Transnational business needed in Sadc

Last Word

The SADC Industrialisation Week starting at the end of this month before the SADC Summit in Harare next month needs to make some really serious recommendations that allow regional industries to grow fast, which requires a far better alignment of many investment and trading policies.

Some of the alignment in trading policies can be done by accelerating measures proposed under the Africa Continental Free Trade Area, AfCFTA, and if necessary for countries to introduce free movement of raw materials and at least certain manufactured and processed products, the free trade being without the tariff barriers, which are easy to fix, and the non-tariff barriers, which will be harder.

One problem will be that group of business people who see every movement to ease barriers as a way of making money illegally.

So stuff shipped in transit can be sold in the non-designated market, and fake products, such as tankers carrying water instead of chemicals or oil products. Even with full AfCFTA this will still require checks to prevent goods that can never fit the rules of origin being moved around without tariffs, or for fake certificates of origin being generated.

But already Zimbabwe has been pushing a lot more electronic clearances, which some neighbours are keen to adopt, and it should be possible to generate the necessary seals on containers, railway wagons, trucks and other systems used to move goods that make rapid and trouble free movement easy.

To give examples of where regional industries can develop, we can start with fertilisers. Mozambique, especially, and South Africa, with far smaller reserves, are already pumping natural gas, the prime ingredient for the ammonia making processes in the modern world. And within a few years Zimbabwe will be pumping as well.

Zimbabwe has phosphate resources, at the moment at one confirmed site but there is room for exploration into similar geologies. Lime exists almost everywhere, sometimes in an easy form to process, although technically any limestone can be converted into lime.

Potassium salts are a bit more of a problem with the African geology. The continent is largely a set of cratons shoved together, and does not really have much of the sort of shallow seas in its geological history that are needed to create the potassium salt deposits.

There are some however in Republic of Congo, and that suggests that Cabinda in Angola and perhaps the mouth of the Congo River in DRC could have similar deposits.

There are also the old rift valley inlets that have silted up, such as the one that now contains the gas reserves at Muzarabani.

These areas have never really been seriously prospected, because they do not hold the igneous rock that is so important for most minerals, but perhaps the time has come for some serious checking. Anywhere where there is petroleum on dry land was once under the sea and the possibility thus exists for potassium salt deposits.

But already we have much of the requirements for regional fertiliser industries. One manufacturer is already showing the way with factories in four countries, and starting to move raw materials around. Its Zimbabwean plant, for example, uses 50 percent local raw material and some of the rest can be imported from Mozambique.

This partial local availability of raw materials in several countries means that the economics suggest a chain of factories with only some of the raw materials moved long distances.

Fertiliser itself being a bulk product means that opening a factory near at least source can help cut movement costs.

And in any case the huge quantities required means that several new factories are needed, and so they can be spaced out nearer the farmers.

A second industry that is talked about is lithium batteries, which would need a variety of other raw materials.

Zimbabwe and DRC hold major chunks of the world’s hard rock lithium reserves, and those will become more important than the hot-spring liquid salt deposits as more output will have to be processed to the hydroxide salt rather than the carbonate salt.

The other critical mineral ingredients are nickel, and Zimbabwe has deposits already being mined, and cobalt, where DRC and Zambia hold major reserves already being mined. Then there are the plastics for casings, the copper for electrical connections, and once again we are looking at Zambia and DRC there, plus others.

But basically everything is in SADC, so factories can be built, so long as the materials can move freely around SADC. But again we need co-ordination.

Steel is a fundamental building block of any heavy industry. South Africa, and now Zimbabwe, have the only steelworks although extra phases are needed at Dinson Iron and Steel Company before sheet steel is ready. Disco are also planning a stainless steel plant, a product that its parent Tsingshan of China specialises in.

That provides the processed ingredient for a wide range of manufacturing throughout SADC. Outside South Africa car manufacture has been assembly, and the Zimbabwean problem of small short runs for assembly means local content is hard to put in place.

What we do need are large factories that have sheet steel, the copper wiring, the lithium batteries and the electric motors coming in one end and the cars, trucks and buses coming out the other end. This could even allow some local design.

But each model will need regional and continental markets if the large volumes that make economic sense are to be made. Assembly is not the way to do, rather proper factories making the final product.

But the AfCFTA can provide those markets and allow a factory to make tens of thousands of a particular set of models each year.

We note that besides the steel the copper wiring and electric motors are needed, and the motors are largely windings of copper wire on specialised steel cores. We need to open factories to make them, as we move towards the electric vehicle age, and this opens up the factory spaces on the Zambia-Katanga copper belt.

So an electric vehicle industry will have the components coming from Zimbabwe, with the steel and batteries, the motors and cabling from Zambia, the plastics probably from South Africa.

When we look at major industrial nations, such as China, the USA and the states within the European Union we see either a major national market, or a huge free-trade regional market.

Even the Belarus products now entering Zimbabwe, and which come from a fairly small although highly industrialised country, are still generated from the free trade area that includes Russia and its large market and population.

Without retaining those free trade links Belarus would be in a very difficult position, which explains the political direction of its leadership of insisting on being friends with all its neighbours.

National self-sufficiency is simply not an option for the small states in Africa, and even South Africa which pushed autarchy hard in the apartheid era, cannot be self-sufficient and in an open economy would have to specialise, with more exports and more imports.

A free trade area encourages this specialisation, and examples show that opening up a huge market does create a lot of extra wealth.

No American state or Chinese province can be self-sufficient. It is the huge size of the main market that makes those countries industrial giants. In the EU Germany needs the whole market to be the industrial leader.

AfCFTA is slowly opening up Africa, and needs to move faster. Previous industrial strategies were national, and were consequently limited, even for South Africa, Nigeria and Egypt with their large populations and high levels of industry.

But we can start opening up Southern Africa tomorrow, even while the detailed work on AfCFTA is in progress. Products that can move easily can be separately listed at a national level and be moved between neighbours.

We can automate customs and border clearance, and have proper almost automatic monitoring of just where cleared goods end up, so as to defeat the cheats.