Energy security is inextricably linked to industrial-ization, but along with other regions of Africa, the

Southern African Development Community (SADC)has some of the lowest rates of access to electricity(SADC and SARDC, 2016). Intermittent power short-ages have been experienced across the region for morethan a decade, and if not permanently addressed, couldhinder the regional push towards higher industrialproduction (EPF and SAIIA, 2015).

Industrial development has been placed at thecore of the developmental integration agenda ofSADC, and Member States acknowledge that indus-trial development is central to the diversification oftheir economies; the development of productive ca-pacity; and the creation of employment in order to re-duce poverty and set their economies on a moresustainable path. Efficient and affordable energy is acrucial enabler for economic activity as well as for ef-forts to attain sustainable development.

The importance role of energy in the SADC regionhas never been more accentuated than now, given theSADC decision to front-load industrial development inits economic integration agenda. Energy is a critical areaof the infrastructure pillar of the Revised Regional In-dicative Strategic Development Plan (RISDP) and con-siderable preparatory work has been done in this area todevelop enabling policies, systems and processes that willgreatly facilitate project preparation as well as help to at-tract private sector investments and further promotepublic-private partnerships.

This Policy Brief looks at the importance of energyin the implementation of the SADC industrializationstrategy. It analyses the nexus between the availability ofreliable and affordable energy and the current industrial-ization drive by the region. It highlights the initiativesbeing undertaken by the region to improve energy infra-structure in support of industrialization, and outlinessome policy options that SADC could adopt in order toensure increased investment in new energy infrastruc-ture, which together with improved management, per-formance and additional spending on maintenance, is aprerequisite for industrial development.

SADC Industrialization Strategy and RoadmapThe approval of the SADC Industrialization Strategyand Roadmap 2015-2063 during an ExtraordinarySummit of SADC Heads of State and Government heldin Harare, Zimbabwe in April 2015, represented a hugestep towards economic liberation in the region and wasexpected to ensure that Member States harness the fullpotential of their vast and diverse natural resources.The strategy aims to provide the framework for major

economic and technological transformations at the na-tional and regional levels within the context of deep-ening regional integration.

The long-term transformation of the SADC econ-omies requires focused qualitative and quantitativeshifts in industrial structure and its enabling environ-ment, and the interdependence with other sectors tomaximize the direct and indirect value addition in theindustrial sector broadly defined to include relatedsupport services (SADC, 2015).

The industrialization strategy is being imple-mented in three phases spanning 2015 to 2063:

• Phase I — 2015-2020• Phase II — 2021-2050• Phase III — 2051-2063The first phase covers the remaining period of the

RISDP until 2020. The second phase, spans 30 years, con-stitutes a period of “heavy lifting development” and es-tablishing strong momentum for competitiveness(SADC, 2015). This will involve efforts to ensure that allMember States have established some level of industrialdevelopment. The final phase, covering 13 years, buildsup on the momentum towards convergence with the Af-rican Union’s long-term Agenda 2063.

The SADC industrialization strategy is anchoredon three interdependent strategic pillars:

❖ Industrialization as a champion of economictransformation;

❖ enhanced Competitiveness; and ❖ deeper Regional Integration. Various strategic interventions are proposed under

each of these pillars. Interventions proposed under theIndustrialization pillar include the creation of an im-proved policy environment for industrial development,increased volume and efficiency of public and privatesector investments in the SADC economy, creation of re-gional value chains and participation in related globalprocesses, as well as increased value addition for agricul-tural and non-agricultural products and services. The39th SADC Summit held in Tanzania in August 2019 ap-proved a Protocol on Industry, which aims to improvethe policy environment for industrial development andsupport implementation. Once operational, the protocolwill become a binding legal instrument that will give legaleffect to the SADC Industrialization Strategy and Road-map and its related Costed Action Plan.

The reduction or removal of structural impedi-ments to industrialization is another target being pur-sued by SADC under the Industrialization pillar. Inthis regard, there is need to improve the power gener-ation capacity and facilitate an increase in the devel-opment and use of renewable sources of energy as wellas to ensure adequate water supply.

Energy and SADC Industrialization

Energy Policy Brief No. 18  

Interventions under the Competitiveness pillar areaimed at strengthening of both the macroeconomic andmicroeconomic environments in the region. Initiativesproposed include the development of industrial invest-ment programmes to support small-to-medium enter-prises by 2018; training for skills, entrepreneurial andmanagerial development; and centres of specializationfor priority sectors. The SADC Centre for RenewableEnergy and Energy Efficiency (SACREEE), whichbegan operations in 2016 and is hosted by Namibia, isone such centre of specialization.

The Regional Integration pillar aims to widen theeconomic space for development and create incentivesfor industry to expand, thus providing opportunitiesfor economies of scale, clustering and economic link-ages. Specific interventions under this pillar includefull implementation of the SADC Free Trade Area tocover all Member States; a common external tariff by2025; gradual phase-down and abolition of rules of ori-gin by 2025; liberalization of exchange controls toallow free movement of capital within SADC by 2030;and ratification of the SADC Protocol on Trade in Ser-vices for implementation by 2020.

These interventions are outlined in a Costed Ac-tion Plan of the SADC Industrialization Strategy andRoadmap that was approved by an Extraordinary Sum-mit of SADC Heads of State and Government held inthe Kingdom of Eswatini in March 2017.

Regional InitiativesVarious initiatives are being pursued by the region toensure that the energy sector responds to the demandsof the industrialization agenda.

• Electricity generation and transmissionThe SADC region has been making efforts to increaseits electricity generation capacity in response to the de-mands of its industrialization programme. In 2018/19,the region commissioned a total of 4,175 megawatts(MW) of power from public utilities and independentpower producers, as shown in the Pie Chart.

The target is to commission 4,883MW in2019/20. This will result in more than 25,000MWcommissioned in the last 10 years.

To promote the development of the least-costpower generation and power trading, the region hasbeen making progress in linking its various nationalgenerating plants through interconnectors and trans-mission systems (SARDC, 2018). To date, nine powerutilities on the southern African mainland are inter-connected, except Angola, Malawi and Tanzania. Somedegree of integration of power networks has been ac-complished, involving Botswana, DRC, Eswatini, Le-sotho, Malawi, Mozambique, South Africa, Zambiaand Zimbabwe.

This interconnectivity has facilitated the establish-ment of the Southern African Power Pool (SAPP) as atrading platform, enabling Member States with powershortfalls to purchase electricity from those with sur-plus within the regional energy security framework. Toillustrate the importance that SADC attaches to energydevelopment as an enabler for rapid industrialization,the region identified the revision of the SAPP Plan asone of the priority interventions needed to address con-straints to industrialization. Institutional re-organiza-tion and strengthening has also allowed the region towork collectively towards creating an environment thatis conducive to make SADC an attractive investmentdestination for energy projects.

There are, however, still challenges as most SAPPmember utilities are struggling to move towards adop-tion of cost-reflective tariffs to levels that justify privatecapital injections while at the same time ensuring thatlow-income households continue to access electricityat affordable charges. According to a report presentedby the Regional Electricity Regulators Association ofSouthern Africa (RERA) during the SADC EnergyThematic Group (ETG) meeting held in April 2019 inGaborone, Botswana, cost-reflective tariffs are movingtargets and only Madagascar, Mauritius and Namibiahad achieved or were close to achieving the target, asshown in the graph.

The tariffs for Zimbabwe were increased in Oc-tober 2019 to US$10.38 cents per kilowatt hour (kWH)as part of efforts by the Zimbabwe Electricity SupplyAuthority (ZESA) to improve the security of supply.

• Oil and gasIn addition to efforts to improve the availability of elec-tricity in southern Africa, the 37th SADC Summit heldin Pretoria, South Africa in August 2017 agreed to es-tablish a regional natural gas committee to promotethe inclusion of gas in the regional energy mix and inthe promotion of industrial development in the region.In June 2018, SADC Ministers responsible for Energyagreed to develop a Regional Gas Master Plan that willguide the exploitation of the vast natural gas resourcesthat exist in the region. This should help to ensure sus-tainable gas exploitation in countries such as Angola,

2

Electricity Commissioned by SADC MemberStates in 2018/19 (MW)

Source SADC 2019

Botswana, Mozambique, Namibia, South Africa, Tan-zania, Zambia and Zimbabwe where gas reserves havebeen determined.

The formation of a regional gas committee is animportant step for the SADC region, given that the re-gion has witnessed significant findings of natural gasin a number of countries, notably Mozambique andTanzania. In Mozambique, the gas-to-power industryis gaining momentum as evidenced by the South Af-rican oil and gas company Sasol’s planned devel-opment of a 400MW gas-to-power plant in InhambaneProvince. This comes on the back of clear indicationsof a very healthy supply of gas in Mozambique. TheUnited Republic of Tanzania has moved rapidly toovercome its energy deficit by developing its gas re-sources for use by the public and private sectors. SouthAfrica will soon start pursuing the exploration of shalegas resources in the Karoo basin.

• Promotion of industrial energy efficiencyThe past few years have witnessed a regional drive to-wards the promotion of industrial energy efficiency.SACREEE has developed the SADC IndustrialEnergy Efficiency Programme (SIEEP), which willinform the formulation of a policy environment thatpromotes industrial energy efficiency in the region.In creating policies, SIEEP will assist Member Statesto articulate standards, regulations, incentives, tariffstructures and mechanisms such as net-metering forself-generation. SIEEP can assist Member States todevelop legislations that will ensure industrial energyefficiency is adopted to ensure security of energysupply in the region.

Policy ConsiderationsCurrent plans for hydropower network connectivityand proposed new generation and transmission pro-jects should be fast-tracked, including regional joint-ventures. In this regard, there is urgent need toaccelerate the design and implementation of an appro-

priate institutional frameworkfor the early development ofthe Inga Dam project in theDemocratic Republic of Congo(DRC) which has enormouspotential for the supply of low-cost electricity to the SADC re-gion.

The current Regional In-frastructure DevelopmentMaster Plan (RIDMP) shouldbe fast-tracked and aligned tomeet the needs of the SADCIndustrialization Strategy andRoadmap as well as to ensurethat the use of existing infra-structure capacity is opti-mized. Adequate measures

should be put in place to ensure that implementationof the RIDMP does not lag behind. Such measurescould include a coordinated mechanism to track im-plementation of priority energy projects.

A strategy for leveraging the RIDMP should bedeveloped to catalyse industrial development and re-duce current high costs of doing business, includingthose related to non-tariff barriers and local procure-ment of inputs for energy infrastructure development.In addition, there should be an infrastructure supportprogramme developed specially for industrialization.Such a programme would ensure that there is a con-stant pipeline of financial resources to support the de-velopment of energy infrastructure and, therefore,industrialization.

It has been noted that the poor quality and ineffic-iency of existing energy (and other) infrastructure inthe SADC region is largely due to the neglect of stan-dards in asset procurement and operation and inad-equate maintenance and management. It will becritical, therefore, for the region to ensure there isregular maintenance of existing energy infrastructure.New funding should include adequate provision forrepair, maintenance, rehabilitation, reconstruction andasset replacement costs. Member States’ nationalbudgets should include increased allocations for oper-ational and maintenance expenditure.

On a related note, Member States should increasepublic investment in energy provision both for do-mestic use and export to regional partners through theSouthern African Power Pool. Attention should bepaid to the reliability, efficiency and cost effectivenessof energy supply. Simultaneously, governments shouldstep up the involvement of independent power pro-ducers to ease the burden on government investmentand spending.

Alternative sources of energy should be ex-ploited with a particular focus on renewables whileconsidering the competitive advantage of the existingnatural energy resources and variable geometry of

3

Electricity Tariffs in SADC Member States, April 2019

Source RERA presenta!on to SADC ETG Mee!ng, April 2019

Member States. The region should take advantage ofits status as a “treasure trove” of renewable energysources such as wind and solar by building its elec-tricity generation capacity.

Similarly, to ensure a sustainable regional indus-trial energy efficiency programme, Member States areencouraged to develop clear energy efficiency policiesand strategies for their implementation. The policiesshould have targets for the industrial sector. Legallybinding directives setting targets to be met by theSADC region and Member States should be con-sidered. Voluntary or mandatory approaches can beadopted working in partnership with the regional stan-dards bodies, such as SADC Cooperation in Standard-isation (SADCSTAN) and the involvement of theprivate sector.

Focus should also go towards the development ofthe oil and gas sector, given the reserves that have beenidentified in the region lately. This would call for thefast-tracking and adequate resourcing of the proposedInter-State Gas Committee. Similar attention shouldbe paid to harnessing the benefits derived from themassive oil reserves that reside in the region.

SADC should exploit the enormous potential of-fered by its ocean resources under the Blue EconomyInitiative in order to catalyse industrialization andeconomic transformation. The opportunities under theBlue Economy Initiative include, among others, re-

newable energy, fishing, shipping, oil and mineral ex-ploration. In this regards, the Blue Economy Initiativeshould be mainstreamed in developing the infrastruc-ture required to accelerate industrialization.

To close financing gaps, action will be neededacross the policy spectrum. Governments will needsubstantial funding for infrastructure developmentof energy and soft infrastructure as well as fundingfor human capital development and access to tech-nology. Almost certainly this will require greater pri-vate sector participation, with potentiallyfar-reaching implications in respect of public-privateprojects and the commercialization or privatizationof infrastructure industries.

A well-resourced Regional Development Fundis a pre-requisite for accelerated regional industrial-ization. The planned SADC Development Fundshould be urgently operationalized as a regional de-velopment bank with the capacity to attract inter-national funding.

Finally, there is need to strengthen efforts to tapinto domestic sources of funding. Possible sourcesinclude taxes, the domestic banking sector, privateequity funds, public-private partnerships, sovereignwealth funds, remittances, and pension funds. Mech-anisms could be put in place to access funding forenergy infrastructure development from these do-mestic sources.

ReferencesEPF and SAIIA 2015. Energy Industries as Drivers of Regional Integration: The Case of SADC. Economic PolicyForum and South African Institute of International Affairs, JohannesburgRERA 2019. Presentation to SADC Energy Thematic Group April 2019. Regional Electricity Regulators Association ofSouthern Africa, WindhoekSADC 2015. SADC Industrialization Strategy and Roadmap 2015-2063. SADC Secretariat, GaboroneSADC and SARDC 2018. SADC Energy Monitor 2018. SADC Secretariat and SARDC, Gaborone and HarareSADC and SARDC 2016. SADC Energy Monitor 2016. SADC Secretariat and SARDC, Gaborone and Harare

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AustrianDevelopment Cooperation

THIS POLICY BRIEF is produced by SARDC through the project on Communicating Energy in Southern Africa supportedby the Austrian Development Agency/Austrian Development Cooperation. Responsibility for the content of this brief liesentirely with the authors. The information and analysis do not reflect the official opinion of the Austrian DevelopmentAgency/Austrian Development Cooperation.