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South Africa’s medium term plan for ‘developmental’ regional integration

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South Africa’s medium term plan for ‘developmental’ regional integration

JB Cronjé, tralac Researcher, discusses South Africa’s recently-published Medium-Term Strategic Framework (MTSF) which will guide implementation of the National Development Plan (NDP) over the next five years

The South African government, as mandated by the policies of the governing party, aspires to create a ‘developmental state’ in which the state sets long-term national goals and objectives, backed-up by policies and resources, for development and growth. This must be achieved through the process of industrialisation and active government intervention in the economy. State intervention occurs in the form of industrial policies that direct and support investment and the innovation activities of certain industries and the strategic use of state-owned enterprises and development finance institutions to advance national objectives. Successful implementation requires leadership that can preserve co-operative relationships and balance the interests of different stakeholders and a competent bureaucracy.

The government is making progress on each key element. For example, it has been able to develop and adopt a shared long-term vision in the form of the National Development Plan: Vision for 2030 (NDP). The NDP is supported by policies such as the New Growth Path (NGP) to set the trajectory of the economy through procurement policies for the build-programme and support for labour absorbing sectors; the National Infrastructure Plan (NIP) to guide the roll-out of infrastructure that unlocks economic opportunities; and the Industrial Policy Action Plan (IPAP) to support the re-industrialisation of the economy. These policies give form to South Africa’s approach to regional economic integration.

With regard to progress on the other key elements of the developmental state, the President established the Presidential Review Committee on State Owned Enterprises in 2012 to determine the place and role of state-owned enterprises in a developmental state. All development finance institutions such as the Industrial Development Corporation (IDC), Land Bank, Small Enterprise Finance Agency and Development Bank of Southern Africa (DBSA) are required to align their functions with the objectives of the NDP, NGP and IPAP. The mandates of both the IDC and DBSA were expanded to include the broader SADC region. The Department of Planning, Monitoring and Evaluation in the Presidency is primarily responsible for monitoring the implementation of the NDP. The Presidential Infrastructure Coordinating Commission monitors the implementation of the eighteen strategic integration projects contained in the National Infrastructure Plan. In order to increase the speed of implementation, the President recently launched an initiative called Operation Phakisa, which brings all stakeholders in a particular sector together to formulate detailed delivery plans for the implementation of the NDP. The initiative is based on the Malaysian Big Fast Results methodology and will initially be implemented in the ocean economy and health sectors. New legislation has been adopted or is in the process of adoption on issues of infrastructure development, public administration management and government shareholder management to realise the implementation of the NDP.

Earlier this month, government published its Medium-Term Strategic Framework (MTSF) which presents a strategic plan for the electoral term 2014 to 2019. The MTSF forms the first five-year phase for the implementation of the NDP and aims to ensure policy coherence, alignment and coordination across government plans and alignment with budgeting processes. Performance agreements between the President and individual Ministers will reflect the actions, targets and indicators of the MTSF. In other words, everything government does over the next five years must happen within this framework. The NDP together with the three policy instruments mentioned above will continue to drive the government’s policy agenda over the next five years.

For example, IPAP provides for the implementation of the SADC Industrial Development Implementation Matrix to build on the Regional Industrial Development Strategy to promote the participation of South African manufacturers in mutually beneficial regional value chains, particularly in agro-processing, mineral beneficiation and pharmaceuticals. It also aims to promote regional sourcing in all regional infrastructure development programmes and the integration of electricity transmission networks through the southern and eastern African power pools. The NGP identifies regional development as one of the ten drivers for future growth. It provides that South Africa should be the driving force behind the development of regional energy, transport and telecommunications infrastructure and that infrastructure constraints in these areas should be addressed in collaboration with South African state-owned enterprises and development finance institutions. An Africa Development Fund will also be created to finance infrastructure projects and at the same time act as a sovereign wealth fund to ensure currency stability. Furthermore, regional projects, especially in the agricultural value chain, including horticulture for South African-owned retail chains; hydro and other green electricity generation; beneficiation of minerals; and, integrated manufacturing supply chains should support development corridors across southern and central Africa.

The MTSF, based on the governing party’s election manifesto and NDP, has two overarching strategic themes (radical economic transformation and improving service delivery) which are divided into fourteen key outcomes, associated activities and targets. One of the outcomes clearly links the development of South Africa with that of Africa. It prioritises the advancement of ‘developmental integration’ through a combination of market integration, cross-border infrastructure development and enhanced connectivity, and policy coordination to enhance productive capacity and intra-regional trade. Less than two weeks ago, the SADC Summit of Heads of State and Government decided that “industrialisation should take centre stage in SADC’s regional integration agenda. To this end, Summit mandated the Ministerial Task Force on Regional Economic Integration to develop a strategy and roadmap for industrialisation in the region.”

The MTSF target is to ensure that key elements of this position of South Africa must be reflected in the final SADC RISDP (2014/2015); SACU integration work programme (2014/2015); Draft Tripartite-FTA on Phase I (2018/2019); and, on the roadmap, modalities and principles for the establishment of the Continental-FTA (2014/2015).

The MTSF, as identified in the NIP, also targets the conclusion of mutually beneficial regional infrastructure projects in energy, road transport and water. For example, the expansion of freight capacity for mineral exports (targeting metal ores and coal) for southern Africa. However, the MTSF provides that private partnerships with South Africa’s state owned enterprises, Transnet (rail) and SANRAL (road), would be essential to upgrade freight corridors. The MTSF also targets the conclusion of at least one major regional hydroelectric power scheme over its implementation period. The objective is to diversify South African supply through investments in competitively priced and clean power projects in the region, notably transmission from Mozambique (Cesul) in the short-term and DRC (Grand Inga) in the long-term. Only last week, cabinet approved the signed Grand Inga Treaty between South Africa and the DRC for ratification by parliament.

It is evident from South Africa’s policies that it views the region as an important element in supporting its own growth and development. It is also evident that it wishes to pursue its national interests through the existing regional economic communities to which it belongs and future ones still under negotiation or consideration. In fact, it seems adamant to ensure its interests translate into regional plans. This is all well, but does it have sufficient buy-in from the rest of the region?

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It was recently reported in the media that South Africa and Namibia refused to sign the Protocol on Trade in Services at the recent SADC Summit of Heads of State and Government. Since then, Namibia’s reasons for not signing the Protocol were also reported in the media citing that it is still busy with internal processes relating to regulated sectors. On the other hand, South Africa’s cabinet approved the submission of the Protocol to parliament for ratification in July 2013 after obtaining legal opinion advising that signature is not a precondition for ratification. The Protocol was submitted to parliament in accordance with section 231(2) of the Constitution requiring approval by both the National Assembly and the National Council of Provinces. The request for approval was considered by the National Assembly and approved in September 2014. The Protocol now awaits approval from the National Council of Provinces, but its Select Committee on Trade and International Relations recommended its approval as far back as October 2013. In the meantime, South Africa is participating in the ongoing trade in services negotiations and cabinet recently approved its initial offer for the Transport Services Sector.

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