04 Mar 2018

SA Must Develop Regional Agro-Processing Industry

Written by  Fritz Nganje and Dawn Nagar

No. 384: SA Must Develop Regional Agro-Processing Industry / Fritz Nganje and Dawn Nagar / The Sunday Independent
4 March 2018

The sector is vital for socio-economic development in Africa, write Fritz Nganje and Dawn Nagar

About two weeks before taking oath as South Africa’s president, Cyril Ramaphosa used his address at the Nedlac Labour School, held in Pretoria on 30, to outline his plans for tackling South Africa’s triple challenges of inequality, poverty, and unemployment.

The 2018 national Budget, presented by former finance minister Malusi Gigaba, has since prompted mixed reactions, with much of the debate focusing on proposed measures, such as the hike in VAT, to narrow the country’s budget deficit, while trying to boost its economic growth and investment prospects.

The measures identified by Ramaphosa to fight socio-economic exclusion and unemployment, though, also included changes in black economic empowerment policies to promote greater worker ownership, and the expansion of the government’s Black Industrialists Programme. While such interventions have strong potential for socio-economic transformation, Ramaphosa would do well not to overlook the regional dimension of South Africa’s economic prospects.

One area that would require attention is South Africa’s leadership in revitalising the agro-processing sector in the Southern African Development Community’s (SADC) renewed industrialisation drive, as well as the 2008 COMESA-EAC-SADC Tripartite Agreement.

On its part, the SADC has identified agro-processing as one of the three regional priority value chains, alongside mineral beneficiation and pharmaceuticals, whose global competitiveness needs to be enhanced to spur industrial development in Southern Africa. As a subset of manufacturing that seeks to add value to products originating from the agriculture, forestry, and fisheries sectors, agro-processing is regarded as a critical vehicle for achieving socio-economic development in Africa for at least two reasons.

First, agro-processing has the potential to contribute to food security, generate large-scale employment and income, and stimulate industrial growth through backward and forward linkages. In particular, agro-processing can contribute to increasing the productivity and profitability of the agricultural sector by extending the life, and enhancing the economic value of, perishables.

Second, the SADC region, like the rest of Africa, is endowed with abundant raw materials and labour. As a result, the region enjoys a comparative advantage in the production of, for example, livestock, oilseeds, sugarcane, and wool, which could be the basis for developing a globally competitive regional value chain in the agro-processing sector.

However, a comparative advantage in the form of an abundance of raw materials and labour does not guarantee a viable regional agro-processing industry. Also required is strong political will and leadership for collective cross-border interventions that will enhance the global competitiveness of the sector. A closer look at the leather industry in Africa and the region, for example, puts into sharp relief the leadership challenge at the heart of the uncompetitiveness of the agro-processing sector in Southern Africa.

At a November 2017 policy meeting hosted by the Cape Town-based Centre for Conflict Resolution (CCR), it was revealed that while Africa accounts for most of the raw hides and skins produced globally, in 2015 the continent earned a meagre $4 billion from an industry that is estimated to be worth over $120 billion annually.

Not surprisingly, value chains in the sector remain significantly under-developed. Not even the leather industry in South Africa has been able to competitive fairly with cheap products coming from China, and increasingly from Vietnam. In this context, regional cooperation and a regional perspective become indispensable for building globally competitive value chains in the leather sector, and the agro-processing industry generally.

This requires SADC member states to demonstrate the ability and willingness to formulate and implement policies regionally, rather than nationally; and to envision the region as a single economic space bound by a shared vision and common objectives. South Africa’s presidency of the SADC, which runs from August 2017 to August 2018, can make a major difference here.

As the major industrial hub in the region, South Africa is well positioned to lead the SADC in developing viable regional value chains in the agro-processing sector. For example, through its Clothing and Textiles Competitive Improvement Programme, the South African Department of Trade and Industry has been working with various agencies and industry stakeholders to turn around the fortunes of South Africa’s footwear and leather industry.

This national experience could form the basis for region-wide initiatives to develop globally competitive value around areas where the region has a comparative advantage such as the production of cotton and livestock. But this would require more than just the scaling up of nationally conceived initiatives.

A regional mind-set is needed to design, and implement initiatives intended to transform the fortunes of the agro-processing industry in southern Africa. Effective regional integration policies, based on the equitable distribution of costs and benefits, would ensure substantial investment in addressing existing infrastructure and logistics challenges, while leveraging the comparative advantages of different national economies and enhancing cross-border linkages in the agro-processing industry.

A regional perspective will also make it much easier and cost-effective to develop the standards, skills, and technology required for the agro-processing industry in the region to be globally competitive.

Nganje is a lecturer in the Department of Politics and International Relations at the University of Johannesburg, South Africa. Nagar is a former senior researcher at the Centre for Conflict Resolution in Cape Town.

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