Factory Southern Africa? SACU in Global Value Chains

Methodology

This paper is a Summary paper of twelve individual papers covering value chains in the SACU region. It synthesises the policy recommendations.

Research Objective

Create greater clarity around the potential of GVCs to act as an engine of growth in the SACU region, the requirements to turn potential into reality, and the implications this would have not only on trade, investment, and growth but also on jobs and productivity.

The main objectives of the study are: (i) to understand trends of GVC participation and competitiveness of South Africa and the wider SACU region, the outcomes from this participation (exports, jobs, and productivity), and the factors that determine competitiveness; (ii) to map the extent of value chain integration across the region and identify barriers to deeper integration; and (iii) to identify policies and actions that will be required to develop a globally competitive, high value-adding factory Southern Africa.

Synopsis

Once concentrated among a few large economies, global flows of goods, services, and capital now reach an ever-larger number of countries worldwide. Global trade in goods and in services both increased 10 times between 1980 and 2011, while foreign direct investment (FDI) flows increased almost 30-fold. A value chain is global when some of these stages are carried out in more than one country, most notably when discrete tasks within a production process are fragmented and dispersed across a number of countries.

SACU-region global value chains are both a new reality and significant opportunity for expanding non-commodity exports to support growth, diversification, and job creation in the region. The task-based nature of GVCs creates opportunities for developing countries to establish very quickly a position in global trade within a sector in which they may have had no previous experience. For South Africa, GVCs are seen as a route to higher manufacturing exports and greater value addition. For other SACU countries, GVCs are seen as a route to diversification and global integration, and to leverage the possibility of greater investment from South Africa itself.

Policy Recommendations

Facilitate regional economic densification by reducing distance and division

  • Improve trade and transport infrastructure
  • Reduce barriers to cross-border trade
  • Liberalise work permits and movements of persons
  • Improve urban infrastructure and services, promotion of clusters and special economic zones

Skills, services and infrastructure for competitiveness

  • Improve skills and close gaps in technical and management skills
  • Promote free movement of people
  • Improve reliability of electricity and quality of ITC infrastructure

Promote open regionalism and institutional coordination

  • Policy and institutional coordination at the regional level, including coordination at provincial and municipal level