BRADLOW SERIES

Number Six

THE NOT SO BRAVE NEW WORLD!

PROBLEMS AND PROSPECTS OF REGIONAL INTEGRATION

IN POST-APARTHEID SOUTHERN AFRICA

Fantu Cheru

THE SOUTH AFRICAN INSTITUTE OF INTERNATIONAL AFFAIRS

May 1992 PROFESSOR FANTU C1IERU from Ethiopia, is a sotio-economist and currently Assistant Professor in African Development Studies at American University in Washington D.C, He has previously taught at Portland State University, where he obtained his PhD degree, and at the Institute for Development Studies, University of Nairobi, Kenya. He has been a consultant to several international and national development agencies, and he acts in an advisory capacity to the present transitional government of Ethiopia. He is the author of inter alia Dependence, Underdevehpment and Unemployment in Kenya (1987) and The Silent Revolution in Africa: Debt. Development and Democracy (1989) and co-author of Ethiopia: Options for Rural Development (1990).

Dr. Cheru spent three months with the Institute at Jan Smuts House as the 1991 Bradlow Fellow. In addition to his research, the results of which appear in this Paper, he travelled within Southern Africa and he addressed meetings of several Branches of the Institute.

THE BRADLOW FELLOWSHIP was founded in 1982 and is awarded annually by the Institute to a distinguished international scholar. The Fellowship was founded on the initiative of the late Dr. E. P. Bradlow who was a Donor Member of the Institute and Chairman of the Tnistees of the Bradlow Foundation, a private body which supports educational projects. The Fellowship is sponsored by the Bradlow Foundation by means of an annual grant to the Institute. The current Chairman of the Foundation's Trustees is the Hon. Justice Richard Goldstone.

The titles and authors of the previous Bradlow Papers published by the Institute are given at the back of this Paper.

THE SOUTH AFRICAN INSTITUTE OF INTERNATIONAL AFFAIRS was founded in 1934 and is a fully independent, non-governmental organisation based at Jan Smuts House on the campus of the University of the Witwatersrand in Johannesburg. It has nine Branches in other centres throughout the country, and it is privately funded by its corporate and individual members.

The Institute's main aims are to promote a more informed understanding of international issues and of South Africa's foreign relations; to provide an input into the foreign policy- making process: to encourage South African involvement in the modern world; to counter trends towards international isolation; and to perform a facilitating role in bringing together persons of different political viewpoints and occupational backgrounds to consider international issues. It fulfils these aims through its programmes of meetings, conferences, research and publications. BRADLOW SERIES

Number Six

THE NOT SO BRAVE NEW WORLD!

PROBLEMS AND PROSPECTS OF REGIONAL INTEGRATION

IN POST-APARTHEID SOUTHERN AFRICA

Fantu Cheru

THE SOUTH AFRICAN INSTITUTE OF INTERNATIONAL AFFAIRS

May 1992 THE SOUTH AFRICAN INSTITUTE OF INTERNATIONAL AFFAIRS Jan Smuts House, PO Box 31596 Braamfontein, JOHANNESBURG, 2017

ISBN 1-874890-07-2 CONTENTS

INTRODUCTION 1

1. SOUTHERN AFRICA: IS PROSPERITY AROUND THE CORNER? 2

I. 1. SOUTHERN AFRICA AND THE NEW WORLD ORDER 5

I. II. WILL THERE BE A POST-APARTHEID DIVIDEND? 7

I.I11. PROBLEMS IN THE SADCC REGION 8

(a) Agricultural Decline 9 (b) Poor Manufacturing Performance 10 (c) Low Commodity Prices 10 (d) The Debt Crisis 12 (e) Shortage of Skilled Manpower 13 (0 The Unbreakable Colonial Trade Links 14 (g) The Policy Dimension 15 (h) Democratization vs. Economic Restructuring? 16

II. NATURE OF SOUTH AFRICA'S ECONOMY 17

(a) Poor Manufacturing Performance 18

III. GROWTH OR REDISTRIBUTION 20

(a) What options? 20 (b) Paying a high price for the golden days of apartheid 22 (c) Inadequate capital 23 (d) Narrowing the Skills Gap 24 (e) Regional Trade Imbalances 25 (0 Possible Access lo Western Markets 26 (g) The Policy Dimension 27

IV. BREAKING NEW GROUND 28

(a) The future of regional integration 28

V. ASSESSMENT OF SADCC 30

VI. ASSESSMENT OF THE PTA 32 VII. AREAS OF FUTURE COLLABORATION 35

(a) Regional Food Security 36 Ib) Regional Industrial/Agro-processing Strategy 36 (c) Alternative Energy Strategy 36 (d) Trade and Finance Policy 36 (e) Human Resource Development 37 (0 Coordination of Resource Management 37 (g) Promotion of Regional Tourist Industry 37

V1I1. IS THERE A FUTURE FOR A SOUTHERN AFRICAN ECONOMIC COMMUNITY? 38

XI. STRUCTURE 40

X. WILL SOUTH AFRICA JOIN THE PTA AND SADCC SOON? 42

(a) Re-establishment of Earlier Relations 42 (b) Expand SACU 42 (c) Expand bilateral relations 43

XI. CONCLUDING REMARKS 44

ENDNOTES 45

APPENDIX - 50 INTRODUCTION governments in the region to solve some of the old problems and The 1980s have been dilemmas. The New World Order characterized as the lost (NWO) may have grave development decade for Africa. consequences for southern Africa Grinding poverty and ecological and the continent as a whole. degradation across the continent are so serious and extensive that the With the end of the cold war, the major international organizations are old military blocs are being replaced predicting even more hard times for by trading blocs, signalling the Africa. The recently released United emergence of a system of "global Nations Development Programme's apartheid" - separating North and 1990 Human Development Report South. Only the United States has confirms that over the past decade, the power and economic leverage to many countries in Africa witnessed withstand or retaliate against this stagnation or a reversal of the gains new "collective protectionist" bloc. of the 1960s and 1970s. In the The recent US-Canada free trade 1930s, expenditures on health, agreement and the soon to be signed education, and other social US-Mexico free trade agreement is programmes were drastically an attempt to create the largest reduced in many African countries, trading bloc in response to the threat with far reaching consequences. The posed by the European Economic infant mortality rate rose, nutrition Community (EC) and an incipient levels deteriorated, employment and East Asian trading bloc under the incomes declined. The countries of leadership of Japan. Africa will find southern Africa were no exception. itself ever more vulnerable and isolated if it chooses (or is obliged) If this cheerless picture prevails to remain a collection of fifty, small, at the end of a decade of stagnation, competing exporters, dependent on the last two years have also signalled these regional giants to purchase its positive changes in a region where output and to supply its needs. peace and stability have proved There is a compelling need to elusive. The independence of reverse this state of vulnerability, to Namibia, the cessation of hostilities strengthen regional markets, and to in Angola, the emergence of rationalize existing resources by democratic movements throughout establishing viable sub-regional the sub-region, have been some of economic integration schemes. the key developments. The apartheid system has begun to unravel as the In the Lagos Plan of Action and possibilities of a democratic subsequent declarations on transition loom over the horizon. development strategy, African While there is good reason to be governments have clearly articulated optimistic about the future, there are the strongly held view that Africans still important challenges facing the should strive for self-reliance

1 through regional integration and challenges, both internal and South-South cooperation. Although external, that the governments in the past efforts by African leaders at region, including South Africa, are collective cooperation have been going to confront on their way to disappointing, the failure of establishing viable economic IMF-induced structural adjustment integration? What preconditions do and liberalization policies to reverse they have to fulfil beforehand? How Africa's economic decline has will the existing organizations that generated renewed interest for a seek economic integration, such as second look at regional integration SADCC, the PTA, SACU, have to and South-South cooperation. restructure to meet the new challenges? How is the entry of Interestingly, the renewed interest South Africa, with its huge in regional integration has been economy, going to affect the pattern welcomed by (he World Bank, an of regional economic interaction, institution long opposed to such an regardless of the political idea. The Bank has singled out the orientations of a post-apartheid Preferential Trade Area for Eastern government? and Southern Africa (PTA), as well as the Southern Africa Development Coordination Conference (SADCC) I. SOUTHERN AFRICA: IS for financial and technical support. PROSPERITY AROUND THE This is interesting since the Bank's CORNER? view on development and regional integration does not correspond to The economic dominance of the view expressed by the Economic South Africa in southern Africa is Commission for Africa (ECA). The well known. In 1986, the GNP of Bank assumes that global South Africa was more than three interdependence and economic times that of SADCC and Namibia liberalism is the only route Africa combined, while the population of should follow. The ECA, on the SADCC was more" than twice that of other hand, tries to achieve African South Africa. The average per capita self-sufficiency through collective income of South Africa was nearly action and through partial de-linking six times that of SADCC. However, from the West's unequal terms of it is clear that while South Africa's trade. In marked contrast to the domestic market comprised a Bank, the ECA calls for economic population of 37 million, South measures such as customs duties to Africa together with SADCC would protect the African market. constitute a market in excess of 114 million people. If South Africa were This report explores the problems to join the PTA, this would translate and prospects of balanced regional into a market of 200 million people integration in post-apartheid (Appendix A). This demographic southern Africa. What are the figure is what has promoted interest in creating a regional market, with new world order, characterized by South Africa supplying the region's powerful trading blocs.J This will capital and goods. transform the world both economically and politically - and Both the SADCC member states not necessarily to the advantage of and the South African Government Africa. Fearing that the continent are propounding the view that the will find itself vulnerable if it end of apartheid and the transition to chooses to remain disunited and democratic rule will open the door dependent on these regional giants, for the establishment of new and African leaders signed the Treaty mutually beneficial economic establishing the Pan-African relation between South Africa and Economic Community at the Abuja its neighbours. Such a move, both OAU summit last year. sides argue, is the only way to resolve the socio-economic backlog A second concern expressed by confronting the region and to African leaders is that the major overcome the difficulty of market capitalist centres are losing interest penetration in relation to the three in much of Africa as they move to world trading blocs.' The SADCC greener pastures in Eastern Europe states believe that, once a and the former Soviet Union. Long democratic government is in place, before the end of the cold war, South Africa could become the Western governments were already engine for regional economic growth showing signs of aid fatigue. in southern Africa and beyond, by Increasingly, the provision of aid is providing the neighbouring countries being conditioned on with access to markets as well as democratization and government capital investment for development.3 accountability/ There is also It is interesting to note, however, widespread fear that increasing that the same enthusiasm has not flows of foreign investment will be been expressed by the PTA, the diverted to Eastern Europe as these largest regional organization in the countries have a better infrastructure sub-region. In anticipation of a and human capital for expanded democratic post-apartheid regime, investment cooperation with the the organization is preparing the West. With the end of the cold war, ground rules under which South the capacity of African states to play Africa wiJJ be admitted into the one super-power off against the community. other, and thus secure foreign aid, has come to an end. Therefore, There are many reasons why Africa is unlikely to benefit from the governments in the region pin so peace dividend in the form of much hope on regional integration. increased aid from the West. These One compelling reason is the developments have forced growing realization that southern governments in southern Africa to Africa will be marginalized in the adopt a framework of economic co-operation if they are to become a the governments in the region, such serious player in the new world as the Lesotho Highlands Water order. project and the Sua Pan Soda Ash project in Botswana, and the A similar rethink is underway in opening up of trade legations in South Africa and visions of a Kenya, Togo and Mali has given common market have emerged rise to the view that a new and although details are sketchy. The positive era is at hand in the region. emphasis, however, is more on the Unfortunately, the new trade expansion of trade relations and less diplomacy towards Africa is not on the formalization of regional based on a realistic assessment and cooperation. The business identification of potential areas of community in particular believes that economic cooperation between South trade opportunities north of the Africa and its neighbors. Limpopo are unlimited and ready for the picking. Emphasizing the That a democratic South Africa dominance of the South African will become an important member of economy in the region, the late the PTA and SADCC is a foregone Governor of the South African conclusion. As the last member of Reserve Bank, Dr. Gerhard de the OAU, South Africa can join any Kock, went even further when he regional organization on the suggested that "little real economic continent if it so wishes. But the expansion in sub-Saharan Africa is current expectations from both sides feasible without simultaneous growth that immediate trade benefits are out in the South African economy" and there for the picking is premature that South Africa is uniquely placed and it needs to be scaled down. to promote economic cooperation in While all governments in the region the continent.5 The Assistant General express an interest in collective Manager of the South African self-reliance and development, all of Foreign Trade Organization them are likely to pursue divergent (SAFTO), Mr. David Graham, also interests and take different actions to argues that "South Africa is the advance their perceived national 'economic engine' of the African interest. South Africa's membership continent generally and of the of the PTA or SADCC in the near southern African region future is unlikely to lead to the specifically."6 equalization of economic relations between member states. In addition, This optimism is reinforced by southern African states should not the new political mood in Pretoria, look to a post-apartheid South Africa which has led to the independence of for their economic salvation. South Namibia and the resumption of Africa will be too pre-occupied with constitutional talks on a future its own problems to come to their non-racial democratic South Africa. rescue. Increased business interaction with At the present moment, the region, the unravelling of the intra-regional trade and industrial apartheid system and the possibilities co-operation in southern Africa face of a democratic government in South a number of serious obtacles - Africa in the not too distant future political, economic, institutional -on are important milestones for a both sides of the border. In fact, sub-region where peace and stability South Africa and its neighbours face have proved rather elusive. very similar political and economic challenges of structural reform and On the economic front, however, adjustment, under deteriorating southern Africa faces major international and economic challenges. Peace and political conditions. Sub-Saharan African democratization will unleash economies have undergone a enormous public expectations from a dramatic decline in the past decade. population whose standard of living The assumptions about the strength had declined as a result of years of of the South African economy are wars, economic mismanagement and over-exaggerated. Overall, the lack of political participation. These economy has performed miserably fundamental changes are taking and the country is currently in the place at a time when the world midst of the longest recession in economy and international forty years. Overcoming these relationships are changing radically. economic and political difficulties is This will make the establishment of not an easy task. If one goes by the viable regional economic experience of Sub-Saharan Africa, cooperation among southern African fundamental restructuring to create states difficult. The stipulation of an enabling environment will prove trade liberalization (reduction of to be difficult, time consuming, and quotas and tariffs) by bilateral and politically risky. Immediate payoffs multilateral aid agencies as part of are unlikely in the short- and their conditionalities, the global medium-term despite the negotiations through GATT to sub-region's economic and resource liberalize world trade, will have potential. profound consequences for southern Africa - including for South Africa.7 These changes are likely to further LI. SOUTHERN AFRICA AND contribute to reduced intra-regional THE NEW WORLD trade, by opening up the SADCC ORDER markets to cheap supplies from outside of the region.5 The end of the cold war has brought both opportunities and While the liberalization of challenges to southern Africa. The intra-regional trade should be independence of Namibia, the end of vigorously pursued, across-the-board hostilities in Angola, the emergence trade liberalization demanded by of democratic movements throughout GATT and the IMF/World Bank Group is counter-productive and aid and export credit to the Baltic contrary lo the logic of the PTA or States is indicative of the new SADCC.9 In the New World Order, thinking in much of Western southern African states have very Europe, as the EC tries to cultivate little room to manoeuvre. The days market access to the Community's of playing one super-power off goods and thus preempt American against the other are over. It is this and Japanese domination of these reality that is shaping the new markets. In the case of South perceptions of policy makers and Africa, it will be some time before business elites on both side of the the impact of sanctions and Limpopo River. As the spectre of a disinvestment are reversed and a democratic transition looms larger resumption of investment can take over the South African horizon, place. Investor confidence is lacking policy makers now urge thai the since the general perception is that language of isolation and the transition to a stable non-racial . dcstabilization should give way to democratic rule will be slow. real economic cooperation among the countries of southern Africa. Another characteristic of the New Therefore, well thought-out World Order is the emergence of protection measures against the competing trading blocs, which are major trading blocs must be likely to consolidate the North-South considered. divide. The European Community (EC) single market, the North Even before the recent global American trading bloc, involving the political changes, direct foreign U.S, Mexico and Canada, and an investment and private financial incipient East Asian trading bloc flows to the continent have slowed under the leadership of Japan will down, primarily on account of the definitely influence, if not debt crisis and the problems which it determine, the context within which has given rise to. With the end of decision-making takes place in the cold war, new investment southern Africa. Given the relative opportunities have opened up for state of underdevelopment of the Western investors in Eastern region's economy, southern African Europe. Sub-Saharan Africa, with its states will have limited economic weak infrastructure, inefficient and political options in the coming management, high debt burden and years. While this political reality is weak managerial capacity does not a powerful incentive for closer attract attention from the West economic collaboration, the anymore and it is increasingly possibilities of internal restructuring considered as a risky place to do to allow the process to go forward business. The recent decision by the will remain difficult. Swedish Government, a major supporter of the SADCC initiative, to allocate a high proportion of its I.II. WILL THERE BE A POST- destabilization, with its enormous APARTHEID DIVIDEND? financial and human cost, will disappear. Ports and railway systems This is not to suggest that the that were closed for more than a transition to democracy in South decade or were operating at low Africa on the whole will have no levels of capacity can begin to immediate positive economic impact generate revenue, and land locked at the national, sub-regional and countries will have access to ports continental level. On the contrary, that are less expensive for shipping the demise of apartheid, the repeal their goods to overseas markets. of sanctions, the cessation of Other countries in sub-Saharan hostilities will generate, what Africa are also expected to benefit Stephen R. Lewis called, a by resuming imports and exports "post-apartheid dividend".10 Most of with South Africa which were this dividend will accrue to South interrupted for decades as a result of Africa. The reduction of expenditure OAU sanctions. on defence, internal security, the administration of Byzantine In sum, these are very important apartheid laws, duplication of and positive developments for a services (for example, the 16 region where "peace and stability" departments of education) will result have proved to be elusive. But once in enormous savings to the the euphoria over a democratic government which in turn can be South Africa is over, regional and used toward black education, continental political solidarity, housing and improved health care. forged over the past thirty years to According to one estimate, the oppose apartheid will be replaced by country can reduce its 900,000 civil economic pragmatism dictated by servants, 150 cabinet bureaux, 1900 national self-interest. Despite MPs and their staffs. Direct repeated reassurances by ANC spending on apartheid accounts for officials that a democratic South up to 14% of the budget." The Africa will not try to dominate the removal of sanctions is also expected region, a post-apartheid government to result in increased access to will be forced to aggressively pursue foreign capital, investment and trade relations to penetrate the markets for South African products African market on behalf of the throughout the world. business community and the new social classes.12 It is at this juncture Likewise, South Africa's that I would like to challenge those neighbours and sub-Saharan African who paint a rosy picture of the countries may also benefit from the future of southern Africa's economic demise of apartheid and the integration. transition to democratic rule in South Africa. For the Frontline States in particular, the threat of I.III, PROBLEMS IN THE even more dependent on export SADCC REGION markets.

The best starting point for Since 1980, the SADCC evaluation of the prospects for countries have been implementing expanded trade between South "structural adjustment" programmes Africa and its neighbours is by under the watchful eye of the IMF examining the performance of and the World Bank. While southern African economies over the adjustment policies in the area of last decade. Since the mid-1970s, all pricing, exchange rates, public the states of the region, including sector reform and liberalization of South Africa, have been hard hit by markets are some of the essential falling terms of trade and a rising ingredients of a balanced national international debt burden. The strategy, conventional stabilization principal factors leading to the crisis and structural adjustment policies have been both internal and external. have contributed to the weakening of Low agricultural production, regional cooperation. These declining levels of investment, with short-term policies, designed to industrial capacity utilization as low improve commodity exports to as 25% in most countries, poor generate foreign exchange for export performance, serious servicing external debt, often institutional and policy weaknesses, conflict with long-term development deteriorating social services and low needs. For example, rapid and steep employment generation have devaluation of national currencies characterized the crisis. As a result, was often required without regard to growth has stagnated, and in some the effects on neighbouring countries may have actually been currencies. By looking at individual reversed. states as separate entities, implementation of such programmes As shown in Table 2 (See inhibited meaningful trade with Appendix), the region shows some neighbours. Implementation of recovery in 1989 and 1990, except stabilization programmes also for Zambia which experienced a ignored the impact of destabilizatioji decline in GDP growth. With the on production and trade. exception of Botswana, the recovery in the rest of the region is far below More importantly, however, the rate of population growth. While implementation of such policies has Angola's growth potential is failed to reverse the decline in promising, the prospect for production. While some countries in Mozambique is bfeak. It will take the region have improved their another decade before a functioning short-term trade positions, few have government and economy is put in gained in any of the indicators that place. With declining receipts, all of measure real, sustainable the states in the region have become development. Rather, most have slid

8 backward amidst growing inequality, unabated to the war-torn countries environmental degradation, while food imports from South de-industrialization and poverty. For Africa to the BLS states continued expanded trade to materialize in the unchecked. The region is currently region, a reversal in the following facing the worst drought in years, areas is necessary: pointing to the vulnerability of the agricultural sector. Both formerly food-sufficient South Africa and (a) Agricultural Decline Zimbabwe are themselves now forced to import food from overseas. The shortcomings of an elite- The need to rethink agricultural oriented export-led strategy are strategy is becoming increasingly clearly evident when one looks at evident. Africa's agricultural decline. Since agriculture accounts for 33% of Declining agricultural output is Africa's GDP, 66% of its labour part of a wider pattern whereby force, and 40% of its exports, the most governments in the region, stagnation of this important sector regardless of ideological orientation, has had a negative impact on the have consistently failed to recognize overall process of development on the role of small farmers, the continent.13 During the 1960s, particularly women farmers, when agricultural production grew at2.7% setting their development priorities. a year, about the same as population Government investment policy growth. Thereafter, agricultural across the region has tended to growth slowed considerably, favour projects in urban areas or in averaging only 1.4% from 1970 to export plantations. Prices paid to 1985 - half the rate of population farmers for food crops are kept growth.14 Agricultural production artificially low, thus providing cheap for the whole of Africa, having food to people in the cities.15 grown by 2.8% in 1989, was Inadequate investment in agriculture, virtually stagnant during 1990. insufficient incentives to peasant producers, the breakdown of In the SADCC region, the marketing and transport systems, performance of the agricultural lack of storage facilities and weak sector was mixed throughout the extension services have further 1980s. While some countries, such constrained agricultural production as Zimbabwe and Malawi increased and proper management and their outputs due to the combination utilization of natural resources. In of economic incentives, Zimbabwe and South Africa, the technological innovation and institution of radical land reform is favourable weather, production a necessary precondition for declined in the war-ravaged improved agricultural production. countries of Angola and Mozambique. Food aid continued (b) Poor Manufacturing sectors. The weak post-1980 Performance performance is explained by relative industrial stagnation in Malawi, The poor performance of the Tanzania and Angola. These manufacturing sector in the SADCC countries have paid a very high region has not shown marked price for South Africa's improvement in the 1980s. With the destabilization policy. exception of Botswana and Lesotho, the other countries in the region Table 4 (See Appendix) shows continue to experience a high level the relative dependence of SADCC of capacity under-utilization. The manufacturing on imported inputs. import-substitution strategy has run The level of import ratios in the its course. Considering the high manufacturing sector varies level of import dependence of considerably from a low of 27% in SADCC manufacturing, both Zimbabwe to highs of 90% in production and output have been Botswana and Swaziland. Since the affected by increased cost of inputs agricultural sector is the sole and spare parts, as well as by the generator of foreign exchange, the lack of foreign exchange to this decline in agricultural output as well sector. As shown in Table 3 (See as the negative terms of trade have Appendix), manufacturing value directly affected the performance of added (MVA) per head declined the manufacturing sector, with significantly, with Tanzania and capacity utilization rates as low as Mozambique experiencing the worst. 20%. The foreign exchange famine is unlikely to disappear in the short- Manufacturing value added term unless radical measures are (MVA) expanded at an average taken to improve agricultural annual rate of 3.1% during the productivity in the region. 1970s, virtually keeping pace with population growth. Since the early 1980s, however, growth in (c) Low Commodity Prices manufacturing has lagged far behind population growth. This was the No other region in the world consequence of demand and depends on commodity exports to supply-side influences. Declining the same degree as sub-Saharan real per capita income and Africa. Burkina Faso and Mali, for overvalued exchange rates in several example, rely on cotton for over countries undermined demand 50% of their export receipts. domestically and overseas. On the Burundi, Ethiopia, Ghana, Kenya supply side, the foreign exchange and the Ivory Coast get over 50% of shortage contributed to significant their export revenues from tropical curtailment of necessary inputs and beverages. Malawi, Mauritania and spare parts, hence the decline in Somalia derive similar proportions capacity utilization across all from food products. Niger and

10 Zambia depend heavily on the However, this simply drove prices exports of metals and minerals.16 further down as dozens of This is equally true for the countries developing countries tried to flood of southern Africa (See the world market with their Appendix:Table 5). They remain commodities as part of donor primarily exporters of raw materials mandated "structural adjustment" while importing industrial goods programmes. The decline in foreign from the West. These countries in exchange earnings further general show very little constrained import capacity, diversification within the primary depriving industry and agriculture of commodities exported. Thus, they important inputs such as fertilizers are competitive with rather than and spare parts. complementary to one another. These countries are unlikely to Over the past decade, (he export overcome the "foreign exchange prices for African commodities have famine" in the foreseeable future. been subjected to very large The strategy of "export your way fluctuations, and are currently at the out of debt" is a recipe for glut and lowest levels in thirty years. The lower prices. So, is there a need to decline in commodity prices in 1990 rethink their strategies? was fairly pervasive (See Appendix :Table 6). While the In addition, market access volume index of exports increased conditions for African exports have by 7.5 percentage points, the unit not improved in recent years. value index dropped 23.2 points. At Although the Lome Convention the same time, the unit value of provides all southern African Africa's imports rose by nearly 13.9 countries, with the exception of percentage points during the 1986-90 South Africa, with duty free access period, against a 3.8 percentage to the European Community points decrease in volume. As a markets, non-tariff and reiated result, the purchasing power of measures are being used as Africa's exports fell sharply, significant barriers to wider entry averaging about 54% in 1986-90, into the Eu ropean ma rkets. A compared to 76% in 1981-85. Many feature of many of these barriers is of Africa's exports are also facing that they are tied to the degree of mounting competition from processing. The greater ihe degree substitutes such as synthetics for of processing, the higher the barrier. cotton and sugar beet and corn syrup Other barriers include: quotas, for sugar. voluntary export restraints, technical (especially phyto-sanitary) African countries tried to offset regulations. The issue of quality and lower world prices by producing standards will affect the capacity of ever-greater quantities of timber, tin, southern Africa to compete copper, cotton, sugar and cocoa. effectively in Europe. Since quality

11 is dependent on technology, it will By most conventional economic be difficult for SADCC countries to indicators, such as the ratio of debt compete on an equal footing with to GNP, sub-Saharan Africa's debt the Newly Industrialised Countries burden was equivalent to 96.9% of (NICs). Even South Africa has to its GNP compared to 45.8% for undergo serious industrial Latin America. For some countries restructuring before it can compete - Congo, Guinea-Bissau, Mauritania, with the Pacific Rim countries. This Mozambique and Somalia - the ratio takes place in the face of increased of debt to GNP was 200% or more. demand from the West for Africa to In terms of ratio of debt to exports, . liberalize its market and open up its the figures were striking; 312% for economy. sub-Saharan Africa, as compared to 288% for Latin America. For the sub-continent as a whole, debt per (d) The Debt Crisis capita in 1989 was $437 as compared to GNP per capita of The debt crisis is another $449." impediment to the establishment of viable economic integration in The combined debt of southern southern Africa. Most governments Africa in 1989 stood at $50 billion, in the region continue to be severely of which $20 billion is owed by affected by the debt crisis, which South Africa (See Appendix:Tab!e crushes the potential for economic 7). Debt service obligations for growth and recovery by diverting 1990, excluding South Africa, local resources towards the payment Angola and Namibia, were estimated of debt. at $2.5 billion. All countries in the sub-region except Botswana In actual terms, sub-Saharan experienced deficits on their balance African debt stood at $161 billion in of payments in the 1980s. The worst 19S9, an increase of more than 9% affected were Tanzania, over the $147 billion of the previous Mozambique and Zambia. The year.17 However, it is important to debt/GNP ratio ranges from a low of note that there are major differences 53.6% for Zimbabwe to a high of between the debt structure of 474.2% for Mozambique. Angola, sub-Saharan Africa and the Highly Mozambique, Tanzania and Zambia Indebted Countries, with much register debt per capita figures much- higher proportions owed to official higher than GNP per capita. With bilateral (41%) and multilateral the transition to democracy and the agencies (21%) and much less to lifting of sanctions. South Africa commercial banks.18 While debt to will be able to overcome its debt private sources can be rescheduled, crisis much more quickly than any debt owed to the IMF and the World of the other countries in the region. Bank cannot. Despite a range of debt initiatives

12 by Western countries over the past Africa's skilled human resources. five years, the total stock of While the lucky ones fled to Europe, sub-Saharan Africa's debt has those less fortunate took up jobs as continued to rise and annual debt teachers and doctors in some of servicing costs have eased only South Africa's 'homelands' - a cruel marginally. In fact, according to the irony. World Bank, no more than a dozen sub-Saharan African countries have In southern Africa, (he brain serviced their debts regularly since drain is taking place in the face of a 1980. Altogether, 25 sub-Saharan growing shortage of skilled countries rescheduled their debts 105 10 manpower in all sectors of the times during 1980-88. economy. For example, a 1987 SADCC mining sector skilled The debt overhang has reduced manpower survey shows that the the amount of foreign exchange region is highly dependent on available to purchase imports, expensive expatriate skills: general leading to a very severe import management (52 %), technical strangulation, depriving industry and service (20%), maintenance (17%) agriculture of much needed inputs; and finance and administration holding back new investments and (14%).a Table 8 (See Appendix) even the maintenance of the existing shows the level of skilled manpower capital stock,21 Debt servicing and requirements by country. The the adjustment policies pushed to demand for skilled personnel is free up foreign exchange needed to particularly high in Zambia where repay the debt, have also worsened the mining sector is adversely social welfare in the areas of health, affected. education and poverty relief.22 The unprecedented flight of high level manpower from the continent (e) Shortage of Skilled is the result of a hostile domestic Manpower economic environment, aggravated by the implementation of harsh One of the most negative aspects adjustment policies. The decline in of the economic crisis, aggravated real earnings, the removal of by a high level of debt, has been the subsidies, the increase in the cost of dramatic growth in the brain-drain medical, educational and other involving middle and high level services, the freezing of wages and manpower whom Africa needs for the massive retrenchments from the its recovery and development. A public service have made life joint ECA/ILO report put the difficult for all Africans. The loss of estimate at 70,000 Africans who had skilled people will continue to affect left the continent by mid-1987, up the functioning of the institutions of from 40,000 in 1985. This higher learning, industry and represents aproximately 30% of enterprises.

13 Wilh a transition to democratic There are many reasons why rule in South Africa, [he brain-drain SADCC's trade is heavily oriented problem north of the Limpopo is towards Europe. First, the existing likely to get worse. South Africa physical and financial infrastructure faces a serious shortage of skilled has been developed to facilitate trade personnel, largely as a result of its with Europe rather than apartheid policy which denied higher intra-regional trade. This historical educational opportunities to the vast relationship has been strengthened majority of the black population. through the Lome" Convention and Until the skills level is improved in other aid programmes.24 Many of the country, the private sector, the purchases from overseas government and non-government suppliers are tied directly to aid institutions will engage in a piracy programmes which tend to favour of high level manpower from the imports from the aid-giving rest of Africa. countries. Nearly two-thirds of capital and commodity aid, and even a higher proportion of technical (0 Unbreakable Colonial Trade assistance, is tied in this manner. As Links a result, trade patterns become distorted in favour of the overseas Historical trade relations with suppliers as the recipient country is Europe pose a serious constaint to tied to the donor country for repeat regional economic integration. The orders and services. Third, through directions of trade in sub-Saharan advertising, African consumers have Africa have changed very little since become captives of goods produced independence, oriented largely to the in Europe and they tend to look markets of the former colonial down on goods produced locally. powers. This pattern of trade can be seen in southern Africa, despite Another factor which has regional efforts by the PTA and tightened the links between southern SADCC to reverse this trend. Africa and the industrialized world Almost 77% of SADCC trade is still has been the SADCC project itself. with countries outside the region, Since the whole SADCC initiative is mainly with the former colonial heavily dependent on external powers. SADCC-South Africa trade financing, aid donors have largely has largely remained unchanged funded projects with positive effects despite SADCC's efforts to reduce for their own economies. In addition dependence on South Africa. In to the purchase of inputs, donors are 1984, for example, intra-SADCC insisting that recipient countries trade was only 4.2% compared to adopt policy measures conducive to 18.5% with South Africa and 77.3% private investment and the with the rest of the world (See liberalization of trade and exchange Appendix:Table 9). rate systems, consistent with the overall development philosophy of

14 the World Bank and the IMF. government bodies and this is very Disbursement of adjustment funds is costly for business. Businessmen often tied to the purchase of inputs interested in cross-border trade are and management expertise from often frustrated by the shortage of Europe .M foreign exchange and complicated visa requirements. South Africa will have to break into African markets which have In the area of macroeconomic been carefully nurtured by other management, few countries have countries during the period when successfully completed the transition Pretoria was busily destabilizing the from command (dirigist) to region. Even in southern Africa, market-economies. Over-valued where SA has long relationships, currencies, unrealistic minimum competition over existing regional export prices and high import duties markets is growing. For example, are insisted upon and there are the Portuguese have tapped the bewildering and different systems of markets of Portuguese-speaking customs tariffs and procedures. Angola and Mozambique, while the This situation is unlikely to be Nordic countries have established a resolved in the near future. In special fund to promote joint addition, reform in the areas of ventures in the region. Given its pricing, exchange rates, financial constraint, South Africa is privatization, containing budget not in a position to supply its deficits, liberalization of trade, neighbours with advantageous credit public sector reform and the like and delivery terms. will be slow particularly in the face of dwindling external assistance, an uncertain commodity environment, (g) The Policy Dimension lack of rain and domestic political events. Most governments are likely Member states of the PTA and to exhibit an excessive preoccupation SADCC are far from creating a with politics rather than economics, policy environment conducive to as the different social coalitions try greater intra-regional trade and to deflect the sacrifices that often investment. There are simply too accompany fundamental economic many unnecessary and bureaucratic restructuring. The case of Zambia in barriers to trade within the SADCC 1987, when the government broke region. Import controls and export off negotiations with the IMF, is licencing, customs hold-ups and instructive. price controls, and a complicated system of documentation are some Additional factors that hinder of the factors that hinder expansion intra-regional trade include: lack of of intra-regional trade. For example, political will to succeed, the Zimbabwe's import control system underdeveloped monetary and involves twenty-two different banking system, lack of adequate

15 domestic savings, credit control, against entrenched parties' high rates ol inflation, exchange rate implementation of stabilisation problems, low producer prices and programmes and "free enterprise" an uncoordinated, inadequate policies.:T regional transport system. Without establishing an enabling environment The trend towards liberalization in sub-Saharan Africa, the prospects of markets and an export-oriented for internal and regional growth - strategy is being challenged by the and thus for expanded intra-regional popular classes who want to see an trade are exceedingly dim.:6 South alternative development strategy. African policy makers, despite their The focus will be on internally- over-exaggerated optimism, should induced development to meet basic accept this reality before initiating needs. In South Africa, the trade policies that will produce very little union movement has argued recently return in the long-term. that the economy must seek its dynamism from the domestic market rather than external markets. This (h) Democratization vs. will bring COSATU on a collision economic restructuring? course with the apologists of export-led growth. What is this The pressure for democratization going to mean for regional trade? (that is: redressing economic The concern for social justice on the injustice simultaneously with one hand, and the drive towards political freedom) is another added export markets on the other, will dimension which will push for an have a pull and push effect, delaying inward looking development quick solutions to domestic strategy. This analysis equally economic and political problems. applies to South Africa. As William Martin succinctly put it: The task for PTA/SADCC member states is to initiate policies Underneath the calls for greater and actions that will address the democracy, for example, lie a problems listed above. It is surging demand for greater important to review policies that participation, accountability, and a have not worked in the past in more equitable distribution of favour of new imaginative policies productive resources and wealth. that support growth and production Such trends are most sharply etched as well as intra-regional exchange. in the burgeoning anti-capitalist Failure to do so will lead to sentiment within South Africa's permanent stagnation, poverty and mass democratic organizations, inequality. particularly in trade union structures. But it is not restricted to those bodies, as is indicated by widespread protest across the region

16 II NATURE OF SOUTH South Africa. Yet they outperformed AFRICA'S ECONOMY South Africa, despite their heavy debt burden - five times greater than It has been pointed out earlier that of South Africa. In every that the assumptions about the respect, South Africa performed strength of the South African badly. As to the potential of South economy are unfounded. It must also Africa emulating the NICs model, be said at the outset that the that is unlikely to happen in the near assumption that South Africa will future. A growth rate matching that salvage southern Africa from its of Korea or Hong Kong will require stagnation is a pipe dream. In fact, massive investment in Research and apartheid has been both an economic Development (R&D) as well as disaster and a human tragedy. Since raising the skills levels of black 1976, the economy has been under South Africa. Even close to home, siege as a consequence of the the South African economy did government's own actions.28 During badly compared to the neighbouring the period 1965-79, the average countries. Between 1980-88, the GDP growth was 5.4%. Since then, economy performed at an average of growth has gone continuously down, 1.3%, a strikingly depressing reaching its lowest levels in the performance compared with 1980-88 period (See Appendix:Table neighbouring countries such as 10). Only once in the 1980s has the Botswana (11.4%), Lesotho (2.9%), GDP grown by more than 5%, the Malawi (2.6%) and Zimbabwe minimum required to keep a ceiling (2.7%). on its dismally high unemployment figures, to absorb the more than As apartheid ends, high 300,000 new workers coming onto expectations will demand more the labour market every year. At the social expenditure on education, beginning of the 1970s, health, and housing. It is difficult to unemployment was about 19%. In see how the domestic economy can 29 1992, the figure is over 4O%. mobilize the investment funds Were it not for the informal sector needed to redress the damage of which has grown rapidly over the apartheid and restore the economy to past three years, the unemployment reasonable growth. While there will figure would have been much be a post-apartheid dividend in the higher. short-term, these savings will be inadequate for the task ahead. South Table 11 (See Appendix) shows a Africa will require a significant comparative analysis of the injection of capital from outside. performance of the South African Whether one travels the "high road" economy vis-a-vis the Asian NICs, or the "low road", the South African some southern African states, and economy is unlikely to generate any Brazil and Mexico. The latter two significant surplus to contribute to have similar per capita income to the development and growth of the

17 rest of the region. goods necessary for building the manufacturing sector. The apartheid labour policy also facilitated the (a) Poor manufacturing availability of cheap labour. performance Since the mid-1970s, however, Despite the fact that South Africa growth has slowed down on account is the economic giant of the of the oil crisis, the general sub-continent, the performance of recession in the world economy, the economy over the last 15 years, domestic political turmoil, and the the manufacturing sector in international pressure to isolate particular, has been disappointing. South Africa. South African exports The success of the economy over the met with resistance abroad and past 40 years depended largely on capital formation was curtailed as a favourable international prices for result of disinvestment and financial agricultural commodities and sanctions. Gold, diamonds and minerals, on credit-financed platinum kept their place in the sun import-substitution industrialization, longer to allow the state to balance centralized state management of the its books. But since 1982, the prices economy, sheltered markets, for metals have plummeted. guaranteed labour supplies and unequal income distribution.30 This The most disappointing strategy is in contrast to the Asian performance is recorded in the tigers who based their success on the manufacturing sector which accounts development of human capital, for 25% of GDP. In its present fostering indigenous technical state, the South African economy capacity, land reform, the creation has little chance of replicating the of an enabling environment for successful export-led growth strategy national and international of the Asian NICs. For a long time, competition for production, South Africa will remain as a innovation and quality through semi-industrialized country at the deregulation and deconcentration of same stage of development as that of ownership. Mexico and Brazil. Its products are not competitive in the world market. Much of South Africa's post-war Low quality standards, high economic boom had to do with the production cost levels, the lack of favourable demand conditions for its indigenous technological innovation exports, mainly gold, metals and capabilities provide some of the 31 agricultural goods. Until about the reasons. mid-1970s, commodity and mineral exports provided the bulk of The manufacturing sector is revenues that was translated into largely dependent on imported rapid growth of GDP. This in turn inputs. This import-intensity has paved the way for imports of capital been financedthroug h the generation

18 of foreign exchange in the primary public enterprise sector in the 1980s. sector, mainly from gold and Manufacturing led the collapse in mineral exports, as well as capital investment spending, but then also inflows from the West. With led the recovery in 1987-90." In declining receipts from gold and addition, because of the absence of metals, the replacement cost of indigenous technical capacity, the capita! stock in the sector will be manufacturing sector has not made expensive and it is difficult to see the necessary adjustment to where additional resources can be industrial export and competition in found for this purpose. the world market- The performance of this sector is likely to be central Another interesting aspect of to South African growth in the manufacturing, has been the trend 1990s. toward capital intensity since the 1970s in the face of growing As is pointed out above, a unemployment. The demands of post-apartheid democratic up-market consumers for expensive government will undoubtedly give durables have dictated industrial priority to the alleviation of poverty strategy. In a country where the and massive unemployment, so average black South African can prevalent in the country, if it wishes barely afford a radio, seven car to avoid a break-down in manufacturers produce each year civil-society relations. The overall thousands of expensive cars. These cost of economic reform to bring companies managed to survive about equality is estimated at R30 because of various forms of billion a year for each year until the protection accorded to them by the year 2000.u This objective state. represents a conflict with the expansion of the manufacturing The extent to which South Africa sector, since both compete for will graduate from low technology scarce resources. The rate at which to high technology production South Africa will be abfc to move largely depends on the availability of from low to high technology investment to remove capacity production, following the NICs constraints in the economy. The model, depends on how the conflict ratio of fixed investment to GDP has between output and employment declined from a high of 30% in objectives is resolved by the new 1974 to a low of 19% in 1990." government when formulating an 35 The sharpest adjustments in industrial strategy, and how investment after the politicat shocks quickly foreign business confidence and financial sanctions of the can be restored in order that the mid-1980s were in the public sector, country may benefit from the spread with large declines in government of technological innovation. Capital fixed investment after the late 1970s intensive development has been and an even sharper decline in the going on for a decade. Can ihis be tolerated? on technological innovation, product characteristics and labour The additional aspect of productivity.37 How quickly South competitiveness and industrial Africa will be able to make these innovation will depend on what the adjustments remains to be seen. The government will do with "dead argument that "we can do it because weight" conglomerates that dominate we are naturally located in Africa- the economy. About 42% of South does not hold water in a changing Africa's GDP is generated by the global economy where innovation 810 JSE listed companies and their rather than proximity is the key to - subsidiaries, which number over competitiveness. '20,000. The four largest conglomerates - Anglo American, In sum, the problem of industrial the Rembrandt group, Sanlam and innovation and competitiveness SA Mutual - control 81 % of the JSE hinges on the political outcome of listed companies. In terms of what a post-apartheid state looks capitalization, percentage of control like, and the kinds of economic and is as follows: Anglo (43.6^), political choices a new government Rembrandt group (14.3%), Sanlam may want to put forward. The 36 (13.9%) and SA Mutual (9.2%). economic solution can neither be The profitability of conglomerates socialization of production nor a was a function of their association continuation of the status quo, which with the apartheid system rather than emphasizes growth (with monopolies their capacity to innovate. Because at the centre) while neglecting social of their size and the many layers of needs. The structure of ownership management structures, inefficiency has to be changed, and the size of is widespread and innovation industries can be scaled down, with lacking. production of components parcelled out to much smaller and efficient Any serious economic companies. Deprived of its apartheid restructuring should not preclude shield, South African industry will reform in the size and ownership of be exposed to stiff competition from enterprises. What is needed is the rest of the world. enterprises that are leaner and more efficient. This implies that more conglomerates may have to divest III. GROWTH OR themselves from the many REDISTRIBUTION? investments in areas which fell outside their expertise. In today's (a) What options? world, competitiveness cannot be built on minimization of labour cost, The economic debate in South a protected domestic market, and the Africa is centred around the issue of intensification of old production the state vs. the market approach, to practices; rather, it must be based reduce the skewed income

20 distribution between a privileged and blacks. At the same time, the white minority community and the ANC advocates state intervention, impoverished black majority. In the using a variety of instruments, to short two years since the release of achieve parity between the races. Nelson Mandela from prison, the Expansion of employment through hardline statist position of the ANC, massive state-funded housing which included nationalization and programmes and upgrading of redistribution of assets, has townships are some of the essential gradually shifted, more or less features of a redistribution strategy coalescing with the economic advocated by the ANC and policies of the National Party and COSATU. This does not mean the business community.38 The term expropriation of assets from the "growth through redistribution" is privileged classes. widely being talked about among the opposition.39 The government and The business community, in the business community have coined particular, has been advocating the the term "redistribution from development of black growth". Terminologies aside, both entrepreneurship, access to credit, parties appear to have charted education and training, and common ground. They both provision of housing as the best way emphasize the role of the market and to make up to the victims of the need for economic growth. apartheid. Nationalization and Nationalization has become, and will redistribution of assets have become remain, an empty slogan. The synonymous with doom and gloom. movement toward market-oriented According to Mr. Leslie Boyd, policies has been endorsed by the deputy chairman of Anglo American major international organizations, Investment Corporation: "only by particularly the World Bank which creating more wealth can we hope to has promised significant amounts of meet the expectations of the poorer financial assistance. section of our population. Redistribution has to come through The basic reason for the shift in economic growth - the reverse is pie fl4Q the economic policy of the ANC has in the sky. to do with the collapse of communism in Eastern Europe and This philosophy is also being the failure of the statist approach reinforced fay increased involvement which dominated much of of the World Bank and the IMF sub-Saharan Africa's economic which have promised significant planning. The ANC now advocates levels of aid to South Africa only if a "mixed economy" mode]. The it sheds its racial character. In this market, if allowed to operate freely respect, Kenya and Zimbabwe are without government intervention, often cited the best models of can deliver the resources needed to transition which South Africa should close the income gap between whites emulate, without jeopardizing

21 growth potential. of southern Africa out of stagnation. How South Africa deals with the Increasingly, however, there is enormous poverty and inequality in growing consensus ihat some form the country will have a major impact of redistribution has to take place on its ability to project itself through inward-looking regionally. Among the issues which industrialization, while pursuing the new government has to address simultaneously outward-looking include the following: growth strategies, to compete in the world market. The government, the business community, and (b) Paying a high price for •international donors now realize that the golden days of the state has to play a role in apartheid removing inequalities and poverty if there is going to be peace and The injustices inflicted by stability in the country. This would apartheid have left the majority of involve massive expenditure on South Africans with poor living education, housing and stimulation standards and insufficient of labour intensive production of opportunities for empJoyment with basic goods for low income only limited access to adequate 41 groups. Massive public housing education, health care and housing programmes and the provision of (See Appendix:Table 12). In 1990, urban infrastructure are some of the for example, educational expenditure means suggested to give a kickstart for the African population was just to inward-look ing industrialization. one-fifth the level of spending for Through these forms of market whites. This represents a substantial intervention, it is expected that a loss of human capital formation. redistribution of income will take Similar disparities exist in health, 42 place. This strategy is also pension and housing services, as considered the best solution for shown in the relevant table (See generating employment and political Appendix:Table 12). stability. The main economic strategy to stimulate growth, The gap in income and the however, is believed to lie in an provision of services between the outward-looking export strategy 43 various racial groups in South Africa characteristic of the Asian model. is a weJl known fact. As shown in Table 12, the average monthly Despite this optimistic scenario, household income of Africans, South Africa will have to pay a high coloured people, Indians, and whites price for wasted opportunities. The was R52I, R1059, R1604, and South African "locomotive" has to R3297 respectively in 1988/89. With be put in reverse gear to pull the over 40% of the black population underdeveloped sections of the already unemployed, redistribution population before it can pull the rest of wealth is unavoidable irrespective

22 of what the business community economy" will have to be redirected does to publicize the merit of - first to help in the reconstruction "redistribution from growth" policy. and rehabilitation of the Even the IMF called for underdeveloped section of the black "redistribution" and growth policies community before it can serve as an (See Appendix:Table 13). engine of growth for the whole sub-region. After all, charity should A post-apartheid government that begin at home. fails to correct the legacies of apartheid cannot hope to get popular support for its economic programme (c) Inadequate capital and is doomed to face serious political crises and civil strife, The expectation that South Africa further undermining business will be able to provide the region confidence. The removal of the with capital is also misleading. If racial basis of the economic and there is anything to be learned from social structure, together with the the disinvestment campaign of the reduction of poverty and inequality 1980s, it is the fact that South are important preconditions for Africa itself is very dependent on building a post-apartheid democratic foreign capital for its development. South Africa.44 The black These external financial flows have community expects the conquest of been disrupted as a result of apartheid to bring more than just disinvestment and financial votes. Activists want jobs in the new sanctions, so that it must first re- bureaucracy. Peasants want white establish these links before it can farmland. Trade unions want a lend a hand to its poor neighbours,45 minimum wage and worker control In fact, if it generates any significant of some enterprises. external capital, a post-apartheid democratic government is most The constitutional negotiations likely to use this capital to spur which are underway will certainly domestic development in order to affect economic questions such as correct the negative legacies of foreign investment, trade policy, apartheid. This does not rule out the industrial and agricultural policy, need to strengthen existing export fiscal and monetary policy, and import support schemes to help international and domestic finance, South African businesses and just to name a few. During the importers. Beyond that, there is a transition period, South Africa will limit to what South Africa can do be more preoccupied by domestic financially for the region. problems, and its capacity to respond to and take advantage of South African exporters are often regional and international at a severe disadvantage in souihern developments will be severely Africa compared to exporters from circumscribed. The exclusive "white competitor countries whose

23 governments have made large debt over three years, commencing amounts of financing available. For in December 1990. In 1990, the example, in 1990, the Nordic debt represented 21 % of GDP and countries established the NORSAD 70% of exports. Interest payments fund to promote joint ventures were only 7.1% of exports. Large between companies in the SADCC debt servicing commitments will region and Nordic private persist through the early 1990s. enterprises. With an initial capital of Taking into account maturities on $30 million, the fund will guarantee debts outside the moratorium, the availability of foreign exchange amortization will remain at or above for the importation of spare parts $1.5 billion through 1993.47 and other production inputs essential for the running the operations of By the standards of sub-Saharan such companies. Also, the foreign Africa, the debt is not" onerous exchange needs for management, considering the size of the economy. technical know-how, licence fees However, the government will be and for dividends will be considered pressured to maintain substantial for support by the fund.46 In addition current account surpluses for to such schemes, the presence of financing large capital outflows. In "tied" aid has, in certain an import-dependent economy like circumstances, limited the potential South Africa, such pressure for South African involvement in handicaps domestic investment, some of the major projects in the employment and growth. One region. important source of hard currency has been gold. Whether the South Africa's huge debt ($21 necessary surpluses can be achieved billion) is likely to have a significant is to a large extent dependent on impact on the capital available to how this industry performs in the fund domestic development as well coming years. The government will as provide export credits to potential need more external resources to fund customers in the region (See its social and industrial development Appendix:Table 14). In 1985, the as well as regional trade. It will not government announced a temporary be able, as it has done in the 1980s, standstill on repayments of to rely more on interbank lending approximately $14 biilion of its $24 without jeopardizing the growth billion total external debt. The prospects of the private sector. government reached a rescheduling agreement with its creditors in 1986, 1987 and 1989, which brought down (d) Narrowing the Skills Gap the total stock of debt to $20 billion by 1989, The third interim South Africa's low labour arrangement of October 1989 called productivity has to do with the lack for repayment of $1-5 billion, equal of skilled manpower which prevents to 20% of remaining moratorium the running of more than one shift in

24 industrial enterprises, leading to Africa and its neighbours. Even unJer-utilizalion of installed during the height of destabiJization capacity.48 The development of and international sactions, South human resources would require Africa consistently enjoyed a massive investment in education as positive Irade balance with the well as in social infrastructure SADCC countries. In 1989, for (housing, health). The post-apartheid example, African countries imported dividend can be diverted to support R3 billion worth of goods from this effort. South Africa. Following the February 1990 reform, exports to The inferior education available Africa soared to R5,5 billion.49 to blacks can be seen in the low SADCC's priority objective of level of performance of black reducing dependence on South students in national matriculation Africa has not been fulfilled. This examinations. As shown in Table 15 pattern of relationship is bound to (See Appendix), only 41% of black continue even under a black students passed their examinations in government in South Africa. This 1989. The corresponding figures for situation is historical and it will take coloureds, Indians and whites were long to reverse. 73%, 94% and 96% respectively. At university level, the number of black The SADCC states would like to students is still insignificant although have closer economic interaction enrollment levels have increased in with a post-apartheid South Africa recent years. Even here, few as long as the price is right for manage to survive their first year of South African goods. Given the university since they are ill prepared increasing penetration of the to compete with white students with southern African market by other a better educational background. In more powerful countries, SADCC terms of faculties, the number of states do not necessarily have to buy black students in (he engineering and from South Africa as was the case in science fields is miniscule. The the past. Some, like Botswana, are entire educational system has to be sourcing their needs from other revamped in a serious way and suppliers, and proximity is no longer government resources must be made a convincing reason to trade with the available to increase black Republic, it being no longer the sole participation rates, particularly at the jnetropole in the region. With regard university level if South Africa is to to SADCC exports to South Africa, become competitive globally. South Africa offers little alternative to their trade problems. Given the dominance of agriculture and (e) Regional Trade Imbalances consumer goods production (textiles, shoes) in the SADCC region, there Assymetry characterizes the are very few goods South African economic relationship between South consumers would want to buy that

25 their own country is not producing. business community who believe that the future for South Africa's In addition, the foreign exchange trade lies in Europe, North America shortage in the majority of and the Far East. These groups sub-Saharan African countries will argue that Africa is financially broke inhibit South Africa from taking and it will take a long time before advantage of trade opportunities. weak governments can establish an With limited resources, securing enabling political and economic export markets through cosily export environment for investment and credits and guarantees could be trade. Indeed, exports to Europe . increasingly dificult. Furthermore, constitute 52% of South Africa's "donor policies, considering strong R60 billion exports in 1990. This colonial ties, often oblige African was followed by the Far East (25%), countries to purchase machinery and the U.S. (10%), Africa (10%) and spare parts as part of a package, South America and Australia (3 %).w which (caves South Africa out in the cold. These relationships have been The pragmatists, on the other developed over a long period of hand, see Africa as an important time, with all sorts of reward and trading partner in the future, in the punishment built into the system, light of the emergence of the three thus, it will be hard in the trading blocs in North America, short-term to abandon them and Europe and Asia. For example, the evolve a new arrangement. The creation of a North American vulnerability of the neighbouring common market comprising the US, countries is well understood by the Canada and Mexico will bring South business community and this Africa into competition with the explains partly why they favour aggressive low-cost producers of bilateral relations over a formal Mexico who are already selling into regional integration, with the U.S. market.51 To repeat earlier compensatory mechanisms built into observations, South Africa has to it to reward weaker partners. move from low to high technology Furthermore, the business production in order to compete community does not want to effectively with the Asian NICs and subsidize the government for the other producers from the West. To high annual membership fees it must do so, industrial "deepening" is of pay should South Africa join the utmost importance and this will PTA and SADCC. require significant resources in Research and Development (R&D), production diversification (i.e. (f) Possible Access to Western microeletronics, biotechnology), Markets investing in people, and upgrading the manpower base than simply relying on foreign capital, as has There are strong forces inside the 5 government and some sections of the been the case in the past. " Pursuing

26 a strategy of export competitiveness, (g) The Policy Dimension however, will be politically difficult against the background of black. In South Africa itself needs addition, the old apartheid structural readjustment in its bureaucracy and trade and economy. In fact. South Africa's investment regulations have to be future competitiveness rests on the radically altered to fit the new quality of economic policies that the regional and global economic government will adopt. As the reality." findings of the IMF and World Bank report indicate, the government will With regard to Eastern Europe, be under considerable pressure from its potential as a viable trading the major donor agencies to foUow partner in the short-term is limited, sensible policies which will attract since the new democracies face the foreign investment, encourage rapid same kind of problems as the rest of economic growth, and facilitate a Africa: foreign exchange crises, a different distribution of the enhanced difficult transition from command to economic benefit. The process of market economies and political domestic economic readjustment will uncertainty. Although East be very slow as different social Europeans may wish to purchase coalitions (labour, business, the South African products which bureaucracy) compete to maintain include a wide range of consumer, advantage for their respective producer and capital goods, they constituencies. These struggles can will not be able to do so unless undermine progress in economic South Africa is prepared to extend reform. export credits. The RSA is already crowded out by German and other The challenge for the new European and American firms. The government will be how to combine $24 billion which the G-7 a vigorous private sector with an governments have pledged to raise efficient state sector concerning for the reconstruction of the former itself with macro-economic policies Soviet Union and the new which promote economic growth. A democracies in Eastern Europe is new government must adopt a contingent on the purchase of prudent overall fiscal and monetary Western capital and expertise. IMF stance. This includes arresting the Managing Director, Michael growth in money supply, Camdessus, said recently that the 15 containment of inflation, former Soviet Republics would need strengthening the balance of payment $44 billion in foreign aid in 1992 situation, phasing out exchange alone, plus a similar sum for several controls, stabilizing the value of the years to come.54 currency, creating incentives for entrepreneurs, removing credit controls and replacing them with open market operations. As

27 experience from other countries to productive areas - for export. shows, fiscal mismanagement is inconsistent with macroeconomic South Africa does possess stability, and thus Jeters a private superior managerial capacity to investment recovery. governments in the rest of the region, which will enable it to put in In terms of overall economic place sensible policies that promote management, the role of the stale growth. However, overcoming the must be curtailed significantly. This economic and political legacies of includes privatization of apartheid will require more than just state-controlled industries; reduction good management skills. The of the bureaucracy; deregulation of government has to be able to fashion economic activities and removal of carefully a social accord on the subsidies. At present, the economy. One view that has been government continues to rely on advanced by the government and the direct subsidies to spur on exports of business community is of a social manufactured goods. For example, market model which argues that the Taiwan can buy South African iron state must be committed to ore cheaper than South African widespread provision of social manufacturers can because of Iscor's benefits to the extent that the market international pricing policy. does not provide these on an equal basis for all.55 A similar view is Protectionism has been at the expressed by the ANC which now forefront of South Africa's trade advocates a social democratic 56 policy for years. By keeping out market-led model. import competition and allowing local industries to grow behind protective tariff walls, consumers IV BREAKING NEW have had to bear the brunt of high GROUND: retail prices. Slashing tariffs would force these industries to compete (a) The future of regional with imported goods. integration

In addition, the government must Economic integration in the be able to reverse net capital outflow post-apartheid period will need to be as a result of its debt. The guided by the opposite principle to international debt freeze has affected that which has formed the basis for the rate of economic growth, by regional cooperation up to now: the diverting resources rather than efforts of regional institutions, such drawing resources from outside. It as the PTA and SADCC, will need also has to reorient strategic to be refocussed - from coping with industries which the government the economic costs of excluding built to deflect the threat of South Africa to deriving the benefits sanctions (ie. armaments industry), of association through South

28 Africa's effective inclusion in the integration" approach during the regional economy. This must be 1992 summit. This approach gives based on equitably adjusted priority to the integration of systems burden-sharing among all members of investment, production and trade, and promoting regional growth with including promoting the freer due consideration for regional movement of capital, goods, labour equity." South Africa should be and people within the region in seen as promoting the material order to create a true southern prosperity of its neighbours by African Community of Nations. This encouraging investment in the region action would not be compatible with and by expanding commercial overlapping PTA membership. relations - not by planning to undermine SADCC or the PTA. During the same week, the heads of states attending the annual PTA Regardless of the future policies meeting in Lusaka endorsed a draft of a post-apartheid government document which calls for the towards the region, the question integration of SADCC and the PTA. must be asked whether the existing These actions point to the fact that regional organizations - SADCC and SADCC governments hold separate the PTA - are equipped to loyalties to the two organizations incorporate South Africa as a new and thus are unable to put the member and still be able to fulfil interest of the entire region ahead of their dream of regional growth with individual national interest. This equity? Given the regional duplication of functions is unlikely disparities, admission of a strong to lead to the development of South Africa will have to be balanced and equitable relations carefully evaluated and appropriate between member states and might rules and mechanisms introduced to even weaken the capacity of the prevent South African domination of region to deal with South Africa. the region. It is, therefore, important The lack of regional consensus and to look critically where these two rational coordination can only institutions stand at this critical benefit South Africa which has the juncture. capacity to use its resources to woo weaker SADCC members to join At the present moment, there is a SACU or to establish bilateral subtle tug of war going on between economic and trade relations. It is, SADCC and the PTA as each tries therefore, important for member to absorb the other's functions as states to consider seriously the part of its own ongoing objective. viability of belonging to more than Arguing that a laissezfaire approach one regional organization. to regional integration would be inappropriate in a region with gross disparities, the SADCC governments endorsed a "development

29 V ASSESSMENT OF SADCC Africa, the region's trade with Pretoria has grown tremendously. SADCC was established in 1980 As long as donors dished out the to promote regional development gravy for regional projects, no effort among the countries of southern was made (o harmonize policies so Africa, and to reduce dependence on as to encourage growing economic South Africa. All the members of interaction among the members. SADCC, except for Angola, Since 1987, however, emphasis was Mozambique and Botswana, have given to issues relating to the joined the PTA. promotion of trade, investment and production in the region. The SADCC has a GDP of $17 strategy for the second decade, as billion (as compared to $78 billion elaborated in the 1990 annual for South Africa) but its population conference, will give priority to of 63 million is twice the size of creating an enabling environment for South Africa. the development of enterprise, skills and productivity. But these will In reviewing the successes and remain mere declarations and failures of SADCC, a much more nothing more, as there is simply no exhaustive treatment is required than political commitment on the part of the one presented here. In its first SADCC leaders. decade of existence, SADCC's strategy has centred on the The second reason for SADCC's rehabilitation and creation of failure had to do with the infrastructures; with emphasis on organization's excessive dependence transport, telecommunications, civil on external funds. This dependence aviation and energy. The has reached a critical threshold with rehabilitation of the transport more than 90% of financial corridors has been the only, and requirements coming from foreign most notable, achievement of donors. Very little mobilization of SADCC. Beyond that, the the region's own resources has taken organization has failed to translate place. Given its dismal record of the logic of regional coordination mobilizing domestic savings, it is and planning into the respective unlikely that investors will be national decision-making process. attracted to the region. The SADCC Project initiation, preparation and approach - i.e. loose cooperation - is implementation have been weak. no longer valid in a changing international and regional economic One of the most glaring failures and political environment. of SADCC has been the limited progress in intra-SADCC trade, At the beginning, SADCC was a which stands at some 5% of total novel idea. But as the organization's trade. Despite its staled intention of survival became tied to the reducing dependence on South availability of aid money, begging

30 rather than planning became the day cross-border investments resulting to day concern of the secretariat. from the adoption of regional The organization showed very little liberalization policies.58 According leadership quality and it lacked to the Bank's vice-president for vision. Even if the member southern Africa, Mr. Edward governments were unable to take Jaycox: initiatives on their own, the organization should have taken the "Successful economic integration lead to ensure that appropriate will be contingent on the policies are formulated and effective implementation of policies that elicit institutions are put in place. They the correct response from markets milked donor countries for a decade, and which will boost regional by exploiting white guilt, and they production and demand. Policy could have done it for another changes such as encouraging decade or so had it not been for the realistic exchange rate movements, rapid political changes taking place liberalizing trade, designing price in South Africa. SADCC incentives for exports, improving governments are concerned that aid public sector investment strategies, donors might abandon them for and increasing private sector activity greener pastures in South Africa. must go hand in hand with specific The fact ihat SADCC now wants to investments in physical and human move from begging to production resource development". and trade, is more indicative of the organization's bureaucratic interest In short, the basic role of donor than a grasp of concrete economic support will be toward overall, realities. It does not make sense to collective economic liberalization of duplicate the functions of the PTA PTA/SADCC countries by although the PTA itself has had little improving conditions for a more success when it comes to active role by private agents across coordinating trade relations. the frontiers of the region. The approach is designed to be consistent What is interesting is that the with and to promote liberalization very donor institutions who efforts at the national level and not commended SADCC for staying set back programmes that any away from commitments to broad individual country may want to formal economic integration among undertake on its own. This market- members are the ones that are now led integration and across-the-board insisting that SADCC should move trade liberalization is inconsistent to towards market integration. The the raison d'etre of both SADCC World Bank has proposed a $30 and the PTA. If fully implemented, million PTA/SADCC Intra-Regional South Africa will obviously be the Trade and Investment Project, main beneficiary and little progress centring around the financing of the will occur in intra-PTA trade. foreign exchange component of

31 For a post-apartheid South VI ASSESSMENT OF THE Africa, there is no pressing need to PTA formalize trade relations with SADCC. Since South African capital The PTA was established in 1981 dominates the region, the country is to promote the development of its already part of SADCC. This is member states by creating a single shown by the fact that, despite internal market, undertaking regional apartheid, economic interaction development projects and between SADCC and South Africa programmes, and encouraging was high throughout the 1980s and cooperation in all fields of economic is on the increase. South Africa's activity. Sixteen of twenty eligible annual exports lo SADCC countries eastern and southern African were, on average, five times more countries have joined - Burundi, than the region's exports to that Comoros, Djibouti, Ethiopia, country. The only thing that South Kenya, Lesotho, Malawi, Mauritius, Africa has not been able to do in the Mozambique, Rwanda, Somalia, past decade was to bid for donor Swaziland, Tanzania, Uganda, funded SADCC projects. With Zambia and Zimbabwe. The group sanctions lifted, South Africa will be has a GDP of $33 billion and a able to take advantage of SADCC population of 146 million. In projects, including the chance to bid contrast, South Africa has a GDP of on World Bank funded projects. $79 billion, more than twice that of the PTA, and a population of only In its present form, SADCC is 34 million (see Appendix A). not equipped to incorporate South Africa as its 11th member. The Unlike SADCC, the PTA has organization simply does not have instituted various instruments the institutional capacity, binding designed to encourage intra-PTA rules and regulations to promote trade, particularly in the areas of economic integration on the basis of agricultural and industrial balance, equity and mutual benefit. production, and transport and In fact, SADCC has missed the communications. Accomplishments opportunity to form a viable to date include: The establishment of economic entity when the gravy a regional PTA Clearing House in train was still running. With Harare which houses local apartheid gone, donors will be currencies for trade transactions, selective as to where they put their thus enabling trading partners to financial support. It is unlikely that save valuable foreign exchange. The SADCC will overcome both the second is the PTA Trade and political and economic hurdles so Development Bank located in vital for increased investment and Burundi for financing regional aid. projects. The third is the Unit of Account of the PTA (UAPTA) travellers cheques that can be

32 purchased with local currency and even though it includes Mauritius can be converted in any PTA which has the most open economy member bank. This allows business of the SSA - and Somalia and people to purchase goods anywhere Uganda which are the least open. in the region and meet (heir travel Most PTA countries have a degree expenses without using any hard of openness that is bunched between currency such as the dollar." In 29% and 49%. 1990, the PTA decided to work towards the establishment of a single There are many reasons for lack common currency by the year 2000. of progress in intra-PTA trade. The first is the lack of tradeable goods of The PTA is structured to check international quality within the PTA. multinational penetration of the Even when such goods are available, regional community.60 The local the lack of trade financing and content and rule of origin clause is export credit guarantees becomes a designed to curtail external problem. Second, transport costs penetration. In addition, the PTA is have become prohibitive, in the process of devising particularly for the land locked programmes to assist the countries. The smaller and weaker economically weaker members members complain about the lack of through programmes for rapid rural adequate mechanisms to enhance the transformation and capacity building equitable distribution of costs and of skills. This is bound to lead the benefits among the member states.63 organization into a collision course Also, the tendency on the part of the with SADCC.61 most industrialized members, such as Kenya and Zimbabwe, to The PTA has achieved limited dominate the sub-region has success with regard to the promotion consistently been raised in PTA of intra-PTA trade. Trade with SSA annual meetings. Malawi, Mauritius (Sub-Saharan Africa) accounts for and Djibouti have particularly been 8% of overall trade of the PTA critical of the organization's inability to adopt compensatory and countries treated as a group, thus 64 implying that intra-PTA trade is corrective measures. equivalent to 7% of total trade. However, there are country In addition, the Rules of Origin variations. For example, only 1% and local content requirements have and 3% of the total trade of been contentious. Most countries Somalia, Mauritius and Ethiopia is have challenged the Protocol on with SSA at one extreme while at Rules of Origin, which stipulates the other end, about 20% of the that goods declared for trade must trade of Uganda and Rwanda is with come from companies with at least SSA partners.62 As shown in Table 51% equity holding by nationals. 5, the PTA has a degree of openness Since most countries cannot meet of 41%, the average for the group, this requirement, this rule has been

33 relaxed. The concern now is more to reviving and then linking where the goods are being production capabilities of member manufactured, raiher than the states. As Martin (1990) succinctly nationality of the manufacturer. argues: Thus, the local content criteria now postulates that at least 40% should Attempts to promote wider economic be of local value, or alternatively exchanges based on notions of not more than 60% (c.i.f.) of cost of comparative advantage immediately imported material. Where goods are exacerbate uneven patterns of in short supply, the local content can accumulation, and thus trigger -be relaxed to 30%." struggles between nationally-based dominant classes. It is precisely Progress on trade liberalization these pressures that have torn apart has also been slow. The main focus regional bodies elsewhere in of internal liberalization has been Africa.66 tariff preferences for a limited list of products. According to the World South Africa's entry into the Bank, official intra-PTA trade is PTA, emphasizing market handicapped by extensive non-tariff integration alone, .will only help barriers and over-valuation of the exacerbate core-periphery relations different currencies. Thus, the PTA and help weaken equitable regional has postponed a 1992 deadline for cooperation. Some members, such as implementing various intra-union Kenya and Zimbabwe, with a large liberalization decisions to 1996 and industrial and manufacturing base, this may well slip further. will resist South Africa's membership into the community for The World Bank would like to fear of being priced out in the see the PTA focus its activities on competition. In addition, the smaller increasing intra-regional economic PTA members engaged in their own activity by (a) reducing non-tariff import-substitution industrialization barriers to imports; (b) promoting with the aim of tackling cross-border investment ventures; (c) unemployment, will resist South permitting traders and investors to Africa's admission to the PTA. If transact on the basis of the trend toward regional free trade market-determined exchange rates. continues, the In short, a simple market integration Pretoria-Wi (waters rand- Vereeniging approach is recommended. While (PWV) region would become the trade expansion among the countries new "bambazonke", roughly of the region is very important, it meaning polarisation between the does not constitute a significant latter and the SADCC region.67 constraint to self-sustained growth. Given South Africa's dominance in The PTA's strategy should go the region (excluding Kenya and beyond a simple market integration Zimbabwe), an economic community approach, and instead give priority dominated by that country - South

34 Africa - will not be welcomed.61 VII AREAS OF FUTURE COLLABORATION In addition, given the crisis of the 1980s, with excess industrial The World Bank and the African capacity and high unemployment in Development Bank (ADB) would the region, governments in the like to see regional integration that region should put their efforts in provides additional means of moving improving capacity utilization and a group of countries towards overall reduction of unemployment before economic liberalization and market jumping on the bandwagon of free integration by improving conditions trade and integration with South for a more active role by private Africa, further exposing themselves agents across the frontiers of Africa. to the dictates of a stronger actor. However, there exists in Africa Therefore, protection issues will today strong interests that resist remain on the economic policy liberalization for good reasons. After agenda of the region, including ten years of structural adjustment South Africa. In this regard, the efforts in the SSA, progress with PTA is better structured to deal with liberalization has been slow and external penetration than SADCC accompanied by reversals. does. To start with, liberalization At the January 1992 PTA policies have been conceived as summit, the heads of states gave the national programmes with national green light for the integration of goals and using national financial SADCC and the PTA. This move policies and thus have lacked a was motivated to keep South Africa regional dimension. Since the at arm's length until regional emphasis of SALS (Southern African policies are harmonized so as to Liberalization Systems) is on bring the PTA/SADCC member demand management, this has not countries to a position roughly encouraged intra-regional trade. In simitar to that of South Africa in addition, liberalization measures order to bargain effectively. The have reduced the size of preferential new PTA/SADCC could then margins and hence encourage trade perhaps coordinate development as outside the SADCC and the PTA separate but equal partners rather rather than within these trading than South Africa being a dominant blocs.*9 In fact, trade liberalization member of either SADCC or PTA. has opened up the SADCC market The action may also have been to cheap supplies from outside the designed to pre-empt possible South region.70 Admission of South Africa African desire to convert SACU into into the PTA without instituting a common market, further tempting rules and regulations to prevent other SADCC members to join it, as domination by the former, could well as Zaire. only undermine intra-regional trade in the region.

35 There are many areas where industrial production and South Africa and ihe PTA/SADCC ivuinufacturing capacities, including countries coulti forge vital economic especially the reduction or cooperation. Whether or not elimination of excess plant capacity, southern Africa as a whole or in part as well as the production of opts for formal integration, agricultural inputs, such as cooperation is necessary at technical fertilizers, pesticides, vaccines and or policy levels if the region is to sprays. compete with world trading blocs. The real challenge is how to re-orient the region's banking, (c) Alternative Energy financial, institutional and transport Strategy infrastructure towards sectors other than trade. These include the Opportunities also exist for joint following: production of new and renewable forms of energy and up-grading existing capacities as well as trade in (a) Regional Food Security energy. For example, it would be in the interest of Angola to supply Because of demographic and South Africa with oil in exchange ecological reasons, South Africa will for consumer and manufactured become a net importer of food in the goods for the Angolan markets. future. Countries such as Zimbabwe, Already, high level contact between Malawi, Zambia (even Mozambique) the two countries is taking place. In might under certain conditions, addition, Angola, Lesotho, Malawi, become exporters of food to South Zambia and Mozambique are richly Africa (fruit, grain, vegetable,meat). endowed with surface water, thus In return, South Africa can provide providing opportunities for cross agricultural technology, expertise border water and hydro-power and inputs. Opportunities exist for supply schemes. South Africa can joint programming, ensuring also play a role in the rehabilitation significant increases in agricultural of the huge Cahora Bassa production, especially food hydro-electric scheme on the processing for domestic Zambezi River. consumption, including the production of cereals for intra-African trade. (d) Trade and Finance Policy

It has been noted earlier that (b) Regional Industrial/Agro- restrictive banking procedures and processing Strategy inadequate trade financing facilities are some of the constraints to A common platform for intra-regional trade in southern restructuring and strengthening of Africa. It is of the utmost

36 importance that the governments in Capacity Building Facility can be the region establish appropriate trade used to strengthen the training financing institutions such as an programmes of regional universities. Export/Import Bank and Export and Import Insurance Schemes. The PTA Trade and Development Bank and (f) Coordination of Resource the DBSA (Development Bank of Management Southern Africa) can play a major role in facilitating trade in the There is also a real need for region. Closer cooperation with integrated strategies for the chambers of commerce, regional protection of the environment and trade promotion councils, financial natural resources, joint use of water institutions and business and resources and river basins and professional associations should common programmes for drought actively be encouraged. management, soil erosion and desertification control. The recent agreement between South Africa, (e) Human Resource Mozambique and Swaziland to Development exploit the waters of the Nkomati river, is the type of cooperation to It has been pointed out in this be encouraged. There are also plans report that skills gaps in the region to transfer water from the Zambezi will remain an important constraint and the Okavango systems via canals to intra-regional trade and or pipelines to the Transvaal. production. There are many universities and training institutions in South Africa and the (g) Promotion of Regional PTA/SADCC region. South Africa Tourist Industry alone has some 25 universities, technical colleges and research The regions of eastern and institutions. Given the resource southern Africa are already famous constraint in the region, ways to for the best tourist spots in the rationalize existing facilities and world. On the average, 2.5 million harmonization of human resource tourists visit East Africa alone. With development policies must be found. the dismantling of apartheid and the Priority should be given to the resolution of conflict in the region, adaptation of science and southern Africa can rival East technology, especially for upgrading Africa. Therefore, eastern and technical skills and managerial southern Africa can benefit a great capabilities, as well as in the deaJ if relevant governments, management of domestic and regional airlines, chambers of external resources for integration commerce and tour operators and cooperation. Existing resources coordinate their activities. The from the World Bank's African growth of tourism can generate

37 billions of dollars in hard currency, to take the lead in transforming the employ thousands >f people, and existing integration efforts in eastern provide income to farmers, hotel and southern Africa. These two and transport operators, and many institutions believe that a weak South more. African economy is in no one's interest and they are prepared to The 1992 SADCC consultative pour billions of dollars into the conference has endorsed South African economy. By reviving collaboration in the above areas, the South African economy, it is without reference to the need for believed that the process of market coordination with the PTA which is integration can be moved forward, also doing the same thing. Urgent by applying the managerial, action must be taken by the member institutional, and financial capacity states to eliminate duplication of South Africa. between the PTA and SADCC. The impoverished population of the Whatever their motives, the region can no more afford to pay a Africa Development Bank and the high price for the extravagant follies World Bank are correct in their of well-paid competing bureaucrats assumptions that the inclusion of of these two institutions. South Africa can bring dynamism to a region where progress in integration has been slow. This VII IS THERE A FUTURE would ultimately involve the FOR A SOUTHERN merging of SACU/CMA with the AFRICA ECONOMIC PTA/SADCC to form a larger COMMUNITY? southern Africa Economic Community. This obviously has to The long term economic interest take place step by step as envisaged of southern Africa can best be by the founding fathers of the PTA. served by formalizing economic integration along the lines of the The PTA is conceived as a free European Economic Community. trade area (i.e. gradual reduction This in essence will require the and eventual elimination of customs integration of the PTA, SADCC, duties). This is a first step towards SACU and CMA (Common the establishment of a customs union Monetary Area) to form one united with a common external tariff, as in Economic Community for Eastern the case of SACU. Therefore, there and Southern African States is no contradiction between the PTA (ECESAS), as envisaged by the and SACU in terms of structure and founding members of the PTA.71 function. The only exception is that There is already pressure from the PTA treaty demands major donor agencies, such as the most-favoured-nation treatment World Bank and the African among its members, whereas the Development Bank, for South Africa SACU agreement does not allow

38 such preferential treatment. Community will be development financing and its administration. The second stage would be for a Although the PTA has established a common market, which entails the PTA Trade and Development Bank, free movement of factors of it is underfunded. Given a great deal production and commodities within of interest by ADB and World Bank the area. Given the level of in using the Development Bank of disparities among the members, a Southern Africa (DBSA) as a junior common market would be ruled out partner in the development of since -the free movement of labour Souther Africa, the region's trade would not be acceptable to receiving financing problem could be solved if countries because of their own the PTA Bank and DBSA were problems regarding job creation. merged and their assets The third stage and eventual goal of consolidated. The DBSA is the PTA is an economic community structured in the same way as the which entails harmonization of ADB and the World Bank and it has national economic policies among the professional capacity to the member countries.72 undertake such a task. Already, the DBSA is cooperating with the World South Africa can bring into the Bank in respect of the Lesotho new Economic Community a Highlands Water Project, and is number of valuable experiences as financing projects such as the well as institutional support. rehabilitation and modernization by Monetary harmonisation is one such the South African Electricity Supply example. The PTA has adopted a Commission (ESCOM) of the strategy towards the establishment of Maputo power station. The a single common currency by the individual national banks would then year 2000. The absence of a simply become instruments of common currency has been a major finance administration thus avoiding impediment to intra-regional trade. the need to create new trade Although the PTA travellers cheque financing institutions, similar to the is a start in the right direction, it one proposed by SADCC. does not come close to instituting a common currency for the whole A third contribution by South region, such as the CFA in Africa to the new Economic Francopohone West Africa. In terms Community will be in the area of of institutional capacity, there should customs administration. As the be little difficulty with architect of the longest running harmonization of monetary policies customs union, SACU, South Africa as the Common Monetary Area will has a wealth of experience and this take care of this." can be used to strengthen the capacities of member countries in Another potential input from customs administration. South Africa to the new Economic

39 A fourth contribution by South post-apartheid southern Africa is Africa will be in the field of how far the region should extend domestic resource mobilisation and geographically in terms of its allocation. The PTA does not have a institutional economic links - should programme to develop the financial it embrace the present the PTA area markets of member states. Although of eighteen countries or should it be commercial banks dominate in the restricted to the present South mobilization of domestic financial Africa/SADCC area? Although this savings, cross border financial is an important question, what mobility is discouraged- With the determines successful integration is exception of South Africa, Botswana the quality of macro-economic * and Zimbabwe, capital market policies of member states and not institutions to facilitate cross border the size of the membership. Those mobility are non-existent throughout countries with policies attractive to the region. South Africa has well investors would develop more developed capital market institutions rapidly than others. Funds, for (i.e. issuing houses, share instance, would move to countries underwriters, security markets) and with lower taxation rates and more it can assist the neighbouring favourable exchange control countries in developing similar policies. Therefore, the new institutions.7* Once similar capital economic community should markets are established, they will be embrace the current area of the able to provide long term loans for PTA, subject to some organisational development purposes at national changes. and regional levels. Another reason for maintaining The existing project and the current PTA area has to do with infrastructure coordination function the fact that the current composition of SADCC will be included in the of SADCC will have to change in new entity. Instead of regional the next three years regardless of projects being entirely funded by South Africa's decision whether or donors, project activity will develop not to join SADCC. The SACU along the lines of the Lesotho grouping of countries - BLSN Highland Water project, whereby (Botswana, Lesotho, Swaziland, regional banks such as the DBS A, Namibia) - would have to choose along with national governments and between SACU and SADCC, and donors, will participate. This will would in all likelihood opt for the solve the problem of duplication former. This will pave the way for between the PTA and SADCC. more countries - Malawi, Angola, Mozambique - to join SACU, further weakening the region's IX STRUCTURE capacity to negotiate effectively with Pretoria. Even if SADCC were to An important point at issue for succeed in its latest initiative of

40 'developing integration', that regard, special provisions similar to literally duplicates the functions of the existing arrangement between the the PTA, the inclusion of South PTA and BLS states or between Africa as the eleventh member, South Africa and Lesotho in the would simply bring to fruition the context of SACU can be applied. latter's unfulfilled dream of a constellation of southern African One problem area that could arise States (CONSAS), with South Africa is the question of labour mobility. If calling the shots. By choosing to go free movement of labour is allowed it alone and by ignoring the PTA's initially, millions of people will plea for coordination, SADCC migrate to centres of growth, would be serving South Africa's and notably South Africa, Kenya and not the region's interest. In the end Zimbabwe. To avoid this influx, SADCC would be contributing to rules governing labour mobility the "recolonisation of southern should be delayed until such time Africa" by South Africa - of course, that imbalances are corrected. The with the assistance from the World eventual goal, however, should be to Bank and the Africa Development move from a customs union to a Bank. This would be a great tragedy common market and then later to an to the peoples of southern Africa. economic community as previously The structure of the economic stated. In this regard, the existing community will have to be flexible PTA treaty has built into it, and change within a specified time step-by-step - mechanisms for frame. Given the variations in the achieving the eventual goal of an size and level of development of the economic community. members - from tiny Djibouti to gigantic South Africa - the most In terms of sectoral cooperation, d is advantaged (and poor performers) the PTA has initiated sub-regional members should be grouped into an programmes and projects that are association (ESAFTA)-Easteni and also covered by SADCC: southern Africa Free Trade agriculture, industry, energy, Association, similar to EFTA. The transport and telecommunications. countries with a higher level of Like SADCC, decisions are taken by development or those with more consensus. Unfortunately, funding open economies could be grouped to for the PTA initiated projects has form the core of the Economic been marginal as donors Community, since integration among concentrated their support on this category of countries would be SADCC. From the point of view of easy (see Figure 2). For those within donors, support to SADCC had an ESAFTA, special exemptions will immediate political payoff, since be accorded to them until they can support to SADCC was perceived as make the necessary domestic fighting apartheid. adjustments before they can be granted full membership. In this

41 X WILL SOUTH AFRICA be fostered and promoted in the JOIN THE PTA AND southern African region to the SADCC SOON? benefit of all its members - but it is premature to speak of a "common Although both SADCC and the market" in the traditional sense. PTA are expected to extend South Africa wiJJ have to forge invitation to a democratic different and new instruments of post-apartheid regime to join both economic cooperation in southern organizations, a new government Africa." will be too preoccupied with . domestic matters and is unlikely to South Africa sees itself as the 'give much attention to regional regional economic power. Thus, the issues. What are the likely choices reluctance to accept formal that a post-apartheid regime will economic integration is based on the make vis-a-vis the region? Without assumption that (a) southern African being speculative, one can expect states will do little to develop their the following options: own productive potential; and (b)that the democratic forces in South Africa will be defeated, and (c) that (a) Re-establishment of earlier the forces which benefited from relations apartheid - i.e. local and foreign capital, and the apartheid The most desirable outcome bureaucracy will remain dominant in preferred by South African business the society. There is also a strong community will be re-establishment belief that the ANC is not prepared of relationships as they existed to take power. This view is between 1945-75 period - with RSA reminiscent of the CONSAS capital dominating the region, and strategy. The only difference is that serving the interests of local elites in it will be the carrot, not the stick, the SADCC region. This might that will be used to make it happen. involve a resuscitation of past patterns of accumulation - i.e. commerce, tourism, manufacturing (b) Expand SACU and raw material extraction(Martin, 1990). There are strong forces A more likely scenario is that inside the regime and the business South Africa will expand and community who are antagonistic to strengthen its customs union regional integration. In a recent (SACU) - a region within a region. speech in Norway, a high level The countries closely allied with official of the South African South Africa in the economic Chamber of Business (SACOB) sphere, namely Botswana, Lesotho, argued: Swaziland and Namibia, are unlikely to give up their membership unless Mutual economic integration must they found an immediate substitute

42 for it. Revenue from customs duties involving reduced or represents a significant portion of non-quantitative trade restrictions for total revenue sources for BLS states. specified goods, with payment in In 1986/87, for example, customs foreign exchange or local currencies; revenue received by Botswana trade protocols with a strong amounted to P197 million, 16.6% of clearing/barter element; or a trade all government revenue. In agreement with a 'most-favoured' Swaziland, the amount for 1986/87 clause for third parties; or trade was El 19.8 million, 48.3% of based on Open General Import revenue. Lesotho received Ml44.3 License (0G1L) where all goods million, 56% of revenue. In fact, which are put on the licensed list countries such as Mozambique, can be freely imported,76 Angola and Malawi will try to find a way to become members of SACU The three options outlined above since they already have deeper are quite possible scenarios, since relations with South Africa than they the movement towards trade do with SADCC or the PTA. liberalization and the removal of barriers will take longer. Experience But before SACU can be from the European Community and enlarged, new negotiations have to the Economic Community of West be undertaken. Since the mid-1980s, African States (ECOWAS) shows the BLS states have been unhappy that the reduction of tariffs, the with the existing agreement and have establishment of a common been seeking to renegotiate it again. currency, and the harmonization of SACU had a detrimental effect on macro-economic policies, will take the industrialization of the BLS much longer, given the divergent states. The recent decision by levels of development among Citroen to abandon its investment members and the level of political agreement with Namibia is commitment. indicative of this problem. Furthermore, in spite of the encouraging trend toward (c) Expand bilateral relations democratization in the region, establishing accountable institutions The third option is for South of government, ensuring people's Africa to delay joining either the participation in national PTA or SADCC. Instead, it should development, and creating an concentrate on expanding different enabling environment for forms of bilateral trade and formulating sensible preferential agreements. Already, macro-economic policies will take South Africa has bilateral relations longer and is bound to present with Zimbabwe, Mozambique and difficulties. Unless driven by Malawi. This could take different political motives, from the economic forms: a bilateral trade agreement point of view there are no

43 convincing reasons for South Africa suggestions arc offered: to join the PTA in ihe near future. As already suggested, South Africa First, southern African states is better off pursuing bilateral trade should not look to a post-apartheid arrangements until it gains the South Africa for their economic confidence of its neighbours. The salvation. South Africa will be too SADCC states also need more time pre-occupied with its own problems to make the necessary internal to come to their rescue. As the adjustments- before they engage in economy grows, it should address formalized integration schemes with the question of poverty and the South Africa. racial disparities in incomes. Far from coming to the region's aid, a future South African government XI CONCLUDING might instead pursue policies REMARKS harmful to its neighbours. For example, to reduce unemployment, This report has focussed it might discourage migrant labour, primarily on the prospects of which would have disastrous economic integration, as opposed to consequences for countries economic cooperation, in post- dependent on their remittances to apartheid southern Africa. It is shore up their foreign exchange important to note the distinctions earnings. between the two terms. Countries can cooperate economically without Second, South African policy- harmonising policy instruments. makers need to recognise the painful SADCC illustrates this approach. On reality that the majority of sub- the other hand, economic integration Saharan African governments are entails harmonisation of some policy completely broke. All governments instruments, such as tariff, customs, in the region have been hit by falling monetary and fiscal policies. A terms of trade and a rising review of the evidence indicates that international debt burden. While the basis for cooperation does exist some countries have improved their in southern Africa. However, the short-term trade positions, few have conditions for consummating a gained in any of the indicators that formal "economic marriage" measure real, sustainable between South Africa and its development. Rather, most have slid neighbours do not exist at the backwards into growing inequality, moment. Both South Africa and its environmental degradation, de- neighbours face very similar industrialisation and poverty. It political and economic challenges of would be some time before structural reform and adjustment, appropriate and sensible policies are under deteriorating international and put in place and the production economic conditions. On the basis of decline is reversed. the foregoing analysis, the following

44 A final point to be made is that 5. Gerhard de Kock, "Economic the survival of the region largely Cooperation in sub-Saharan Africa", speech delivered to the depends on the ability and Council on Foreign Relations in willingness of the governments New York, reprinted in Mining concerned to harmonize economic Survey, No.2, 1989, policies, and to find ways in the appropriate utilization of existing 6. David Graham, "The Prospects for regional resources to generate Increased Economic Interaction in balanced development. The cost of Southern Africa", ISSVP Bulletin, No. 3/88, University of Pretoria, inaction could be very high. In the Institute for Strategic Studies, p.2. new world order, southern African states will have very little room to 7. William G, Martin, "The Future of manoeuvre. Southern Africa: What Prospects After Majority Rule?", Review of African Political Economy, No.50, ENDNOTES March 1991, pp.115-134.

1. SADCC (1992), "SADCC: S. Dan O'Meara, "Regional Towards Economic Integration", Integration in Post-Apartheid Theme Document for the January Southern Africa - Dream or 1992 Annual Consultative Reality?" in van Nieuwkerk and Conference, (Maputo:29-31 van Staden (eds) Southern Africa At January 1992), p. 10. the Crossroads: Prospects for the Political Economy of the Region, 2. Ibid. SA1IA Special Study Series, (Johannesburg, October 1991), 3. Peter Meyns, "The New World pp. 120-140. Order and. Southern Africa in the 1990s", in van Nieuwkerk and van 9. Bernhard Weimer, "Post Apartheid Staden (eds), Southern Africa at the Southern Africa: Regional Crossroads: Prospects for the Cooperation and Trade", Political Economy of (he Region, International Afrika Forum, SAUA Special Studies Series, Vol.27, No.2, 1991,p.I73. (Johannesburg, October, 1991), pp.56-76; also in the same 10. Stephen R. Lewis, The Economics Volume, Robert Davies, "South of Apartheid, Council For Foreign Africa Joining SADCC or SADCC Relations Press (London :1989), Joining South Africa?: Emerging p.145. Perspectives on Regional Economic Cooperation 'After Apartheid", 11. Christopher Coker, "Changes and pp.235-244. Limits of a Siege Economy", RSA 2000: Dialogue wilh the Future, 4. World Bank, Sub-Saharan Africa: Vol.11, No.l, 1989. p.57. From Crisis to Sustainable Growth. (World Bank: Washington D.C.: 1989).

45 12. Thabo Mbeki, "South Africa's 23. SADCC, Macro-Economic Survey International Relations - Today and 1987/88, (SADCC: 1989), p.240, Tomorrow", South Africa Table 10.5. International, Vol.21, No.4, (1991) pp.231-35. 24. Dani W. Nabudere, "Africa's Development Experience Under the 13. World Bank, op.cit.t p.8, Lome" Convention", paper prepared for Pan-AFrican Conference on 14. World Bank, op.cit,, p. 18. Thirty Years of Independence: Results and Prospects 15. World Bank, op.cit. pp.89-107; (Windhoek:May 23-24, 1991) also Robert Bates, Markets and State in Tropical Africa, University of California Press 25. Joseph Hanlon, SADCC in the (Berkeley:l981). 1990s: Development on the Frontline, Economist Intelligence 16. United Nations, Financing Africa's Unit, Special Report No. 1158, Recovery, Report and (September 1989). Recommendations of the Advisory Group on Financial Flows for 26. Sandy Kuwali, "SADCC: The Africa (New York: 1988). barriers within", The Southern A fr i c a n Economist, 17. World Bank, World Debt Tables October/November 1989, p.33. 1990-91 Edition; External Debt of Developing Countries* 27. William Martin, op.cit. (Washington, D.C.:1990). 28. Christopher Coker, op.cit. pp.5O- 18. World Bank, World Development 57. Report 1991, Oxford University Press, (London:1991). 29. World Bank, South Africa: Macroeconomic Issues for the 19. World Bank, op.cit. Transition, October 23, 1991, p .2.

20. World Bank, op.cit., p.21. 30. Chrisopher Coker, op.cit.; and also Stephen R. Lewis, op.cit. 21. World Bank, Adjustable Lending Policies for Sustainable Growth, 31. Nicole Nattrass, "Post-war Policy and Research Series No. 14 Profitability in South Africa: A (Washington, D.C.:1990). Critique of Regulauon Analysis in South Africa", Transformation, 22. Frances Stewart, "Are Adjustment No.9, 1989:66-80; C.L. Policies in Africa Consistant with McCarthy, "Structural Long Run Development Needs?", Development of South African Paper prepared for a panel of the Manufacturing Industry", South American Economic Association African Journal of Economics, (Washington, D.C.:December 30, Vol.56, 1988, 1:1-19. 1990). 32. World Bank, op.cit. p.9.

46 33. From the point of view of foreign 39. P. Moll el al (eds.). Redistribution investors, this is not a good sign. - How U works in South Africa?, They will not be interested to Cape Town: David Philip 1991; •"-vest in South Africa when local see also same author, The Great investors are scaling down their Economic Debate: The Radical's investments- Financial institutions Guide to the South African in particular have been placing the Economy, Johannesburg: Skotaville bulk of their cash in the financial 1991. markets and property rather than into greenfields developments 40. "Wealth Creation Beats Charity", which would create job The Citizen, February 19, 1992, opportunities and economic p.25. Summary of speech delivered growth. at the Annual Frankel, Max, Pollak, Vinderine Investment 34. Azar, Jam mine, quoted in the Conference in Johannesburg. 1991/92 Race Relations Survey, p.441. 41. R.W. Bethlehem, "The Need for Change in the South African 35- F. Stewart and P. Streeten, Economy", in D.J. van Vuuren et "Conflicts between Output and at. (eds), South Africa in the Employment Objectives in Nineties, Pretoria: HSRC Developing Countries", Bulletin of Publishers 1991, pp.389-412; also the Oxford Univenity Institute of his 'Economic Restructuring in Economics and Statistics, 34 Post-Apartheid South Africa", (1972). paper delivered at the annual Conference of the British 36. McGregor's, Who Owns Whom, International Studies Association 1992. (December 1991).

37. Raphael Kaplinsky, "After 42. H. Zarenda, "The rationale Sanctions: Implications for the underlying the policy of inward Development of the Manufacturing industrialization in South Africa", Sector in a Democratic South Development South Africa, Vol.6, Africa", paper delivered at the No.4, (1989) , pp.409-20. Conference on South and Southern Africa into the 21st Century, 43. South African Chamber of Maputo, 10-11 December 1989, Business, Economic Options for p.12-13. South Africa, (September 1990).

38. Patrick Bond, South African 44. F. Wilson and M. Ramphele, Socialists on Crisis: The State and Uprooting Apartheid: The South the Economy, Johannesburg: African Challenge, (New York, Phambili Books 1991. W.W. Norton and Co. 1989).

47 45. Gavin Maasdorp and Alan 54. "IMF, World Bank to focus on Whiteside, "Economic Relations in Soviets", The Citizen, Southern Africa - Changes Johannesburg, April 24, 1992, Ahead?", paper delivered at the p.31. Conference on South and Southern Africa into the 21st Century, 55. R.W. Bethlehem, op.cit. Maputo, 1989. 56. P. Le Roux, "The Case for a 46. Ame Tostensen et al., The Social Democratic Compromise", Nordic/SADCC Initiative: A Nordic in N. Nattrass & E. Aldington Review, Chr. Michelsen Institute, (eds), The Political Economy of Report 1990S, pp.57-63; also South Africa, Cape Town: Oxford Southern African Economist, University Press, 1990, pp.24-43. February/March 1990, p. 14. 57. Reginald Herbold Green, "How to 47. Institute of International Finance, Add 10 and One - Some South Africa: Country Update, Reflections on Attaining Creative Washington, D.C., November 17, Economic Interaction Between 1989. Southern Africa and the 'New' South Africa", paper prepared for 48. Bernard Weimer, "New Deal Africa Leadership Forum Economics: Post Apartheid Conference on the 'Challenges of Priorities", Indicator, Vol.8, No.3 post-apartheid South Africa to OVinter 1991). pp.33-36. Southern Africa in particular and Africa in general', Windhoek, 8-10 49. SACOB Review, Firsl Quarter, September 1991, pp. 20-21. 1991. 58. World Bank, Intra-Regional Trade 50. Gerhard Erasmus, "Export and in Sub-Saharan Africa, Trade Service", Financial Mail Washington, D.C.:April 21, 1989 Survey, September 14, 1990, p. 17. (Confidential Draft).

51. "Emerging From the Tunnel", 59. Guy Martin, "The Preferential Financial Mail, February 21,1992, Trade Area (PTA) for Eastern and pp.5-6. Southern Africa: Achievements, Problems and Prospects", Afrika 52. Raphael Kaplinsky, op.cit. Spectrum, No.2 (1989).

53. Andre" du Pisani, "Ventures into 60. Tandon, Yash, "SADCC and the the Interior: Continuity and Change Preferential Trade Area (PTA): in South Africa's Regional Policy points of convergene and (1948-1991)", in van Nieuwkerk divergence1, in Shaw, T. and Yash and van Staden (eds), Southern Tandon (eds). Regional Africa at the Crossroads: Prospects Development at the International for the Political Economy of the Level, Vol.2, Lanham, New York, Region, SAIIA Special Studies 1985, pp.113-133. Series (October 1991), pp.188-234.

48 6), Interview with Dr. Bengu Wa 73. Chinyamata Chipeta, "Towards an Mutharika, Secretary-General of Integrated Regional the PTA, in Southern African Macroeconomic Policy Framework Economist, April/May 1991, p.45. for Southern Africa", SAPEM (February 1992), p.27. 62. World Bank, Irura-Regional Trade in Sub-Saharan Africa, (April 21, 74. Chipeta, opxit. 1989), Table 8, p.45. 75. R.W.K. Parsons, "South Africa 63. Dr. Bengu Wa Mutharika, and Southern Africa - A New ' Secretary-General of the PTA, Era?", address to Scandinavian- op.cit. pp.45-46. South African Business Association Conference, Oslo, Norway (August 64. Guy Martin, op.cit. 29, 1991), p.8.

65. D. Mbilima, "Regional 76. Bemhard Weimer, Vie Southern Organization in Southern Africa", African Development Coordination in Alan W. Whiteside (ed), Conference (SADCC): Past and Industrialization and Investment in Future, SWp-AP 2673 (December Southern Africa, James Curry 1990), p.23. Publishers (London: 1989), pp.36- 37.

66. William Martin, op.cit.

67. Paul Jourdan, ANC Department of Economic Planning, quoted in Patrick Bond's "South Africa Extending Economic Grip Upwards", The Financial Gazette, March 12, 1992, p.32.

68. Maasdorp and Whiteside, op.cit. p. 13.

69. J. Boidin, "Regional Cooperation in the Face of Structural Adjustments", The Courier, No. 112, November-December, 1988.

70. Hanlon, op.cit. p.56.

71. PTA Treaty, Preamble, p.viii.

72. Guy Martin, op.cit., p.160.

49 APPENDIX

TABLE I: SOUTHERN AFRICA: TRENDS IN FOREIGN DIRECT INVESTMENT (in Millions of US dollars)

COUNTRY " 1980-84 1985-89

ANGOLA 373.6 -27.5 BOTSWANA 307.1 354.2 LESOTHO 19.4 37.5 MALAWI 13.2 1.0 .MOZAMBIQUE 6.3 1.7 SWAZILAND 47.7 192.3 TANZANIA 33.9 10.1 ZAMBIA 106.0 128.8

ZIMBABWE -0.2 -20.1

SADCC TOTAL 907.0 678.0

SOUTH AFRICA 944.0 -453.0

SOURCE: UN Centre for Transnational Corporation TABLE 2: GROWTH OF GDP (AVERAGE ANNUAL PERCENTAGE) AT CONSTANT 1980 PRICES

COUNTRY 1965-73 1973-80 1980-87 19891 19901

ANGOLA 3.7 - 9.4 0.6 BOTSWANA 14.7 10.5 13.0 6.3 8.3 LESOTHO 3.8 7.6 2.3 -2.1 4.1 MALAWI 5.9 5.3 2.6 4.1 4.8 MOZAMBIQUE - - -2.6 5.3* 1.5 SWAZILAND 7.6 3.5 3.3 4.6 4.0 TANZANIA 4.8 2.3 1.7 3.3 3.0 ZAMBIA 2.4 0.3 -0.1 0.1 - 1.9 ZIMBABWE 8.0 - 0.1 2.4 4.5 2.0

SOURCE; SSA, Table 2; l SADCC Annual Progress Report 1990-91

50 TABLE 3: MANUFACTURING VALUE-ADDED (MVA) PER HEAD CONSTANT 1980 $ PRICES

% OF CHANGE COUNTRY 1970 1980 1987 1980/87

ANGOLA 25.1 10.1 8.9 - 12.0 BOTSWANA 35.0 69.3 80.2 + 15.7 LESOTHO 3.4 14.1 18.2 + 29.1 MALAWI 18.1 27.7 25.3 - 8.7 MOZAMBIQUE 46.6 29.3 18.2 -37.9 SWAZILAND 81.7 183.0 181.5 - 1.0 TANZANIA 26.1 26.5 17.7 -33.2 ZAMBIA 135.7 127.0 115.3 - 9.2 ZIMBABWE 150.3 169.3 157.9 - 6.7

REGIONAL AVERAGE 55.0 54.0 47.0 - 13.0

SOURCE: VNIDO Database

TABLE 4: NATIONAL IMPORT RATIONS OF MANUFACTURERS: 1980*

COUNTRY IMPORT RATIO IMPORT RATIO (%) % (excluding fuel)

BOTSWANA 90 78 LESOTHO 96 87 MALAWI 60 51 SWAZILAND 90 74 TANZANIA - ZAMBIA 35 34 ZIMBABWE 27 22

* Excluding Angola and Mozambique

SOURCE: VNIDO 1985

51 TABLE 5: SOUTHERN AFRICA: COMMODITY DEPENDENCE

COUNTRY MAIN EXPORT % SHARE

ANGOLA (1985) Oil 90 BOTSWANA (1986) Diamonds 78 LESOTHO (1985) Mohair 24 MALAWI (1986) Tobacco 55 MOZAMBIQUE (1987) Prawns 42 SWAZILAND (1986) Sugar 42 TANZANIA (1986) Coffee 50 ZAMBIA (1987) Copper 85 ZIMBABWE (1986) Tobacco 20 SOUTH AFRICA Gold 40

SOURCE: SADCC. Regional Economic Survey 1988, p. 177

TABLE 6: AFRICA'S TERMS OF TRADE (1980=100 average)

1981-85 1986-90

EXPORTS Value 68.1 55.6 Unit Value 89.8 66.6 Quantum 75.9 83.4

IMPORTS Value 92.3 82.4 Unit Value 89.9 103.8 Quantum 83.1 79.3

TERMS OF TRADE 97.7 64.1

PURCHASE POWER/EXPORTS 75.7 53.7

SOURCE: UNCTAD Secretariat

52 TABLE 7; SOUTHERN AFRICA'S DEBT PROFILE: 1989

• TOTAL DEBT STRUCTUR£ DEBT SERVICE DEBT SERVICE DEBT/GNP DfcBT PER GNP PER DEBT IX) IS 89 19S0 RATIO (X) CAPITA CAPITA (1989) (ACTUAL) (OBLIC.ATIONS) AS X OF AS X OF Sum BILATERAL LATERAL. PRIVATE Smn EXPORTS Soi EXPORTS m ANGOLA 6,950 n.a. 1 n.a. 1,322 42.0 n.a. - 115.6 716 620

BOTSWANA 513 24 68 « 69 3.6 82 4.0 36.5 422 1,112-

LESOTHO 324 9 80 11 22 2.8 32 4.0 39.0 188 483*

MALAWI 1.394 19 73 8 95 28.0 76 22.4 89.4 16y 189

MOZAMBIQUE 4,737 60 9 31 63 24.4 613 238.5 474.2 310 65

SWAZILAND 281 42 48 10 35 4.8 32 4.5 43.6 370 848*

TANZANIA 4,918 55 34 11 87 16.6 365 69.1 186.1 192 103

ZAMBIA 6,874 34 31 35 171 12.3 529 37.9 137.9 877 636

ZIMBABWE 3,088 27 19 54 472 2S.6 536 29.1 53.6 323 602 TABLE 8: SKILLED MANPOWER REQUIREMENTS BY COUNTRY IN THE MINING SECTOR (1987)

HIGH SKILLS SUPERVISORS AND TOTALS MANAGEMENT TECHNICIANS No. %

ANGOLA 550 1750 2 300 13 BOTSWANA 367 987 1 354 8 MOZAMBIQUE 524 2 32S 2 852 16 SWAZILAND 49 187 236 1 TANZANIA 277 916 1 193 7 ZAMBIA I 786 5 234 7 020 39 ZIMBABWE 716 2 062 2 778 16

TOTAL 4 288 13 452 17 829 99

SOURCE: SADCC Mining Sector Skilled Manpower Survey (1987)

TABLE 9 DIRECTIONS OF TRADE IN SOUTHERN AFRICA (in percentages)

1979 1982 1984

Percent of SADCC Exports:

To SADCC Countries 2.8 4.6 4.3 To South Africa 6.4 6.9 7.2 All other countries 90.8 88.5 88.5

Percent of SADCC Imports:

From SADCC countries 2.6 3.9 4.2 From South Africa 35.3 31.5 29.7 All other countries 62.1 64.6- 66.1

Percent of Total SADCC Trade:

Intra-SADCC 2.7 4.2 4.2 With South Africa 21.4 20.3 18.5 All other countries 75.9 75.5 77.3

SOURCE: 1979 and 1982 data from UNIDO, 1985; 1984 data from World Bank. Table adapted from Stephen Lewis.

54 TABLE 10 AVERAGE GDP GROWTH IN SOUTH AFRICA (in percentages)

1965-70 5.4

1970-75 4.0

(975-80 2.8

1980-85 2.3

1985-90 1.5

SOURCE: Calculated from various EW Reports.

TABLE 11 GROWTH PERFORMANCE: SOUTH AFRICA, EAST ASIA AND NEIGHBOURING COUNTRIES

Country 1965-80 1980-88

Korea 9.6 9.9 Thailand 7.2 6.0 Malaysia 7.3 4.6 Singapore 10-1 5.7 Hong Kong 8,6 7.3 Mexico 6,5 0.5 Brazil 8.8 2.9 SOUTH AFRICA 3.8 1.3 Botswana 14.2 11.4 Lesotho 5.7 2.9 Malawi 5.6 2.6 Zimbabwe 5.0 2.7

SOURCE,- World Bank, World Development Report',1990

55 TABLE 12 SOCIAL SPENDING ALONG RACIAL LINES IN 1990

White Black Colored Asian

EDUCATION: Pupils (millions) 1.0 7.7 0.9 0.3 Pupil/teacher ratio 18.6 40.8 23.3 1.7 Expenditure per pupil in Rand 4,087 907 2,406 3,055 Expenditure as % of GDP 15.4 3.4 9.1 11.5

HEALTH SECTOR: Per capita in rand 322 147 304 330 Expenditure as % of GDP 4.7 2.1 4.4 4.S

SOCIAL PENSION: Per capita benefit in Rand 3,312 1,980 2,700 2,700 Percent of GDP if equalized 3.1 1,8 2.5 2.5

SOURCE: Compiled from IMF Report on South Africa, tables on pages 37, 40 and 41

56 TABLE 13 MONTHLY HOUSEHOLD INCOME 19W89

Income Group African Coloured Indian White R/month % % % %

1-399 50.9 24.4 6.1 2.6

400-699 23.1 18.4 14.5 5.3

700-1199 19,0 25.1 26.8 10.1

1200-1999 4.7 19.5 26.3 16.1

2000-2499 0.9 5.1 9.5 11.1

2500-3999 U 5,3 Uj 24.9

4000-5999 0.3 1.5 4.5 18.9

W00+ 0.1 0.6 1.1 10.9

SOURCE: Race Relations, 1989/90, p.653.

Note: Columns may not add up to 100% as figures have been rounded off.

57 TABLE 14: SOUTH AFRICA: EXTERNAL DEBT POSITION

1986 1987 1988 1989f l990f

EXTERNAL DEBT AND RESERVES <$ million) Total External Debt 22667 22590 21168 19736 18718 % GDP 37.3 28.6 25.0 20.9 % Exports goods, services & income 107.2 93.1 82.6 76.4 69.8 (Interest arrears) 0 0 0 0 0

International financial institutions 487 0 0 0 0 Official bilateral creditors 3155 3850 3830 3899 4094 Commercial banks 14343 14635 13176 12207 11217 Other private creditors 4682 4105 4162 3630 3407

DEBT SERVICE PAYMENTS ($ million) Total debt service _2522 3301 3093 _2153 4021 % Exports goods, services & income 11.9 13.6 12.1 13.4 15.0

Interest payments due 1986 1871 1902 1998 1831

Amortization paid 536 1430 1190 1455 2190

f = forecast

SOURCE: Institute of International Finance TABLE 15 MATRICULATION EXAMINATION RESULTS: 1989

African Coloured Indian White

Candidates: 177,076 22,666 14,191 70,666 Total Passes 72,787 16,475 13,282 67,825 Proportions 41.1% 72,7% 93.6% 96.0%

Passed with exemptions: 17,170 4,044 6,004 29,933 Percent of total Candidates 9.7% 17.8% 42.3% 42.4%

Passed with school- leaving certificate: 55,617 12,431 7,278 37,892 Percent of total Candidates 31.4% 54.8* 51.3% 53.6%

SOURCE: South African Institute of Race Relations, p.828.

59 PREVIOUS Pl/BUCATIONS IN TIIE BRADLOVV SERIES

Number One: Kenneth W. Grundy: The Rise of the South African Security Establishment: An Essay on the Changing Locus of State Power, (out of print).

Number Two: Murray Forsyih: Federalism and the Future of South Africa, R20.00 inclusive of post and packaging.

Number Three: T.B. Millar: South Africa and Regional Security, R20.00 inclusive of post and packaging.

Number Four; F.H. Hinsley, Noel Garson, Sara Pienaar: South Africa in its international Context; Some Historical Reflections, R12.00 inclusive of post and packaging.

Number Five: Jack Spence: The Soviet Union, The Third World and Southern Africa, R20.00 inclusive of post and packaging.