The future of Sadc

Dr Keen Mhlanga

The Southern African Development Community (SADC) has been a beacon of hope for regional integration and economic growth in Southern Africa since its inception in 1980. With 16 member states, SADC has made significant strides in promoting economic cooperation, peace and security in the region.

However, as the organisation looks to the future, it faces both opportunities and challenges in achieving its goals. This article explores the future of SADC, examining its strengths, weaknesses and potential directions.

The future of SADC is promising, with the organisation aiming to increase intra-regional trade from 22 percent in 2020 to 35 percent by 2025, as outlined in the SADC Trade Protocol.

This goal is already being achieved, as evidenced by the growth in trade among member states, with South Africa exporting $12.6 billion worth of goods to other SADC countries in 2020.

Furthermore, SADC plans to invest $500 billion in infrastructure development by 2027, as per the SADC Infrastructure Development Master Plan. The Kazungula Bridge, a $259 million project connecting Zambia and Botswana, is a prime example of this initiative, enhancing regional connectivity and facilitating trade.

In addition to trade and infrastructure development, SADC aims to promote industrialisation, increasing industrial output from 20 percent of GDP in 2020 to 30 percent by 2025, as outlined in the SADC Industrialisation Strategy.

The SADC Regional value chain development programme has already supported the growth of the textile industry in Lesotho, with exports increasing by 15 percent in 2020.

The digital economy is also a key focus area, with SADC aiming to increase its contribution to GDP from 5 percent in 2020 to 10 percent by 2025, as per the SADC Digital Economy Strategy. South Africa’s digital economy is expected to grow to $14.4 billion by 2025, driven by e-commerce and digital payments.

Addressing climate change is another critical aspect of SADC’s future plans, with the organisation aiming to reduce greenhouse gas emissions by 20 percent by 2030, as outlined in the SADC Regional Climate Change Strategy.

The SADC renewable energy programme has already supported the development of solar and wind energy projects, such as the 100MW solar farm in Botswana. With a projected GDP growth from $600 billion in 2020 to $1 trillion by 2025, and a population expected to grow from 340 million in 2020 to 450 million by 2030, SADC’s future looks bright.

SADC infrastructure: High-impact uncertainties

In a rapidly changing, complex world where crises occur with regularity, there are weighty uncertainties that shape future markets, governments and governance, as well as social and economic values.

These factors and how they are addressed, have a profound effect on systems and organisations, as well as their capacity to deliver on their objectives.

In relation to understanding what future infrastructure challenges may bring, a UN Environmental Programme (UNEP) model advances a useful global framework for presenting uncertainties within infrastructure design and development processes.

These include project selection, design, procurement, deployment and financing decisions relating to low-emission, resilient infrastructure – all of which are key considerations that can improve the infrastructure landscape in SADC.

A STEEPV12 framework is the preferred model for this futures analysis and is represented in Figure 1 with relevance for SADC. This six-tiered approach is taken to reflect on the factors affecting future infrastructure demand and supply.

On the infrastructure-demand side, different social and economic values and regional belief contexts are considered across countries at various development stages. On the supply side, the factors affecting the future of infrastructure are: technological developments accompanied by evolution of business models, and financial approaches, the environment and political will.

Social, technological, economic, environmental/ecological, political and value-based (STEEPV) analyses are future-oriented and consider possible future factors of change and developments in a broader thematic context.

Socio-economic transformation for SADC (and African) infrastructure?

SADC countries include small, isolated island states, several landlocked states, a mix of low-and middle-income countries and larger economies.

The region’s economic geography — 16 relatively small and non-complementary markets, with NTBs frustrating cross-border movements into neighbouring states — emphasises the need for integrated infrastructure for a larger, stronger economic market for the socio-economic development of its citizens.

Moreover, climate resilience is a necessity for SADC economies plagued by long periods of drought, interrupted by episodes of storms and flooding.14

The region needs to transform the way in which infrastructure is viewed and pursued. The networked nature of infrastructure assets must be emphasised for a more resilient SADC that relies more on regional economies than on international partners.

This requires new approaches to blended financing, emphasising domestic (and regional) mobilisation of financial resources.

Several financing techniques and models have emerged within the past decade, including infrastructure asset recycling.

This concept has been adapted and innovated in several developing-country contexts and could offer interesting opportunities for Africa.

Clearly, trust in regional partners, including among SADC member states, international partners and the private sector is an important area element that must continually be fostered through ongoing dialogue, followed by practical steps to implementation.

In SADC, as highlighted by the current pandemic, clean drinking water and better sanitation services can help to limit the spread of infectious diseases. Reliable electricity is essential in medical services.

Moreover, improved transport and digital communications infrastructure that supports the trade in essential goods and services is required.

The speed and efficiency with which these infrastructure networks can be rolled out to support SADC recovery from the health and economic crisis remain key high-impact uncertainties in its infrastructure future.

In terms of African demographics, 28 countries doubled their population between 1990 and 2015, and another 26 countries will double their population between 2017 and 2050.The African population is expected to grow to over 2 billion before 2040 — making up about 50 percent of the worldwide increase by that year.

This implies that the current state of infrastructure in Africa (and SADC) will not be able to satisfy growing demands, or the development objectives set out in the AU’s Agenda 2063.

The ability of governments to deal with SADC’s population growth thus represents a driver of change. International organisations and development finance institutions (DFIs) recommend that Africa build infrastructure that is resilient to climate change to tackle its rapidly urbanising population.

Over 40 percent of the population of sub-Saharan Africa live in cities, and this is expected to grow to 60 percent by 2050.17 Urbanisation puts pressure on quality drinking water and sanitation services.

Droughts and changing rainfall patterns also place a burden on food and energy security — especially for countries relying on hydro-energy (e.g., Lesotho, Zambia, Zimbabwe and Mozambique).

SADC economies’ coal-driven mining and industry are, in turn, heavily reliant on water. Africa’s economic growth and infrastructure development needs will impact its energy demands — projected to rise by an additional 60 percent to around 1 320 million tonnes of oil equivalent in 2040 based on the policies and plans currently in place. These plans will leave over half a billion people on the continent without access to electricity in 2030, falling well short of the Sustainable Development Goal (SDG) targets.

What does a preferred future for infrastructure look like in SADC?

According to the Global Infrastructure Hub (GI Hub), a more resilient infrastructure future stimulus packages that rely on infrastructure’. The joint Organisation for Economic Co-operation and Development, World Bank and UNEP model sets out an agenda for a low-carbon, resilient economic transformation where governments, the private sector and civil society play their designated roles in overall infrastructure development.

The plan goes beyond just an incremental approach to addressing climate challenges and keeping to national policy commitments.

Instead, it pursues an authentic change process in infrastructure development. It also acknowledges the importance of planning, innovation, budgeting, adequate financial systems, urban development and a holistic, systems approach to this transformation.

The IMF recommends that, in the recovery from the pandemic, policy efforts can focus more on building resilient, inclusive and greener economies, both to bolster the recovery and to raise potential output.

Priorities should include investing in green infrastructure to help mitigate climate change, strengthening social assistance and social insurance to arrest rising inequality, introducing initiatives to boost productive capacity and adapt to a more digitalised economy, and resolving debt overhangs.

In SADC, transformative infrastructure should stimulate economic growth, thereby delivering employment and an economically, socially and environmentally sustainable recovery from the Covid-19 crisis.

Infrastructure investment has a high potential multiplier effect on GDP and a long-term impact on raising productivity. In its research, the GI Hub found that the fiscal multiplier of public investment has generally been higher in the contractionary phase of the business cycle, particularly when interest rates have been low.

Through this current recessionary phase, the economic scene is set for greater government investment in infrastructure.

The question is how to achieve transformative infrastructure outcomes in the region now, when many of the economic conditions for a multiplier impact have been in place in previous years and where the region has endured other health, environmental and economic crises.

The study employed a 2×2 uncertainty matrix scenario method to enable better anticipation of opportunities and challenges that could emerge in the future, while seeking policy innovations to spur new thinking about the best policies and alternative futures and stress-testing existing or proposed strategies.

Multiple scenarios are set out considering future options for embracing or rejecting transformative, inclusive, sustainable and resilient infrastructure with or without good policies, partnerships or new financing models.

Recommendations: Pathways to desired SADC infrastructure

There is a clear need to reverse the trend away from the self-interests of leaders and national protectionism exacerbated across Africa by Covid-19.

By focusing on greater regional interconnectedness and regional competitiveness, SADC should improve its ability to grow resilience and preparedness for future global shocks.

Regional trading and value chains should be encouraged, whereas dialogue and trust — both between and among member state governments and regional business — are vital.

The AfCFTA presents a unique opportunity for intra-regional and intra-African collaboration on NTB elimination, including the development of connective infrastructure.

The growth of Africa’s youthful population, the speed of urbanisation in SADC (and across Africa) and the resulting informal settlements in SADC centres will continue to place a crushing burden on governments, if they are left to develop the requisite infrastructure on their own.

SADC governments, partners and the private sector must develop joint solutions to current lacklustre economic performance.

They should actively develop and support job-creation opportunities in sustainable, transformative infrastructure programmes to manage the dire socio-economic consequences of COVID-19.

Governments must foster anticipatory innovative governance by being more proactive in their planning and budgeting, and by creating a transparent environment for regional problem-solving. Policy reform and implementation should focus on transformative, inclusive infrastructure financing and development.

Innovations in infrastructure financing should explore blending solutions, where pilots are attempted first on smaller projects and then scaled up.

As highlighted during the pandemic, inclusive digital transformation is a regional and global imperative. If access to digital infrastructure and information is not universal, socio-economic problems such as poverty, inequality and unemployment will only be compounded.

SADC governments can no longer be held solely responsible for infrastructure funding and development.
Building anticipatory innovation in SADC infrastructure governance

The Covid-19 pandemic and the associated economic crisis have laid bare how intricately linked the social infrastructure sectors are with the region’s economic infrastructure.

The complex linkages between, for instance, health, housing and education, and water and sanitation, transport systems and digital communication have revealed structural weaknesses in the SADC economies.

Without greatly improved and more proactive planning, reform and implementation, SADC governments and institutions will always be at risk of catastrophic events – whether health crises or economic and financial crises.

There is a need to operationalise anticipatory governance, which involves reflecting and acting on early signals and inputs barely visible on the horizon.

It is also crucial to adjust rapidly to unexpected and complex emerging problems while developing proactive strategies and experiments — well before the irrevocable decision to execute necessary changes.

Anticipatory governance enables use of foresight, networks and feedback systems to experiment with potential strategic activities. Such activities may help to shape regional responses to governance structures to reduce risk and increase capacity to respond by harnessing collective intelligence to better use the future in a complex environment.

Anticipatory innovation in governance does not prevent a crisis from occurring. It does, however, provide the institutions and individuals responsible for managing the economy out of the crisis (i.e., governments and their officials) with the ability to explore possibilities and experiment with future scenarios.

This relies on officials actively learning from changing conditions, anticipating what future the changes will bring about, and preparing policy positions and implementation to secure a future where infrastructure is more responsive to citizens’ needs.

It has always been a pan-African aspiration that regional blocs develop and strengthen to ensure a stronger continent.

SADC member states, as a regional bloc, can select a route towards a more sustainable, more resilient future. The 16 countries could together embark on a process to strengthen the networks that bind them — roads, rail, ICT, energy and waterways.

Stronger infrastructure links should inevitably bring more robust regional trade and harmonised approaches to the manufacture, procurement and distribution of goods (where pharmaceuticals are especially significant in a health crisis), among others. By focusing on these pathways towards regional cooperation, each participating member state can expect to benefit economically – as will the region.

In the short to medium term, significant (new and existing) challenges will arise, as set out in the scenarios above. The options that SADC leaders and key stakeholders select will determine whether and to what extent our future is different from the past, or simply more of the same.

SADC’s primary objective is to promote regional integration and economic growth among its member states.

The organisation has made progress in implementing regional policies and programmes, such as the SADC Free Trade Area and the Regional Indicative Strategic Development Plan. These initiatives aim to increase intra-regional trade, investment, and economic cooperation.

However, challenges persist, including uneven economic development and limited intra-regional trade. Infrastructure development is critical to SADC’s future success.

The organisation has identified key infrastructure projects, such as transportation networks, energy systems, and communication technologies, to enhance regional connectivity and economic growth.

The SADC Regional Infrastructure Development Master Plan aims to address these needs. However, financing and implementation remain significant challenges. Peace and security are essential for SADC’s future stability and prosperity.

The organisation has made efforts to address regional conflicts and promote democratic governance. The SADC Peace and Security Protocol and the SADC Tribunal aim to promote peace and resolve disputes.

Nevertheless, challenges persist, including terrorism and political instability in some member states.

The digital economy and innovation offer significant opportunities for SADC’s future growth. The organisation has launched initiatives to promote digital transformation and innovation, including the SADC Digital Economy Strategy. This strategy aims to enhance digital infrastructure, promote e-commerce, and support innovation and entrepreneurship.

However, challenges remain, such as limited access to technology and digital skills. SADC’s industrialisation strategy aims to promote regional value chains and enhance economic diversification.

The SADC Industrialisation Strategy and Roadmap 2015-2063 aims to increase industrial output and promote regional trade. However, challenges persist, including limited industrial capacity and competitiveness.

Climate change and sustainable development are critical issues for SADC’s future. The organisation has launched initiatives to promote sustainable development and address climate change, including the SADC Regional Climate Change Strategy.

This strategy aims to enhance climate resilience, promote renewable energy, and support sustainable land management. However, challenges remain, such as limited capacity and resources.

In conclusion, the future of SADC depends on its ability to address regional challenges and capitalise on opportunities.

By strengthening regional integration, investing in infrastructure development, promoting peace and security, embracing the digital economy and innovation, promoting industrialisation and regional value chains, and addressing climate change and sustainable development, SADC can achieve its goals and promote sustainable economic growth and development in Southern Africa.

Dr Keen Mhlanga is an investment advisor with high skills in finance. He is the executive chairperson of FinKing Financial Advisory. Send your feedback to [email protected], contact him on 0777597526.