SADC Action Plan for SADC Industrialization Strategy and Roadmap

ACTION PLAN FOR SADC INDUSTRIALIZATION STRATEGY AND ROADMAP Approved by Summit in Lozitha, Swaziland on 18 March 2017 1 TABLE OF CONTENTS Page EXECUTIVE SUMMARY………………………………………………………………….………. 3 PART ONE: INDUSTRIAL STRATEGY I. Background and Context ………………………………………………………………....14 II. Value Chains and Industrialization Strategy………………….……............................ 23 III. Criteria for Value Chain Entry and Potential Value Chains in SADC….....................28 IV. Industrial Clusters and SMEs Development………….……………..…………………..39 V. Capabilities and Capacities for Industrial Development…………………………….….43 VI. Industrial Policy and Value Chains………………………..……….…..........................46 VII. Financing………………..…………………………………………………………………..54 VIII. Governance and Interface Institutions…………………………....…………………......61 PART TWO: THE ACTION PLAN FRAMEWORK ………………………..….…...................69 Action Plan Templates PART THREE: CONCLUSIONS AND RECOMMENDATIONS ………………...................138 Tables 3.1 Potential Value Chains in SADC ..……………………………...……………………...................34 7.1 Investment and Financing in SADC (2000-2014) …………...…………..…………...................54 7.2 Financing Gap 2014……………………………………..…………...………………………………55 7.3 Projected Financing Gap: Phase One (2015-2030)…………...…..………………….……….....57 Boxes Box 1.1 Strategic Objectives of the Strategy………………………...………………….…………….…....19 Box 2.1 Country Specificities …………………………………………………….…….………….……..…..25 Box 8.1 The SADC Industrial Observatory …………………………..............................………….……. 68 Box A.1: Glossary …………………………………………….……..….…………….…………………....... 75 Figures Figure 1.1 Transformational Interdependences…………………………..……..……………………........18 Figure 3.1 The Four Stages of Value Chain Policymaking……………..….…..……….….……………...29 Figure 8.1: A Coordination and Oversight Framework for Industrial Development in SADC Region ..66 2 Vers. 11.03.2017 EXECUTIVE SUMMARY At its Extra-Ordinary Summit, held on 29 April 2015, in Harare, Zimbabwe, the SADC Heads of State and Government adopted the SADC Industrialization Strategy and Roadmap 2015 – 20631. The Summit also directed the SADC Secretariat to develop a detailed and costed Action Plan for the implementation of the Strategy, and design and develop an appropriate institutional framework to implement the Strategy. Pursuant to these decisions it was resolved that the Costed Action Plan should cover Phase I and II of the Strategy, with specific focus on the first fifteen years (2015- 2030). It is within this context that the Costed Action Plan is hereafter elaborated. The Industrialization Strategy was developed as an inclusive long-term modernization and economic transformation scheme that enables substantive and sustained raising 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. The Strategy sets out three potential growth paths – agro-processing; mineral beneficiation and downstream processing and industry-and service-driven value chains. The paths are mutually supporting and inclusive, encompassing the combination of downstream value addition and backward integration of the upstream provision of inputs, intermediate items and capital goods. The central challenge facing Africa is how to transition from the commodity- dependent growth path in which African countries find themselves to value-adding, knowledge-intensive and industrialised economies. The goal is to occupy a higher place in the global division of labour. Africa at present is predominantly viewed as a producer and exporter of primary commodities and an importer of value-added manufactured goods. There are deep structural fault-lines in the economies of the SADC countries that remain entrenched, characterised by resource-dependence, low value-addition and low levels of exports of knowledge-intensive products. This is reflected in the low levels of private sector investment into the manufacturing sector of the economy. The concern of policymakers is that if the declining share of manufacturing (11.3% in 2014 across SADC, down from 15.9% in 2004), is not reversed, the “ladder” to address the deep structural problems in these economies will be effectively removed. 1 See SADC Industrialization Strategy and Roadmap 2015-2020 3 Vers. 11.03.2017 A key focus of the SADC strategy is to develop targeted and selected industrial policies that create conditions that will enable higher rates of investment by the public and private sectors into economic infrastructure, which in turn will enable crucial sectors of the economy, particularly value-adding manufacturing, to grow. The policy toolkit should include a review of existing trade, investment and industrial policies, with a view to these being deepened and broadened. This will, amongst others, entail the more strategic use of tariffs, incentives and industrial financing, targeted foreign direct investment, stronger customs controls, compulsory specifications and standards, public procurement policies and other measures. Within this context, the Strategy sets out ambitious, but highly feasible growth targets (of 6 percent annual growth in per capita income) and significant transformation of the industrial sector and allied services – through doubling of the share of manufacturing value added (MVA) in GDP to 30 percent by 2030 and to 40 percent by 2050, raising the share of medium-and-high technology from its current level of less than 15 percent to 30 percent by 2030 and 50 percent by 2050. To achieve these targets, the share of manufactured exports in total exports should rise from the present 20 percent to at least 50 percent by 2030, and the share of industrial employment in total employment increase to 40 percent. This should be underpinned by a strong industrial diversification drive, the development of viable and competitive regional value chains capable of interacting with global value chains, as well as supporting measures to enhance capital and labour productivity and efficiency. Emphasis on value chains promotion arises from the desirability of moving development perspectives from a national to a regional focus. Secondly, the greater share of global exchange is currently carried out through value chain participation, reflecting the profound structural changes in modern manufacturing systems and their complex product and geographical interdependencies. The fundamental issue is not whether or not SADC countries are integrated into global value chains (GVC’s); rather, it is where the SADC countries are integrated in GVC's. The key objective of the Action Plan is to facilitate the movement of SADC participation up the value chains where the highest value is derived. This will be accomplished by working with and supporting industry players and investors to diversify into higher value-addition activities. This needs to be supported by the application of well-harmonised industrial policies at both a member state level that is supported by a strong regional integration agenda. In light of the above, the Action Plan proposes an approach that calls for very decisive actions by SADC Member States to promote investment, trade, and industrial regionalisation. This requires national policies that, as a collective, are coherent and support the growth of productive capacities of the regional economy and achieve regional industrial integration for a more effective participation at higher levels within RVC’s and GVC’s. This will depend on a functional free trade area 4 Vers. 11.03.2017 (FTA) which facilitates export diversification, enhanced competitiveness, inclusive growth (with greater participation of women, youth and persons with disabilities), movements of goods and services and macroeconomic convergence within the regional integration arrangements and promote economies of scale. Experience suggests that the best development outcome for SADC countries will be achieved by a combination of increased value chain participation with simultaneous upgrading. Participation in value chains may start at regional level and graduate to the global level. Within this context, the key challenge for corporate and government policy makers is to identify and prioritize entry points into value chains, as well as tasks that can be undertaken competitively and how they might be shared within value chains in the region. Deeper regional integration is an essential pre-requisite for the development of regional value chains and integration in global value chains. Close public-private collaboration is pivotal. The industry 'discovery' process in value chain policymaking is heavily reliant on close collaboration between the two main actors to remove the infrastructural, institutional and financial constraints to value chain development, and to encourage investment by private sector players. Central to attracting more targeted investment is the access which a regional market will provide, supporting – as it must – a far greater advantage in its economies of scale. SADC Member States have committed themselves to investment-led trade and regional economic and industrial integration. This also requires addressing the many physical and soft barriers to investment-led trade. From an implementation perspective, the emphasis therefore needs to shift to some of the microeconomic elements underpinning future growth, with a particular emphasis on moving up regional and global value chains supported by regionally coordinated procurement; targeted domestic and foreign investment; technology transfer; skills development; and the development of a friendly investment and regulatory environment. Specific investment and industrial opportunities emerge from integrating value chains and ensuring specialisation across the region. Judicious and strategic development of domestic and regional value chains will also allow supply companies to increasingly explore higher value-added export opportunities and enter into global value chains. The investment opportunities that arise from the regional value chain work will need to be underpinned by a significantly ramped-up focus on industrial finance and incentives, particularly with the strengthening of the role of national and multilateral development finance institutions (DFIs) to leverage and secure investment in the productive sectors of national economies, and in catalytic projects that facilitate regional trade and industrial integration. 5 Vers. 11.03.2017 A significant focus of the past decade has been on expediting investment into major infrastructure projects. The focus moving forward should also emphasise ensuring that private sector investment is leveraged in key economic infrastructure (with strong conditional reciprocal conditions) and unlock major economic activity in the productive sectors of the regional economy. State Owned Enterprises (SOEs) also have a major role to play in supporting infrastructure development and enabling economic infrastructure (energy, rail, road and port, and telecommunications) and crowding in investment. To achieve this, strong support for localisation and support for regional supplier development is essential. To encourage the entry of domestic players into new industrial activities, particularly into higher value-added activities, will require the application of smart and responsive trade measures to create a dynamic regional market. This for example, would require the rapid response to the dumping of sub-standard products in the region or the flooding of markets of second hand clothing and vehicles. Without protection against these forms of market penetrating strategies it would be exceptionally challenging for emerging producers to be able to compete in what is an unequal playing field. There should also be a deliberate policy to promote national and regional clusters as vehicles for developing the SMEs sector, enhance competitiveness and innovation and facilitate interface and complementarily between firms and value chains. A critical mass of competitive enterprises with high aptitude and readiness to operate regionally and globally is a precondition for successful interface between clusters, SMEs and regional and global value chains. To strengthen capabilities and interfaces, the Action Plan proposes two linkage programmes: (i) action programme to strengthen SMEs, clusters and regional value chains; and (ii) a business linkage programme. Capabilities and capacities development require massive investments especially in education, innovation, institution building and physical assets to create strong knowledge economies in SADC countries, and raise productivity and competitiveness. The Action Plan therefore indicates important areas for capabilities and capacities development, comprising of: i) a business environment and competitiveness programme; and ii) a programme for enhancing the quality of education, training and innovation and related support institutions including the strengthening/creation of Centres of Excellence and Centres of Specialization. The policy focus should target raising productivity and competitiveness, laying emphasis on research and development (R&D) and the science, technology and mathematics (STEM) education and leveraging them to support industrialization. Focus areas for value chain policymaking should be on facilitating: i) entry into regional/global value chains; ii) expanding and strengthening cross-border value 6 Vers. 11.03.2017 chain participation, and iii) embedding value chains in the domestic economy. This requires strong cooperation between governments, the private sector and other critical role-players to address the medium-term challenge of building consensus among Member States to determine which policy functions should be prioritized and to what extent. Policy must also be value chain-specific and maximize national gains rather than those of a specific sector or industry or firm. The implementation of the Action Plan would require significant financial, technical and logistical resources, which for the sake of greater economic and social prosperity, should be situated within a long-term macroeconomic equilibrium path. Analysis for the Plan suggests that the SADC region has a financing gap amounting to 11.3 percent of GDP in 2014. Resource needs projections for the period 2015- 2030 reveal that investment will need to rise substantially to 41.3 percent as compared to 23.6 percent of GDP (2014), in line with the targeted high growth rate of 6 percent in per-capita income and the assumed improved capital efficiency. Assuming that savings rates, FDI and ODA remain at their historical averages for the period 2000-2014, the financing gap will rise to 18.2 percent of GDP. These projections have important implications for resource mobilization. To close the financing gap, action will be needed across the policy spectrum. To this effect: - Efforts will be needed to boost savings rates, enhance FDI flows and ensure fiscal consolidation - Specific measures to increase the flow of risk capital to SMEs - Institutional reforms and incentives - Governments will need substantial funding for infrastructure development, notably energy, transport, skills and technological development - SMEs will need large amounts of capital for output expansion, technology upgrading and the replacement of obsolete plant and equipment, and - Special provisions will also have to be made for financing start-ups. The relative importance of these sources of demand for finance will naturally vary according to the stage of a country's development, its resource endowments, macroeconomic challenges and the sophistication of the private sector. Given the funding constraints, the Action Plan prioritizes those activities most crucial to the successful implementation of the Industrialization Strategy. The implementation of the Strategy also requires a strong, capable, cohesive and accountable governance body. The Action Plan is of the view that this structure should consist of four interdependent tiers, namely: SADC statutory bodies; national structures; private sector associations; and industry-related Centres of Excellence and Centres of Specialization. A new dispensation is needed, functionally and institutionally. The Strategy and its Action Plan recognize the critical role of the private sector in industrial development. Efforts to create knowledge economies across the region also underscore the role of technological and scientific inputs. The 7 Vers. 11.03.2017 Strategy also calls for efficient functioning and inclusiveness of the industrialization decision-making process. It is therefore imperative that these singular and complementary roles be formalized and institutionalized. The Action Plan outlines the specific functions of these bodies. In particular, it calls for the reconfiguration of the Industrial Development Forum to consist of Member States, the private sector, think tanks and other stakeholders. The technical capacity of the Secretariat should be substantially enhanced to cope with the heightened coordination and monitoring responsibilities. To this effect, the Action Plan strongly recommends the establishment of an Industrial Development and Trade Directorate within the Secretariat to provide guidance to implementation. In line with this, the industry related functions currently residing in different units would need to be structurally aligned. The Action Plan Framework (Part II) outlines the numerous actions and policy interventions embodied in the goals and objectives of the Strategy. Without such framework and direction, there is obvious risk that the interventions, while competing for financial, technical and time resources, may not impact synergistically or result in unpredictable outcomes that will inhibit industrial and overall development of the region. To this end, the Action Plan utilizes a number of guiding principles on form and content. Among the most important principles are: - A developmental state perspective as an essential driving force for advancing industrialization, while recognizing the critical role of the private sector. - The strengthening of trade and industry capacity across Member States to support and manage the application of cohesive industrial policy tools. - Strong complementarity and interdependence of the three strategic pillars of the Industrial Strategy. - The recognition that targeted outcomes are a function of the quality of deployed assets (physical, human and technological) and policies. - Prioritization of actions embracing the three growth paths identified by the Strategy, namely: agro-processing, minerals beneficiation and manufacturing value chains development. - The Action Plan also attaches equally high priorities to removing the three binding constraints indicated in the Strategy (i.e. infrastructure, skills and finance). The prioritization of these focus areas arises from their combined positive impact on deepening regional integration and speeding up the tempo of industrialization. - The critical need for initiation and sustainability of industrial clusters and regional value chains and their integration into global value chains, including upgrading and deepening of existing value chains. 8 Vers. 11.03.2017 - The recognition that value chain development and sustainability will depend on a number of parameters, notably: the nature of value chain positioning (raw material, low-tech, high-tech, etc), the extent of value addition; upgrading potential; the willingness of Member States to accept deeper integration; and necessity of longer-term up-scaling from regional to global levels. - Recognition of the stage of development, size and geographic location of Member States and the need for inclusive industrialization and development. - The importance of the private sector as wealth creator and policy partner. - Clarity of requisite responsibilities of the various development agents involved in the development and implementation of the Action Plan. - The necessity of establishing a coherent and effective industrial development- supporting environment, for the public as well as for private involvement. The Action Plan templates (in Part II) detail the key actions, organized with reference to the three pillars of the Strategy, and the requisite activities as well as the key enablers needed to unlock industrial potential. Whilst some of these measures and interventions need to be undertaken immediately, the majority target the medium to long term. Built in the Action Plan is the flexibility of implementation of the Strategy, where beyond collective action on regional projects, national development (a preserve of the countries) would take into consideration the capacities and constraints they face individually. Ultimately, the far-reaching changes and the long-term transformations envisaged in the Strategy (production, distribution, policies, institutions and the global and regional engagements) would assist Member States to converge into the unified and developed SADC economy of the future by 2063. By then SADC countries would be readier to operate and compete at the demanding developed country standards of high business and economic sophistication and innovation. The total indicative public coordination cost for the Action Plan over the period 2016- 2020 is estimated at about 102 million US dollars. Indicative Action Plan Public Coordination Costs (In Thousands of US Dollars) Phase 1 Phase 2 Total Percentage (2016-2020) (2021-2030) (2016-2030) of Total Industrialization 25,464 19,292 44,756 43.72% Competitiveness 11,382 14,958 26,341 25.73% Regional Integration 19,722 3,862 23,584 23.04% Cross-cutting Issues 2,119 658 2,777 2.71% Institutional Arrangements* - - - 0.00% Monitoring and Evaluation 4,521 400 4,921 4.81% Grand Total** 63,208 39,171 102,379 100.00% * The Institutional Cost will be determined based on the Structure approved by Council. 9 Vers. 11.03.2017 ** The relatively higher total cost in Phase 1 (2016-2020) is attributed to setting up activities which will not recur during the 2021-2030 period. Priority Project Sequenced Matrix Although the 50 projects in the Draft Action Plan are split into Phases, there is need to prioritize and sequence the interventions within each phase. The importance of the sequencing of interventions has been strongly made in the Strategy and Roadmap. Considering that a fully functional Industrial Directorate will take some time to be established and operationalized, it is recommended that a limited number of projects are prioritized for the period up to 2020 corresponding to Phase 1 of the Strategy and Roadmap as well as the RISDP. Many of the projects in the Action Plan are to be undertaken by Member States and/or the private sector with the Secretariat playing the regional coordinating role. It will also be critical to ensure the alignment between the projects and to re-enforce the linkages between programmes. Having a limited number of projects to focus on should allow a more realistic alignment of budgets to the income potential that is anticipated, and ensure greater impact during the kick-start phase. In light of the above, the interventions in this prioritized list have been selected on the following basis: 1) Short-term kick-starter projects for Phase 1 (such as Value Chain studies; Value Chain coalitions etc.), 2) Projects of long duration that will be essential for Phase 3 (such as skills development; and R&D, innovation and technology transfer), but must start during Phase 1 in order to avoid a bottleneck in the future, 3) Quick-win projects addressing the binding constraints (such as a particular priority infrastructure project or quickly implemented reform to the Power Pool, and access to finance by SMEs etc). 10 Vers. 11.03.2017 Expected Type of Intervention Indicative Cost Main Tasks/Activities Results/Outcomes (Sub-activity) (Phase 1) Sustainable Industrial Development 1. Improved policy Review and align national Capacity building and support 369,400 environment for industrialization strategies to Member States on SADC industrial and policies with the SADC Industrialization Strategy development Industrialization Strategy 2. Increased Develop and implement Develop and coordinate 7,441,760 participation in value value chains and value implementation of 10 value chains for regional addition strategies for each chains value addition value addition priority value chain identified strategies by 2020 and selected 3. Improved policy Develop Protocol on Develop and implement the 100,000 environment for Industry Protocol on Industry industrial development 4. Enhanced Develop and implement Develop regional programme 3,774,580 competitiveness programmes and policy to improve competitiveness of through the use of instruments for improving Member States selected industrial competitiveness Provide overall coordination policy instruments and capacity building at Member State level 5. Update SADC IUMP 500,000 Member States develop and implement national IUMPs Coordinate implementation across Member States 6. Agro-processing: the Identification and targeting of Support Member States in 1,614,000 development of a key agri value chains for implementation of RAP/RAIP vibrant agricultural analysis and support under sector that will the Regional Agricultural stimulate domestic Investment Plan (RAIP) that and regional implements the RAP production of essential inputs, and improved investment in productive agro- industry value chains 7. Higher level of Develop and implement the Develop and implement the 650,000 minerals beneficiation SADC Mineral Beneficiation SADC Mineral Beneficiation and downstream Plan Plan processing Lead the development and approval of Regional Mining 100,000 Vision 8. Increased regional Develop and implement Develop Action Plan for 453,480 manufacturing of Action Plan for SADC regional manufacturing of generic medicines Regional Manufacturing of medicines and health and health Medicines and Health commodities commodities for Commodities for communicable and Communicable and Non- non-communicable Communicable Diseases, to diseases taking place implement the SADC in SADC Pharmaceutical Business Plan and the Strategy for Regional Manufacturing of Generic Medicines and Health Products for Communicable Diseases 11 Costed Action Plan for SADC Industrialization Strategy and Roadmap 9. Capacities and Member States submit Develop and implement 1,100,000 capabilities of SMEs national measures and Regional SME Development enhanced to proposals for regional Programme and Coordinate participate in collaboration programme implementation industrialization and value chains 10. Self-sustaining Develop a framework for Develop and domesticate 4,550,000 national and regional encouraging and supporting Master Plans for industrial clusters and industrial clusters to establishment of regional SME sectors facilitate SMEs development industrial clusters developed and operating in the Develop Business linkages region programme aligned to prioritized VCs 11. Improved public- Develop and implement Develop regional strategy for 1,230,000 private dialogue and Regional Private Sector the development of the Private collaboration Development Strategy Sector in line with Savuti Declaration Support establishment of the platform for PPD and Monitor effectiveness of PPD Competitiveness 12. Improved skills, Develop and implement Coordinate assessment of 3,506,000 specialization relevant relevant skills programmes industry-related skills needs for industry for industry and Develop programmes and Coordinate programme implementation Establish and maintain regional platform for industry-academia linkages and Monitor effectiveness 13. Centres of Excellence Strengthen existing CoEs Identify/ propose 886,000 (CoEs) and Centres and CoSs to serve the strengthening/ of Specialization region and Establish new establishment of CoEs/CoSs (CoSs) for selected CoEs/CoSs, leveraging on priority sectors comparative advantage 14. Enhanced innovation Develop and implement Develop R&D and Innovation 703,480 and business programme for promoting programmes sophistication to R&D, innovation and and monitor investment in advance commercialization by SMEs R&D and Innovation technological Develop technology transfer readiness framework and support programmes Develop programme for promoting and capacitating SMEs on Information Technology and Operational Technology 15. Industrialization Improve quality Facilitate development and/or 727,000 supported by infrastructure services that adoption of standards strengthened support industrialization and Regional SQAM and enhance competitiveness SPS infrastructure 12 Costed Action Plan for SADC Industrialization Strategy and Roadmap 16. Accelerated Accelerate implementation Co-ordinate project N/A industrialization of RIDMP and PIDA priority identification & implementation promoted by development projects with addressing the key particular focus on infrastructural industrialization constraints (Energy, Transport, ICT Water and Meteorology)* 17. Infrastructure Develop and implement Develop the Strategy 940,000 development Strategy for SMEs to leveraged to catalyse effectively participate in the industrialization implementation of major infrastructure projects 18. Enhanced access to Develop and implement Develop the strategy and 273,000 finance by SMEs strategy for financial Coordinate implementation inclusion and SMEs access to finance Regional Integration 19. Improved logistics to Develop priority transport Develop the prioritization and 16,122,000 support trade, corridors by improving hard sequencing of Trade, Transport transport and transit and soft infrastructure and Transit facilitation facilitation priority measures on the basis of sectors priority assessments Coordinate implementation of soft and hard infrastructure activities, especially along the priority corridors Facilitate establishment of corridor-wide management institutions Advocacy and Communication 20. Effective Develop communication Develop and implement 474,300 communication in strategy advocacy and communication support of strategy industrialization Establish platform for dialogue on industrialization and monitor effectiveness Institutional Arrangements 21. Effective governance Establish a new Industrial Establish new Directorate tbd mechanism for Development Directorate to implementation of coordinate implementation the Industrialization of the Industrialization Strategy in place Strategy Monitoring and Evaluation 22. Effective Monitoring Develop and install an Develop and install an 4,520,960 and Evaluation effective M&E system for effective M&E framework (M&E) system in assessing and evaluating place progress Install, build capacity in Member States and manage the electronic information system * Implementation of RIDMP and other facilities, including PIDA, are being handled under other initiatives 13 Costed Action Plan for SADC Industrialization Strategy and Roadmap I. BACKGROUND AND CONTEXT 1. Background 1.1. Mandate At its Extra-Ordinary Session, held on 29 April 2015, in Harare, Zimbabwe, the SADC Summit of Heads of State and Government adopted the SADC Industrialization Strategy and Roadmap 2015-2063. The Strategy seeks to engender a major economic and technological transformation of the SADC region through the instrumentality of advanced industrialization. The April 2015 Summit also adopted the Revised Regional Indicative Strategic Development Plan 2015-2020 (RISDP), which provides for a development integration approach in the SADC region, with a focus on promotion of industrial linkages and efficient utilisation of regional resources through increased value addition. The Industrial Upgrading and Modernization Programme (IUMP) was adopted by the Committee of Minsters of Trade (CMT) in 2009 to enhance competitiveness, strengthen production capabilities and reinforce the institutional support structure of industry in the region. Furthermore, CMT in 2013, adopted the SADC Industrial Development Policy Framework (IDPF), to enhance sectoral interdependence and economic and trade diversification. The IDPF recognises that industrial development is essentially a national prerogative and encourages Member States to continue to formulate policies and strategies that stimulate and enhance their productive capabilities. These two instruments are complementary to the SADC Industrialization Strategy and Roadmap 2015-2063. The mission, vision and guiding principles permeating the SADC industrial orientations call for the establishment of a strong innovative and competitive regional economy that contributes to economic sustainability, employment creation and inclusiveness with recognition of the need for regional focus, industrial cooperation and responsiveness for addressing regional development concerns. These as formalized in the IDPF are: Vision “An integrated regional economy with a diversified, innovative and globally competitive industrial base, which contributes to sustainable growth and employment creation” 14 Costed Action Plan for SADC Industrialization Strategy and Roadmap Mission To provide a framework for enhanced cooperation and exploitation of synergies among SADC Member States to build a diversified, innovative and globally competitive industrial base, which contributes to sustainable growth and employment creation. Principles The SADC Industrial Development Policy Framework is premised on the following guiding principles: (i) Regionality which requires that policy interventions and measures should have a regional focus and allow policy space and flexibility for national industrial policies and strategies. (ii) Additionality which requires that regional industrial cooperation should add value to national industrial policies and strategies. (iii) Diversity of Member States creates an opportunity for enhancing regional industrial integration, growth and broad based manufacturing. (iv) Responsiveness which requires that regional interventions and measures should be aligned to the broader SADC objectives of reducing poverty, creation of employment and sustainable livelihoods. (v) Realism and Implementability which requires that regional interventions and measures be based on a realistic action plan with measurable targets biased towards short term interventions and subject to results based monitoring. (vi) Inclusiveness which requires engagement with a broad base of stakeholders, including private sector participation. In approving the SADC Industrialization Strategy and Roadmap 2015-2063, Summit directed the SADC Secretariat to: (i) Develop a detailed and costed Action Plan for the implementation of the Strategy and Roadmap to be submitted to Council in March 2016; and (ii) Design and develop an appropriate institutional framework to support the implementation of the Industrialization Strategy and Roadmap and the 15 Costed Action Plan for SADC Industrialization Strategy and Roadmap Revised RISDP. The institutional framework was to aim at enhancing the capacity of the Secretariat to deliver on the Strategy, including the institutional infrastructure requirements of the organization. 1.2 Overall Objective The overall objective is to develop and cost an Action Plan for implementation of the Industrialization Strategy. The Action Plan should be elaborated in line with the long- term perspective and quantitative goals stipulated in the SADC Industrialization Strategy and Roadmap while taking the following into consideration: (a) the transformation of the region, which should be driven by the process of manufacturing, value addition, and value chains; (b) the growth targets and quantitative goals set out in the Strategy; (c) the partnership between states and the private sector, and a consideration that industrialization will essentially take place at the national level; (d) the three binding constraints that need to be tackled to accelerate industrialization, namely, infrastructure, skills and finance; (e) priorities for industrialization, namely, agriculture-led, natural resource led and environmentally sustainable growth and enhanced participation in value chains; (f) the need to link national and regional priorities as well as coordination of industrial policies towards convergence in the medium to long term as a way to ensure that all Member States benefit from SADC membership; (g) the need to recognize the vital role to be played by both public sector and private sector at national and regional levels; and (h) The need for effective financing mechanisms. 1.3 The Industrialization Strategy and Roadmap The SADC Industrialization Strategy and Roadmap (2015 – 2063) was developed as an inclusive long-term modernization and economic transformation scheme that enables substantial and sustained raising 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 strategic pillars (Figure 1): industrialization as champion of economic transformation; enhanced competitiveness; and deeper regional integration. The quantitative and qualitative goals of the Strategy are outlined in Box 1.1. Deeper regional integration should involve the use of industrial policy levers to enhance competitiveness that will drive industrialization over the planning horizon to 2063. To deliver this process greatly hinges on the adoption of appropriate long-term 16 Costed Action Plan for SADC Industrialization Strategy and Roadmap macroeconomic policies that unlock economic potential, sustained growth at high levels and ensure fast catching up and the transformation of the SADC economy. The use of industrial policy tools to move upwards and strengthen regional value chains (RVCs) and take positions in critical segments of global value chains (GVCs) should constitute one of the major drivers of industrialization in SADC. Demonstrated political commitment as well as strong and cohesive institutional, social, governance and environmental frameworks are critical to underpin the strategic interdependence and successful implementation of the Strategy. 17 Costed Action Plan for SADC Industrialization Strategy and Roadmap Figure 1.1: Transformational Interdependences Industrialization  Policies  Policies  Modernization  Technology  Standards  Skills  Standards  Investments  Institutions  Skills  Innovation  Investments Capacity Capacity building/ building/  Institutions Political will Political will  Innovation Structural Transformation Competitiveness Regional Integration Capacity  Firm level building/  Strategies Political  National will  Resources  Regional  Constituency  Global Enablers Enablers  Policies  Policies  Investments  Investments  Capabilities  Capabilities - Institutions - Institutions Catching Up - Technology - Technology - Innovation - Innovation Source: SADC Industrialization Strategy and Road Map 2015-2063 18 Costed Action Plan for SADC Industrialization Strategy and Roadmap Box 1.1 Strategic Objectives of the Strategy (a) Quantitative The quantitative goals are:  To lift the regional growth rate of real GDP from 4 percent annually (since 2000) to a minimum of 7 percent a year.  To double the share of manufacturing value added (MVA) in GDP to 30 percent by 2030 and to 40 percent by 2050, including the share of industry-related services.  To increase the share of medium-and-high-technology production in total MVA from less than 15 percent at present to 30 percent by 2030 and 50 percent by 2050.  To increase manufactured exports to at least 50 percent of total exports by 2030 from less than 20 percent at present.  To build market share in the global market for the export of intermediate products to East Asian levels of around 60 percent of total manufactured exports.  To increase the share of industrial employment to 40 percent of total employment by 2030. (b) Qualitative The qualitative goals seek to:  Achieve a major socio-economic transformation at the national and regional levels.  Accelerate the growth momentum and enhance the comparative and competitive advantage of the economies of the region.  Diversify and broaden the industrial base and interdependences.  Enhance the productive capacity, productivity and competitiveness of SADC economies.  Provide a framework for environmentally friendly and climate resilient technological and industrial catch-up, export diversification, natural resources beneficiation, enhanced value-addition and increased regional trade and employment generation.  Develop viable regional value chains capable of interacting with global value chains and identify areas where the SADC region can have the greatest success in capturing high opportunities based on present and future strengths and capabilities.  Build a collaborative but challenging strategic partnership between governments, the private sector, the civil society and the development partners as a compact for industrialization.  Ultimately, build firm and enduring foundations for a modernized SADC economy Source: SADC Industrialization Strategy and Roadmap 2015-2063 The Strategy outlines three corresponding time-framed growth scenarios underpinning this process, referenced as: Phase I: Years 2015-2020. This phase covers the remaining period of the Revised RISDP and constitutes a period of active frontloading of the Industrial Development and Market Integration component and laying firm foundations for long- term development. 19 Costed Action Plan for SADC Industrialization Strategy and Roadmap Phase II: Years 2021-2050. This phase will focus on diversification and enhancement of productivity of factors of production and competitiveness. Phase III: Years 2051-2063: During this phase, the economy would further transform, with its strength based on high levels of innovation and business sophistication. 1.4 The Action Plan The Action Plan addresses the following issues: (i) Identification of high potential areas for value chains and value addition. (ii) Infrastructural needs and removal of constraints on trade and industry. (iii) Making regional integration the fulcrum for collective industrialization and competitiveness. (iv) Involving and leveraging the resources and ingenuity of the private sector for industrial transformation. (v) Competiveness constraints of the business environment. (vi) Enhancing productive capacities within the context of industrial cluster and small and medium enterprises (SMEs) development while ensuring resource efficiency, environmental sustainability and climate resilience. (vii) Benchmarking the Action Plan to high performance comparators. (viii) Strategic and investment planning. (ix) Costing and financing the Action Plan. (x) Institutional structure to drive, support, monitor, evaluate, and govern the industrialization process in SADC. To this effect, the costed Action Plan identifies the outputs that are required to implement the SADC Industrialisation Strategy. For each key measure, it indicates the core actions and Key Performance Indicators (KPIs) that are necessary for the Strategy to succeed. To support effective implementation and monitoring, the Action Plan includes only specific, achievable and agreed-on KPIs that are reflected in the Industrialisation Strategy and Roadmap. It takes on board relevant elements of the SADC Industrialization Strategy that are managed under other processes, most importantly:  The SADC Trade Protocol;  The Industrial Policy Development Framework (IPDF)  The Regional Infrastructure Development Master Plan (RIDMP)  The Industrial Upgrading and Modernisation Programme (IUMP)  The protocol on Trade in Services  The Action Plan for Regional Manufacturing of Medicines and Health Commodities (African Union – AU) 20 Costed Action Plan for SADC Industrialization Strategy and Roadmap  The Standardisation, Quality Assurance, Accreditation and Metrology (SQAM) initiative  The Regional Action Programme on Investment (RAPI)  The Regional Agricultural Plan (RAP)  The Mineral Linkages & Beneficiation Plan  Digital SADC 2027  Strategic Water Supply Infrastructure Development Programme  Regional Green Economy Strategy and Action Plan for Sustainable Development It also includes measures to ensure that they are aligned, and promote industrialisation. In addition, national industrial policies would need to be realigned across the region for accelerated implementation of the above initiatives. To this end, the Action Plan also identifies more precisely the activities that need coordination at the regional level, while acknowledging that industrial policy remains a national prerogative. The results-based framework has been utilized to define more precisely:  The targeted outcomes and outputs  KPIs and key actions  Timeframes  Responsibilities  Indicative direct costs These aspects constitute the elements of the Action Matrices outlined in the part on the Action Plan Framework. By situating the Action Plan within the context of current and future challenges, the following measures should be prioritized:  Ensure that macroeconomic policy supports industrialization through appropriate counter-cyclical approaches, support inclusive growth, economic diversification, enhanced competitiveness and promote regional integration.  Ensure that Member States, supported by the SADC Secretariat, target support to industrialization with a particular emphasis on enabling infrastructure development; investment-led trade; strong and enabling regulation; industrial finance and incentives; local procurement and the 21 Costed Action Plan for SADC Industrialization Strategy and Roadmap strategic use of a toolbox of policy measures to support regional industrialisation more effectively.  Identify mechanisms to strengthen demand for local and regional products, secure investment in large, strategic catalytic industrial projects that will act as anchor projects around which development can be spurred, and promote the development of regional value chains. Finally, the Action Plan advances, as an imperative, a “developmental integration” approach whereby SADC Member States promote investment, trade, and industrial regionalisation. This entails policy coherence, alignment and certainty which, as a collective, strengthens the productive capacities of companies in the regional economy and achieve regional industrial integration. Sustainable diversification and integration to facilitate effective participation in the higher levels of regional and global value chains will require a functional free trade area (FTA) which facilitates movements of goods and services, capital and business people within the region and promotes economies of scale. The focus, moving forward, should also ensure that private sector investment is leveraged in key economic infrastructure (with strong reciprocal conditions) to unlock major economic activities in the productive sectors of the regional economy. State Owned Enterprises (SOEs) also have a major role to play in supporting infrastructure development and enabling economic infrastructure (energy, rail, road, port, and telecommunications) and crowding in investment. To achieve this, strong support for localisation and for regional supplier development is essential. 22 Costed Action Plan for SADC Industrialization Strategy and Roadmap II. VALUE CHAINS AND INDUSTRIALIZATION STRATEGY 2.1 Introduction Value chain participation is a crucial driver of the Industrialization Strategy in view of its potential for expanding production possibilities and enhancing cross-border utilization of the natural and human resources of the region. This participation can be of regional or global nature. By nature, global and regional value chains involve the ‘unbundling’ of factories across international borders so that individual tasks are performed in different countries, which enjoy competitive advantage in a specific activity. A key element in the evolution of global and regional value chains is outsourcing by firms in mature economies of unskilled-labour-intensive activities and their relocation in low-wage economies. Typically, firms seek to retain high value-added tasks at home where the necessary skills and intangible capital are available. The focal point of the SADC Industrialization Strategy is participation in regional and global value chains. The strategy sets out three Resource-Based Industrialization (RBI) preferred growth paths towards industrialization in the region – agro-processing, minerals beneficiation and industry and service-driven value chains. The three paths are mutually inclusive, encompassing the combination of downstream value addition and backward integration or the upstream provision of inputs, intermediate items and capital equipment. The key challenge for corporate and government policymakers is to identify and prioritize entry points into value chains, which from a SADC perspective involves identifying tasks that can be undertaken competitively and how they might be shared within regional value chains in SADC. From an implementation perspective, the emphasis therefore needs to shift to some of the microeconomic elements underpinning future growth, with a particular emphasis on moving up regional and global value chains supported by procurement localisation; targeted domestic and foreign investment; technology transfer; skills development; and the development of a friendly investment and regulatory environment. Specific investment and industrial opportunities emerge from integrating value chains and ensuring specialisation across the region. Judicious and strategic development of domestic and regional value chains will also allow supply companies to increasingly explore export opportunities for higher value-added products and services, and a more effective entry into global value chains. 23 Costed Action Plan for SADC Industrialization Strategy and Roadmap Competitiveness is crucial to the success of value chain participation, and may mean where imported inputs are cheaper, better quality or more readily available than those produced locally do, firms that rely on foreign suppliers will produce at lower cost and/or at higher quality than those relying on locally supplied inputs. 2.2 Value Chain Participation in SADC SADC value chain participation takes the following features: (i) Cross-Border Participation: While regional value chains in SADC are, developing – most rapidly in services – participation in GVCs is modest, with the exceptions of apparel and in South Africa’s case, automobiles. SADC value chain participation is mainly upstream – the export of primary commodities, minerals, tobacco, sugar, and beef – with limited local value addition. (ii) The region is involved at the lower segment of value chains while focus should be on enhancing participation at the upper end and diversification into new high-productivity activities. (ii) Hub-and-Spoke Value Chains: Regional value chains are primarily hub-and-spoke in structure with South African corporates as the lead firms with relatively few linkages to GVCs. Growing South African dominance, most notably in services, favours a hub- and-spokes regional model. (iii) Remoteness Participation in GVCs is constrained by geography – remoteness of major global hubs thereby strengthening the argument for emphasising the need for regional value-chains. Distance and weak connectivity have adverse effects – on costs, on delivery times and network flexibility. SADC economies participation in RVCs and GVCs is generally stunted by weak logistics and inadequate physical and natural capital, as well as serious skills deficiencies. (iv) Scale Small populations – less than two million people in the BLNS, Mauritius and Seychelles – restrict the size of the industrial sector, inhibit both diversification and cluster developments. Scale effects are exacerbated by regional imbalance between South Africa, accounting for over 60 per cent of regional GDP, and the other 14 with much smaller economies in terms of GDP. 24 Costed Action Plan for SADC Industrialization Strategy and Roadmap Ownership and Embeddedness As illustrated in Lesotho, Madagascar and Mauritius, different patterns of ownership give rise to different value chain strategies. As ownership changes – the relative pull- back of some Western investors and their replacement by Asian, Latin American, Central European as well as African investors, both domestic and foreign – embeddedness characteristics change and with them their value chain strategies. Value chain participation may start regionally and graduate to the global level or work in the reverse direction, from global to regional. However, because the majority of SADC Member States have broadly similar industrial structures, the scope for the relocation of labour-intensive tasks to low-wage economies is limited, though there are cases where South African and Mauritian firms outsource such manufacturing activities to other countries within the SADC Free Trade Area. For further dimensions see Box 2.1. Box 2.1: Country Specificities All countries engage in value chain activities to some extent, though in SADC the bulk of participation is forward rather than backward and global rather than regional. The strategies outlined in the SADC Industrialization Strategy and Roadmap focus on enhanced domestic value-addition leading to reduced backward integration and enhanced forward integration. This follows from the fact that as backward integration declines due to greater domestic value-addition, forward integration increases because of the enhanced domestic value addition. There is a direct link between the pattern of resource endowment and the nature and extent of value chain participation. Within SADC, because exports are overwhelmingly resource-based with limited domestic value-addition, forward integration is dominant. Similarly, because regional usage of unprocessed and semi-processed primary products is limited, the volume of intra-regional trade is small as also is the extent of regional value chain participation. Typically, backward linkages develop in the earlier stages of industrialization as countries reduce dependence on agriculture and mining. Forward linkages become dominant again as economies shift towards service-driven growth and the evolution of Headquarter as distinct from Factory economies. Accordingly, value chain participation is U-shaped in nature with forward integration declining as countries industrialize and backward integration increases. Thereafter, forward integration levels off and starts to increase again with the transition to services-led growth. Countries with higher per capita incomes tend to have higher forward participation rates. This is certainly the case in some SADC economies – notably Angola, Botswana and South Africa. The share of MVA in GDP is positively correlated with value chain participation. In SADC, the share of MVA in GDP has fallen significantly over the last 20 years, which helps to explain the under- development of cross-border value chains in the region. 25 Costed Action Plan for SADC Industrialization Strategy and Roadmap 2.3 The Role of Services in Value Chains Arguably in the SADC region, insufficient attention has been paid to service sector engagement in value chains. Domestic service providers may be contracted by regional or international firms to provide services within Member States – IT, banking, retail, hotel chains etc. This is forward integration. a) There are opportunities also for domestic service providers to access competitive inputs from abroad (backward integration), as in the case of vehicle hire, financial and accounting services and IT. b) High quality services – domestic or foreign – may enhance competitiveness of local industry. The OECD estimates that up to 30 percent of value-added in manufacturing exports is accounted for by services. Although this is not specific to value chain development, it can be an important influence in the growth of value chains. 2.4 Innovation and Export Diversification A qualitative measure of value chain integration is the diversification of export baskets. One crude measure is the number of export products which, in recent years, has declined in all SADC states for which there are data, with the exception of Tanzania. Export sophistication data suggest that since the mid-1990s the quality of exports has improved in the SADC countries for which there are data. 2.5 The Skills Dimension The SADC Industrialization Strategy and roadmap pinpoints the scarcity of skills essential for accelerated industrial development as one of three major constraints. Recent research highlights changes in income distribution in value chains in favour of capital and high-level skills, in emerging as well as in mature economies. Income shares of medium-skilled personnel decline, on average, by one percentage point while those of low-skilled workers fall by five percentage points. 2.6 Key Messages a) Natural resource exporters such as Angola, the DRC, Mozambique, South Africa, Zambia and Zimbabwe can enhance their already-high levels of forward integration by adding value (upgrading) exports of unprocessed and semi-processed products. Indeed, this is one of the three growth paths – raw 26 Costed Action Plan for SADC Industrialization Strategy and Roadmap materials beneficiation – prioritized in the Industrialization Strategy and Road Map. In doing this, there will be need to ensure that investments are adequately climate proofed and have the necessary strategies for ensuring resource use efficiency and waste and emissions reduction. b) Those such as Lesotho, Swaziland, Mauritius and Seychelles should upgrade their value chain participation by moving up-market from low-technology activities and/or developing or expanding their service sector value chains, as is already evident in Mauritius and Seychelles. c) Scale and productivity issues also play a large part in explaining the relative under-development of value chains in SADC. According to the OECD these are exacerbated by fundamental problems related to the quality of infrastructure or indeed institutions. Accordingly tackling these aspects should have a high priority. d) Gains from value chain participation do not accrue in a uniform fashion. One size does not fit all and benefits will vary in line with production technologies, market geography and the level of industrialization. e) To leverage industrialization, Member States should collaborate on specific industrialization projects, value chains and clusters. 27 Costed Action Plan for SADC Industrialization Strategy and Roadmap III. CRITERIA FOR VALUE CHAIN ENTRY AND POTENTIAL VALUE CHAINS IN SADC The identification of potential regional and global value chains is an extremely complex process. National accounting and statistical data are helpful, but in a world of fast- changing market conditions, volatile exchange rates and rapid technological change and where decision-making is decentralized, not just across countries but continents, even intensively researched and detailed value chain studies can be no more than indicative of current and prospective opportunities. Furthermore, it is simply impossible to predict how individual entrepreneurs and managers will behave. Although there is no way that these conditions can be simulated or predicted, intensive research into value chain experiences both within SADC and abroad will be needed to facilitate value chain decision-making by SADC policy makers and business people. Within this context, a number of factors provide the basis for determining value chain participation and criteria for potential value chain identification and selection. 3.1 Determinants of Value Chain Entry Structural characteristics are the main determinants of global/regional value chain participation, especially in emerging markets. The key determinants are: a) Market Size. The larger the domestic market, the lower the backward VC participation of a country and the greater is the forward engagement. This is because larger markets imply a greater variety of domestic intermediates. b) Level of Development The higher per capita incomes the greater is the degree of forward and backward participation. Developed economies source more from abroad and sell a bigger share of gross exports in the form of intermediates. c) Industry Structure The greater the share of manufacturing value added (MVA) in GDP, the higher the degree of backward integration and the lower is the extent of forward engagement. d) Location and Remoteness GVC activity is centred around manufacturing hubs. The greater the distance to the main manufacturing hubs of Asia, Europe and North America, the lower is the degree of backward participation, which also means that there are likely to be more opportunities within the region for the domestic and cross-border 28 Costed Action Plan for SADC Industrialization Strategy and Roadmap development of intermediates, though this will depend on cost, delivery- reliability and quality issues. Regional influences are substantial. World Bank research suggests that “remote countries tend only to achieve GVC participation in two situations: (i) Where they are large and have significant internal markets to support integration in automotive and/or electronics GVCs in the assembly stages; (ii) In mining and other commodity-oriented value chains”. e) Policy Influences Although policy variables appear to have a lesser impact on VC participation in emerging markets where structural influences are more dominant than in developed ones, three key elements of policy stand out: (i) Low import tariffs – both at home and in export markets and participation in regional trade areas (RTAs), facilitates both forward and backward integration; (ii) Openness to inward FDI boosts both forward and backward participation; and (iii) Logistics, including infrastructure quality, quality of institutions, protection of intellectual property and trade facilitation, are positively correlated with greater value chain participation. The OECD has designed a four-stage hands-on approach to value chain policymaking (Figure 3.1) that should serve as a blueprint for policymakers in the SADC region. The schema suggests that where weak infrastructure and insufficient skills are pervasive, stage three – bottlenecks and weaknesses – should be prioritized to facilitate the identification and implementation of specific value chain opportunities. Fig 3.1. The four stages of Value Chain Policymaking Identify potential Assess Pinpoint Design and Value Chains opportunities bottlenecks and implement within a specific supply appropriate chain weaknesses policy interventions Source: OECD (2014) 29 Costed Action Plan for SADC Industrialization Strategy and Roadmap 3.2 Successful Value Chain Participation a) Value Chain Positioning Successful value chain participation is about positioning within the GVC or RVC to capture value. Some countries and firms have the capabilities to capture value in upstream activities, which may be resource intensive or skills and innovation intensive. Others, with good market proximity and access as well as relatively low-cost labour can thrive in downstream processing, final products and customer services. The key drivers of positioning decisions tend to be a country (or firm’s) capabilities and the actual value chain. b) Labour Costs Although low wages may attract value chain investment and productivity is usually much higher in low-wage manufacturing than in traditional agriculture, value chain participation is likely to be a function of productivity and efficiency as reflected in unit labour costs rather than wage levels alone. Moreover, low wages for unskilled workers will not, on their own, attract investment, which will depend on market conditions, the state of physical infrastructure and, crucially, the availability and cost of appropriate skills. Above all upgrading within value chains depends not just on the availability of the requisite skills but also on the state of soft infrastructure in terms of the inputs and services in finance, technology and living conditions, in the absence of which value chain upgrading is unlikely to take place. 3.3 Criteria for Identifying Value Chain Potential in SADC A number of specific and dynamic criteria need to be satisfied for identification of potentially successful value chains within the SADC development environment. These include the following: 1. Growth Potential Growth opportunities in output, employment and exports should be disaggregated so as to assess the potential economic impact of different value chain segments in different countries. 2. Availability of and Access to Resources Linked to the growth potential, is the need for availability and access to resources. Aside from raw material and intermediate inputs, the crucial elements of successful value chain participation are financing, skills, technology, infrastructure and logistics. 30 Costed Action Plan for SADC Industrialization Strategy and Roadmap 3. Levels and Segments of Participation Value chain impacts are greatest where entry occurs in the middle segment of the chain. Middle segments are defined as exports of intermediate products for downstream processing in other countries (Forward Integration). Middle segment participation is a function of trade openness, of the level of industrial sophistication in an economy, and skills and education levels. 4. Upgrading Potential Upgrading potential is a key consideration because policymakers do not want to be locked into low-technology sweatshop-type operations that are competitive regionally and globally primarily because unskilled labour is cheap or because there is access to low cost natural resources. Upgrading potential will be greater where there are diversification opportunities while the benefits will be greater where firms enjoy knowledge and technology spill-overs. 5. End Markets and Market Access Market entry is driven in part by market considerations. Taiwanese investors in the Lesotho garment industry were motivated by access to the US market through the Africa Growth and Opportunity Act (AGOA). South African investors in the clothing chain were driven by cost competitiveness considerations – lower wages in Lesotho allied with close proximity to the lucrative South African market. Upgrading in Madagascar has been greater than in Lesotho or Swaziland partly because its market shifted from the US (under AGOA) to the EU and South Africa. 6. Competitiveness In a fast-changing global economy, competitiveness is dynamic forcing policymakers to distinguish between current and future competitiveness. Firms are much more likely to be highly competitive in task manufacture within a regional or global value chain than in a vertically-integrated national value chain. 7. Complementarity There are extensive complementarities in both demand and supply in SADC, which will promote increased value chain participation on the basis of participant firms seeking to exploit their competitive advantage at different stages of the value chain. 8. Potential for Embeddedness The evidence underlines the importance of participants committed to embedding their operations in the country where the value chain link is located. Case studies show how the degree of embeddedness varies according to the strategic motivation of the lead firms in the value chain. The impact is more positive where the investor is a long-term player with an interest in upgrading the value chain 31 Costed Action Plan for SADC Industrialization Strategy and Roadmap than where the value chain partner is a quota- or island-hopper. Regionally embedded investors from Mauritius and South Africa have had a significantly greater positive impact in other SADC states, like Madagascar or Lesotho, than those from further afield. 3.4 Other considerations There are a number of considerations to be taken on board in situating effective value chain participation. These include: 1. Key Capabilities Capabilities that matter most for GVC participation are: (i) Fixed capabilities, which cannot be changed by a country such as proximity to markets and natural resource endowments; (ii) Long-term policy variables - capabilities that can be changed gradually over a relatively long time horizon (human, physical and institutional capital); and (iii) Short-term policy variables – capabilities that can be changed directly through a policy shift or negotiations (logistics connectivity, wage competitiveness, market access, access to inputs). 2. Bottlenecks and Obstacles to Value Chain Development The impact of constraints to production and trade, such as transport costs and cross-border delays, and the time and resources necessary to overcome them will influence policymaking. 3. SME Integration into Value Chains This is a high priority across the SADC region but extremely difficult to achieve with the enhanced focus on quality and delivery times that is fundamental to value chain participation. The recent trend towards shorter and tighter value chains also militates against SME involvement (See Section IV). 4. Potential Adverse Consequences An important element of Value Chain policymaking is the requirement to assess and cost potentially adverse circumstances – environmental impacts, implications for communities, as well as health and social considerations. 5. Competition Policy and Consumer Welfare Value chain selection will be influenced by competition policy considerations as well as those relating to consumer welfare especially in such sub-sectors as foodstuffs, beverages and pharmaceuticals. 32 Costed Action Plan for SADC Industrialization Strategy and Roadmap 6. Country Risk Producers are reluctant to locate value chain operations in high-risk environments because the entire chain is only as strong as its weakest link. 7. Dependence and Vulnerability Policymakers seek to minimize risks arising from dependence on foreign suppliers, as in the food and electricity supply sectors as well as risks from environmental factors related to climate change such as floods, cyclones and drought, particularly for climate sensitive value chains. Following the catastrophic nuclear accident at Fukushima in Japan, which seriously disrupted industrial production and value chains in Japan and abroad, multinational enterprises have become more risk averse, as a result of which there is a new preference for shorter and geographically proximate value chain partners. 3.5 Regional Value Chain Potential in SADC The Action Plan is not designed to prescribe value chains for Member States to prioritize and promote, but highlights value chains with demonstrable potential to deepen regional integration by boosting intra-regional trade and cross-border investment flows. Drawing on national reports by country experts, industrial reports, case and sector studies the section, a brief survey of existing value chains that have the potential to deepen regional and global participation that could be promoted by SADC governments acting under the umbrella of the regional authority or in bilateral or multilateral co- operation with other Member States was undertaken. Six main value chain clusters are identified. These are: (i) Agro-processing (ii) Minerals Beneficiation and related mining operations (iii) Pharmaceuticals (iv) Consumer goods (v) Capital Goods (vi) Services Specific sectors and the SADC countries that can potentially participate in each value chain have been identified by Member States. The central question however is not the focusing on the product or sector per se, but rather understanding the full value-chain and what is required to take advantage of opportunities to add value and migrate to new activities along the value chain. 33 Costed Action Plan for SADC Industrialization Strategy and Roadmap Table 3.1: Products and Sectors in SADC with Potential for Value Chain enhancement Sectors Countries Agro-Processing Cluster Soya South Africa, Zimbabwe, Zambia, DRC, Malawi, Madagascar Sugar Malawi, Mozambique, South Africa, Swaziland, DRC, Tanzania, Zambia, Zimbabwe, Mauritius, Botswana Meat products (poultry and beef) Botswana, South Africa, Zambia, Zimbabwe, Namibia, Swaziland, Madagascar, Tanzania, DRC Cassava Angola, DRC, Mozambique, Tanzania, South Africa, Malawi, Madagascar, Zambia, Zimbabwe Dairy products Madagascar, South Africa, Namibia, Tanzania, DRC, Malawi, Botswana, Zambia, Zimbabwe, Swaziland Other food and drinks Angola, DRC, Lesotho (maize), Mauritius (sea food), Zambia (oil seeds and livestock products), Malawi (oil seeds), South Africa, Zimbabwe, Swaziland, Madagascar (Rice, maize, black eyed beans, pea), Namibia, Tanzania (maize, rice, oil seeds) Fish and fish products Angola, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Zambia, Madagascar, Malawi, Tanzania, DRC, Zimbabwe Horticulture (Fruits, Vegetables and Swaziland, Lesotho, Zambia, South Africa, Malawi, Flowers) Madagascar, Zimbabwe, DRC, Namibia, Tanzania Wildlife (game meat and hide Botswana, Namibia, South Africa, Zambia, Zimbabwe, processing) DRC Forestry – Timber and non-timber forest DRC, South Africa, Angola, Madagascar, Swaziland, products (medicinal, cosmetics, essential Mozambique, Zimbabwe, Zambia, Namibia, Tanzania, oils and other herbal products) Malawi, Mauritius Minerals and Beneficiation Cluster Energy Mineral (including polymers) Angola (oil), Botswana (coal), DRC (oil, gas, coal, uranium), South Africa (coal), Mozambique (gas and coal), Tanzania (gas, coal), Madagascar, Zimbabwe, Swaziland (coal), Malawi, Namibia (uranium, coal and gas) Ferrous Minerals (Iron/Steel) Angola, DRC, South Africa, Tanzania, Mozambique, Zambia, Zimbabwe, Swaziland, Namibia Base-metals Mineral (Copper, DRC, Zambia, South Africa, Namibia, Mozambique, Aluminium, Nickel, Cobalt) Tanzania, Madagascar, Zimbabwe Fertilizer South Africa, Zimbabwe, Zambia, DRC, Malawi, Mozambique, Angola, Tanzania, Namibia Diamonds Botswana, Namibia, South Africa, Zimbabwe, DRC, Lesotho, Angola, Tanzania Platinum South Africa, Zimbabwe, DRC Cement South Africa, Zimbabwe, Zambia, DRC, Mozambique, Namibia, Malawi, Tanzania Soda Ash Botswana, Zambia, South Africa, Tanzania Mining machinery South Africa, Zambia Small Scale Mining Malawi, DRC, Tanzania 34 Costed Action Plan for SADC Industrialization Strategy and Roadmap Pharmaceutical products and preparations cluster Anti-retrovirals (ARV) South Africa, Zimbabwe, Tanzania, DRC, Namibia, Malawi Anti-TB drugs South Africa, Zimbabwe, Zambia, Namibia, DRC Anti-malarial (Artemisinin) Madagascar, DRC, Tanzania (Artemisinin, Biolarvicides), South Africa, Namibia Condom South Africa, Botswana, Namibia, Malawi, DRC Bed Net value chain Tanzania, Malawi Health commodities Malawi, Namibia (Syringes; Intra Venous Infusions - IV Fluids; Surgical Equipment; Laboratory Reagents and Materials; Methylated Spirit Manufacturing: Consumer Goods Cluster Leather, Leather Goods and Footwear Botswana, Lesotho, Namibia, Zambia, South Africa, Zimbabwe, Mozambique, Madagascar, Malawi, DRC, Swaziland, Tanzania Clothing and Textiles Botswana, Lesotho, Madagascar, Mauritius, Namibia, South Africa, Swaziland, Zimbabwe, Malawi, Tanzania, Mozambique, DRC 5. Capital Goods: Machinery and Equipment Automobiles South Africa, Lesotho, Mozambique, Zimbabwe, Namibia, Malawi, Botswana 6. Services Cluster Tourism Botswana, Mauritius, Seychelles, South Africa, DRC, Tanzania, Zambia, Zimbabwe, Madagascar, Lesotho, Swaziland, Mozambique, Namibia, Malawi, Angola Financial services Botswana, Mauritius, Seychelles, South Africa, Swaziland, Zimbabwe, Namibia, Malawi ICT All Member States Source: Compiled from National Reports, industrial reports, case and sector studies In identifying value chains in the SADC region, focus was on: (i) Value chains already in existence and their potential (ii) New value chain possibilities or links into regional and global value chains. In applying the value chain identification criteria (section 3.3), the initial mapping of the value chain landscape in the SADC region indicates that for each sub-category of products produced, production is undertaken at different levels of range and sophistication. Secondly, the geographical spread is often characterised by the shortness of range of the chains. Thirdly, the major orientations of the chains are natural resources based. Fourthly, capital goods and equipment value chains tend to be concentrated in South Africa. 35 Costed Action Plan for SADC Industrialization Strategy and Roadmap Many of the value chains are supply-based, whose potential in terms of output and employment, is currently constrained by inadequacy of finance and high transaction costs. There are ample opportunities for upgrading but that tends to be also limited by technological and industry skills deficiencies. Once the constraints are removed, many of the identified value chains will have potential to link more densely regionally and globally. In the agro-processing sector, existing or potential value chains include soya, sugar and related products, cassava, food and drinks, fisheries, forestry, dairy, leather and leather products, meat and meat products, fruit and vegetables, etc. The recent profiling studies in the minerals sector (metallic and non-metallic) of the SADC region point to a number of potential value chains. Candidates in this area include: (i) Energy mineral value chain based on coal, oil and gas resources; (ii) Ferrous minerals value chain – that processes iron ore, zinc, chromium, nickel, manganese, tungsten and vanadium to produce different types of steel for infrastructure development; (iii) Base metals mineral value chain which utilises copper and aluminium; (iv) Fertiliser mineral value chain based on coal gas, phosphate and potassium; (v) Cement value chain which utilizes limestone; (vi) Value chains on minerals where SADC has producer power such as diamonds, platinum and cobalt to produce catalysts and jewellery; and (vii) Mining inputs value chain for upstream linkages into mining capital goods, consumables and service industries. The pharmaceuticals sector offers a number of opportunities for regional value chain formation. Areas already identified cover: Anti-retrovirals; anti-TB drugs, artemisinin, condoms, bed-nets and DDT. Crucial to value chain analysis is the identification of links where a country or a firm can participate competitively. There is need for detailed studies to be undertaken to identify particular links in the value chains for each product that could be developed to facilitate deepened Regional Value Chains (RVCs) and/or GVC participation in SADC. It is also critical for the studies to identify the capacities and capabilities as well as the policy and regulatory environment necessary to facilitate effective participation in these value chains. The Action Plan proposes that funding be sought for such hands-on studies. 3.6 Other Potential Regional Value Chains Cross-border services are a promising avenue for RVCs, though for the foreseeable future the probability is that South African dominance will increase. However, there has 36 Costed Action Plan for SADC Industrialization Strategy and Roadmap been, albeit very limited to date, development of regional (non-South African) value chains in tourism and hospitality, energy supply (electricity and gas) and retail. The potential for agro-based RVCs is significant but constrained, especially by very low levels of agricultural productivity along with supply chain and logistical challenges as well as the infrastructure deficit. Moreover, downstream processing, most relevant in agro-processing, “is constrained by a restrictive trade policy environment that undermines downstream competitiveness in an attempt to protect upstream markets”2, apparent in intra-SADC trade restrictions on a range of agricultural commodities. Minerals beneficiation and associated downstream operations are prioritized in a number of Member States but the rate of development will depend on global market conditions, access to capital (constrained by weak end-market demand for mineral- related products) and access to skills and technology. The potential for backward integration into the provision of mining inputs, intermediates, capital plant and machinery and mining services, is huge. Most Member States have prioritized links in the cotton-textiles-apparel value chain for which there would seem to be greater regional than global opportunities. Even with the sharp depreciation of the South African rand, South African manufacturers and retailing groups are under pressure to contain costs, which makes regional outsourcing to lower wage locations potentially attractive. Key obstacles that must be overcome include access to fabric and finance, the skills deficit and logistics. For the foreseeable future the development of both RVCs and GVCs in the SADC region will be constrained by the acute scarcity of skills, especially those necessary for value chain upgrading. 3.7 Action Plan for Regional Value Chain Development a) Deeper Regional Integration Although SADC is a free trade area numerous obstacles to the free movement of goods and services remain in place, underscoring the role of trade facilitation measures, including promoting frictionless border posts and vastly improve physical infrastructure, in levelling the playing field. Deeper regional integration, including further trade liberalisation, is an essential pre-requisite for the development of RVCs and increased integration in GVCs. 2 World Bank (2015) Factory Southern Africa. 37 Costed Action Plan for SADC Industrialization Strategy and Roadmap b) Private-Public Interface Without close public-private collaboration in the realm of industrial policy, there is a danger that policymakers will launch well-intentioned but poorly designed or even ill-advised industrialization strategies. Textbook learning or donor advice is no substitute for in-house and first-hand knowledge, experience of technological, and market conditions. The “discovery” process in value chain policymaking is heavily reliant on close co-operation between the public and private sectors. Improved management information on both sides is crucial to efficient and effective decision making. c) Constraints The national reports and case studies consulted pinpoint infrastructure – both physical (hard) and institutional and scope economies (soft) – as critical constraints in value chain development. In agriculture value chain developed is impeded by poor transport, storage and marketing facilities, along with insufficient or tardily available information. Similarly, the case studies highlight the scarcity of essential skills and invariably finance. 3.8 Policy-mix in Support of Value Chain Participation The Strategy proposes a stronger focus on ensuring that macroeconomic policies support inclusive growth, economic diversification, enhanced competitiveness, and promote regional integration. This will require private sector investment in the productive sectors of national and the regional economy, in close coordination and cooperation with Member States. To this end the specific actions proposed are the following: (i) Ministries and departments responsible for trade and industry and the relevant fiscal and monetary authorities should consult closely on the use of macroeconomic and industrial policy instruments to facilitate accelerated industrial development. (ii) That Member States put in place macroeconomic policy regimes that aim at achieving inclusive growth; economic diversification and competitiveness; deeper regional integration; and macroeconomic policy convergence. (iii) The key policy recommendation of value-chain development is working with and supporting industry players and investors to occupy higher value-adding segments of the production chain. In that regard, the IUMP is an important tool in supporting the development of productive capacity, enhancing the competitiveness of SMEs and the strengthening of regional value chains. 38 Costed Action Plan for SADC Industrialization Strategy and Roadmap IV. INDUSTRIAL CLUSTERS AND SMEs DEVELOPMENT 4.1 Clusters and SMEs Clusters - geographically proximate companies, suppliers, service providers and associated institutions in a particular field - boost competitiveness because of their positive impact on productivity, innovation and new business formation. They are key drivers of regional growth, productivity and competitiveness. Closely related to cluster development is nurturing and enhancing the competitiveness of the SMEs in terms of productive capacity and ability to interlink within a cluster, regionally, and even globally, through the producer-supplier-value chain process. Dynamic and innovative clusters strengthen SMEs and enable them to compete regionally and globally. Cluster development should be a deliberate effort in the early stages of transformation. As the industrial setting is improved, self-discovery of enterprises and clusters will establish the firmer foundations for cluster-led or facilitated industrialization. Given the initial development conditions of the SADC region, governments should provide guidance, planning and mapping of actual and desirable agglomeration paths. 4.2 Interfacing SMEs, Clusters and Regional and Global Value Chains The successful development of clusters, embodying SMEs, and their integration into RVCs and GVCs is dependent on the interface between the different actors. Firm level: Firms must satisfy the competitiveness requirements in terms of skills, efficiency, innovation and managerial disposition that merits excellence as well as inter- firm cooperation. Cluster level: clusters should satisfy the criteria of: collective efficiency; industrial complementarity; existence of a critical mass of competitive enterprises; the existence of support services; presence of collaborative arrangements with knowledge-creation- and internalization institutions; a cluster policy that encourages agglomeration’ and existence of clear and conducive regulatory frameworks. Regional level: a regional investment and incentives policy that encourages, and rewards, regional industrialization programmes and projects that are geared towards establishing strategic RVCs and creating production or market niches for the region, as well as those that promote structural transformation and deepen regional interdependence. 39 Costed Action Plan for SADC Industrialization Strategy and Roadmap Global Level: linking with GVCs is inevitable over the longer term, for which SADC’s SMEs, industrial and service clusters should build commensurate capabilities. Best business practices should be disseminated and gradual (protected) upgrading of clusters would be essential for global interface. 4.3 Capabilities Capabilities necessary for linking the four tiers include: (a) Training. Appropriate skills must be developed in core areas to facilitate linkages across the four tiers to encompass technology, entrepreneurship, communication, and awareness building. Training should go beyond production techniques to include components designed to build entrepreneurial and interpersonal skills. (b) Access to Finance. The optimal functioning of the links would require access to significant resources to finance needed infrastructure, equipment and operations, driven by a conscious policy to assist SMEs to overcome resource constrains and raise the scale of operations and competitiveness. (c) Coordination. There is a heightened need for building strong coordination and collaboration mechanisms to oversee guide and monitor the interactions between various producers and actors in the link chain. The loci of the interface should be primarily around the firm, cluster and RVC link as a strategic first action block. Links with GVC should constitute a graduation process, evolving overtime and geared towards creating conditions for equitable partnership with GVCs in interdependence and governance. 4.4. Action Programme for SMEs, Clusters and RVC Development The Action Plan proposes two linkage programmes: (i) Actions to strengthen SMEs, clusters and RVCs; and (ii) Business linkages. 4.5 Actions to Strengthen SME, Clusters and RVCs 4.5.1 SME Development Areas of intervention include: (i) Provision of business support services to enhance competitiveness and to operate efficiently. Important areas include training, technological and managerial assistance, marketing and physical infrastructure. 40 Costed Action Plan for SADC Industrialization Strategy and Roadmap (ii) Access to advanced technology and modern means of production, service and distribution. (iii) Enhancing ability to acquire and master technology and to innovate. (iv) Accesses to finance as own resources are insufficient for promoting technologically based SMEs. (v) Establishment of SMEs support agencies to render them partnership-ready (in terms of management and technical skills) as well as to facilitate their integration into RVCs and GVCs. 4.5.2 Cluster Development Proposed interventions include: (i) Actual and potential cluster identification, by geography, industry composition, and existing networks. (ii) Once identified and received government recognition, clusters’ capacities should be built. (iii) A Master Plan for national and regional clusters should be developed, underpinned by related government policies geared towards their success. (iv) Determination of the cluster infrastructure needs in the short, medium and long term. (v) Capacity building in terms of institution building, human resources development and physical environment readiness. (vi) Deliberate technological upgrading programme to enable clusters develop cutting – edge positions. (vii) Develop cluster policies to promote entrepreneurship. 4.6 Government Interventions (i) Mapping industrial structure and capacity, including quality of capital stock, efficiency, skills and competitiveness. (ii) Establishing credible criteria for identification of industries that are appropriate to the endowment structures and have potentiality for becoming globally competitive. (iii) Readiness actions to facilitate spontaneous self-discovery by private entrepreneurs and to encourage innovation in new industries. (iv) Facilitation of intra-firm collaboration. (v) Skills upgrading and retooling to meet the dynamic and technological needs of firms and clusters. This includes reorientation of education in favor of science and technology, and target international standards compliance (health, safety, environment, etc.). (vi) Establishing supportive technological institutions to facilitate skill development for firms and clusters directly or indirectly. 41 Costed Action Plan for SADC Industrialization Strategy and Roadmap (vii) Investing in industrial parks and undertaking location improvements to help attract local and foreign investors to targeted industries. (viii) Catalyzing finance for industrial development (e.g. grants, loan guarantees and equity stakes) particularly for technologically oriented SMEs and start-ups in targeted industries. 4.7 Business linkages programme (i) Development of entrepreneurship and support to related education and training, as well as for strengthening business associations. (ii) Regional and global business linkages to facilitate establishment of cross-border enterprises and transmission of best business practices. (iii) Partnership between governments, transnational corporations (TNCs) and SMEs support agencies. 4.8 Key Messages a) Specific policy interventions are essential to deepen and improve interfaces between the four levels of - firm, cluster, regional and global. b) Capacity building to achieve this goal includes appropriate training and skills development, improved access to funding and closer coordination between various producers and actors in the value chain. c) Linkage programmes are required to strengthen SMEs, clusters and RVCs, supported by d) Entrepreneurship training programmes, and e) Closer ties between public and private sector actors. 42 Costed Action Plan for SADC Industrialization Strategy and Roadmap V. CAPABILITIES AND CAPACITIES FOR INDUSTRIAL DEVELOPMENT 5.1 Introduction Capabilities development requires massive investments especially in education and institution building as well as in the tangibles such as physical equipment. This, in turn, requires the mobilization of adequate financial resources and their transfer to industry. Knowledge and capability development are crucial levers of productivity and competitiveness of firms and sectors as well as for more effective functioning of the overall economic system. The knowledge-based economy is becoming a key pillar of competitive advantage, i.e. created advantage. 5.2 Productivity Productivity for both capital and labour is low and often declining in the SADC region and to sustain economic growth and enhance competitiveness, Member States must invest in infrastructure, education and technology to raise productivity levels to global standards. 5.3 Competitiveness SADC countries rank poorly in the World Economic Forum’s Global Competitiveness Index (GCI), with only South Africa and Mauritius listed in the top half of the 144 countries covered in the 2014-2015 index. While there is considerable heterogeneity among the 15 countries the performance gap between SADC countries performance and comparators in Asia and Latin America is significant, pointing to the need for major efforts to raise competitiveness across the board. Competitiveness is weak partly because the productivity of both capital and labour is low and often declining in the SADC region, especially in agriculture. To sustain economic growth and enhance competitiveness, Member States must invest in infrastructure, education and technology to raise productivity levels to global standards. With the development of cross-border value chains, competitiveness is no longer a function only of domestic clusters of manufacturing firms, but is increasingly reliant upon successful integration of other tasks in the chain, both domestic and foreign. In the 21st century what a country exports matters less than what tasks it undertakes within a value chain. Competitiveness in components and tasks, as distinct from comparative advantage in final products, is the key to initial value chain participation whether at regional or global level. 43 Costed Action Plan for SADC Industrialization Strategy and Roadmap 5.4 Education, Innovation and Entrepreneurship Education is key to capacity development and for SADC to graduate to a competitive knowledge-based economy high level specialisations will be crucial, notably tertiary education and specializations in science and engineering disciplines. The data for SADC countries show a highly differentiated but generally unsatisfactory performance. The role of R&D is progressively being recognized as an important technological facilitator. The initial conditions within the SADC region, however, indicate that the countries are yet to raise their R&D expenditure to levels that match that of their comparators. Within SADC, South Africa stands out with a R&D ratio to GDP significantly higher than any of the other Members while the wide gap between the region and the comparators underlines the magnitude of the catch-up challenge. 5.5 Programme of Action for Capabilities Development 5.5.1 Business environment and competitiveness (i) Creating a business-friendly and competitiveness-aware environment. (ii) Developing high quality entrepreneurship and consolidation of national and regional business associations. (iii) Encouraging entrepreneurial clusters and facilitating links between entrepreneurs and universities and research institutions, to speed up the utilization of their knowledge spin-offs and thereby encourage start-ups formation and growth. 5.5.2 Education The core building blocks should be: (i) Reorientation and repurposing education to facilitate industrialization and transformation with emphasis on science, technology, engineering and mathematics (STEM) education. (ii) Establishment of partnerships between universities, research institutions and the business community to fast-track utilization of knowledge generated for production. (iii) Governments to fund collaborative research that involves industry and the academics. (iv) Identification/strengthening/establishment of Centres of Excellence and/or Centres of Specialization. 5.5.3 Innovation The focus should be on the creation of national and regional innovation systems to speed up the accumulation of technological capacity and develop its linkage mechanisms. The programme components should include: 44 Costed Action Plan for SADC Industrialization Strategy and Roadmap (i) Assessment of the innovation climate and capacities in SADC countries. (ii) Strengthening national innovation systems and development of a long term Master Plans populated by science parks. (iii) Promoting R&D and high-tech clusters and acquiring new technological capacities. (iv) Building a private sector R&D culture. (v) Ensure adequate financing for R&D for industry. 5.5 Key Messages Priority actions: a) A focus on productivity and competitiveness at firm and national levels. b) Increased investment spending on R&D. c) Design and implementation of Science, Technology, Engineering and mathematics (STEM) education and skills development programmes. d) Ample recognition of the role of technology in industrialization and the impact of the 4th industrial revolution on the SADC industrialization agenda. e) Establishment and/or strengthening of Centres of Excellence. 45 Costed Action Plan for SADC Industrialization Strategy and Roadmap VI. INDUSTRIAL POLICY AND VALUE CHAINS The main drivers of industrialization in the action plan are: (i) Structural Transformation through accelerated industrialization (ii) Enhanced Competitiveness (iii) Regional Integration To achieve these three goals, substantially increased and more efficiently targeted investment will be required, most notably in infrastructure and expanding the supply of industry related skills, especially in medium and high technology activities. In addition, far-reaching institutional reforms will be required including region-wide measures to deepen integration and institutional restructuring within the SADC Secretariat to champion the industrialization thrust. The activities necessary to implement the industrialization strategy are cross-cutting in nature and mutually reinforcing. Policies essential for enhanced value chain participation as a vehicle for structural transformation are also essential to deepen regional integration and enhance competitiveness. This overlap means that similar but reinforcing activities occur throughout the Action Plan. A developmental state perspective is an essential context for advancing industrialization. At the same time, the role of the private sector must be recognized. To this effect, actions and policies are needed to address the issue of policy space required for industrialization that could be undermined by trade and investment policy arrangements, especially with third parties. Particular emphasis should be placed on a set of policy-mix in support of industrialization including policies related to procurement, investment, taxation (e.g. export taxes, double taxations and mineral access agreements which are skewed in favour of investors), as well as necessary legislative reforms. 6.1 Connectivity Deeper regional integration is essential for the fast and efficient connectivity that is a prerequisite for supply chain efficiency and greater value chain participation. Connectivity is not simply a matter of trade barriers or high tariffs, but extends to encompass a country’s competitiveness and capabilities as well as institutional efficiency in terms of border post management, logistics and the predictability and consistency of macroeconomic policies. 46 Costed Action Plan for SADC Industrialization Strategy and Roadmap 6.2 Trade Integration Because value chain participation is substantially driven by trade policy it is important to minimize – if not eliminate altogether – obstacles to imports and exports of both goods and services. This implies reducing “at border” costs – tariffs and other regulatory requirements and time delays as well as “behind the border” regulatory measures. Tariffs in SADC have been largely eliminated, although tariffs applicable to imports to non-SADC countries in Africa remain high in several countries. Specific policy recommendations in the Action Plan include: (a) Completion of the FTA area to cover all intra-regional trade; (b) Elimination of non-tariff barriers; (c) Rules of Origin should be amended in a targeted manner to facilitate industrialization; (d) Harmonization of differential trading regimes, particularly in the COMESA, EAC and SADC regions; (e) Eventual establishment of a Common External Tariff; (f) Measures to phase out behind-the-border obstacles to free trade in the region, such as harmonization of health and safety regulations etc.; (g) Enhanced and coordinated cross border investment in trade infrastructure – roads, railways, ports, airlines etc.; (h) Accelerated implementation of Trade Facilitation measures and programmes; (i) Logistics, border post management etc. – a shared function between the regional authority and the Member States, who will have prime responsibility. 6.3 Regional Integration Policies The Industrialisation Strategy calls for a revitalisation of regional integration. Integration requires a collaborative approach to secure 1) investment in economic infrastructure, and 2) an enabling environment for domestic and foreign direct investment by the private sector in productive capability, supported by the state. Optimally this should lead to increased trade, regional investment and industrial policy interventions to ensure that all countries increasingly benefit from the expanded regional market. Twenty-first century Regional Trade Agreements or “deep” RTAs include tariff preferences, but they are not primarily about preferential market access but focus instead on disciplines underpinning international supply chains”. Going forward SADC must adapt to the new regionalism of the 21st century, characterised by two crucial elements:  Internationally dispersed production facilities or supply chain disciplines; and  Producing abroad or offshore disciplines. 47 Costed Action Plan for SADC Industrialization Strategy and Roadmap These are qualitatively very different from the earlier RTAs whose focus was the reduction of trade barriers, primarily through tariff concessions to Member States. In the 21st century trade facilitation is less concerned with the elimination of tariffs and non- tariff barriers to trade and more about “deep” regional integration in terms of the movement of services, people, skills, capital, technology and intellectual property. The Action Plan calls for the accelerated implementation of the SADC protocols, as well as the re-alignment of national industrial policies across the region. The policy toolkit should include a review of existing trade, investment and industrial policies, with a view to these being deepened and broadened. This will, among others, entail the more strategic use of tariffs, incentives and industrial financing; targeted foreign direct investment; stronger customs controls; compulsory specifications and standards; and public procurement. 6.4 Investment Policy and Financial and Capital Market Integration An open investment regime is an important part of the policy mix since there will be positive spill-overs where FDI leads to closer interaction between foreign and domestic firms including technological and skill transfers. FDI decisions are often central to value chain participation meaning that governments who wish to enter and upgrade in value chains need to implement investment-friendly policies. Linkages with lead firms are more likely to sustain SME innovation, technology transfer and upgrading than official interventions. Because outsourcing and sub-contracting are key elements of value chain participation, respect for intellectual property rights and patent protection is also essential. Specific measures include: (a) Removal of controls on cross-border financial capital flows (b) Protection of Intellectual Property Rights (c) Harmonization of banking regulations and supervisory requirements (d) Rationalization of interest rates regionally (e) Free movement of portfolio investments across the region. (f) Regional Stock Exchange (g) Regional Venture Capital and Private Equity Funds (h) Regional Development Bank (i) Regional Sovereign Wealth Fund. 6.5 Liberalization of the movement of people and skills Phased measures to enable the freer movement of skills than is currently possible due to immigration, employment and residence restrictions. 48 Costed Action Plan for SADC Industrialization Strategy and Roadmap 6.6 Doing Business Policies These are a component of deeper regional integration designed to remove behind-the- border (non-trade) obstacles to industrialization. The necessary policies are monitored and analysed in detail in the annual Doing Business surveys published by the IFC and World Bank. The number of SADC Member States adopting such policies is growing. 6.7 Competition Policy Competition policy is a particularly important area for cooperation at both the domestic and regional level because it ensures that investment in upstream stages of the value chain results in competitive supply of intermediate goods to downstream manufacturers across the region. At early stages of the industrialization process predatory monopoly practices can inhibit growth, delaying or even preventing new entrants from developing upstream and downstream linkages. 6.8 Fiscal Policy Greater harmonization of fiscal policies – another example of deep integration – is desirable since material differences in tax rates and the treatment of profits and dividends distort investment decision-making within an RTA. Where governments apply low rates of tax – as in Mauritius – there is a danger of a risk of a race to the bottom should others seek to follow suit. As yet this has not happened in SADC but there must be a risk that at some future date it may. 6.9 Growth Policies Well-designed and efficiently implemented macroeconomic and structural policies must be part of the mix, which will be determined in part by the resource-endowment and competitive advantage characteristics of individual Member States. Although one-size- fits-all industrial policy is not an option in a region as diverse as SADC, strategic supply-side investments in infrastructure, skills development and health are priorities for all Member States. 6.10 Focus Areas for Value Chain Policymaking  Entering global/regional value chains  Expanding and strengthening cross-border value chain participation, and embedding value chains in the domestic economy so that they accelerate economic development (i) Entering Global and Regional Value Chains Two main options are suggested – GVC entry via foreign direct investment and domestic and regional initiatives to facilitate entry. The FDI option is particularly 49 Costed Action Plan for SADC Industrialization Strategy and Roadmap apposite in low income countries where infrastructure is poor and where natural resources, skills and capital are in scarce supply. One popular route to FDI participation is the establishment of Export Processing Zones or Special Economic Zones where investors – not only foreign – are attracted by the provision of essential infrastructure and a variety of incentive packages. An alternative, often complementary, strategy is domestic and regional facilitation in the form of partner assistance packages (to assist domestic and foreign firms in the identification of value chain partners) export promotion schemes and arranging trade and investment missions to and from other countries. (ii) Embedding RVCs and GVCs in the domestic economy Integrating global and regional value chains in the domestic economy – densification – is fundamental to the maximisation of domestic value addition. It includes the creation of more and better-quality jobs, value chain upgrading and fostering technological and other spill-overs from FDI. There is a central role for the state in building absorptive capacity in the economy via productivity gains and investment in human capital (skills) and physical capital (infrastructure). 6.11 Value Chain Governance Where value chain governance is strongly hierarchical, as is usually the case with FDI projects, this may inhibit efforts by host country affiliates to upgrade and diversify. Over time, as affiliates acquire experience and skills, so the relationship with offshore partners and owners changes thereby enabling host firms to upgrade. However, there is no guarantee that this will occur and there is therefore a very real danger of SADC firms becoming locked into low-technology, low-productivity, undiversified activities. Policies to tackle this problem should be developed in co-operation with investors and value chain partners. 6.12 Co-operation with the Private Sector: Discovery and Dialogue Value-chain policy differs from macroeconomic development strategies in its focus on the micro-level – dialogue with individual enterprises and industry associations. It is difficult enough for policymakers with hands-on experience of industry to ”pick winners” by prioritizing value chains, but much harder to ”pick tasks” at firm level. Policymakers must decide what to prioritize – value chains or links in value chains – while accumulating the knowledge base to be able to make such choices against a background of rapid technological change and volatile exchange rates and market conditions globally. Efficient value chain decision-making is dependent on ongoing and 50 Costed Action Plan for SADC Industrialization Strategy and Roadmap close interaction – dialogue – with investors at home and abroad to ensure that the discovery process works to maximum efficiency. 6.13 Aims and Instruments for Industrial Policy “Selective industrial policy” entails strategic support for important spill-over sectors where countries or a region enjoy comparative or competitive advantages and when there is a deliberate choice to build industrial capabilities in a close collaborative relationship with the private sector. Such a strategy deliberately targets particular industries with the judicious use of key policy instruments to support investment, technology transfer, innovation and to raise competitiveness. Building public sector capacity to deploy industrial policy levers and engage with the private sector to secure national and regional interests is imperative. A Toolbox for Member States Levers available to SADC Member States, and which require regional coordination and collaboration, include the following: 1. Stronger articulation between macroeconomic and microeconomic policies. 2. The deployment of a range of integrated and aligned industrial finance and incentive programmes targeting projects and sectors to support industrial development and regional industrial integration. 3. Promotion of public procurement localisation to support domestic production by raising aggregate demand to secure investment, capacity utilisation, product development and technology acquisition. 4. Developmental trade policies that deploy trade measures in a selected and strategic manner, including tariffs and Standardisation, Quality Assurance, Accreditation and Metrology (SQAM) measures. These should be aligned to Member States’ international commitments and must be deployed together with stronger customs regulations and enforcement to prevent illegal imports and fraud. 5. Appropriate, certain and development-friendly competition and regulation policies that lower costs to encourage productive investments, skills, and innovation policies that are aligned to sectoral priorities, such as providing R&D. 6. Interventions designed to stimulate sub-national growth, including in key sectors and value chains by way of the special industrial/ economic zones and clusters supported by a variety of enabling infrastructure and programmes. The above generic policy tools should be supported by Member States in addition to drawing on a range of less direct measures. These often require strong coordination from government and key stakeholders within each Member State. This will require 51 Costed Action Plan for SADC Industrialization Strategy and Roadmap strengthening of capacities and capabilities within key trade and industry departments. These measures include: 1. Identifying and supporting investment in economic opportunities that private actors may not be prepared to enter without the support of the state. 2. Addressing blockages to new activities as a result of inadequate or costly infrastructure and education and training systems. Using this lever requires close collaboration with infrastructure and education departments and agencies to ensure that decisions around core functions of the state do more to support industrialisation. 3. Developing market institutions to support new kinds of economic activity. This is particularly important for small producers by providing inputs, infrastructure, skills, finance, quality control and access to sales outlets. Small producers are often not served by existing public or private agencies, which are designed to assist larger enterprises. New institutions to supply these services to small producers may include private or non-profit support agencies, marketing co-ops or state marketing boards. 4. Trade measures, compliant with Member States’ international commitments to support infant industries, including tariff measures, rules of origin and standards, and customs control. These measures should also support localisation requirements in key sectors and products, both at a member state level as well as for regional producers. 5. Identifying and, when possible, modifying regulatory obstacles to new activities. 6. Industrial financing and incentives: national and multilateral development finance institutions have a central role in effective industrial strategies, together with measures to incentivise and facilitate increased private investment. To be effective, DFIs should support new industrial activities, which may initially provide lower initial rates of return and face higher risks than those that accrue from mining, import intensive retail sub-sectors and services sectors. Industrial financing should also be provided to sectors in distress arising from the local recession and negative cyclical market conditions. A Regional Toolbox The tools available for the SADC Secretariat and for Member States at a regional level are mainly, but not exclusively, in the arena of coordination and facilitation of processes, management and implementation of cross-border programmes; regional research such as regional value chains; and oversight of opportunities and challenges faced by the region. These include: 1. Coordination and facilitation of Member States on issues of common interest to further investment-led trade and industrialisation. 52 Costed Action Plan for SADC Industrialization Strategy and Roadmap 2. Identifying regional industrial opportunities and working with the relevant Member States to move them towards their initiation. 3. Financing and management of research into topics of mutual interest, such as key policy tools and instruments, key catalytic projects and regional value chains. 4. Coordination of agreed-on regional programmes, such as the IUMP (but not in the implementation of these programmes at a Member State level). 5. Maintaining a data repository of key reports, material and information on industrialisation for use by Member States. 6. Facilitating capacity building and information-sharing workshops and conferences. 7. Actively creating linkages between the industrialisation strategy and other relevant SADC strategies, and ensuring feedback loops. 8. Identifying bottlenecks and working with Member States to develop strategies to unblock them. 9. Co-ordinated engagement with the private sector on specific value chains. Key Messages a) The cross-border nature of regional and global value chains elevates the role of regional policy in fostering industrialization and deepening integration beyond national industrial policy. b) The challenge facing policymakers in the medium-term is building of consensus among Member States to determine which policy functions should be regionalized and to what extent. This is vital in the context of regional value chains whose growth will depend on cross-border co-operation and facilitation. c) Policy must be value-chain specific and formulated in close collaboration with industrialists and entrepreneurs. Policymakers must identify the stage or stages of the value chain where enterprises are most competitive. d) Effective public-private collaboration between the business community and the Centres of Excellence is crucial for advancement of industrialization. e) Industrial policies should ensure that specific value-chain policy does not create losers in other industries or sectors of the economy. Policy should maximize national gains rather than those of a specific sector, industry or firm. f) Industrial development must ensure climate proofing of value chains to ensure sustainability and that value chain development minimises environmental externalities including greenhouse gas emissions and liquid and solid waste. 53 Costed Action Plan for SADC Industrialization Strategy and Roadmap VII. FINANCING 7.1 Introduction Costing and financing estimates for the Action Plan are unavoidably fragile given the uncertainties and unknowns inherent in such an exercise, especially under current conditions of heightened uncertainty in the world economy. The Action Plan distinguishes between regional and national responsibilities and also between those to be undertaken by public agencies, including state-owned enterprises, and the private sector. 7.2 Demand for Financing While the demand for finance can be analysed in tandem with the costing exercise of public regional and national expenditures, private sector funding requirements can only be very crudely estimated at macro-level. Since 2000, fixed investment in SADC has averaged 21 percent of GDP which with GDP growth of 3.6 percent annually implies an incremental capital-output ratio averaging just under 6. (Table 7.1) Over the 15-year period to 2014, the bulk of this funding has come from the private sector whose share of total fixed investment for 11 of the 15 countries for which data is available was two- thirds. Table 7.1 Investment and Financing in SADC (2000-2014) COUNTRY Gross Fixed Private Foreign Gross GDP Incremental Investment Sector Direct Domestic Growth Capital- % of GDP Investment Investment Savings (% 2000- Output (% share) (% of Fixed of GDP) 2014 Ratio Investment) (% p.a.) (ICOR) Angola 28.5 n.a. 33.5 47.1 9.7 2.9 Botswana 27.9 64.2 12.7 34.9 4.7 5.9 DRC 12.2 66.6 38.4 8.7 5.6 2.2 Lesotho 29.7 61.8 14.9 n.a. 4.1 7.2 Madagascar 27.3 73.0 24.5 5.8 2.6 10.5 Malawi 21.0 53.0 16.4 5.1 4.4 4.8 Mauritius 23.0 73.0 11.3 15.8 3.7 6.2 Mozambique 21.0 n.a. 42.5 6.1 7.9 2.7 Namibia 26.5 73.0 27.1 12.9 4.9 5.3 Seychelles 28.0 n.a. 47.6 18.4 3.1 9.0 South Africa 19.6 69.0 9.4 19.4 3.1 6.3 Swaziland 12.6 58.0 23.0 5.7 2.4 5.5 Tanzania 29.7 70.7 14.4 17.4 6.7 4.4 Zambia 21.3 n.a. 23.0 n.a. 7.2 2.9 Zimbabwe 11.2 83.0 7.4 -7.2 -1.3 n.a. SADC 21.0 65.7 18.8 14.0 3.6 5.8 Sources; World Bank: World Development Indicators and UNCTAD: World Investment Report 2015 54 Costed Action Plan for SADC Industrialization Strategy and Roadmap If investment levels were to remain at those for the 14 years to 2014, while investment efficiency as measured by the capital-output ratio remains unchanged, SADC will fall well short of the Industrialization Strategy and Roadmap indicative goals. To approach the Roadmap targets, the region must both invest more – a minimum of 33 percent of GDP - and invest more efficiently to bring the amount of capital required to increase GDP by one percent to around 4 percent of GDP. If those two targets could be met, GDP growth would rise to around 8 percent annually, which with two percent annual population growth would result in per capita incomes growing by some 6 percent a year. While there are substantial country-to-country variations, the data in Table 7.1 which are no more than indicative, suggest that for the region as a whole, about two-thirds of fixed investment is undertaken by the private sector and one-third by the state. The bulk of state-funded investment is in physical infrastructure and social overhead capital (education, training, health, and housing). About one fifth of all investment – public and private – is funded from FDI, primarily in productive projects. In 2014, SADC GDP was estimated at $706 billion, which means that if fixed investment had reached 33 percent of GDP it would have totalled 233 billion (Table 7.2). In that year gross domestic savings in SADC reached $150 billion while net FDI contributed a further $3.3 billion leaving a funding gap of some $80 billion or 11.3 percent of GDP. Table 7.2: SADC: Financing Gap (2014) SADC (o/w) South Africa (o/w) Angola (o/w) Other 13 GDP ($ billions) 706 350 148 208 Investment $ billions 167 73.4 35.8 57.8 % of GDP 23.6 20.9 24.2 27.8 Gross Domestic 150.0 65 59 26 Savings % of GDP 21.2 18.6 40.0 12.5 Net FDI 3.3 -1.4 -8.6 13.3 % of GDP 0.48 -0.4 -5.8 6.4 Target: Investment 233 116 49 69 (33% of GDP) Financing Gap* 80 52.4 (3.2) 36.6 Of GDP 11.3 15.0 (2.2) 17.6 Current Account 43.0 19.1 3.7 20.2 Balance of Payments Deficit % of GDP 6.0 5.5 2.5 9.7 Sources: SADC: SADC Year Book (2014); World Bank: World Development Indicators (2016) * Financing gap = Target investment- (Gross Domestic Savings + Net FDI) The net FDI figure for 2014 is seriously distorted by the outflow of $8.6 billion (outward investment by Angola or disinvestment from that country). If Angola is excluded, the net 55 Costed Action Plan for SADC Industrialization Strategy and Roadmap inflow of FDI for the region rises to $12 billion or 1.7 percent of GDP which exceeds the Sub-Saharan average (1.3 percent) and is not far short of the median for Sub-Saharan Africa (2.4 percent). Net official development assistance inflows in 2014, estimated at $12.6 billion, further narrow the financing gap, though because no more than half of this – at the most - represents investment, the financing requirement remains formidable. On the basis of external debt data (excluding Namibia and Seychelles), the region has been borrowing (net) some $14.5 billion a year (2 percent of GDP) since 2010. This still leaves a large financing gap of 9 percent of GDP, comprising a balance-of-payments financing gap of 4 percent of GDP to which must be added a further 5 percent of GDP for the domestic shortfall of savings. Resource needs projections were made for the period 2015-2030 based on a number of plausible assumptions: (i) That the SADC region will continue to target a per capita growth rate of 6 percent annually. (ii) That resource use efficiency will gravitate towards median ICOR values (5.4). (Iii) That savings rates, population growth, and the FDI and ODA as ratios of GDP will remain at their historical averages. The projections reveal that investment will need to rise substantially to 41.3 percent of GDP as compared to 23.6 percent (2014), or to about double recent levels in response to the targeted high growth rate and the assumed improved capital efficiency. With savings rates and FDI and ODA net flows are maintained at their historical levels, the overall financing gap is accordingly projected to also rise to 19.2 percent of GDP compared to 11.3 percent in 2014 (see Tables 7.2 and 7.3). These projections have important policy implications for resource mobilization. Detailed policy reforms to achieve these goals, some already set out in Industrialization Strategy and Roadmap and accompanying consultancy report, are beyond the reach and scope of the Action Plan. 7.3 Key Messages To close these financing gaps, action will be needed across the policy spectrum: (i) Boosting domestic savings. Domestic savings rates would need to be significantly raised, thereby reducing reliance on volatile and fickle offshore financing. (ii) Fiscal consolidation. An IMF study (2015) suggests that four SADC countries – Angola, Madagascar, South Africa and Tanzania – have the potential to 56 Costed Action Plan for SADC Industrialization Strategy and Roadmap significantly increase tax revenues as a percentage of GDP, which could contribute to the financing of infrastructure investment.3 (iii) Doing Business. Given the central role of FDI in enhancing value chain participation, institutional and Doing Business reforms will be needed to improve the business and investment environment. Table 7.3: Projected Financing Gap for 2015-2030 in SADC Countries SADC Countries ICOR GDP Population Average* Average* Required FDI ODA Financing (Median) per growth rate Investment Savings Investment (% of (% of Gap capita rates rates (% of GDP) GDP) GDP) (% of Target GDP) Angola 5.4 6.0 3.4 28.5 47.1 50.7 6.0 1.8 -4.2 Botswana 5.4 6.0 1.6 27.9 34.9 41.3 4.6 1.4 0.4 Congo, Dem. 5.4 6.0 3.1 12.2 8.7 49.2 3.1 15.9 21.5 Rep. Lesotho 5.4 6.0 0.8 29.7 36.8 3.4 7.8 25.5 Madagascar 5.4 6.0 2.9 27.3 5.8 48.3 5.5 11.6 25.4 Malawi 5.4 6.0 2.8 21.0 5.1 47.4 2.6 20.4 19.3 Mauritius 5.4 6.0 0.6 23.0 15.8 35.4 2.3 0.7 16.7 Mozambique 5.4 6.0 2.9 21.0 6.1 47.8 5.5 20.9 15.3 Namibia 5.4 6.0 1.5 26.5 12.9 40.6 2.8 2.9 22.1 Seychelles 5.4 6.0 1.0 28.0 18.4 37.8 11.7 2.8 4.9 South Africa 5.4 6.0 1.5 19.6 19.4 40.7 1.9 0.3 19.1 Swaziland 5.4 6.0 1.2 12.6 5.7 38.8 2.6 1.8 28.7 Tanzania 5.4 6.0 2.9 29.7 17.4 48.1 3.8 11.2 15.7 Zambia 5.4 6.0 2.7 21.3 47.1 5.8 12.8 28.5 Zimbabwe 5.4 6.0 1.1 11.2 -7.2 38.4 0.8 6.0 SADC Countries (as a group) Mean 5.4 6.0 2.0 21.0 14.6 43.2 4.2 7.9 17.1 Median 5.4 6.0 1.6 23.0 12.9 41.3 3.4 6.0 19.2 Standard 2.4 0.0 1.0 6.5 14.0 5.3 2.6 7.2 10.2 deviation Source: Authors’ Computations based on data from World Bank: World Development Indicators and UNCTAD Reports: World Investment Reports. Notes: The ICOR is the median of historical values for the period 2000-2014. * Averages for the period 2000-2014. A negative sign (-) suggests a possible surplus. 3 IMF (2015): Sub-Saharan Africa, Regional Economic Outlook (October 2015) 57 Costed Action Plan for SADC Industrialization Strategy and Roadmap (iv) Specific measures to increase the flow of risk capital to SMEs, in particular, will be required. (v) Institutional reforms and initiatives, outlined in the Industrialization Strategy and Roadmap will be necessary to increase the flow of resources, including skills, to the infrastructure sector of the regional economy. (vi) Governments will need substantial funding for infrastructure development of all kinds, especially energy and soft infrastructure as well as funding for human capital development and access to technology. Almost certainly this will require greater private sector participation than in the past, with potentially far-reaching implications in respect of public-private projects and the commercialization or privatization of infrastructure industries. (vii) Medium-scale and large firms – both in the private and public sectors – will need large amounts of capital for output expansion, technology upgrading and the replacement of obsolete plant and equipment. They too will also need finance for ‘soft’ infrastructure: in-house training for skills development, product development and branding, market research and export and domestic market promotion. (viii) Special provisions will also have to be made for the financing of start-ups and SMEs through state and donor-supported SME programmes but also in the form of venture capital and private equity markets. The relative importance of these sources of demand for finance will vary according to the stage of a country’s development, its resource endowment, the health or otherwise of its balance-of-payments, its debt exposure and the sophistication of the private sector, including the degree of domestic financial sophistication and diversification. 7.4 Potential Sources of Finance SADC countries will need to match the financing demand with appropriate and robust financial systems and modalities to finance the Action Plan interventions. These resources could be sourced from both public and private sources as well as through joint Public-Private Partnerships (PPPs). 7.4.1 Public Sources Judiciously used, and administered, and equally matched by improved expenditure systems, taxation could make a major contribution to financing the Action Plan. In addition, sovereign wealth funds could be re-invested in tangible wealth (infrastructure, plant and machinery, etc.) or intangible wealth (education, health, skills, development research, and technology transfer). A fully resourced and operationalised SADC Development Fund will be an important source for long-term financing of the Action Plan, especially in the areas of industry, infrastructure and capacity building. In mobilising the huge resources, SADC countries 58 Costed Action Plan for SADC Industrialization Strategy and Roadmap could be guided by experiences elsewhere, for example European Regional Development Fund and the Mercosur Development Fund in Latin America. To this effect, the Action Plan lays out interventions to speed up the operationalisation of the SADC Development Fund. Actions are needed to address illicit financial flows and to reform the financial sector to ensure adequate resources for industrialization. The role of Development Finance Institutions (DFIs) is critical in this context. National and multilateral development finance institutions have a central role in effective industrial strategies, together with measures to incentivise and facilitate increased private investment. To be effective, DFIs should support new industrial activities, which may initially provide lower initial rates of return and face higher risks than those that accrue from mining, import intensive retail sub-sectors and services sectors. Industrial financing should also be provided to sectors in distress arising from the local recession and negative cyclical market conditions. 7.4.2 Private Sources Stock exchanges in the region could provide critical resources for financing industrial activities. In particular, private equity and venture capital funds (risk capital) can be used to develop new products and technologies, expand and strengthen company operations. 7.4.3 Public-Private-Partnerships Public-Private-Partnerships (PPPs) are effective financing mechanisms for both national and regional development activities, especially infrastructure projects. PPP policies and strategies should allow consideration of a full range of PPP options to ensure optimal investment and financing choices. 7.4.4 Foreign Direct Investments FDI flows, already significant for some SADC countries especially those endowed with tradable natural resources, should be judiciously attracted to finance industry, tourism and infrastructure. To this effect, the micro and macro-economic environment for development should be significantly enhanced across the SADC countries. 7.4.5 External Assistance External financial and technical assistance should be well targeted to achieve long-term development objectives notably in the areas of industry and infrastructure and skills development. In the light of the financing constraint implicit in Tables 7.1 to 7.3, the Action Plan seeks to prioritize those activities most crucial to the successful implementation of the 59 Costed Action Plan for SADC Industrialization Strategy and Roadmap strategy, given that funding will not be available to meet all desirable, but lesser priority, activities. 60 Costed Action Plan for SADC Industrialization Strategy and Roadmap VIII. GOVERNANCE AND INTERFACE INSTITUTIONS 8.1 Governance Bodies The implementation of the Industrialization Strategy and Roadmap hinges greatly on the effectiveness and seamless interface of its governance institutions. The linkages between national structures, the Secretariat, the private sector and the knowledge- support institutions will promote interdependence and generate further direct and indirect spill-over effects in support of industrialization in the region. This requires the establishment of a strong industrialization governance body which recognizes the critical roles of each component and defines their respective responsibilities and interface culture. To this effect, the industrialization governance structure could consist of three interdependent tiers, namely: (i) National structures: The national bodies should consist of, but not be limited to, line ministries, institutions and legislative organs. They should operate synergistically within a long term strategic transformation context. (ii) Overall coordination and oversight: National organs should be closely linked to a wider framework for guiding and monitoring the implementation of the Strategy. The structure should cascade from the SADC Summit down to Secretariat level. Figure 8.1 provides a framework for interconnections between the related institutions, bodies and actors. (iii) Secretariat level: The Strategy amply recognizes the importance of the role of a strengthen Secretariat to underpin the industrialization process in the region. This strengthening could be considered within the context of the establishment of an Industrial Development and Trade Directorate. Figure 8.1 indicates the necessary constituent units: Industrialization and Competitiveness, Value Chains, Industrial Project Preparation, Trade, SQAM and Science, Technology and Innovation. These bodies, working as a system, ensure policy coherence and Member States accountabilities to foster industrialization and development. 8.1.1 Private Sector Participation in Industrial Development Governance The SADC Industrialization Strategy and Roadmap amply recognizes the central role of the private sector as a wealth creator and facilitator of national and regional industrial development and transformation. It further underscores that a productive and systemic relationship be established between the public and private sectors and other stakeholders. To be effective, this relationship should be formalized in the decision- making process and policy formulation. Specifically, the Strategy calls for the establishment of a platform for public-private dialogue on industrial development and 61 Costed Action Plan for SADC Industrialization Strategy and Roadmap enable business leaders to participate in regional policy-making and capacity development and that incentives be created for business participation within the regional context, and that the sector should be supported with adequate space created for the participation of the business associations. To satisfy such requirements, the sector, as priority, should: (i) Help the State to remove obstacles to doing business. (ii) Observe industrial and ethical business codes and compliance with environmental principles, rules and regulations. (iii) Interact with governments and regional policy structures and represent the interests of the private sector, i.e. it should satisfy the legitimacy criteria for dialogue and interaction with the public sector and other stakeholders, including development partners. (iv) Remain sharply focused on building interest in the regional policy organs. (v) Strengthen links with the national and regional Centres of Excellence. (vi) Develop capacities commensurate with the trying challenges of industrialization in the Twenty-First Century. (vii) Establish a working relationship with the public sector, geared towards the joint fulfilment of national and regional industrial development goals and targets. To ensure that these singular and complementary roles should be formalized for delivery at the successively higher structures of industrialization governance, at both the national and regional levels, it is imperative that the status of the private sector be elevated to participation in the policy and decision making structures of the SADC region. It is within this context that the Action Plan envisages a constituent sub-structure to integrate the private sector in the governance structure of the SADC industrialization process. 8.1.2 Centres of Excellence and Industrialization Governance Centres of excellence play an important role in the creation of new knowledge, products, technologies and facilitation of advanced industrial thrust and content. The new knowledge could be transferred through advanced technical and vocational training, research and innovation and bringing together industry and academia. Acting as think-tanks and industrial incubators, their participation in the industrialization architecture will enhance the policy and dialogue on future opportunities and challenges for industrialization, particularly in the context of regional and global value chain progression and integration of the SMEs in the process. The Action Plan should aim at establishing and strengthening relevant Centres of Excellence and fashion a credible architecture for their interaction within themselves as 62 Costed Action Plan for SADC Industrialization Strategy and Roadmap well as with other bodies of the industrialization governance. A first building block in this respect is the mapping out of current areas of competences and capabilities at the regional level. 8.2 Governance Architecture To be effective, the governance architecture of the SADC Industrialization Strategy should embody a number of critical organizational and management attributes, most importantly the following: (1) Unifying doctrine (i) Strong unity of purpose focusing on the speedy attainment of the strategic goals of the Industrialization Strategy: This will build confidence in the process and its outcomes. (ii) Systemic coherence and synchronous design of structures and processes: This includes clear delineation of functions and responsibilities of the principal organs and players. Organizational set-ups must be efficient, effective, flexible, agile, innovative, responsive and closely aligned. The set-ups should clearly delineate vertical (structural) differentiation of the constituent organs, as well as their horizontal (process) interactions. The system should be functionally efficient, facilitate seamless coordination, and be amenable to continuous adaptation. (2) Functional clarity (i) Clarity of mandates, roles and division of authority and responsibility between the constituent organs and players. (ii) Clarity of rules of engagement of how the organs relate to each other. (iii) Clarity of modalities of interaction among the various organs, and dialogue and communication culture. (3) Organizational culture (i) Dialogue within and without the structure: The governance architecture should be cemented by adopting a positive dispensation for constructive engagement and dialogue between the players. The institutional architecture, postulated by Figure 8.1 below, shall consist of the following official and representational bodies: (1) Summit: It is the ultimate decision-maker on industrialization policies. Article 9 of the SADC Treaty established the overarching authority of the Summit of the Heads of State and Governments of SADC. The Summit may be convened at least biennially to discuss industrialization and economic integration matters. The Summit could meet twice in accordance with Article 10(5) of the Treaty. 63 Costed Action Plan for SADC Industrialization Strategy and Roadmap (2) The Ministerial Task Force on Regional Economic Integration will remain as is, with an enhanced focus on industrialization and economic integration issues, supported by Senior Officials. Other Ministries and institutions, such as the Central Bank Governors could be invited depending on the agenda. (3) The Industrial Development Forum will continue as a technical body supporting Senior Officials, with representation from Member States, private sector associations (or designated bodies), the regional technical and financial think tanks and other industry-related stakeholders. The Terms of Reference will be expanded to include: (a) Provision of technical inputs on strategic industrialization intervention areas. (b) Ensuring inclusiveness (by member, geography and sub-region) of actors and equity of their economic impact. (c) Facilitation of the harmonization of the rules and regulations affecting industrialization. (d) Creation of space for leveraging the direct and indirect contribution of the private sector and the Centres of Excellence to speed up the industrialization and regional integration processes. 8.3 Functions and Terms of Reference for the Industrial Development Forum (a) Member States shall: (i) Bring in collective political will and commitment of Members to enhance industrialization (ii) Establish a National Commission on Industrialization to be composed of the Government (i.e. relevant public sector departments), the private sector and other stakeholders to internalize the goals and objectives of the Strategy and facilitate coordination and monitor progress and identify gaps that could be addressed nationally and regionally. The Commission will act as a focal point for guidance on national and regional industrialization issues. (iii) Provide feedback to their Members on jointly discussed issues and outcomes. (iv) Member States should strengthen their capacities to play an effective industrialization role. (b) The Private Sector The private sector participating organs shall: (i) Satisfy the requisite designation from representatives. (ii) Satisfy the qualifications for participation (as outlined in Section 8.1.1) (iii) Show readiness for constructive dialogue on the alliance for industrialization rather than being burdened by mere protection of group interest. 64 Costed Action Plan for SADC Industrialization Strategy and Roadmap (iv) Share the private sector’s perspectives on long-term industrialization and how to address the challenges and seize on emerging opportunities. (v) Act as a vehicle to initiate/interrogate/interface efforts to create regional value chains and links with global value chains. (vi) Facilitate (technically/financially) the implementation of the Industrialization Strategy and build a constituency for it across the private sector bodies. (c) Centres of Excellence The participating Centres of Excellence are representatives of those with links to industrial development and related science, technology, socio-economic research and innovation. They should be seized by the needs of industrialization and competitiveness challenges of the Twenty-First Century and are capable of capturing and using frontier knowledge and fostering collaboration between industry and academia and act as magnets for excellent researchers and developers. Within the Forum they shall: (i) Help widen the impact of the Centres on private sector and innovation and enhance productivity. (ii) Adopt a mission geared towards fostering bilateral science and technology cooperation within SADC and with other regions, including the European Union and ASEAN countries around large scale research infrastructure. (iii) Leverage knowledge to speed up the industrialization process. 65 Costed Action Plan for SADC Industrialization Strategy and Roadmap Figure 8.1: A Coordination and Oversight Framework for Industrialization and Economic Integration in SADC Region 66 Costed Action Plan for SADC Industrialization Strategy and Roadmap (d) The SADC Secretariat The SADC Secretariat, established by Article 14 of the Treaty, should be appropriately strengthened and empowered. The Secretariat should have executive authority/mandate to take initiative and make decisions and implement programmes. This requires closer cooperation between Member States and also a much greater sharing of sovereignty in support of the Secretariat to strengthen the integration process and enhance the tempo of industrialization in the region. Empowering the Secretariat requires institutional innovation and realignment of its structures. The SADC Secretariat serves as a technical organ for fostering regional integration and industrialization and supports the other components of the industrialization governance structure. Strengthening and coordinating industrialization thrust would require the establishment of an Industrial Development and Trade Directorate within the SADC Secretariat. The Directorate shall: (i) Champion industrial development in SADC, including the monitoring of implementation of the Industrialization Strategy and Roadmap, the compilation and dissemination of analyses of industrial developments and other economic developments in SADC by way of regular bi-annual reports. To this end, it will be essential to strengthen the statistical capacity by ensuring that it has the appropriate skills and resources to develop Trade-in- Value-Added data that are essential for value chain development. See Box 8.1 below. (ii) Be mandated to prepare and publish working papers, research reports etc. that contribute to the information flow to Member States, to potential investors, donors, lending agencies etc. It should undertake the role of a regional think-tank. (iii) Work closely with the private sector to foster industrialization. The private sector should be included, not excluded, from the decision-making process, where project investment and value chain participation is concerned. The Southern African Business Forum (SABF) could establish a starting point. (iv) Develop a SADC-specific Ease of Doing Business framework. 67 Costed Action Plan for SADC Industrialization Strategy and Roadmap (v) Prepare and publish reports pinpointing the constraints and obstacles to industrial development that need to be tackled by Member States. The analyses would provide a basis for consensus building on deeper regional integration. (vi) Take lead in the promotion of regional Centres of Excellence for skills development. This in turn will require closer cross-border co-operation than at present. (vii) Have the capability and capacity to inform and coordinate the technical and institutional dimensions and interaction of the SADC industrialization governance structure. Box 8.1 The SADC Industrial Observatory The primary objective of the Observatory is to provide a single access point to high quality information, data and analysis on SADC’s industrialization perspectives, programmes and products, geared towards engendering a fast catching up. Its main targets are investors, policy makers, the private sector and its associations and business networks, researchers and industry-allied knowledge institutions and beyond the SADC region. The strategic focus should be on: (i) Provide on-line access and virtual interface on industry-specific information. (ii) Act as SADC’s tool for guiding and monitoring of the implementation of the Industrialization Strategy and publishing regular progress reports. (iii) Unlock the potential for the establishment of competitive and new industries and scaling up related investments and efforts. (iv) Support SMEs and industrial cluster formation and upgrading and sharing successful experiences elsewhere and dissemination of product and market intelligence. (v) Act as platform for forming strategic alliances for fostering industrialization. 8.4 Coordination Coordination is key to the implementation of the Action Plan, hence the need for proactive measures and programmes within the governance architecture, in the absence of which industrial development will not take off and the proposed targets may not be met. 68 Costed Action Plan for SADC Industrialization Strategy and Roadmap PART TWO: THE ACTION PLAN FRAMEWORK 1. Strategic Intent The Action Plan seeks to effectively implement and achieve the goals and objectives of the SADC Industrialization Strategy and Roadmap 2015-2063, with focus on the first fifteen years. The strategic development progression perceives of a long-term development continuum that seeks to move the SADC economies from their present largely factor-driven stage to the next stage driven by efficiency and ultimately to reach the high development stage, where present developed countries are, with economic and industrial sustainability a direct function of economic and business sophistication and innovation. The Industrial Strategy is to graduate the SADC economies, through these development pathways to ultimately converge with the end-results of the African Union Agenda 2063. 2. Modalities and Strategic Approaches The Action Plan establishes a coherent and synergistic implementation scheme that seeks to: (i) Outline the core strategic options and general policies towards the progressive attainment of the growth and development time-bound targets. (ii) Create an enabling environment for engendering and sustaining industrial development, as champion of transformation at the highest feasible level, with ultimate targets as desirable overall outcomes. (iii) Establish an enduring alliance for industrialization consisting of the public and private sectors (comprising of domestic, regional and international investors) and strategic partners. (iv) Widen societal ownership of the strategy through effective outreach and communication mechanisms. 3. Guiding Principles The development and implementation of the Action Plan is guided by the following seventeen principles: (i) A developmental state perspective is an essential context for advancing industrialization, while at the same time the critical role of the private sector must be recognized. (ii) Strong complementarity and interdependence of the three strategic pillars of the Industrial Strategy for fast transformation and catching up, namely: (a) Industrialization as champion of transformation; (b) competitiveness as a pointer 69 Costed Action Plan for SADC Industrialization Strategy and Roadmap of efficiency and maturity of economic setups; and (c) deeper regional integration as the wider context for collective industrialization, trade and development. (iii) The recognition that targeted outcomes will critically depend on the quality of the physical and human assets and the effectiveness of the policy and organizational instruments leveraged to create the desired enabling environment. (iv) Recognition of the different levels of development among SADC Member States and the need to ensure equity in the implementation of programmes. (v) Prioritization: The Action Plan will follow a set of priorities, embracing the three growth paths identified by the Strategy, namely: agro-processing, minerals beneficiation and manufacturing value chains (CVs) development. The Action Plan will also attach equally high priority to removing the three binding constraints identified by the Strategy – infrastructure, skills and finance. – The thrust of the two priority axes will be on their regional applications to ultimately achieve deeper regional integration. The interventions in these priority areas are expected to help further leverage national development efforts. This, naturally, is premised on far closer cooperation between Member States than has hitherto been experienced. (vi) A topic approach, rather than sector approach, will be followed, as it readily responds to the finite necessary interventions and measurement of performance. It is also amenable for suggesting specific ways of implementation of the Strategy and its components. A sector approach entails many overlaps and repetitions. (vii) Respect for and recognition of the interests of all stakeholders and regional development and trade commitments. (viii) While informed suggestions on future investments are strategically desirable, yet they are inadequate to rightly second-guess private initiatives, in particular as related to development of potential value chains. Upgrading and deepening of the operations of existing value chains however would benefit from deliberate extension of their operations increasingly in the direction of regional economic domain. (ix) The initiation and sustainability of regional value chains (RVCs) and their integration into global value chains (GVCs) – a strategic imperative – will depend on a number of parameters, notably: – The nature of value chain positioning – raw material, low-tech, high-tech etc; – The degree of value addition; – Sustainability in terms of upgrading potential; – Regional participation beyond current hub-and-spoke orientations; – Willingness of Member States to accept deeper regional integration so that such chains can prosper; and – Longer-term up-scaling from regional to global levels. In the earlier sections of the Action Plan, criteria have been developed to guide value chain identification. 70 Costed Action Plan for SADC Industrialization Strategy and Roadmap (x) Clear delineation of the requisite development responsibilities between the national and regional domains of action for fast catching up. (xi) The necessity of establishing a strong enabling environment for the private and public sectors. Business decisions, especially for regional value chain development and linking with global value chains critically depend on the quality of and, indeed, perceptions about the conduciveness of that environment. The key enablers would need to be put in place. (xii) Sequencing of interventions is governed by technical, geographical and the necessity of levelling the development field for national and regional industrial development factors that imply a high measure of objectivity and qualified discretion. The programmes that require immediate attention are those that: – Have cross-cutting impact across the economy but with special bearing on industrialization – Have the biggest potential to generate “multiplier effects” – Are pre-conditions for other interventions – Are by themselves new initiatives or geared towards impacting existing ones – Indicate commitment to collective industrialization (xiii) The imperative that costing of the Action Plan should pay due cognisance to the long-term nature of the interventions of the Strategy. (xiv) The recognition of member country heterogeneity – size, stage of development and technological and transformation readiness. There should be built-in adaptability/flexibility mechanisms to ensure that the industrial development process is fully inclusive and that programmes and projects may not start at the same time in all the countries. (xv) The vital importance of both a stable macroeconomic environment and strong microeconomic foundation for the development and growth of the private enterprises. (xvi) The necessity of establishing a coherent and effective industrial development governance structure to accelerate the implementation of the Strategy. (xvii) The viability of the Action Plan will primarily hinge on its coherence and technical and financial feasibility as well as on the individual and collective political will of Member States to its implementation and succeeding related sovereignty. 4. Assumptions (i) Availability of resources; (ii) Commitment of Member States; (iii) Capacitation of SADC Secretariat; (iv) Peace and political stability in the region; (v) Growth in SADC region per capita incomes of at least 6% yearly; (vi) (some) Mitigation of climate change risks; (vii) Gross fixed capital formation (GFCF) of $50 billion in industry in 2016 increasing annually at 6%. 71 Costed Action Plan for SADC Industrialization Strategy and Roadmap (viii) Increase in industry share of GFCF to 33% from 24%; 5. Risks (a) Risk sources (i) Secular stagnation –protracted global economic slowdown; (ii) Depressed commodity prices; (iii) Slower global trade growth; (iv) Increased global trade protectionism; (v) Reduced global flows of FDI and financial resources including non- humanitarian foreign aid; (vi) Accelerated climate change resulting in failure of agricultural productivity to improve; (vii) Shortening of GVCs reflecting heightened global political and economic risks; (viii) Technology shifts in favour of high-tech, capital/skills intensive operations; (ix) Deterioration in political risk profiles in the region. (x) Depletion of natural resources due to unstainable exploitation (b) Risk Management and Mitigation The feasibility of implementation of the Action Plan will be greatly assisted by establishing built-in risk tracking, mitigation and management mechanisms that optimally and speedily respond to the related internal and/or external sources. Those arising from domestic factors exhibit themselves mostly in the form of macroeconomic instability, institutional inefficiency and project or programme failure due to lack of capacity or poor design. The external factors are normally linked to international economic gyrations, technological evolutions, environmental (including climate change and disasters) factors and socio-political tensions. Naturally, these factors impact different countries differently. But in all probability they will affect raw material prices, ODA and FDI resource flows negatively. To mitigate the impact of both the internal and external sources of risk, a four-pronged strategy will be needed. (1) Strengthening the compact for industrialization consisting of the public and private sectors and other industry/development-related stakeholders. (2) Risk-mapping and management, with focus on: (i) Risk identification, probability of occurrence and possible impact. (ii) Regular risk-tracking and evaluation (iii) Risk readiness and stand-by risk mitigation measures. (iv) Risk management planning scenarios, informed by competent forecasts and analysis. 72 Costed Action Plan for SADC Industrialization Strategy and Roadmap (3) Strengthening planning and implementation skills, notably through: (i) Adequate supply of skilled human resources. (ii) High technical standards for project and programme preparation and implementation. (4) Putting in place competent institutions: (i) Capacitating the SADC Secretariat – to collect, disseminate and use data and information on industrialization issues; (ii) Regularly upscale coordination between the constituents of the SADC industrialization governance. 6. Financing assumptions (a) Costing and financing estimates for the Action Plan are unavoidably fragile given the uncertainties and unknowns inherent in such an exercise, especially under current conditions of heightened uncertainty in the world economy. The costing approach followed however, observes regional and international standards. It further makes a distinction between activity/programme based expenditure and capital costs. (b) The Action Plan distinguishes between regional and national responsibilities and also between those to be undertaken by public agencies, including state-owned enterprises, and the private sector. (c) For the region as a whole, two-thirds of fixed investment is undertaken by the private sector and one-third by the state. The bulk of investment is in physical infrastructure and social overhead capital (education, training, health, and housing), while approximately one fifth of all investment – public and private – is funded from FDI, primarily in productive projects. (d) Resource needs projections for the period 2015-2030 assume: (i) That the SADC region will continue to target a per capita growth rate of 6 percent annually. (ii) That resource use efficiency will gravitate towards median ICOR values (5.4). (iii) That savings rates, population growth, and the FDI and ODA as ratios of GDP will remain at their historical averages. The projections reveal that investment must rise substantially to 41.3 percent of GDP or to double recent levels in response to the targeted high growth rate and the assumed improved capital efficiency. Assuming savings rates, and FDI and ODA net flows are maintained at their historical levels, the overall financing gap is accordingly projected to rise to 19.2 percent of GDP by 2030 compared with 11.3 percent in 2014. 73 Costed Action Plan for SADC Industrialization Strategy and Roadmap 7. Cross-cutting issues Cross-cutting issues such as gender, financing, infrastructure, constituency-building for industrialization and environment (including blue and green economy, climate change and variability and waste management) are crucial elements for widening the scope and benefits of industrialization and regional integration. These are addressed either separately or within other areas of intervention and action. 8. Functional Responsibilities Actions identified in the Plan are clearly demarcated as national or regional, and in some cases, a distinction is made between public and private sector responsibilities. Value chain implementation for instance is not a regional responsibility, cross-cutting measures to facilitate their development are a function that SADC Secretariat should coordinate and where appropriate implement. 9. Communication and Outreach The communication strategy is geared towards educating, sensitizing and informing the industrialization stakeholders on the Industrialization Strategy thrust and initiatives. It is also intended to ensure systematic and continuous flow of information and feedbacks with a view to re-informing the Strategy and deepening its interventions. The proposed Industrial Statistics Unit and Observatory in the Industrial Development Directorate to be created will back up such efforts. 10. Monitoring, Evaluation and Risk Management Strong governance, monitoring, evaluation, and risk management mechanisms are central for smooth implementation and, indeed, insulation of the Action Plan from negative externalities. It also permits the exploitation of the ample opportunities and coping with increasing competitiveness challenges arising from changes in the international economy. Working with all development agents in strategic partnerships will not only help create more opportunities and skilled jobs, but also establish joint and enlightened accountability in industrial development to cope with and manage enterprises in the evolving fast-paced transformations in world trade and industry. The results-based framework, organizing all the related interfaces, would thus need to be responsive to these peculiarities. A main attribute of such framework should be its internal consistency and peculiarity of the actions and interventions. It should contain standards against which interventions and actual outcomes can be achieved and compared. 74 Costed Action Plan for SADC Industrialization Strategy and Roadmap Box A.1: Glossary Goals: Ultimate results (Long-term Objectives) Outcome: Shows way ahead. Outcomes can be considered mid-term results. Output: Results achieved immediately after implementation. Key Indicators: Indicators should be clear, relevant, economic, adequate and monitorable. Indicators are the quantitative and qualitative variables that provide a simple and reliable means to measure achievement, reflect the changes connected to an intervention, or to help assess the performance of (an operation) against the stated objective. Indicators measure progress with respect to: - Inputs; - Activities; - Outputs; - Outcomes, and - Goals Indicators answer two fundamental questions: (i) How will we know success or achievement when we see it, and (ii) Are we moving towards achieving our desired outcomes? Number of Indicators: The minimum number that nswer the question: Has the outcome been achieved? A minimum that directly measures the outcome desired. Target: A specified objective that indicates the number and timing etc., of what is to be realised. Targets are interim stages on the way to the long-term outcome. Evaluation and Monitoring: Assessment (quantitative and qualitative) of progress towards achieving goals and outputs, and progress towards attainment of the goal objectives. 75 Costed Action Plan for SADC Industrialization Strategy and Roadmap SADC INDUSTRIALIZATION AND ROADMAP 2015-2063 ACTION PLAN FRAMEWORK I. Overall Goal The overall goal of the SADC Industrialization Strategy and Roadmap (2015-2063) is to engender the structural transformation and fast catch-up of the economy of the region. It is anchored on three pillars: industrialization as champion of economic transformation; competitiveness as an instrument of efficiency and new source of competitive wealth creation; and deepened regional integration. It endeavours to converge SADC economies into the high development level of present day developed countries as well as with the African Union Agenda 2063. Output Key Timeframe Responsibilities Indicative Costs (USD) Expected Main Targeted Output Performance Sub-activities Results/Outcomes Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member Indicators (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II. Industrialization Strategy Pillars II.1 Industrialization Industrialization is the main instrument for transformation and catching up for the SADC region. As a cumulative long-term process, industrialization implies major transformation in the structure of the economy, its productivity and efficiency, diversification (horizontal and vertical), competitiveness and intensive interdependence to maximise manufacturing value addition and catalyze the creation of regional value chains as well as its integration into the global value chains. The dynamism of this process will critically depend on deepening regional integration, building requisite knowledge-based capabilities, sinking the necessary quality investments (both domestic and foreign) and creating the enabling environment for public and private participation and inclusiveness. Strong institutional setups and policy interventions will further advance industrialization as a champion of transformation and avoid de-industrialization. 76 Costed Action Plan for SADC Industrialization Strategy and Roadmap II.1.1: To attain accelerated sustainable industrial development by increasing share of Manufacturing Value Added (MVA) in GDP to 20% by 2020 and 30% by 20304 Output Key Indicative Costs Timeframe Responsibilities Performance (USD) Results/Outcomes Targeted Output Main Activities Sub-activities Indicators (KPIs) Phase 1 Phase 2 SADC Member Private SADC Member (2016-2020) (2021-2030) Secretariat States Sector Secretariat States Stabilised and Macroeconomic No. of Member Strengthen Conduct peer review 2016- 2021- Facilitate Participate in Nil regionally environment States peer implementation of performance of 2020 2030 peer review peer review converged stabilised and reviewed of SADC Member States meetings meetings macroeconomic regionally macroeconomic against environment converged through convergence Macroeconomic within a improved programme Convergence developmental consultation targets, including state between fiscal and how these support monetary industrialization authorities and industrial-policy Member States National ministries Consolidate Develop Provide 59,000 authorities to develop to draft plans national national input for (Targets: inflation tightly focused plans/ plans to developme range: 3-7%; fiscal plans to ensure reports ensure nt of deficit: 3% of GDP; alignment alignment national public debt: not between At regional level, Present between plans for exceeding 60% of industrial policy sharing of best- consolidated industrial policy GDP; and GDP and practice National policy and alignment Plans to growth: of at least macroeconomic macroecono Obtain input from Council of 7%) policies at mic policies private sector Ministers national level stakeholders to support industrialisati on 4 Industrial Strategy target 77 Costed Action Plan for SADC Industrialization Strategy and Roadmap Hold a workshop with technical experts on opportunities for aligning policies across government and fostering industrial development 78 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Performance Main (USD) Targeted Outputs Sub-activities Results/Outcomes Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.1.1: (continued) Improved policy Protocol on Existence of the Develop Protocol Develop Concept 2017 Develop Review and 100,000 environment for Industry Protocol on on Industry Note on Protocol Concept Note approve industrial developed and Industry on Industry Concept development implemented by Note 2020 No. of Member Develop the 2017- Develop Provide input Provide States Protocol on 2018 Protocol on and input and implementing Industry Industry participate in participate the Protocol development in of the developme Protocol nt of the Protocol Approval of the 2018 Facilitate Ratify the Protocol on ratification of Protocol on Industry the Protocol Industry Implement 2018- 2021- Monitor Adopt and Protocol on 2020 2030 implementatio implement Industry n of Protocol Protocol on on Industry Industry National Aligned Review and align Capacity building 2018 Provide Review and 1,090,460 Industrialization national national to Member States capacity align Policies and policies industrialization on SADC building and national Strategies strategies and Industrialization support to industrializa- aligned with the No. of Member policies with the Strategy, including Member tion policies Regional States SADC aligning national States on with the Industrialization implementing Industrialization industrial policies SADC SADC Strategy and aligned Strategy and strategies Industrializatio Industrializati implemented by policies with and support n Strategy on Strategy 2020 global best practices 79 Costed Action Plan for SADC Industrialization Strategy and Roadmap Agreements with Proposals with Preserve policy Develop proposals 2017 Provide Prepare Provide 250,000 third parties are implementation space in for aligning support for proposals inputs to aligned to plan approved negotiations with agreements with development consultatio Regional by Ministers by third parties third parties, etc of proposals n policies/instrume 2017 especially as they with policies/ and Submit nts to support relate to infant instruments to implement- proposals to industrialization industries, support ation plan MTF government industrialization, through procurement, e.g. infant industry, Monitor relevant resources procurement, etc implement- structures beneficiation and ation of the industrial policy MTF to consider plan Preserve policy space proposals in negotiations Monitor with third implementation parties 80 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Performance Main (USD) Targeted Outputs Sub-activities Results/Outcomes Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.1.1 (continued) Increased Share of gross % share of Implement Design Regional 2017 Coordinate Design Actively 1,000,000 volume and domestic gross SADC Regional Investment Policy design of national participate efficiency of investments to domestic Action Framework with a investment investment in design of public and GDP increased investments to Programme on view to meet the policy policy to investment private sector to 30% by 2020; GDP Investment policy needs of framework facilitate policy investments in 35% (MEC), (RAPI) with a priority sectors/value increased framework the SADC 41.3% (ICOR) by view to chains investments economy 2030 supporting in SADC industrialization Ensure that 2016- 2021- Coordinate Promote and Invest in activities Investment Promotion 2020 2030 investment facilitate the Agencies support in the investment manufact industrialization manufactur in the uring/ efforts, especially in ing/ manufacturi productive priority sectors/value productive ng/ sector chains sectors productive sector Undertake capacity building for Investment Promotion Agencies in support of industrializa- tion efforts Establish a SADC Establish Support Participat Investment Forum to SADC SADC e in attract investment in Investment Investment SADC the region Forum Forum Investme nt Forum 81 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Performance Main (USD) Targeted Outputs Sub-activities Results/Outcomes Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.1.2: Enhancing competitiveness through industrial policy Enhanced National No. of Develop and Member States to 2017- 2021- Update Develop and/or Participate 6,436,740 competitiveness Industrial Member implement develop and 2020 2030 SADC IUMP implement in through the use Upgrading and States with national IUMPs implement their national IUMPs developme Coordinate of selected Modernisation national national IUMPs nt and implementati industrial policy Programmes IUMPs implement on of SADC instruments (IUMPs) ation of IUMP developed by IUMPs 2018, and implemented by 2020 Competitiveness Number of Develop and Develop national 2018 Develop Provide support Participate 500,000 of Member initiatives in implement strategies to regional to other in States improved each Member programmes and improve programme Member States developme State that policy competitiveness, to improve that do not have nt of targets instruments for with a focus on competitiven such capacity regional improved improving strengthening key ess of and competitivene competitiveness institutional Member national ss interventions and States by strategies initiatives strengthenin g institutions and initiatives Member States to 2021- Coordinate Implement the Participate implement the 2030 regional programmes in programmes and programme and instruments programme policy instruments implementati for improving implement for improving on competitiveness ation competitiveness 82 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Performance Main (USD) Targeted Outputs Sub-activities Results/Outcomes Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.1.3: Increase participation in global value chains Increased Regional/global No. of specific Develop and Undertake 6 2020 Undertake Participate in Participate 14,800,000 participation in value chain and area value implement value profiling studies on the profiling and in the value chains for value addition chain chains and value assessments with regional identification of profiling regional value strategies for strategies addition a view to value chain potential RVCs and addition each of the 6 developed strategies for identifying potential profiling and identificatio areas (agro- and each priority priority value mapping n of processing, implemented value chain chains in the areas potential minerals identified and indicated by the RVCs beneficiation, Value/volume selected Industrialization pharmaceuticals, of value Strategy consumer goods, added  agro-processing capital goods, products and  minerals services services beneficiation clusters)  pharmaceuticals developed and  consumer goods implemented by  capital goods 2020  services 83 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Performance Main (USD) Targeted Outputs Sub-activities Results/Outcomes Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.1.3: Increase participation in global value chains (continued) Conduct a 10 20 VC Undertake Provide Participate in detailed value implement implement the mapping input, strategy chain mapping able VC able and develop consider, development and build the strategies strategies the adopt and needed by 2020 by 2030 implementab implement implementation le strategies the regional alliance for value chain specific strategies products/services in the priority areas and develop strategy with relevant implementing stakeholders for at least four regional value chains in each of the 6 priority areas for a specific product / service, staggered over years 2018-2020 84 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Private SADC Member Member States (KPIs) (2016-2020) (2021-2030) Secretariat Sector Secretariat States II.1.3: Increase participation in global value chains (continued) Implement at least 10 RVC 20 Coordinate Establish Exploit value 30 regional value by 2020 the conducive chain chain strategies in implement environment opportunities the priority areas for ation of the Invest in Invest in specific regional support targeted/ products/services value chain infrastructure selected strategies for value chain value chains participation Develop Collaborate bankable with regional value Government chain projects and CoEs on Facilitate value chain financing of development projects, incl. and feasibility technologi- studies and cal support start-ups 85 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Private SADC Member Member States (KPIs) (2016-2020) (2021-2030) Secretariat Sector Secretariat States II.1.4: Agro-processing, Minerals Beneficiation and Downstream Processing and Value-Chain Development Agro-processing: Improved Active Identification Member States to 2020 Coordinate Implement the Actively 2,000,000 the development productivity and implementation and targeting of implement implementati RAIP participate in of a vibrant competitiveness by Member key agri value recommendations on of RAIP implementati agricultural of the entire States of chains for from the RAIP on of the sector that will agricultural recommendatio analysis and Identify specific RAIP and stimulate value chain, ns emanating support under agro-processing invest in domestic and and increased from SADC the Regional activities (with agro- regional levels of private Regional Agricultural emphasis on rural processing production of sector Agricultural Investment Plan linkages) and activities essential inputs, investment Policy (RAP) (RAIP) that develop bankable and improved implements the project proposals to investment in RAP ensure successful productive agro- implementation industry value Facilitate rural chains industrial clusters Promote productivity in agro-processing Establish mechanisms for sharing technical, marketing, financial information and best practices to enhance productivity and competitiveness in agriculture value chains 86 Costed Action Plan for SADC Industrialization Strategy and Roadmap Put in place, well- resourced, country level, Supplier Development Programmes that channels donor and Corporate Social Investment (CSI) funding Higher level of Higher levels of Active Develop and Organize meeting 2017 Develop the Adopt the Provide 650,000 minerals beneficiation implementatio implement the for approval and SADC SADC mineral input for plan beneficiation and and n of the SADC SADC Mineral adoption of the Mineral beneficiation and downstream industrialisation “Mineral Beneficiation SADC mineral Beneficiation plan by implement processing and an Linkages and Plan beneficiation plan, Plan Ministers the plan improved Beneficiation with emphasis on responsible for system for the Plan” regional capital Mining and management of goods Industry resources and Regional manufacturing the rents that Mining Vision accrue in place Develop Regional 2017 Lead the Participate in Actively Mining Vision development development participate in and approval and approval Regional Consideration of 2018 of Regional process of the Mining Regional Mining Mining initiative/ Vision Vision by the Vision strategy development Ministers (RMV) by responsible for Ministers Mining and Mineral responsible Development for Mining and Mineral Developmen t 87 Costed Action Plan for SADC Industrialization Strategy and Roadmap Stronger Increased use Relevant Develop strategy 2017 Facilitate Approve the Actively 100,000 regional value of regional Member States and costed process strategy and participate in chain for capital capital goods to establish implementation implementa- implementa- goods in with higher structure to plan for regional tion plan tion of mining, with value-add for all develop manufacturing of strategy roles defined participating strategy and capital goods in Implement the for small and countries and costed mining strategy medium increased implementation producers participation by plan small and medium producers Increased Stronger Increased local Develop and Develop 2017 Develop Implement Implement 1,100,000 regional regional value formulation and implement implementation Action Plan plan for the strategy manufacturing of chain for regional trade in Action Plan for plan aligned with for regional regional generic pharmaceuticals pharmaceutical SADC existing regional manufacturi manufacturing medicines and in line with s with stronger Regional and continental ng of of medicines health SADC R&D and Manufacturing initiatives, for medicines and health commodities for pharmaceuticals technical base of Medicines approval by and health commodities communicable strategy and Health Member States commodities and non- Commodities communicable for Participating diseases taking Communicable Member States in place in SADC and Non- each value chain to Communicable develop and Diseases, to implement joint implement the strategy and costed SADC implementation Pharmaceutical plan Business Plan and the Strategy for Regional Manufacturing of Generic Medicines and Health 88 Costed Action Plan for SADC Industrialization Strategy and Roadmap Products for Communicable Diseases 89 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Performance Main (USD) Targeted Outputs Sub-activities Results/Outcomes Indicators (KPIs) Tasks/Activities Phase 1 Phase 2 Member Private SADC Member SADC Secretariat (2016 - 2020) (2021 - 2030) States Sector Secretariat States II.1.5: SADC Raw Material Initiative as a path to "Factory SADC" Increased SADC raw The SADC Raw Develop the Assess 2017 Undertake the Provide input Provide 1,500,000 production and material Material SADC Raw availability of raw assessment of in relevant use of SADC initiative/strategy Initiative/Strategy Material materials for raw material development information raw materials as developed and Initiative agro-processing, availability of for of SADC on required feedstock for implemented by No. of Member mineral agro-processing, initiative/ inputs downstream 2020 States beneficiation and mineral strategy on processing in cooperating on other beneficiation access to raw agro-industries access to raw manufacturing and other material and and other materials activities manufacturing mineral manufacturing availability and activities beneficiation industries use for beneficiation and Develop SADC 2018 Develop SADC Participate in Participate value addition initiative/strategy initiative/strate development in on access to raw gy and approval developme material for process nt of the industrialization Strategy Implement SADC 2019- 2021- Coordinate Implement Participate initiative/strategy 2020 2030 implementation the SADC in on access to raw of initiative/ initiative/strat implement material for strategy egy ation of the industrialization Strategy Evaluate impact 2020 2025; Facilitate Actively Actively (economic, 2030 evaluation participate in participate social, process evaluation in environmental) of evaluation the SADC Raw Material Initiative periodically 90 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Secretariat Member States Private SADC Member (KPIs) (2016-2020) (2021-2030) Sector Secretariat States II.1.6: To diversify industrial production and exports through sinking substantial investments in advanced technologies and emphasis on intermediates production and exports Increased share Measures in Measures to Analyse relevant Undertake Dec Undertake the Committee of Support 386,000 of diversified place to promote procurement study and 2017 study and Senior Officials development production and ensure regional processes and develop develop to review draft of strategy exports preference to procurement by extent of imports strategy for strategy and strategy and and regional Member States, from outside the diversification implementation implementation implementati products over mining region, and on into medium plan for plan on plan imports companies, that basis high-tech diversification construction develop costed, production and Council of Manufacturing firms and retail tested measures implementation Ministers to component of chains based to increase local plan approve draft total exports on research and regional strategy and increased to into current procurement implementation 60% by 2025 procurement plan processes and Build regional Develop and 2017- 2021- Develop Establish Provide 2,100,000 production capacity for implement 2020 2030 regional public input to the opportunities competitiveness strategy for strategy and research strategy in medium-and- building regional implementation institutions and % of medium- high tech capacity for plan for focusing on implementa and-high tech manufacturing competitiveness enhancing high-tech tion plan products in in medium- and competitiveness production; developme exports high-tech in medium- and and nt Promote high- manufacturing high-tech technology Share of high- tech clusters and exports manufacturing transfer Implement tech capital in and exports offices/ the plan new regional increase investments technology medium transfer offices and high – tech production and exports 91 Costed Action Plan for SADC Industrialization Strategy and Roadmap Establish private research institutions focusing on high-tech issues Sink Facilitate Invest in Invest in substantial incentive medium and high-tech capital scheme to high – tech based investment in support high- based production high-tech tech production and and export based production exports Organize 2017 - 2021 - Organize Establish a dissemination 2020 2025 dissemination tripartite activities activities arrangement to targeting link academia, business private sector community and and policymakers to Government sensitize on the need and tools for gaining competitive advantage in production and exports Diversified and Volume/value Ensure that Remove 2018- 2021- Coordinate Implement Provide 100,000 restructured of trade in national and barriers to 2020 2030 implementation policies of information industrial base intermediates regional policy trade in of diversification industrial on barriers and export regimes support support of and export diversification to trade portfolios Volume/value diversification diversification promotion and export attained by of domestic and export policy promotion in 2020 value addition promotion close within regional cooperation and global with the private value chains sector 92 Costed Action Plan for SADC Industrialization Strategy and Roadmap New No. of new Member States Develop a 2018 Coordinate the Convene task Actively productive industrial to establish central register process for teams, and participate investments projects that fit task teams (bid-book) of developing the capture country- and identified the region’s drawn from projects on central register level project contribute to comparative public and country-by- data project and competitive private sectors country basis proposals advantage to identify new opportunities Member States that fit the to coordinate profile of the task teams from country and the private and region public sectors Consolidate register (bid book) of potential projects 93 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Performance Main (USD) Targeted Outputs Sub-activities Results/Outcomes Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.1.7: Enhance contribution of SMEs to Industrial Development Capacities and SMEs Consolidated Member States Based on 2017 Consolidate Provide input Provide input 2,500,000 capabilities of contribution to national submit national national inputs from for national SMEs enhanced Manufacturing measures and measures and measures, Member proposals to participate in GDP increased proposals proposals for identify areas States industrialization to 30% by 2030 approved by regional for regional and value chains Council of collaboration collaboration to Survival rate of Ministers support SMEs SMEs in SADC improved No. of Develop 2018 Develop Provide input Provide input significantly by local/regional Regional SME Regional for for programme 2030 SMEs Development SME programme development capacitated Programme developme development nt % rate of programme survival and Submit growth of Programme SMEs to Council Implement the 2019- 2021- Coordinate Implement Implement % share of Programme 2020 2030 programme programme programme SMEs in implementa industrial tion output 94 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Private SADC Member Member States (KPIs) (2016 - 2020) (2021 - 2030) Secretariat Sector Secretariat States II.1.7: Enhance contribution of SMEs to Industrial Development (continued) Self-sustaining Well- No. of Develop a Identify and map 2017 Undertake Provide input, Provide 2,000,000 national and developed industrial framework for out actual and the studies consider and information regional national and clusters encouraging potential, type to identify approve the and participate industrial clusters regional operational and supporting and location of potential reports in identification and SME sectors industrial/ industrial regional regional and mapping developed and technological No. of SMEs clusters to industrial clusters of regional operating in the clusters in operating in facilitate SMEs clusters industrial region place in industrial/ development, clusters SADC technological covering: Develop Master 2018- 2021-2030 Develop Implement the Provide input clusters  Entrepreneurs Plans for 2020 industrial establishment for A well- preparation establishment of clusters of industrial development developed No. of RVCs and regional Master clusters in and participate SME sector and GVCs empowerment industrial Plan collaboration in clusters capable of supplied by  Business clusters, with private supplying SADC SMEs counselling including sector and high quality and technological Centres of intermediate technology upgrading Excellence input and tie-up programmes through strong components  Business partnerships to enterprises linkages Domesticate the in national, amongst Master Plan and regional and SMEs and establish global value large regional clusters chains companies to facilitate developed by  Incubation access to 2025  Post information, incubation preferential and growth procurement, programmes financing and assistance in accessing 95 Costed Action Plan for SADC Industrialization Strategy and Roadmap modern technology 96 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.1.8: Develop and expand industrial clusters Strengthened Master Plan Master Plan Develop Establish a 2017 Coordinate Government and Lead 2,500,000 interface on clusters on cluster institutional Regional Working the private sector Regional between firms, and value and value infrastructure for Group on activities of establish joint Working clusters and chains chain linkages development of the working group on Group on value chains developed between firms regional clusters Working the development development and and clusters at and interface with Group of industrial of industrial implemented regional and RVCs and GVCs clusters clusters by 2018 global levels Develop business 2018 - 2021 - Develop Government and Participate in 2,500,000 linkage 2020 2030 linkage private sector to development programmes for programmes collaborate on and entrepreneurship development of implementati development and institutional on of outreach programme to business promote firm, linkage cluster and value programmes chain linkages 97 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.1.9: Closer public-private cooperation in industrial development A developed Regional public- The Strategy Develop and Develop regional 2018- 2021- Develop Provide input Lead 3,300,000 Private Sector in private sector document implement strategy for the 2020 2030 regional for developme SADC for partnership and Regional development of strategy for development nt of the improved public- collaboration No. of Private Sector the Private the of the regional strategy for private dialogue, fully developed functioning Strategy Sector developme strategy for developme collaboration and and national and in line with nt of the the nt of the partnership on implemented by regional Savuti Private development Private industrial 2020 business fora Declaration Sector of the Private Sector development Sector Implement Implement the the strategy strategy Strengthen the Support Participate in Lead PPD Public-Private establishme the PPD Dialogue (PPD) nt of the to entrench PPD platform for in industrial PPD development and ensure it is inclusive Monitor and 2020 2025; Monitor Evaluate Evaluate evaluate 2030 effectiveness PPD PPD effectiveness of of PPD the PPD 98 Costed Action Plan for SADC Industrialization Strategy and Roadmap Indicative Costs Output Key Timeframe Responsibilities Expected Targeted Main (USD) Performance Sub-activities Results/Outcomes Outputs Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member Indicators (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.1.10: Ensuring greater environmental sustainability (green and blue economy) Environmental Green No. of Member Implement the Monitor 2017- 2021- Facilitate Consider, Participate 2,500,000 standards, SDGs Economy and States with SADC Green progress to 2020 2030 implementation adopt and in Green and Paris Accord Climate Green Economy and meeting of Green implement Economy 2015/16 Change Economy and Climate Change climate Economy and the Climate programm mainstreamed Strategies Climate Strategies and change Climate Change Change and es into industrial implemented Change Action in line commitments Strategies Green development in by 2020 Strategies with and Green Economy line with the internationally Economy Develop M&E Strategies Protocol on Level of agreed requirements framework for and Action Environment for gas/carbon commitments Green Economy Plans in line Sustainable emissions and Climate with Development Change internationall No. of y agreed industries commitment utilizing s cleaner Align Progressiv Progressiv Develop Comply Comply production production e e incentive with Paris with Paris technologies technologies implement implement schemes for Declaration Declaration and ation ation sustainable 2015 and 2015 and No. of consumption industrial resolutions resolutions industries patterns to production of the of the producing promote Future we Future we cleaner environmental Monitor Want”, Want”, technologies sustainability compliance Agenda Agenda and maximize with Paris 2063 and 2063 and Level of resource use Declaration Agenda Agenda energy efficiency 2015, “the 2030 2030 efficiency in Future we production Want”, Agenda 2063 and Agenda 2030 99 Costed Action Plan for SADC Industrialization Strategy and Roadmap % of renewables energy to total energy usage Compliance with Paris Declaration 2015, the Future we Want, Agenda 2063 and Agenda 2030 100 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.1.10: Ensuring greater environmental sustainability (green and blue economy) (continued) Improved Blue (Ocean) Blue Economy Develop and Develop Blue 2020 Develop Blue Consider Provide 650,000 exploitation of Economy Strategy implement the (Ocean) Economy and relevant input industrial (including Blue Economy Economy Strategy approve for strategy opportunities inland water Strategy on Strategy and a Strategy and Blue development associated with bodies) Sustainable Strategy on Strategy on Develop Economy Natural Strategy and Utilization of Sustainable Sustainable Strategy on Strategy Resources and Strategy on highly Utilization of Utilization of Sustainable the Blue (Ocean) Sustainable endangered highly natural and Utilization of Consider Economy Utilization of species of high endangered ocean highly and highly commercial species of high resources of endangered approve the endangered value commercial high species of high Strategy on species of value to commercial commercial Sustainable high % contribution sustainably value value Utilization commercial of Blue exploit industrial Implement the 2021- Coordinate of highly Participate and 1,000,000 value Economy and opportunities Blue (Ocean) 2030 implementation endangered invest in developed other high (e.g. fisheries, Economy of Strategy species of implementation and commercial aquaculture, Strategy high of Blue implemented value plant shipping and Implement the commercial Economy by 2020 and animal transport, Strategy value strategy species to tourism, marine Undertake GDP of energy, Implement capacity participating pharmaceutical the building for Member and cosmetics, Strategy Landlocked States blue carbon Countries on market benefiting from opportunities, the Blue etc) Economy 101 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.1.10: Ensuring greater environmental sustainability (green and blue economy) (continued) Regional Number of Facilitate Mainstream 2017- 2021- Coordinate Mainstream Participate in Guidelines for extractive domestication of Provisions of 2021 2030 mainstreaming Provisions of all relevant Mainstreaming industries Regional the Regional of the the Regional programmes Biodiversity and mainstreaming Guidelines for Guidelines for provisions of Guidelines in Ecosystem provisions of Mainstreaming Mainstreaming the Guidelines operations of Services in the Guidelines Biodiversity and Biodiversity and in operations of extractive Extractive in their Ecosystem Ecosystem extractive industries at Industry operations Services in Services in industries the national domesticated Extractive Extractive level Industry Industry Manage Provision of % waste Implement the Promote waste 2017- 2021- Coordinate Implement Comply with Nil Environmental the SADC reduction Waste reduction 2021 2030 implementation the Waste Waste Impacts of Regional Management during of the Waste Management Managemen Industrialization Waste % of waste Programme production Management Programme t (*) Management reuse and (2013) in Programme Regulations Promote Programme recycled particular Waste reuse related to focusing on Develop M&E through industrial % contribution waste framework to resource use waste to the energy Reduction, monitor improvements implemented consumption of Reuse and implementation Promote waste the Industry Recycling at recycling and source waste to energy recovery * A programme for Waste Management was approved and related costs will be determined. 102 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Responsibilities Indicative Costs Timeframe Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II. Industrialization Strategy Pillars II.2 Competitiveness Long-term economic prosperity underscores the importance of building and sustaining highly competitive economies. This entails strengthening of both the macroeconomic and microeconomic environments. A healthy macroeconomic competitiveness setting helps optimize the microeconomic capability and sophistication of domestic production and service structures and enhance overall productivity. II.2.1. Creation of a business-friendly and conducive environment for competitiveness Improved micro- Rankings on Global Undertake the Assess 2018 - 2021 - Assess Create Provide 5,000,000 economic Global Competitivenes necessary performance of 2020 2030 performance enabling feedback on environment for Competitivene s Index (GCI) policy reforms Member States environment key aspects firms and ss and Ease of rankings to create a against GCI and for ease of of GCI and enterprises Doing business Ease-of-Doing doing Ease of Business Ease-of-Doing enabling Business indicators business Doing (World Bank) Business environment Business indices index rankings Develop Monitor and Implement Implement significantly performance evaluate recommendati recommenda improved by indicators progress ons tions 2030 Enhance Enhance Participate in institutional public/private enhancing capacity for institutional public/private improving capacity institutional performance capacity Establish forums for peer learning, information and knowledge sharing 103 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Performance (USD) Expected Targeted Main Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Private SADC Member (KPIs) (2021 - Member States Secretariat States (2016 - 2020) Secretariat Sector 2030) II.2.1. Creation of a business-friendly and conducive environment for competitiveness (continued) - Improved skills Share of % of skilled Develop and Map-out 2017 Coordinate Provide input, Participate in 10,600,000 relevant for skilled personnel in implement regional assessment of consider and programmes industry personnel in industrial relevant skills industry–related skills needs approve industrial workforce programmes for skills needs programme workforce industry Develop 2018- 2021- Develop the Increase Provide increased by programmes to 2020 2030 programmes access to information 50% by 2030 address the training on industry needs of facilities in skills industry entrepreneurs requirements hip Built industrial No. of Implement the 2017 - 2021 - Coordinate Implement Provide skills capacity industrial skills skills 2020 2030 programme skills information in specialised produced in programmes implementatio development on industrial and priority priority sectors n programmes skills sectors for industry requirements Quality of and invest in industrial skills skills in priority development sectors Develop 2017- 2021- Establish and Establish, Participate in guidelines for 2020 2030 maintain support and industry- industry- regional promote academia academia platform for industry- linkages linkages industry- academia activities academia linkages linkages Monitor Monitor Monitor effectiveness effectiveness effectiveness of industry- of industry- of industry- academia academia academia linkages linkages linkages 104 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.2.2: Upscaling Efficiency enhancers Improved labour Regional Level of Establish the Facilitate 2018 - 2021 - Facilitate Participate in, Comply with Nil productivity and Productivity productivity RPO to implementation 2020 2030 establishment and support productivity labour market Organisation implement the of the Charter of the RPO the targets set efficiency (*) (RPO) Range and Charter on by Regional implementation by the RPO established quality of Productivity Productivity Monitor of the RPO and data Organization productivity Charter operational (RPO) indicators by 2020 Regional Develop and Establish and 2019 - 2021- Facilitate and Establish Provide Database implement maintain 2020 2030 coordinate the LMISs input for on education regional regional labour development developing and labour database on database of national Input national LMISs developed education and LMIS and data on the and labour Establish and regional labour regional labour implemented strengthen database database by 2020 national labour market Monitor skills information gaps in systems industry (LMISs) * No additional programme resources anticipated 105 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.2.2: Upscaling Efficiency enhancers (continued) Education Long-term No. and type Undertake Develop and 2018 Undertake the Coordination Provide data 1,000,000 system and plans of skills skills audit to submit draft skills audit by Trade and and continuous implemented forecasted identify key skills audit Industry participate in training that ensure shortfalls in report and ministries with development programmes are each Member No of skills general implementation Education of strategy more responsive State development education from plan for ministries to development to need of education plans the standpoint approval address of the training industry system is of industrial industrial skills programmes restructured Level of employers shortfalls Organize Organize to meet the skills deficit Undertake SADC skills for periodic SADC needs of Develop industry skills for skills industrialisati programme to development conference industry on by 2019 address at firm and with national conference industry skills education enterprise shortfalls, ministries taking into Establish / 2019 - Facilitate and Establish Provide account likely strengthen 2020 coordinate the EMISs input on the sectoral national and development developmen developments, regional of national and t of with costed education regional education implementation management EMISs curricula in plans information support of systems industrialisat (EMISs) ion 106 Costed Action Plan for SADC Industrialization Strategy and Roadmap Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.2.3: Improving Regional Standards, Quality Assurance, Accreditation and Metrology (SQAM) Industrialization Regional No. of Improve quality Strengthen 2018- 2021- Facilitate Lead and Utilise 2,500,000 supported by SQAM and functional infrastructure SQAM and SPS 2020 2030 development fund services of strengthened SPS Quality services that infrastructure to and/or strengthenin SQAM and Regional SQAM infrastructure Infrastructure support attain adoption of g of SQAM SPS and SPS strengthened institutions industrialization international standards and and SPS programmes infrastructure by 2020 internationally and enhance recognition any other programmes to enhance (especially recognised competitiveness requirements to facilitate international standards, quality Focus on the important for conformance competitiven assurance, implementation competitivene of ess accreditation, and resourcing ss of the enterprises metrology and of the regional region to technical SQAM and SPS international regulations) to programmes to standards enhance ensure competitiveness of Standards, Monitor Comply with the region Quality compliance standards Assurance, and with Metrology standards institutions are strengthened 107 Costed Action Plan for SADC Industrialization Strategy and Roadmap Indicative Costs Output Key Timeframe Responsibilities Expected Targeted Main (USD) Performance Sub-activities Results/Outcomes Outputs Tasks/Activities Indicators (KPIs) Phase 1 Phase 2 SADC Member Private SADC Member (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.2.4: Establish and Invest in Innovation and Technology Transfer Programmes in support of Industrialization Centres of Regional No. of Centres of Identify existing Assess existing 2018 Identify/ Participate in Participate 4,900,000 Excellence industrial Excellence and CoEs and CoSs CoEs and CoSs propose and support in (CoEs) and Centres of Centres of Strengthen Identify initial 5 2019- 2021- strengtheni identification identification Centres of Excellence Specialization existing CoEs and CoEs/CoSs and 2020 2030 ng/ / propose /propose Specialization (CoEs) and identified/ CoSs to serve the raise funding to establishme strengtheni strengtheni (CoSs) for Centres of strengthened/ region capacitate them nt of ng/ ng/ selected priority Specialization established CoEs/CoSs establishme establishme Establish new Provide 2021- sectors (e.g. (CoSs) for nt of nt of CoEs/CoSs, resources for 2030 engineering, ICT, priority sectors CoEs/CoSs CoEs/CoSs leveraging on establishing pharmaceuticals) identified and/or comparative targeted identified/ strengthened by advantage CoEs/CoSs strengthened/ 2030 established Enhanced Government Percentage Promote Facilitate 1% by 2% by Monitor level Invest in Invest in 1,810,000 innovation and investment in increase of GDP investment in partnership 2020 2030 of R&D and R&D and business R&D increased invested in R&D R&D and between investments Innovation Innovation sophistication to to 2% of GDP Innovation academia, in R&D and programmes activities advance research Innovation technological institutions and readiness industry Commercializa No. of innovative Establish/strength Develop a 2018- Develop Develop Invest in tion of products and en national and programme for 2019 R&D and R&D and R& D and innovative services regional promoting R&D, Innovation Innovation Innovation products and innovation innovation and programmes and programmes services in systems commercializati commercializain support of SADC on by SMEs tion support industrializat Implement 2021- programmes ion innovation and 2030 for SMEs commercialization programme 108 Costed Action Plan for SADC Industrialization Strategy and Roadmap Develop and 2018- 2021- Develop the Develop and Invest in implement 2020 2030 framework implement technology technology and support national transfer transfer programmes technology programmes framework and transfer in support of programmes in policy industrializat support of instruments ion industrialization and programmes Promote digital Develop and Develop Implement Participate technology implement a programme programme in programme for for for programme promoting and promoting promoting on capacitating and and Information SMEs on capacitating capacitating Technology Information SMEs on SMEs on and Technology and Information Information Operational Operational Technology Technology Technology Technology and and Operational Operational Technology Technology 109 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.2.5: Infrastructure in support of industrialization Accelerated Fast-tracking of Improved Implement Identify priority 2018- Identify Identify and Participate in 1,000,000 industrialization Programme for multi-modal RIDMP and development 2020 opportunities highlight key development promoted by Infrastructure transport PIDA priority corridors and facilitate potential of project addressing the Development in systems development (transport and synergies projects proposals key infrastructural Africa (PIDA) (road, rail, projects minerals) and between constraints and Regional water, air), anchor industry and (Energy, Infrastructure access to industrialization infrastructure Transport, ICT Development and projects along the programmes Water and Master Plan affordability corridors Meteorology)* (RIDMP) and of Undertake Provide Participate in Participate in ensuring infrastructure capacity building capacity capacity capacity alignment to services for project building for building for building for the needs of formulation on project project project key infrastructure formulation on formulation formulation industrialisation infrastructure on on plans infrastructure infrastructur e Accelerate Implement PIDA 2021-2030 Coordinate Implement Provide To be implementation and RIDMP to implementatio RIDMP information determined of RIDMP and support n of PIDA and on impact based on PIDA with industrialization RIDMP of project particular focus implementa proposals on tion of industrialization RIDMP * Implementation of RIDMP and other facilities, including PIDA, are being handled under other initiatives 110 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Responsibilities Indicative Costs Timeframe Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Private Sector Secretariat States II.2.5: Infrastructure in support of industrialization (continued) Infrastructure Major Value of Develop and Develop Strategy 2018 Develop the Consider, Provide 1,500,000 development infrastructure local/regional implement for leveraging Strategy adopt and input for leveraged to projects content as a Strategy for regional implement strategy catalyse leveraged to proportion of SMEs to infrastructure the strategy development industrialization catalyse total cost effectively development to for industrialization used in participate in catalyse leveraging infrastructure the industrial regional projects implementation development, infrastructure of major utilizing development No. of infrastructure preferential local/regional projects procurement SMEs framework to capacitated to ensure increased participate in local content infrastructure projects No of SMEs involved in infrastructure projects 111 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main Sub-activities (USD) Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.2.6: Access to finance for Industrialization Established Measures Signed Sign Agreement Urgently 2016- 2021- Procure the Sign and ratify Participate 1,110,000 regional financing implemented to Agreement for and avail operationalize 2020 2030 services of a the RDF in utilization mechanism for improve operationaliz- contributions for the RDF in Fund of the RDF sustainable industrial ation of the the Fund support of Management Operationalize industrial financing in the RDF regional Team RDF Phase 1 Contribute development region Implement Phase industrializatio 2017- and Phase 2 to the RDF Phase 1 and 1 and n and 2020 Operationaliz Regional Phase 2 of subsequently infrastructure e the Contribute to Development RDF Phase 2 of RDF, Governance the Fund Fund (RDF) operational with strong Prioritise Structure operationalised emphasis on support for to support Ratified financing local and industrialization Agreement infrastructure and regional by 2018 industrialization manufacturing in the operationalizat ion of the RDF Ratify the Agreement Identify other 2017 Facilitate alternative workshop of financing options key public and private financiers to discuss industrial finance, and to make recommendati ons to improve 112 Costed Action Plan for SADC Industrialization Strategy and Roadmap outcomes Strengthened Financial and Developed Develop and Map readiness 2017 Undertake a Governments Private 250,000 financial and capital regulatory implement a of SADC capital and to facilitate sector to capital markets to markets framework regional financial and financial the study indicate support financing regulatory programme for capital markets markets scale and industrialisation frameworks strengthening to support readiness nature of and facilitate harmonized to national and industrialisation study to financial value chain enable regional inform how resources participation convergence financial and the markets needed of norms and capital markets will support mechanisms industrializatio of SADC stock n exchanges developed by 2020 Capital market Level of Develop a 2020 Coordinate Provide Provide operations capital comprehensive development input, input and deepened market legal and of a consider, participate in through liquidity regulatory regulatory adopt and strengthenin measures on framework to framework for implement g the increasing support the financial and the financial and liquidity, operations of capital regulatory capital dispute financial and markets framework markets settlement capital markets for financial procedures, and capital etc. markets Inter- IT density in Establish IT 2021 Coordinate Participate in Actively connectivity capital platform for establishment establishment participate in infrastructure market investors and of the of platform activities of developed (IT) operations lenders platform the platform interaction 113 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States II.2.6: Access to finance for Industrialization (continued) Strategy to The Strategy Develop and Develop a 2019 - Develop a Provide Provide 703,000 mobilise Document implement a Strategy to 2020 Strategy to input, input for domestic Strategy to mobilise domestic mobilise consider, Strategy financial mobilise domestic financial resources domestic adopt and developme resources for financial for industrialization financial implement nt industrializatio resources for resources the n developed industrialization Implement the for Strategy and Strategy industrializa- implemented tion by 2018 114 Costed Action Plan for SADC Industrialization Strategy and Roadmap Indicative Costs Output Key Timeframe Responsibilities Expected Targeted Main (USD) Performance Sub-activities Results/Outcomes Outputs Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Membe Indicators (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat r States II.2.6: Access to finance for Industrialization (continued) Enhanced Strategy for Strategy Develop and Conduct an 2017 Undertake Provide Provide 1,100,000 access to financial document on implement assessment of assessment information information for finance by SMEs inclusion and Financial strategy for level of financing of level of for the the SMEs access Inclusion and financial inclusion requirements for financing assessment assessment to finance SMEs Access to and SMEs access SMEs requirement developed, Finance to finance for SMEs implemented Develop Strategy 2016 Develop the Provide Provide input by 2020 for financial Strategy input during for the inclusion and assessment assessment SMEs access to study study finance Develop 2017 Develop Consider Provide input implementation implementati and approve for the plan plan on plan the plan Implement the 2017- 2021- Coordinate Implement Provide Strategy 2020 2030 implementati the Strategy feedback on on of Strategy Strategy implementatio n Share of % of private Improve access to Undertake 2018 2021-2025 Monitor Initiate Provide private sector credit to total finance by financial sector progress financial information credit credit strengthening reform to facilitate sector for financial increased to domestic savings domestic savings reform sector reform 40% by 2025 % of domestic mobilization and and improve savings to GDP improving the investment climate Domestic investment savings climate for private increased to sector investment, 35% of GDP including FDI by 2025 115 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member SADC Member Private Sector (KPIs) (2016-2020) (2021-2030) Secretariat States Secretariat States II. Industrialization Strategy Pillars II.3 Regional Integration: Regional integration widens the economic space for development and creates incentives for industry to agglomerate. It provides opportunities for economies of scale, encourages clustering and promotes economic interlinkages. Deeper economic integration will, in addition, create numerous positive externalities. Among the important priorities in the SADC region is the frontloading of industrialization in regional integration. This includes the frontloading of regional integration efforts with a refocusing and prioritizing of activities that an accelerate industrialization in priority sectors and value chains. II.3.1: Implementation of SADC protocols in the Regional Economic Integration Priority Areas relevant for industrialization Compliance with Status of Regional In accordance with Member 2017 Assess Provide data Provide 750,000 SADC Protocols regional progress RISDP, develop States submit compliance and information on regional integration is reports on regional progress their reports in with MRE submissions and economic thoroughly compliance with reports on the basis time with systems in a timely technical integration is assessed and SADC of Member States’ protocol manner, input for advanced through gaps affecting Protocols on report/submissions, monitoring, engage in validation a staggered and industrialization relevant for highlighting gaps reporting and cross- process sequenced identified and regional and discussing their evaluation validation in approach that addressed economic implications for (MRE) cycles SADC prioritizes areas integration regional and engage in structures required for highlight gaps industrialization cross- regional affecting validation industrialization regional through SADC industrialization structures Protocol Undertake Protocol Monitor monitoring compliance compliance reports monitoring with the protocols 116 Costed Action Plan for SADC Industrialization Strategy and Roadmap Secretariat assesses the data and prepares regional progress report, focussing on industrialization theme Non-Tariff NTBs Proportion of Member States use NTB 2020 Provide Strengthen Report 500,000 Barriers (NTBs) impacting reported NTBs existing mechanism capacity structures NTBs, are removed in a priority value resolved mechanisms to and building, for using the timely fashion to chains address NTBs corresponding sensitization eliminating NTB support development within their national and NTBs and mechanism development of expeditiously jurisdiction, structures mediation/re NTMs and and other regional trade and resolved as prioritizing those (such as solution using them means develop an they arise that most affect National support to to react to effective system regional Monitoring Member complaints to facilitate industrialization, i.e. Committees States removal of NTBs those most (are further that hinder affecting priority strengthened industrial sectors, industries, in accordance development at value chains and with RISDP regional level transport corridors and Member States use them to expeditiously address new NTB complaints 117 Costed Action Plan for SADC Industrialization Strategy and Roadmap Map NTBs Facilitate Engage in affecting mapping national and priority value exercises bilateral chains on the processes to basis of value resolve chain studies, identified as well as NTBs along priority corridors, and remove those identified as main obstacles 118 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main Sub-activities (USD) Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.3.2: Deepened Regional Integration to facilitate industrialization Rules of Origin Rules of origin Proportion of Engage in Identify inputs 2017- 2021- Conduct Participate in Provide 1,100,000 (RoO) support are reviewed intra-SADC comprehensive whose 2020 2030 assessment negotiation on inputs to industrialization and reformed to trade not review of SADC movements are and Rules of assessme support cross- subject to Rules of Origin constrained by coordinate Origin nts border Rules of foreseen by existing RoO negotiations movement of Origin RISDP by on Rules of inputs in priority focusing on Conduct review Origin industries/along products in of RoO priority value priority chains industries/along priority value chains that have been identified as being negatively affected by existing RoO 119 Costed Action Plan for SADC Industrialization Strategy and Roadmap Indicative Costs Output Key Timeframe Responsibilities Expected Targeted Main (USD) Performance Sub-activities Results/Outcomes Outputs Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member Indicators (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.3.3: Promote Trade Liberalisation and Services Market Integration Regional trade in Liberalized No. of Member SADC Protocol on Ratify and 2017- Facilitate Ratify and Lobby 1,130,000 services trade in States that have Trade in Services is domesticate 2018 ratification domesticate govern facilitates targeted ratified and ratified and Protocol on and the Protocol ments to industrialization services sectors domesticated the domesticated by Trade in domesticatio ratify to support Protocol on Trade Member States, Services n process and industrialization in Services with priority given to domesti sectors that affect cate the regional Protocol industrialization Member States 2017- Assist in Implement Highlight implement the 2030 identifying and sensitize needs protocol with relevant private and priority given to areas sector opprtuniti commitments es and and areas that make use affect of them industrialization 120 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Timeframe Indicative Costs Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.3.4: Enhance factor mobility Industry and Regulations Ease of Facilitate the Align 2020 Facilitate Implement Provide 521,000 labour benefit from facilitate movement and movement of immigration implementation Protocol on information enhanced mobility movement of employment of skills and laws across of Protocol on Movement of on ease of of skills, business skills and SADC business people the region to Movement of Persons and movement people and right of business nationals and grant right facilitate Persons and other of employ- establishment people and within the to establish movement of other measures measures on ment of across the region establishment region businesses skills and on skills, skills, SADC of enterprises within the SADC business accreditation accreditation nationals region for SADC people etc etc and lobby persons especially for governmen entrepreneurs ts to and investors implement Protocol Adopt an agreement to increase opportunities for mutual recognition of qualifications Develop sector specific immigration facilitation, such as secondment visas in priority sectors 121 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.3.5: Enhanced institutional and legal framework for Intellectual Property Rights Intellectual Supportive Regional IPRs Facilitate Develop Regional 2017- Develop Develop Develop 500,000 property rights Regional Framework development and IPR Framework 2020 draft and and support attraction Framework on and national implementation of and Model regional IPR implement implement of investment as Intellectual IPR Laws Regional IPR Legislation Framework national IPR well as research Property Framework and and Model IPR systems and development Rights (IPRs) Guideline Law policies and technology developed and and transfer, implemented programme especially in by 2020 s priority industries Implement IPR 2018 2021- Coordinate Monitor support 2030 and monitor and programmes in implementati evaluate support of on of IPR national industrial programmes IPR development programme s and systems Develop and 2021- Develop and Provide Provide implement 2030 maintain information information regional database regional IPR for for for IPR database database database 122 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.3.6: Enhanced cooperation on Competition Policy to support Industrialization Increased Regional Regional Develop and Review the 2018 Review Provide Provide 900,000 competition in industrializatio Competition implement regional Regional SADC input, and input for SADC market n supportive Policy in place competition policy Cooperation Regional approve review of leads to greater Competition to foster regional Framework on Cooperation Regional competition diversification Policy industrialization competition laws Framework Cooperatio laws and developed and and policies on n policies implemented competition Framework by 2020 laws and on policies competition laws and policies Develop a 2020 Develop Provide Provide Regional Regional input and input for Competition Competition approve developme Policy Policy Regional nt of Competiti Regional on Policy Competitio n Policy Implement the 2021- Monitor Consider Provide Regional 2030 implementati and input for Competition on of approve setting up Policy through the Competition the of regulatory Policy strengtheni regulatory infrastructure at ng of the authority national level regulatory infrastructu re at national level Implement Implement Participate the Regional the in Competition Regional implement 123 Costed Action Plan for SADC Industrialization Strategy and Roadmap Policy Competitio ation of the n Policy policy 124 Costed Action Plan for SADC Industrialization Strategy and Roadmap Indicative Costs Output Key Timeframe Responsibilities (USD) Expected Targeted Performance Main Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021 - 2030) Secretariat States Sector Secretariat States II.3.7: Improved Trade, Transport and Transit Facilitation Measures to support Industrialization Improved Aligned hard Performance Improve hard Develop a plan 2017- Assess trading Participate in Provide 17,122,000 logistics to and soft trade on logistics and soft for sequenced 2020 costs for priority assessment information support growth infrastructure performance infrastructure at and coordinated sectors/product of impact of on key and improvements index priority corridors implementation of s along trading costs bottlenecks, competitiveness to reduce trade with an soft and hard corridors on priority priorities and of priority costs and Performance emphasis on trade value chains opportunities sectors facilitate on customs/ priority sectors’ infrastructure Develop the along the for creating production in border needs implementation to prioritization corridors synergies priority sectors efficiency support priority and sequencing and mutually sectors of hard and soft Implement reinforcing Simplified Trade Time-release trade the effects. Regime within study for Implement the infrastructure measures SADC imports/ regional trade, measures on Participate implemented by exports transport and the basis of in 2020 transit facilitation priority implementati programmes assessments on, including Identify through infrastructure Coordinate soft investments needs that will and hard result in quick infrastructure and tangible activities, improvements for especially along priority sectors the priority and implement in corridors coordination with soft infrastructure improvements 125 Costed Action Plan for SADC Industrialization Strategy and Roadmap Establish 2018- 2021- Facilitate Establish Participate corridor-wide 2020 2030 establishment corridor-wide in management of corridor-wide management establishme institutions management institutions nt of institutions corridor- wide managemen t institutions 126 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.3.8: Integrate SADC with other regional markets to support industrialization preferences Integration of Tripartite FTA Tripartite Complete the Complete the 2017 Facilitate Engage in Provide 150,000 SADC region with Agreement FTA negotiations on TFTA, including negotiations the information other regional signed and Agreement built-in agenda; the Industrial and negotiations for the markets ratified by Ratify TFTA and implementatio as a region negotiation 2017 Agreement Infrastructure n of the TFTA s Development and the Pillars Industrial and Infrastructure Development Pillars Industrializatio No. of Implement Complete 2018 Collaborate Implement Participate n and projects Industrialization negotiations on with other Programmes in Tripartite Infrastructure implemented and Infrastructure Regional on programme Development Infrastructure Development Economic Industrializati s Pillars Development Pillar Communities on and Programmes Pillars to mobilize Infrastructure implemented Programmes and Development Mobilize 2017 2021- implement Pillars resources for 2030 programmes implementation on Industrial of Tripartite and programmes Infrastructure Development Pillars 127 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main Sub-activities (USD) Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States II.3.9: Complete CFTA negotiations Increased CFTA Percentage Negotiate CFTA Participate 2017 Participate in Participate Provide 1,000,000 volume/value of negotiations increase agreement, with actively in CFTA CFTA actively in input for the intra-African trade completed by intra-African particular negotiations negotiations CFTA negotiations resulting from 2017 trade and emphasis on the negotiations diversification and investments industrial pillar broader and negotiations geographical relevant for participation in creating policy value chains space to accelerate industrialization 128 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD) Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member SADC Member Private Sector (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Secretariat States III. Cross-cutting Issues There are a number of industrialization-related enabling requirements that cut across economic and social sectors, notably participation of women, youth and persons with disabilities, financing and ownership, macroeconomic environment, environmental sustainability and communication, that help maximize the benefits from industrialization and identification with the Strategy. III.1: Increase women participation in the industrialization process Increased Empowerment Programme Develop and Develop 2017 Develop the Contribute to Provide input 703,000 participation of of women for implement programme for Women’s development for women in mainstreamed empowering SADC Women's empowering Economic of programme industrial in the women in Economic women Empowerment Programmes development development industrialization industrializatio Empowerment including Programme process by n Programme by instruments 2020 Women 2018 Develop women Develop the Entrepreneurs entrepreneurshi Women hip p programme, Entrepreneur- programmes focusing on ship self- Programme employment No. of women Implement the 2019- 2021- Coordinate Implement Actively actively Programme 2020 2030 programme programmes participate participating in enhancing implementation at national programme national and participation of level implementatio regional value women in n chains (at value chains ownership, and SMMEs management and employee levels) 129 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main Sub-activities (USD) Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member SADC Member Private Sector (KPIs) (2016-2020) (2021-2030) Secretariat States Secretariat States III.2: Increase youth participation in the industrialization process Increased youth Empowerment Programme Develop and Develop 2017 Develop the Contribute Provide input 1,200,000 participation in of youth for implement programme for Youth to for programme industrial activities mainstreamed empowering SADC Youth empowering youth Economic developme development in the youth in Economic including Empower- nt of industrializatio industrializatio Empowerment instruments ment Programme n process by n Programme by Programme 2020 2018 Youth Develop youth 2019- Develop the Contribute Contribute to Entrepreneurs entrepreneurship 2020 Youth to youth hip programme, with a Entrepreneur developme entrepreneurshi programmes focus on self- ship nt of p programme employment/ Programme Programme development small business start-ups No. of youth Implement the 2021- Coordinate Implement Actively actively Programme, 2030 programme programme participate participating facilitating entry implementati at national programme in national and participation of on level implementation and regional youth in value value chains chains and SMEs (at ownership, management and employee levels) 130 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main Sub-activities (USD) Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States III.3: Increase participation of persons with disabilities in the industrialization process Increased Empowerment Programme for Develop and Develop 2017 Develop the Contribute to Provide 452,000 participation of of persons empowering implement programme for Empower- development input for persons with with disabilities persons with SADC Persons empowering ment of programme disabilities in mainstreamed disabilities in with disabilities persons with Programme Programme development industrial activities in the industrialization Economic disabilities industrializatio Empowerment including n process by Programme by instruments 2020 2018 Entrepreneur- Develop Develop the ship entrepreneurship Entrepre- programmes programmes, neurship targeting with a focus on Programme persons with self-employment/ disabilities, small business among others start-ups No. of persons Implement the 2019- 2021-2030 Coordinate Implement Actively with disabilities Programme, to 2020 programme programme participate actively enable implement- at national programme participating in participation of ation level implementati national and persons with on regional value disabilities in chains (at value chains and ownership, SMEs management and employee levels) 131 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main Sub-activities (USD) Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016-2020) (2021-2030) Secretariat States Sector Secretariat States III.4: Advocacy and Communication Strategy for Industrialization Effective Advocacy and Communication Develop Develop 2017 Develop Participate in Participate in 500,000 communication in communication Strategy communication communication communicatio strategy strategy support of strategy document strategy strategy n strategy development development industrialization developed and document implemented Media and Organize research regional/national citations of the fora for strategy Industrializatio development n Strategy Establish Form lead 2018- 2021- Promote Actively Actively Platforms for platform for advocates 2020 2030 establishment participate participate in dialogue on dialogue on groups to of the groups in platforms platforms Industrializatio industrialization champion Monitor Support Participate n Strategy involving industrialization effectiveness establishmen and provide legislatures, in the region t of advocacy resources policy makers, groups experts, academics, researchers, civil society, media operators, partner institutions and private sector 132 Costed Action Plan for SADC Industrialization Strategy and Roadmap IV. Institutional Arrangements Support institutions are necessary organs for advancing the process and content of industrialization. Most importantly, this relates to establishing and/or strengthening governance structures and Centres of Excellence/Centres of Specialization that facilitate the generation of ideas, products and management processes and leverage them to promote industrialization. Indicative Costs Output Key Timeframe Responsibilities (USD) Expected Targeted Performance Main Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States IV.1: Governance institutions for industrialization Effective Governance Existence of a Develop consensus Organize 2017 Coordinate Participate in Participate Cost to be governance structure governance on constituent dialogue consensus- and in the determined mechanism for instituted by mechanism for organs, levels and between main building contribute to dialogue after the implementation of 2017 industrialization functions of stakeholders meetings consensus structure the Industrialization governance building has been Strategy in place structure (Member meetings for approved States, Private developing by Council Sector, Centres of governance Excellence, SADC mechanism Secretariat) SADC Industrial Establish an Define 2018 Establish Provide Provide Secretariat is Development Industrial functions, scope Industrial resources information capacitated to and Trade Development and of work, and Developme and support on the deliver on the Directorate Trade Directorate activities of the nt and for functions of implementation operational to coordinate Industrial Trade operations of the of the implementation of Development Directorate the Directorate industrialization the Industrialization and Trade Directorate strategy by Strategy Directorate 2018 133 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Performance (USD) Expected Targeted Main Indicators Sub-activities Phase Results/Outcomes Outputs (KPIs) Tasks/Activities 1 Phase 2 SADC Member Private SADC Member (2016 - (2021 - 2030) Secretariat States Sector Secretariat States 2020) IV.1: Governance institutions for industrialization (continued) Widened Industrial Reconfigure the Reconfigure the 2017- 2021- Coordinate Participate in Participate in industrialization Development IDF IDF 2020 2030 activities of activities of activities of governance Forum IDF IDF IDF structure to reconfigured Expand the include Terms of Government Reference of officials, private IDF sector, academia, think tanks. 134 Costed Action Plan for SADC Industrialization Strategy and Roadmap Output Key Indicative Costs Timeframe Responsibilities Expected Targeted Performance Main (USD Sub-activities Results/Outcomes Outputs Indicators Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States IV.1: Governance institutions for industrialization (continued) A well- A functioning Mobilize adequate Provide 2017 Facilitate Provide resourced Industrial financial and financial, provision of adequate Industrial Development human resources to technical and financial financial and Development and Trade capacitate and human and human human and Trade Directorate facilitate the resource resource resources for Directorate operations of an requirements requiremen the Industrial established and Industrial for the ts of the Development operational by Development and Industrial Directorate and Trade 2018 Trade Directorate Development Directorate and Trade Directorate Note: Costs associated with the establishment and operationalization of the Directorate involve staff costs, equipment, database and observatory and backing up the governance structure for industrialization 135 Costed Action Plan for SADC Industrialization Strategy and Roadmap V. Monitoring and Evaluation: The implementation of the Strategy should be regularly monitored and reported on at national and regional levels within the context of the three pillars and timeframes. Strategic interventions and alignments may be required during the course of implementation to ensure that targets are met. A well-resourced Industrial Development Directorate within the Secretariat and a strong Statistics Unit will be essential for effective monitoring and evaluation. Indicative Costs Output Key Timeframe Responsibilities Targeted Main (USD) Expected Performance Sub-activities Outputs Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member Results/Outcomes Indicators (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States V.1: Close monitoring of the Action Plan implementation Effective Effective Existence of an Develop and Develop an 2017 Develop Contribute to Provide 5,000,000 Monitoring and Monitoring effective M&E install an effective M&E framework M&E system M&E system information Evaluation and system for M&E system which has development for the M&E (M&E) system in Evaluation monitoring and (covering both regular and system place (M&E) plan evaluating process reporting operationaliz development developed progress and monitoring and Organize intervals ation Participate and achievements output monitoring) workshop to in implemented for assessing and consider and workshop by 2017 Regular and evaluating approve M&E to approve timely reporting progress system M&E system Install electronic 2018 Install and Link Provide information manage the national information system for electronic systems for gathering key information with monitoring information system, regional and needed for linked with system evaluation monitoring and national evaluation of systems industrial development 136 Costed Action Plan for SADC Industrialization Strategy and Roadmap Indicative Costs Output Key Timeframe Responsibilities Expected Targeted Main (USD) Performance Sub-activities Results/Outcomes Outputs Tasks/Activities Phase 1 Phase 2 SADC Member Private SADC Member Indicators (KPIs) (2016 - 2020) (2021 - 2030) Secretariat States Sector Secretariat States Build capacity for 2018- 2021- Coordinate Participate Participat collection and 2020 2030 M&E in the M&E e in the collation of activities process M&E information for process monitoring and evaluating progress Develop links 2018- 2021- Advocate Interface Provide between the 2020 2030 strongly for governmen regular Secretariat, strengthenin t structures informati Member States g links with on and and Development Secretariat respond Partners to gather to information surveys 137 Costed Action Plan for SADC Industrialization Strategy and Roadmap PART THREE: CONCLUSIONS AND RECOMMENDATIONS The SADC Industrialization Strategy holds great promise for the rapid economic transformation and catching up with the industrializing and developed regions. To this effect, the mutually supporting strategic interventions in the areas of industrialization, competitiveness and regional integration constitute the essential building blocks. They were to be underpinned by quality actions and policies to enhance the productivity of the physical and human resources deployed. The economic dynamics are to be situated within stable macroeconomic and conducive microeconomic environments for national and firm/enterprise level development and prosperity. The Strategy underscores the necessity of pursuing three strategic growth paths, namely: (i) agro-processing; (ii) mineral beneficiation; and (iii) manufacturing value chains development. The strategic goals will not be achieved without removing three binding development constraints: (i) infrastructure; (ii) skills; and (iii) finance. The analysis supporting the Action Plan (Part I) throws up a number of conclusions in the areas of industrialization and value chain development in light of the SADC initial development conditions and the global dynamics of the 21st Century; competitiveness challenges and related capacity building demands; and the imperatives for deepening regional integration. - Industrialization and Value Chain Participation The three industrial paths are variations of a single theme, namely greater value chain participation, as a critical driver of the Strategy in light of its potential for expanding production possibilities, nationally, across borders or globally. Value chain participation/planning must assess entry possibilities and take specific account of infrastructure capacity, availability of skills and financing opportunities. It should equally take account of ease of doing business within a widened regional economic space. Actions related to these interventions areas should be conducted in tandem with value chain identification studies and development. The key challenge to policy makers and investors is to identify and prioritize entry points in value chains. Given time and resource constraints, it will be essential to focus on a limited range of high- potential regional value chains, and through learning-by-doing, and demonstration effect, increased impetus for value chain formation/participation will be generated. The key to success are productivity, efficiency and competitiveness. Value chains will develop only where tasks are efficient in comparative cost terms. Currently, the bulk of value chains in SADC are global and take the form of exports of unprocessed/semi-processed items (forward integration). 138 Costed Action Plan for SADC Industrialization Strategy and Roadmap Recommendations (i) SADC region would need to intensify efforts to remove the structural constraints on industrialization and broadening the scope of development (infrastructure, skills and finance). (ii) The region (through public and private efforts) would need to identify and prioritize entry points into value chains, notably tasks that could be undertaken competitively and, to the extent possible, jointly. The criteria developed for potential value chain identification (Section II) should be utilized. (iii) The best value chain participation scenario for the region would be a combination of increased global value chain participation with simultaneous upgrading, which could start regionally and extend globally. (iv) While exploiting supply-based opportunities (e.g. mineral beneficiation) the value chain participation should target demand-driven involvement. (v) Greater attention should be given to development of regional value chains in services, to enhance overall competitiveness. (vi) Without close public-private collaboration and sharing information in the realm of industrialization tapping value chain potential would be severely constrained. - Clusters, SMEs and Value Chains Interdependence Clusters, in the form of locally proximate and complementary producers or service providers, are crucial engines of technological transformation and levers for reducing costs. Dynamic and innovative clusters strengthen SMEs and maximize value chain potential. Successful development of clusters, embodying SMEs and their integration into RVCs and GVCs will unleash economic potential at the firm, enterprise, national and regional level. Recommendations (i) Cluster development should be a deliberate effort. Governments should provide guidance, planning and mapping of actual and potential agglomeration possibilities. 139 Costed Action Plan for SADC Industrialization Strategy and Roadmap (ii) Once identified, cluster capabilities should be built and infrastructural needs be addressed. (iv) Targeted efforts should be deployed to promote entrepreneurship and promotion of enterprises that have potential for becoming globally competitive. (v) Provision of business support services to enhance competitiveness of SMEs, their ability to acquire and master technology and be eligible for appropriate financing. (vi) Develop a business-linkage programme for clusters, SMEs and value chain interaction. - Competitiveness SADC countries, with the notable exception of South Africa and Mauritius, rank poorly in the global competitiveness indices and the gap between the region and its comparators in Asia and Latin America is wide. The competitiveness lag straddles almost all areas of assessments, requiring an all-out effort to enhance abilities and capabilities and raise capital and labour productivities. Indeed, competitiveness in components and tasks, as distinct from comparative advantage in final products, is instrumental to value chain participation. Recommendations (i) SADC countries would need to develop and implement dedicated programmes to raise capabilities, in particular for enhancing education, innovation and entrepreneurship. (ii) Education is pivotal and would hence need to be oriented and repurposed to facilitate industrialization and overall transformation, notably through greater doses of science, technology, engineering and mathematics (STEM) education and establishing strong partnerships with universities, research institutions and the private sector, creation/strengthening of Centres of Excellence and Centres of Specialization as well as through funding support. (iii) Innovation is a key component of knowledge-driven economies, hence the need for strong and sustainable national and regional innovation systems and the up-scaling of expenditure on R&D by both public and private sectors. (iv) Enhancing competitiveness would also require the creation of a business- friendly and competitiveness-aware constituency. 140 Costed Action Plan for SADC Industrialization Strategy and Roadmap - Deeper Regional Integration The case for deeper regional integration cannot be over-emphasised. Deeper integration, including further trade liberalization, will provide the space and conditions for the development of regional value chains, through reduced transaction and border costs and exploiting opportunities for economies of scale. Deeper integration will also facilitate increased inflow of FDI and integration in global value chains. Recommendations (i) Completion of the FTA areas to cover all intra-regional trade and elimination of tariff barriers and targeted reduction of Rules of Origin. (ii) Harmonization of differential trading regimes, especially in the COMESA, EAC and SADC regions (iii) Acceleration of the Trade Facilitation measures and programmes (iv) Eventual establishment of a Customs Union, incorporating a Common External Tariff (v) Facilitation of capital and labour mobility (vi) SADC would need to adapt to the challenges of the new regionalism of the 21st Century characterised by dispersed production facilities and diversity of value chain disciplines. - Private Sector Participation The private sector is the main wealth creator and industrialization promoter. To effectively play this role, the private sector should be enabled and its participation in policy planning and investment sought. Value chain identification and decision- making would require close interaction and dialogue with local and foreign investors to ensure that the “discovery” process works to attain maximum efficiency and benefits to the regional economy. Recommendations (i) A main priority is the improvement of microeconomic environment for business competitiveness. 141 Costed Action Plan for SADC Industrialization Strategy and Roadmap (ii) As emphasised in the Industrialization Strategy, the private sector should be consulted and involved in the implementation of the Strategy and that a platform for public-private sector dialogue on industrial policy and its implementation be established to facilitate interaction at the national and regional levels. (iii) A capacity-building programme for enhancing the private sector capabilities should be an important policy priority. 6. Participation of Gender, Youth and Persons with Disabilities in Industrial Development The inclusiveness of the Action Plan extends beyond targeting equitable opportunities for the development of all the SADC countries to sharing the efforts and benefits of industrialization. Gender and youth mainstreaming and empowerment is a tenant of the Strategy. Recommendations (i) A gender empowerment for engagement in industrialization needs to be developed, with focus on capabilities, ownership of assets and access to finance. (ii) The entrepreneurial and innovation skills of women, youth and people with disabilities to effectively participate in modern industry should be up-scaled, through formal education and targeted training. 7. Industrial Policy and Value Chain Development The policy focus is on creating conditions for enhanced industrialization and value chain development and participation, both of which are fundamental to domestic value addition. Macroeconomic and microeconomic policy are at the centre of the policy spectrum. The main targets are the removal of infrastructural impediments, addressing the skills deficit, financing constraints, attracting investments and improving the business environment in general. Recommendations (i) Policies should be value chain-specific to embed regional and global value chains in the domestic economy. Member States should determine which policy functions should be regionalized and to what extent. (ii) Competition policy should be geared towards facilitating exchange and controlling monopolies, cartels and abusive business practices. 142 Costed Action Plan for SADC Industrialization Strategy and Roadmap (iii) Regional connectivity could be enhanced not only by removal of trade barriers, but also by enhancing competitiveness, capabilities and institutional efficiency. (iv) Implement investment-friendly policies to attract FDI resources to increase productive capacity and facilitate technological and skills transfers. (v) Liberalize movement of people, skills and right of establishment and residence. 8. Environmental Sustainability The SADC Industrialization Strategy calls for promoting inclusive and sustainable industrialization and addressing environmental challenges. This requires mainstreaming environmental standards in industrial development and rational exploitation of industrial opportunities associated with natural resources. Recommendations SADC countries should: (i) Implement the Regional Green Economy Strategy and Action Plan. (ii) Exploit the huge potential offered under the Blue (Ocean) Economy Initiative. 9. Industrialization Governance The implementation of the Industrialization Strategy and its far-reaching activities, which extend through to the long term, will be critically dependent on the establishment and empowerment of a competent, synergistically functioning and committed action-oriented oversight structure. This architecture, working as a system, should consist of: (i) national structures; overall guidance, coordination and oversight bodies; and (iii) the SADC Secretariat. The structures should bring in the contribution of the private sector, the regional think tanks and other industrial development stakeholders. Recommendations (i) The governance bodies shall consist of:  Summit  Ministerial Task Force on Regional Economic Integration  Industrial Development Forum  SADC Secretariat 143 Costed Action Plan for SADC Industrialization Strategy and Roadmap (ii) SADC Secretariat should be strengthened and empowered. 10. Financing the Action Plan Funding the Industrialization Strategy is an enormous undertaking and is of long term nature that must be situated within a long term macroeconomic stability perspective. The Action Plan projects that the overall financing development gap would rise to 19.2 percent of GDP in 2030, rising from 11.3 percent in 2014, which underscores the need for deploying major efforts to increase savings, increase capital efficiency and non-debt creating external resource flows. Recommendations (i) Urgently develop a resource mobilization strategy to support industrial development. (ii) Recognize that the greater source of funding will come from the private sector, which provided the bulk of resources in the period 2000-2014. (iii) Operationalize, without delay, a fully resourced SADC Regional Development Fund. (iv) Capital markets should be strengthened with focus on industrial financing. There should be specific measures to increase the flow of risk capital to SMEs. (v) Exploit the financing and operational potential of Public-Private Partnerships (PPPs). (vi) Explore potential of innovative financing, such as the Diaspora resources. 11. Next Steps The implementation of the Action Plan requires immediate and medium-term priority actions. These primarily include: 1. Operationalization of the Industrial Governance Structure. 2. Undertaking well-targeted and sustained popularization and communication strategy to promote industrialization. 144 Costed Action Plan for SADC Industrialization Strategy and Roadmap 3. Agreeing on priority areas of action. 4. Development of a long-term resource mobilization strategy for industry with the help of the private sector and development partners. 5. Full scale implementation of the Action Plan. 145