Intra-Sadc trade jumps to 23 percent…need to deepen economic diversification

The Chronicle

Prosper Ndlovu, Business Editor

REGIONAL economic diversification efforts and improving trade facilitation are paying dividends for the Southern African Development Community (Sadc), whose intra-trade has risen to 23 percent, up from 19 percent in 2021.

The sub-regional trade level is above intra-Africa trade, which is hovering around 15 percent of total continental exports.
Citing the latest African Union (AU) Regional Integration Report (2021), the Sadc Secretariate says the improvement reflects the positive impact of ongoing efforts to roll out various provisions of the regional Protocol on Trade.

This includes the implementation of simplified trading arrangements that have enabled an increase in informal cross-border trade covering both agricultural and non-agricultural commodities.

Sadc member states’ economies are at different stages of development, and, as a result, the state of industry varies widely throughout the region.

In many member states, agriculture plays a significant role in the economy, employing almost half of the region’s population.
However, much of this agriculture is subsistent rather than large-scale high-value crops.

The mining sector, on one hand, employs about five percent of the population but contributes 60 percent to the foreign exchange earnings and 10 percent of the Gross Domestic Product for the entire region.

In a statement following the release of the trading report, the Sadc Secretariat said it continues to monitor the progress on regional levels of industrialisation and intra-trade to ensure the scaling up of regional economic diversification.

“There is an improvement in the Southern African Development Community (Sadc) intra-trade, which has risen to 23 percent up from 19 percent in 2021,” it said.

“Several activities and intermediate outputs have been achieved, but little change has been noted in impact indicators. The share of manufacturing value added to the Gross Domestic Product is still below 12 percent compared to a target of 30 percent by 2030 and 40 percent by 2050.

“Most Sadc member states still depend on agro-based and mining commodities in terms of contribution to GDP.”
The region is already developing a regional framework and programme to improve the diversification and restructuring of its industrial base.

This includes undertaking several activities in support of developing value chains that can improve its industrialisation base and productivity to enhance the region’s participation in global value chains.

This is being done in the context of the region’s identified six priority areas where the value chains can be established and for which regional strategies should be developed.

The six priority areas are agro-processing, minerals beneficiation, pharmaceuticals, consumer goods, capital goods, and services.

Similarly, the Regional Detailed Mapping and Analysis of the cotton, rice, soya and wheat value chains, with the primary objective of identifying opportunities for the upgrading of the value chains resulting in increased regional production and intra-regional trade, is being undertaken, said the Secretariat.

Despite existing bottlenecks and continued dominance of the primary sector in the regional economy, Sadc says there are reasons to believe diversification is attainable through focusing on priorities indicated under the Sadc Industrialisation Strategy and Roadmap (2015-2063).

“Through the industrialisation strategy, Sadc has a better chance to improve the business environment for merchandise and services trade, attracting new and productive private investment,” it said. “This will likely require significant improvements in the infrastructure and processes that facilitate international trade and reforms in key input sectors, such as energy and information communication technologies (ICT).”

There is consensus on the need to enhance economic diversification, which can be explored in different sectors, namely GDP diversification, export diversification and fiscal diversification.

According to the Sadc Secretariat, the first aspect encapsulates diversified sectoral contributions to domestic production and employment, that is, expanding already existing sectors and/or creating new ones to ensure diversification of production and employment.

The second aspect comprises diversifying trade partners and/or products a country currently trades with the world.
Export diversification on one hand enables countries to move away from exporting low-value primary goods to exporting value-added products.

The third aspect involves diversifying a country’s revenue sources and targets of public expenditures. It is linked to the success or failure of the other two aspects in that if economic diversification happens, diversified revenue is generated to fund further industry development and other public services.

In the broader scheme of things, the Sadc Secretariate says embracing the African Continental Free Trade Agreement (AfCFTA) was critical as it affords the region preferential access to the recently established continental market as a direct export destination, access to the inputs and skills needed to compete internationally.

UNCTAD estimates that the AfCFTA could boost intra-African trade by about 33 percent and cut the continent’s trade deficit by 51 percent.

Article Source: The Chronicle

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