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«ANSA Alternatives to Neo-liberalism in Southern Africa The search for Sustainable human development in Southern Africa Editors: Godfrey Kanyenze, ...»

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4.2 Infrastructure In most countries of Southern Africa, high budget deficits have culminated into unserviceable debts, subsequently resulting in the lack of proactive policy measures to expand the countries' basic infrastructures in urban areas (workspace provision such as factory shells, commercial stands, communication facilities and electricity), and in rural areas (water, roads, communications, marketing channels, agro-industry etc). The often perceived result can be failure by firms to modernise their outdated and worn-out machinery and equipment.

The basic conditions for infrastructure (physical, institutional, sociopolitical, human) with which firms exploit technology are lacking in regional economies. This has been the major obstacle to investment, especially the pervasiveness of poor and deteriorating road infrastructure, inadequate and unreliable communication systems, high utility costs etc.

Water and electricity supplies were cited as a major problem with fairly large factories often forced to run several boreholes on their own at high utility charges. Poor roads and railways were also cited as a constraining factor though in some countries notable improvements are underway.

The lack of proactive policy measures to expand the country's basic infrastructure in urban areas (workspace provision such as factory shells, commercial stands, communication facilities and electricity), and in rural areas (water, roads, communications, marketing channels, agro-industry etc) in many countries is to a large extent a result of inadequate funding.

As infrastructure forms a crucial base for any forms of development it is therefore important that policy makers in the region put much emphasis on its development starting at the domestic level. For regional infrastructure to improve there is need for concerted efforts from all the member states in terms of financial resources and expertise.

4.3 Human resources development and access to capital Skilled labour that allows for specialisation and efficiency is often in short supply among countries of Southern Africa, which is a major problem facing firms. In the context of a globalised economic environment, which is knowledge-based, the conventional comparative advantage of raw materials and unskilled labour is increasingly becoming insignificant. High quality services such as accounting, management, production engineering, design, packaging, processing and quality control are crucial for export survival. Many of the member countries have invested a lot in human capital only to lose this precious factor through the "brain drain". This is, among others, due to poor working conditions and extreme deterioration in real wages and salaries.

The availability and access of capital are important factors in determining production and export performance. In most of the member states of Southern Africa, banks are under-capitalised to the extent that they are barely able to issue both long-term and short finance.

Access to capital is even more acute for the small firms. SMEs in the region have not contributed much to growth and exports as they tend to be sidelined by banks when extending credit facilities. Top priority is given to large-scale operators, who in most cases are TNCs, with a wide choice for raising capital through home-country equity markets, local financial institutions and international capital markets. The main reason for the discriminatory behaviour has been the lack of collateral by the SMEs.

Though the accessibility problem has been slightly eased through financial reforms, the cost of capital has since been skyrocketing to unsustainable levels thereby slowing down investment.

However it is not only the access to funds and the cost of servicing the debt that are hindering production but also lack of proper financial management within manufacturing support institutions. This has often resulted in heavy indebtedness hampering chances to expand operations.

5. Alternative strategy for the manufacturing sector

An alternative strategy for the region's manufacturing sector will entail seizing the opportunity to achieve inclusiveness of the regional manufacturing sector by progressively extracting a proportion of income from the FS and investing it in transforming the NFS. Agrobased industries such as sugar processing plants, cotton ginneries, forestry and pulp plants could be the first areas of investments in the rural areas. Governments have to recognise and accept this alternative development agenda as the only option for reversing the long drawn out de-industrialisation of the regional economy. This approach would also enhance the integration of production and marketing within the national economies while triggering linkages and connectivity of value chains at both the national and regional level as well. This process can and will result in income growth in the NFS that will then produce goods for the FS as well as act as a market for the FS output.

Also to be transformed is the African governments' "business as usual" approach to regional economic integration, which has been the hallmark of the African regional integration culture. This reflects a stage in regionalism referred to as "distributive regionalism", where states continue to pursue their individualistic interests, with no overriding common goals, except that those are negotiated on the basis of the relative strengths of the negotiating partners (See, Alternatives to Neo-Liberalism in Southern Africa [ANSA], concept paper, [July 2004], mimeo, p.25).





This type of regionalism can be seen in COMESA, SACU and SADC, which is quite unlike the old East African Community that existed prior to the independence of Kenya, Tanzania and Uganda where there was a kind of integrative regionalism, perhaps because of the common imperial interests of the British colonial empire. But under the plethora of independent flags, the desire for regionalism has often stopped at the doorsteps of some narrowly defined "national" interests, which in essence are far from "people-oriented" interests.

A more successful integration of the NFS of the regional economy would come under a more inclusive regionalism, referred to as integrative regionalism. This is where integrating partners (regional states) are perceived to have compatible interests, interests that are "sublimated" and subservient to the higher consideration of the common objective and common good that will come out of integrating into a single economic or political unit or union. The integration of the NFS into both the individual national economies and the regional economy through firms exploiting value chains in the process of production and marketing of their goods and services is without constraints and obstacles all the way.

Under integrative regionalism, dynamism can be created between the manufacturing sectors of the Southern African economies, which will reflect some elements of endogenous capitalist relationships. Eventually, the non-formal sector can be gradually formalised, triggering the supply side chain responses and through a bottom-up approach, the competitiveness of the economy can be enhanced. The expectation is that such a process stands to broaden the economic base and strengthen the economies of the region.

Chapter 9 Free trade and regional integration in Southern Africa "Small nations are like indecently clad women, they tempt the evil minded. Only in coordinated action could the small independent states of Southern Africa achieve the strength and the power necessary to resist those who were tempted to exploit the region and perpetuate its economic fragmentation and dependence" [Julius Nyerere]

1. Introduction Southern African economies are characterised by enclavity and dualism, as discussed in Chapter 2. This enclavity and dualism is expressed not only within the SADC countries but also between South Africa and the rest of the region.

Southern Africa therefore faces the monumental task of challenging enclavity and dualism not only at national but also regional levels as it tries to adopt and implement alternative trade policies that should also help overcome its marginalisation and underdevelopment in a rapidly globalising world economy. As in other developing regions, Southern Africa has chosen regional integration as the most appropriate strategy to realise economies of scale, achieve global competitiveness and fight poverty and underdevelopment.

However, it is argued that regional integration based on the application of market forces alone tends to reinforce rather than change the structural imbalances in the global, regional and national economies. Deliberate, informed, well-sequenced and popularly driven interventions by the state are therefore proposed as an alternative strategy.

This chapter briefly delves into an analysis of the traditional integration theory as well as the development integration theory, which seems to be the theoretical underpinning of SADC co-operation. Further, it goes on to argue that meaningful integration is only possible if it is people centred and people driven.

An alternative vision for free trade and regional integration is proposed which calls for action at the national, regional and multilateral levels. It is argued that the basic tenet of this alternative vision is to challenge the current international division of labour by strategically repositioning our individual countries and the region in relation to a rapidly globalising world economy. It is acknowledged that governments cannot accomplish this task without the participation and active involvement of the region's citizens. Fundamentally, this process should begin with the redefinition and restructuring of the relationship between the region's citizens and its abundant human capital and natural resources.

2. Situational context and theoretical framework

Most of the literature on African regional integration schemes has tended to ignore or downplay the global social-political and economic background underlying African development and regional integration efforts. This has often led to analytical myopia, which treats integration theories as if they operate in a vacuum. This study seeks to avoid this pitfall.

According to theorists such as Samir, Gunder, Arrighi and Wallerstein, "there is a social whole that may be called a capitalist world economy whose genesis dates back to around the sixteenth century and which by the nineteenth century had expanded historically from its European origins to cover the globe" (Samir et al. 1962:9). The history and future of Southern Africa are entwined in this "social whole" and any analysis thereof should not ignore this fact as reality. It is for this reason that the world systems theory provides the most appropriate tools for analysis.

This theory has some distinct advantages over others in the sense that "it acknowledges the existence and strengths of international capital in the world society". In this way it seeks to explain the international division of labour between the core, periphery and semi-periphery states.

It acknowledges that due to technological changes and other variations in the international economic and trading environment the situation or condition of states or groups of states might change in relation to others over a period of time. It also acknowledges the varying degrees of influence exerted by the various interest groups within a state or group of states” (Samir et al. 1962:9).) As former colonies, the integration of the economies of SADC member states with the world capitalist system was determined by the mercantilists' imperialist interests of the European powers, which created vertical linkages between the European metropoles/centre and the SADC region/periphery. While development was occurring in the European metropoles, a historic process of under-development and/or dependent development was taking place in the periphery, resulting in structural linkages between the global periphery and global centre.

It is also important to note that capitalism in Southern Africa did not arise through the transformation of agrarian subsistence forms of production and the simultaneous emergence of capitalist forms production that encompassed both agriculture and industry.

In addition, the global centre also created global semi-peripheries.

Wallerstein explains, "economically, semi peripheral areas are used by the global centre for redistributing surplus products with the aim of increasing profit. Politically, they serve as buffers between the high status, high income sector (the global centre) and the relatively homogeneous low status, low income (the periphery) from rebelling. The economic relationship between the global centre and the global semi periphery is one of symmetrical interdependence. While the global periphery is economically dependent on the global semi periphery (Samir et al.

1982:10).

In the case of Southern Africa, South Africa is the global semi-periphery and this is clearly acknowledged in the Lusaka Declaration which highlights that SADC dependence on South Africa "is not a natural phenomenon nor simply the result of a free market economy … but a deliberate incorporation by the metropolitan powers, colonial and subcolonial structures centering in the general on the Republic of South Africa" (Lusaka Declaration 1980).

Alternative strategies to achieve equitable integration in Southern Africa must therefore address this asymmetry. The concept of "economic liberation" which was embraced by the African nationalists was meant to first and foremost, break the exploitative vertical ties between the centre and periphery and allow Africa to follow an independent path to economic development.

It was also quickly realised that the new independent states emerging were too fragmented, small and underdeveloped so that they could not attain economic liberation on their own. Regional co-operation was therefore seen as the appropriate vehicle for economic liberation in Africa as well as in Latin America and Asia. To this end, the United Nations Regional Economic Commissions became the most active proponents of regional integration schemes in developing countries.

2.1 The traditional integration theory However, the integration model that was chosen was based on the traditional variance to economic integration, the Customs Union theory.



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