenarios of shifting geopolitics may create new trade partnerships for the region. “In a scenario in which ties are cut only between Russia and the US/EU while sub-Saharan African countries continue to trade freely (referred to as “strategic decoupling”), trade flows would be diverted partly towards the rest of the world and intra-regional trade in sub-Saharan Africa may increase.”
IMF recommended that countries in Sub Saharan Africa should build resilience that requires strengthening regional integration and expanding the pool of domestic resources to counter potential external shocks: According to IMF trade experts strengthening the ongoing regional trade integration under the African Continental Free Trade Area could help build resilience amid external shocks. Greater integration will require reducing tariff and non-tariff trade barriers, strengthening efficiency in customs, leveraging digitalization, and closing the infrastructure gaps, according to the experts.
The experts also recommended that countries in the region should deepen domestic financial markets as that can broaden the sources of financing and lower the volatility associated with excessive reliance on foreign inflows. “By upgrading domestic financial market infrastructure including through digitalization, transparency and regulation, and expanding financial product diversity, sub-Saharan African countries can expand financial inclusion, build a broader domestic investor base. Improving domestic revenue mobilization is critical to reducing the share of commodity-linked fiscal revenues.”