UNITED NATIONS

ECONOMIC AND SOCIAL COUNCIL ECONOMIC COMMISSION FOR AFRICA: SOUTHERN AFRICA

Twentieth Meeting of the Intergovernmental Committee

Of Experts of Southern Africa (ICE)

13-14 March 2014

Livingstone, Zambia

Making Natural Resources Work for Inclusive Growth and

Sustainable Development in Southern Africa

Distr.: GENERAL

E/ECA-SA/ICE.XX/2014/ 06

Original: ENGLISH

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Executive Summary

The exploitation of the region’s abundant natural resources has been at the heart of the high rate

of economic growth since the economic and financial crisis due mainly to buoyant commodity prices.

However, the impressive growth trends have not been accompanied by an improvement in human

development conditions as poverty; inequality and unemployment remain high in Southern Africa. The

growth has thus been described as jobless, poverty-insensitive and non-inclusive for its failure to be

accompanied by a clear transition from natural resources wealth to economic well-being where the

growing national output is reflected in rising productive employment, improved skills levels, access to

services and a reduction in poverty and inequality.

This report on Making Natural Resources Work for Inclusive Growth and Sustainable

Development in Southern Africa addresses the theme of the 20th

Session of the Intergovernmental

Committee of Experts (ICE) of Southern Africa. The main objectives of the report are to: (i) provide

member States with an overview of the state of natural resources exploitation in the region; (ii) identify

the resources value chains and operating challenges; and (ii) provide policy advice on how to deepen

the role of the sector in addressing poverty, unemployment and inequality in Southern Africa. The

report consists of five sections. Section 1 provides an overview of the importance of natural resources

to the economies of Southern Africa and isolates the various dimensions of inclusive growth. Section 2

reviews the various natural resources sectors focusing on current production activities and activities

along the value chains and identifies the challenges in each case. Section 3 outlines the possible

strategies towards strengthening the role of the exploitation and utilization of the resources in inclusive

growth and uses examples to illustrate how other countries have used natural resources revenues to

diversify economies and strengthen growth, create jobs and provide economic opportunities for

citizens. Section 4 presents the conclusion to the analysis. This is followed in Section 5 by sectoral

recommendations for member States and for the SADC Secretariat and development partners..

Member States’ representatives and other stakeholders are invited to consider the analysis

presented in this report and its recommendations. Delegates are specifically requested to provide

additional information to strengthen the analysis and recommendations proffered in this report.

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Section 1: Background

1. The Southern African Development Community (SADC) is richly endowed with natural

resources, a number of which are world class. The region has a land area of about 964.63 million

hectares of which 23.4 percent is arable, 394 million hectares of forestry, 21.6 million hectares of

inland and marine water resources, a wide array of industrial, precious, metallic and hydrocarbon

minerals, high levels of wind speeds rising to as much as 9m/s onshore, high solar insulation levels

averaging between 5.5 to 7 kWh/m2 per day (IRENA, 2014) and vast wildlife resources for tourism

and other uses. The exploitation of these resources has been at the heart of economic development in

the region. For example, agriculture currently accounts for 8 percent of the regional gross domestic

product (GDP) and 66 percent of employment. The minerals sector directly contributes about 10

percent to regional GDP, 7 percent to employment and 35 percent to export earnings (SSY, 2012).

However, the sectoral contributions vary significantly at country level. For example, copper alone

accounts for about 80 percent of Zambia’s export earnings, 18 percent employment and 8 percent of

government revenues (UKAid and World Bank, 2011). For Namibia, the minerals sector accounts for

11.5 percent of GDP and provides about 8,000 direct jobs (CMN, 2012). For Malawi, agriculture

contributes 37 percent to GDP and 82.5 percent to export earnings (AfDB, 2013a). Furthermore, the

fisheries sector accounts for 4 percent of Malawi’s GDP (Phiri et al, 2010).

2. Economic developments patterns in the region during the last decade have further demonstrated

the importance of the resources sector in economic recovery. Generally, resource-rich Sub-Saharan

African economies rebounded relatively quickly from the impact of the 2008-09 global financial and

economic crisis compared to other regions on the continent due to a combination of sound

macroeconomic policies and the upturn in commodity prices. For example, according to the SADC

Databank of Economic Indicators (2012), the Zambian economy grew by 7.3 percent in 2012 up from

5.7 percent in 2008 and 6.8 percent in 2011. Growth rates in Namibia were 5.0 percent in 2012 up

from 3.4 percent 2008 and 4.9 percent in 2011. Similar patterns are discernible in the case of DRC,

Malawi and Tanzania. In the case of Botswana, economic growth has declined from 8.6 percent in

2009 to 3.7 percent in 2012 due to the sluggish demand in diamonds. Overall, the average regional

growth rate has increased from 0.2 percent in 2009 to 4.3 percent in 2012 due mainly to improved

commodity prices.

3. One of the major criticisms of the high growth rate in the region which, incidentally is natural-

resources based, has been its failure to address socio-economic challenges. For instance, despite a

decade of strong economic expansion, the pattern of unemployment in the region is high at 26 percent,

thus making bleak the employment chances for the millions of young people annually entering the

labor force. Part of the challenges for policymakers is to assure employment opportunities for the large

youthful population. Furthermore, human development indicators in the region have remained

comparatively poor despite the high growth rates in member States during the last five years. For

example (AfDB, 2013b), undernourishment for the period 2010 – 2012 in total population in SADC

stood at 26.7 percent, much higher than in ECOWAS (11.8 percent) and in North Africa (4.4 percent).

Maternal mortality in 2010 was high at 382 for every 100,000 in SADC compared to 84 in North

Africa. The literacy rate of 15-24 year-olds, women and men, in SADC was 74 compared to North

Africa’s rate of 85 for the period 2009 – 2010. The Gender related development index (GRDI) in

SADC was 0.560 in 2007 compared to 0.693 in North Africa and the human development index was

0.447 for SADC in 2012 compared 0.662 for North Africa. Based on UNDP’s Human Development

Index (HDI), which is a “composite index measuring average achievement in three basic dimensions of

human development—a long and healthy life, knowledge and a decent standard of living” and

Inequality-adjusted HDI (IHDI), which is “HDI value adjusted for inequalities in the three basic

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dimensions of human development”, only Seychelles, Mauritius, Botswana, South Africa and

Swaziland, in that order, have performed relatively well with these indices above 0.5 (UNDP, 2013).

4. Furthermore, access to electricity in Southern Africa is only 24 percent compared to 36 percent

for East Africa and 44 percent for the West African power pools (IRENA, 2014). In some SADC

member States, access to electricity in rural areas is lower than 5 percent. In addition, poverty in the

region at an average of 45.4 percent, remains unacceptably high and the pace of its reduction within

member States is also unacceptably slow.

5. These observations have led some analysts to describe growth in the region as ‘jobless growth”,

‘poverty-insensitive growth’ and “non-inclusive growth”. The positive economic growth has to be

accompanied by a clear transition from wealth (in this case natural resources-based) to economic well-

being, where the impacts of the growing national output are reflected in productive employment,

improved skills levels, access to services and reduction in poverty and inequality if it is to be inclusive.

The region’s high inequality hinders the transformation of growth into poverty reduction.

6. It is instructive to discuss the concept of inclusive growth so as to appreciate the challenges

facing the region. Various definitions have been proffered. The European Union (EUfacts, 2010)

defines inclusive growth as growth based on a high employment economy and that all groups in

society participate in such a growth while also enjoying its benefits. In another view, the Asian

Development Bank (AsDB, 2007) defines inclusive growth as growth with equal opportunities for all.

The growth should focus on creating opportunities as well as making them accessible to all and growth

is inclusive when it allows all members of a society to participate in and contribute to the growth

process on an equal basis regardless of their individual circumstances. The AsDB has also constructed

a composite inclusive growth index at country level and has identified suitable indicators for (i)

growth, productive employment and economic infrastructure; (ii) income poverty and equity, including

gender equity; (iii) human capabilities; and (iv) social protection. The African Development Bank

(AfDB, 2013c) contends that inclusive growth should focus on both creating opportunities and making

the opportunities accessible to all and should be a process whereby individuals are provided with

improved opportunities to benefit from growth. Other definitions of inclusive growth have focused on

the same broad parameters of productive employment and access to opportunities. At another extreme,

inclusive growth is also sometimes loosely referred to as ‘growth that benefits everyone’, which

appears to imply that growth should ‘benefit all segment of society, including the poor, the near-poor,

the middle income groups and even the rich’.

7. Although in some literature the term ‘inclusive’ growth is often used interchangeably with a

suite of other terms, including ‘broad-based growth’, ‘shared growth’ and ‘pro-poor growth’, we adopt

the view that inclusive growth is about allowing people to contribute to and benefit from economic

growth and together with sustainability encompasses being broad-based, shared and pro-poor. Overall,

inclusive growth then is growth that reduces the disadvantages of the most disadvantaged while

benefitting everyone.

8. Wealth from natural resources have propelled countries into inclusive growth path trajectory

when such countries apply themselves well across the six areas of the resources value chain including

(i) institutions and governance; (ii) infrastructure; (iii) fiscal policy and competitiveness; (iv) local

content development, (v) spending the windfall; and (vi) economic development (MGI, 2013). As can

be seen in Annex 1, the countries in the region that are in the top ten bracket are Botswana, Namibia

and South Africa, all of them with various experiences in the minerals sector. In the case of Botswana,

this is due to good fiscal policy, competitiveness and well deployed mineral windfall revenues.

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Namibia’s position is due to good infrastructure and South Africa’s ranking is due to prudent

utilization of mineral windfall revenues and the development of local content and local linkages.

9. The remainder of this report examines how the exploitation of natural resources in the region

could contribute to inclusive growth as broadly defined, i.e. address the challenges of the poor, while at

the same time making everyone else better-off. In other words, how can SADC achieve material

progress through economic growth while encompassing equity, equal opportunity, access the key

markets and guaranteeing social protection for the most vulnerable in society.

Section 2: Exploitation of Natural Resources in the Region

10. In 2012, the estimated total regional GDP from the exploitation of natural resources, their

products, and various services in the region amounted to US$629 billion and the GDP per capita

(purchasing power parity) ranged from US$400 for DRC to US$25,000 for Seychelles1. Regional GDP

is expected to grow by around 4 percent in 2013 and to accelerate to 4.6 percent in 2014 due to the

buoyant commodity prices (United Nations, 2014)2. The following section focuses on the operations in

the various resources sectors and the attendant constraints to sectoral contributions to inclusive growth.

2.1 Mineral Resources

11. The region produces various minerals including copper, chromium, cobalt, diamonds, coal,

hydrocarbons, gold and platinum group metals (PGMs) at various scales from artisanal mining to large

scale production. However, the extent of value addition to these minerals before export is relatively

low. Generally, all minerals are exported in a semi-finished state and thus the region loses potential

revenues from higher value finished products as well as from linkages created through domestic value

addition. Overall, in 2012 mining contributed about 16 percent to regional GDP and accounted for

US$23.545 billion in intra-SADC trade (SSY, 2012). Angola produces about 650 barrels of oil per day

and is the second largest oil producer in Africa, after Nigeria. Botswana is a major global producer of

diamonds and currently accounts for 28 percent of global production. In 2009, Congo DR accounted

for 40 percent of the world’s cobalt production, 31 percent of industrial diamonds, 6 percent of gem

quality diamonds and 9 percent of world tantalum production (E&MJ, 2013). South Africa is the 6th

world producer of gold while Tanzania holds about 34 percent of gas reserves. As of January 2012,

Mozambique had 126 billion cubic meters of proven reserves while Tanzania had about 6.5 billion

cubic meters (Ernest & Young, 2012). Zambia currently ranks 7th

in the world in copper production

and is projected to rise to 5th

with currently available reserves. Zambia hosts an estimated 2.8 billion

tonnes of copper ore ranging between 0.6 percent and 4 percent copper3. South Africa and Zimbabwe

account for about 89 percent of world platinum group metals production (POLINARES, 2012) and

Zimbabwe currently hosts a quarter of the world’s diamond reserves (UKAid and World Bank, 2011).

However, as is the case with other African countries, the region is relatively underexplored and with an

average exploration expenditure of $5 per square km, compared with $65 per square km in Australia

and Canada. The geological potential of the region is therefore still unknown.

12. In addition to medium and large scale operators, an estimated 1.5 million people in the region

are engaged in the artisanal mining sub-sector and these support about 7.5 million people. The sub-

sector is dominated by both women and the youth who work in hazardous conditions. The sector’s ease

1 www.cia.gov

2 Other observers such as UNDESA (in the ESCR), IMF and World Bank have different estimate; all are however pointing

in the same direction 3 siteresources.worldbank.org. What Zambia needs its potential.

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of entry and exit as well as the low capital requirements has made it a haven during times of economic

contraction and often attracts seasonal miners. The miners lack proper mining skills and competences,

they use unsafe and environmentally unfriendly approaches; they have poor access to markets and

contribute to deforestation and water pollution and are known to use child labour. Among the

challenges hindering contribution of the small scale mining sector to inclusive growth is inefficient

taxation, low value addition, access to mineralised ground, limited marketing skills, high mineral

economic leakages and loss of revenues due to operational inefficiencies and losses and poor

diversification of miner’s earnings into other more sustainable sectors, thus creating very little

backward and forward linkages.

13. Mineral exploitation is a major source of state revenues through exports and through direct and

indirect taxes on mining operations. It is these fiscal linkages which have been the focus of many

policy interventions in the sector. However, apart from Botswana and South Africa, other mining

countries in the region have high levels of inequality as shown by the poor human development index.

This could be due to various factors including inefficient rent (tax) collection methods and the failure

to utilize mining revenues for development needs. The transnational nature of mining company

operations also complicate the efficiency of the taxation systems due to the challenges of transfer

pricing. The capacity to negotiate contracts has also resulted in poor fiscal agreements between

governments and mining companies. The enclave nature of the minerals sector in most countries and

lack of linkages undermines the impact on inclusive growth. Linkages are associated with high paying

jobs and higher incomes and hence greater prospects of contributing to poverty reduction.

2.2 Forest Resources

14. Forests (including natural and planted) in the region are diverse and cover an estimated area of

394 million hectares. They contribute towards the basic needs of communities and individuals in the

form of fuel for cooking and heating, fodder for animals, medicine, resource for shelter and housing

construction, mining support, treated poles for power lines, material for furniture, curios and

agricultural tools such as yokes and hoes. There are also non-wood forest products such as medicinal

plants, indigenous fruits, edible plants, edible insects, honey, bees wax, exudates and mushrooms

derived from forest resources.

15. As the forest-based industry does not necessarily require large investments compared to mining

industry and the technologies and skills are wide ranging from low level to highly skilled, the sector

offers an opportunity to contribute to inclusive growth by providing employment opportunities at both

artisanal and industrial level. At global level, the market for forest products is projected to grow to

US$1.2 trillion by 20154. Although there is no disaggregated data on the contribution of timber-based

industries to national output in most countries, anecdotal evidence shows that the sector is a major

contributor to economic activity. Available data shows that in South Africa, the exotic forest plantation

contributed 1.8 percent to the country’s GDP and employed about 110,000 people5. According to the

same report, in Zimbabwe, the forestry sector employed 14,500 people and contributed 3 percent to

GDP and in Swaziland, the forestry sector contributed 25 percent of the country’s foreign exchange

earnings. Data by the Food and Agricultural Organization show that forestry contributed US$25

million to GDP for Mauritius and US$9 million for Tanzania in 2005 (FAO, 2010). The FAO reports

that SADC exported US$33.149 million of wood charcoal, 57 percent of which, was by South Africa.

The charcoal intra-trade was US$699,000 of which Malawi was responsible for 80 percent.

4 http://www.prweb.com/releases/forest_products_paper/wood_and_wood_products/prweb9190684.htm

5 http://www.fao.org/docrep/005/ac850e/ac850e07.htm

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16. The main classes of forest-based industries in SADC are wood/charcoal, timber and wood

products, and non-wood forest products. More than 70 percent of the total energy consumed in the

SADC region is from the wood/timber industries. An estimated 89.3 million cubic meters of wood are

used in the region6. The value chain of the industry includes wood production, charcoaling, packaging,

transportation and trading before charcoal reaches consumers. The timber and wood products

industry is a major sector with a high degree of vertical integration (Imani Development, 2003). The

non-wood forest products (NWFPs) sector is also important for communities in Southern Africa as it

contributes to food security (Chidumayo and Gumbo editors, 2010).

17. The forestry sector in the region faces many challenges due to unsustainable practices, poor

operating conditions and pressure from rapid rates of population growth and urbanization. Inadequate

skills, lack of secure access to land, illegal wood harvesting and uncontrolled charcoal production and

corruption are among other reasons the region is failing to maximize revenues from the wood-based

forestry resources. For example, forgone tax revenues from clandestine charcoal production and trade

in Tanzania, Kenya and Malawi are estimated to be about US$ 100 million, US$ 65 million and US$ 7

million respectively (Minten et al, 2010).

2.3 Wildlife Resources

18. Wildlife resources are a vital renewable resource in Southern Africa. Apart from tourism,

wildlife supports local communities in several ways including traditional uses such as food and

clothing. This growing industry has become increasingly important and has benefits to private sector

tourism businesses and local people. Tourists are a growing market for leather products from the

sector. Generally, tourism is a growing economic sector in the region. Recent World Bank data shows

that world tourism amounted to an average of US$15.35 billion for the years 2006 to 2010, while data

by the World Travel and Tourism Council compiled from country reports shows that direct and

indirect jobs created in tourism industry in 2011 were more than 5.7 million7. Employment in the

sector was projected to increase to more than 5.9 million by 2012. However, the region is losing

revenues in the tourism value chain as tour packages are sold by operators either on the regional

market or outside SADC as an add-on package to tourists in other African countries. For example,

Quirimbas case study in Mozambique accounted for 19.2 percent, 16.4 percent and 64.4 percent of the

published package price and 15.5 percent, 15.1 percent and 51.7 percent of total tourist expenditures

respectively, leaving very little for the host countries of tourist attractions (IFC, 2006).

19. The industry faces various challenges which include poor skills for communities to

meaningfully participate in wildlife conservation projects, poor local marketing skills by local tourism

agents to package affordable tours in competition with international tour agents, inadequate resources

to develop projects to fully blown commercial levels, lack of transparency in wildlife conservation

projects and tourism hunting management system and unfair benefit distribution formulae such that

benefits secured from wildlife for host communities are often lower than traditional livelihood

activities for the same level of community effort.

2.4 Water Resources

20. The region hosts about 21.6 million hectares of inland and marine water resources and these

water bodies sustain a rich diversity of natural ecosystems and are critical for meeting the basic needs

such as water supplies for domestic and industrial requirements. Water food security, improving access

6 http://www.sardc.net/imercsa/programs/cep/pubs/cepfs/CEPFS12.htm

7 www.wttc.org

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and availability of energy through hydropower (both large and mini levels) and provides employment.

Shared watercourses generate regional economic benefits. For example, the Zambezi Basin has eight

regional member States and provides a source of livelihood along its course. Similarly, the ten

countries (four in SADC) of the Congo Basin derive livelihood from the basin (Sakibede, 2012). Thus

shared water resources can contribute to inclusive growth when harvested in a holistic manner. The

regional policy on the management of transboundary water resources adopted in 2005 provides a

framework for cooperation in the sector.

21. Aquaculture is an important economic activity that has hitherto not made full use of available

water resources in the region. It can be easily integrated into farmers’ primary agricultural activities

and products can be sold at the farm gates or local markets and thus provide another source of income

which diversifies farmers’ income streams. Aquaculture production in the region is concentrated in

Madagascar (black tiger shrimp), Tanzania (seaweed), Mozambique (shrimp), Namibia (shrimp) and

South Africa (abalone). In 2004 aquaculture production in the region was 0.14 percent (US$97.556

million) of the world’s total of US$71,670 million (SADC Trade, 2007).

22. However, illegal fishing is a challenge in Africa. It is estimated that one in four fish in Africa is

caught illegally and that specific losses to African economies could be around US$6-7 billion per year

(NEPAD, 2013b). Fish processing activities in the region tend to be simple and rely on traditional

methods such as drying, salting and smoking. Higher-value fish products, such as fresh fish, chilled or

ground or frozen, canning, fish meal and oil are mostly produced by South Africa and Namibia.

23. In addition to low value addition due to capital constraints, the contribution of the fisheries

industry to inclusive growth in SADC is hampered by conflicts between artisanal and industrial fleets,

disagreement on management measures and the use of harmful fishing practices and poaching. There is

also a potential source of conflict in fish harvesting especially in shared watercourses across national

boundaries.

2.5 Renewable Energy Resources

24. Energy and in particular, green energy, is crucial in achieving sustainable inclusive growth

because production and access to green energy have the potential to accommodate all strata of society.

The region possesses vast natural resources from which to harness clean energy including a potential

of 800 TWh/year from wind, 20,000 TWh/year from solar, 660 TWh/year from hydro, 17,700

MW/year from coal and also hydrocarbons and geothermal resources (IRENA, 2014). Other renewable

energy (RE) sources which can be harvested for commercial and domestic use include wave energy,

tidal range tidal currents, ocean currents, ocean thermal energy, salinity gradients and biomass power.

25. The region has the largest installed electricity generating capacity compared with other

economic communities in Africa. Yet it has one of the lowest rates of electricity access, at 24 percent

compared to 36 percent for the East Africa and 44 percent in West Africa FANR, 2013). In some

countries, access in rural areas is lower than 5 percent. The region had a peak power demand of 53.8

GW against an available capacity of only 51.7 GW, which is 96 percent of the requirement. As a result

many SADC member States are experiencing unreliable power supply leading to high economic costs

in lost production.

26. Renewable energy has the potential to close the energy gap in the region but is constrained by

poor quality of input data, inconsistent demand forecasts nationally and regionally, low capacities to

speed up penetration of renewable energies, slow pace in implementing cross-border projects and cost

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of accessing RE technologies and micro-grids. The Africa Clean Energy Corridor launched in January

2013 at the Third Assembly of the International Renewable Energy Agency by twenty SADC and

COMESA States aims to accelerate the expansion of renewable electricity production, taking

advantage of the continent’s enormous untapped potential and helping to sustain future growth

(IRENA 2014). The initiative will optimize the grid infrastructure and operations to support increasing

shares of renewable energy utilization.

2.6 Agricultural Resources

27. Agro-resources include land/soils, water and sunshine. As noted earlier, the region possesses

964.63 million hectares of which 23.4 percent is arable. Agriculture is central to poverty reduction,

inclusive growth, and food and nutrition security in developing countries (World Bank, 2011). The

agriculture sector in the region provides livelihood and subsistence, employment, income and creates

wealth. It is a major source of jobs and, in 2012, the sector contributed 8 percent to regional GDP and

an estimated 82.8 million people or 66 percent of the regional labour force were employed in the

agricultural sector8. The region has registered a positive agricultural sector annual growth rate of 2.6

percent against a population growth rate of 2.5 percent during the last decade (FANR, 2013).

28. The Comprehensive Africa Agriculture Development Programme (CAADP) goal is to achieve

agricultural sector growth of 6 percent per year on average and halving poverty and hunger by 2015

(IWMI & ReSAKSS-SA, 2013). The region has domesticated CAADP through country compacts9.

Unfortunately, in 2012 agriculture growth rates in the region were still lower than the 6 percent target

with the exception of Malawi, Zambia and Zimbabwe. Fertilizer application in the region (especially in

the low income countries) was still lower than the Abuja Declaration of 65kg/ha and the regional target

under the Regional Indicative Strategic Development Plan (RISDP) target of 50kg/ha. Low income

countries in the region allocate less than 8 percent of their national budgets to agriculture whilst the

middle income countries allocated about 2 percent of their national budgets to agriculture (FARNPAN,

2009). Furthermore, the R&D expenditure as a share of AgGDP remains low and is still lower than the

1 percent of AgGDP aspired for under NEPAD. An average share of government spending on

agriculture in the region in 2010 was 5.8 percent compared with an average 7.3 percent for West

Africa. This is still lower than the Maputo Declaration target of 10 percent. However, as of February

2013, only seven10

out of fifteen SADC countries had signed national level compacts (NEPAD 2013c).

Of these, only Malawi, Zambia and Zimbabwe have met budgetary targets.

29. The region remains a net importer of most agricultural products in spite of this positive

performance and malnutrition and food insecure population remain high with child underweight above

26 percent in nearly all countries in the region. The agricultural sector has performed poorly due to low

labour and land productivity (poor soils). Labour productivity in agriculture in the region is on average

30 times lower than in developed countries. However, productivity in commercial agriculture is

comparable to international standards11

. Similarly, land productivity in the region has grown by one

percent per annum from the 1990s, yet it has more than tripled in other regions. In addition, cereal

yields have remained between 1.5 and 1.7 Mt/Ha on average since 2000, with the low income

countries accruing the lowest yields. This is below the Africa average of 2 Mt/Ha and 8 Mt/Ha for

developed countries; and whilst intra-regional agricultural trade has performed better than other

8 www.cia.gov

9 www.nepad.org. Agricultural transformation

10 SADC countries that signed COMPACT by February 2013 include Congo DR (18/3/2011), Malawi (19/4/2010), Mozambique

(9/12/2011), Seychelles (16/9/2011), Swaziland (4/3/2011), Tanzania (8/10/2011), Zambia (18/1/2011) 11

SADC Agricultural Policy

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sectors, overall intra-regional trade remains, at 10 percent of total trade, compared to 30 percent in the

Association of Southeast Asian Nations (ASEAN) region.

30. Agriculture can be one of the key drivers of socio-economic development in the region through

its potential to generate employment and backward and forward linkages along the value chain. Many

of the world’s poorest people are themselves farmers and hence growth in GDP originating from

agriculture can be effective at reducing poverty. Furthermore, women comprise about 41 percent of the

agricultural workforce worldwide and thus issues of gender equality and income distribution can be

addressed with increased incomes to farm workers and farmers. Women constitute more than 70

percent of those who are wholly reliant on agriculture as a livelihood in the region12. However, less

than 1 percent of women own agricultural land and they can only access less than 10 percent of

agricultural credit. Despite the good intentions of the SADC Protocol on Gender and Development on

the empowerment of women and the elimination of discrimination and the pursuit of gender equality

and equity through the development and implementation of gender responsive legislation, policies and

programmes, challenges still remain in the agricultural sector and this is a threat to inclusive growth.

31. The sector consists of subsistence, small holder as well as large scale commercial farmers

producing a variety of crops and animals. Generally, smallholder farmers in the region are poorly

organized, own an average of one hectare of land, produce maize as the main crop, use only 20

percent of recommended/desired fertilizer levels, are unable to access finance and can only produce

about 100 Kg/Ha. They often use uncertified seeds and are poorly mechanized. Furthermore, small

scale farmers have problems with physicalaccesstomarkets, they lack agro skills and they face

challenges with accessing agro and market information. Yet they are responsibleforover80 percent

ofstaplefoodcrops in Africa (FARNPAN, 2009). In Sub Sahara Africa, they account for 70 percent

agricultural labour force13

, but unfortunately make up 80 percent of people living with HIV/AIDS.

Furthermore, 75 percent of women living with HIV/AIDS are in sub-Sahara Africa (AfDB, 2013b).

32. Trade is the key driver for agricultural growth. Poor rural infrastructure makes moving produce

from rural to urban areas difficult and knowledge of potential markets and market expectations is also

limited. Small holder farmers suffer huge post-harvest losses due to poor infrastructure and challenges

with accessing markets. The trend towards informal cross-border trade in SADC has accelerated in

recent years, with an estimated business volume of US$17.6 billion per year14

. Informal cross boarder

trading requires appropriate attention to examine the role it can play in inclusive growth development

in the region.

33. Under the Regional Agricultural Policy, the region endeavours to support agricultural

development and enhance its role in regional development. As signatory to CAADP, the region is

bound by the pillars of land and water management, market, food supply and hunger and agricultural

research in its endeavours to promote agriculture-led development.

Section 3: How to Make Natural Resources Exploitation Contribute to Inclusive

Growth

34. Inclusive growth is founded upon broad-based growth across all sectors of an economy,

includes low- and middle-income groups and has a distributional aspect that aims to minimize income

12

www.southernafricatrust.org 13

http://www.fao.org/docrep/v4805e/v4805e03.htm#P119_22526 14

http://www.southernafricatrust.org/changemakers/

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inequality in society. The approach suggested here is to identify and promote natural resource based

industries, with assured markets, that prioritize the participation of locals throughout the value chain as

a bedrock for catalyzing inclusive growth path in the region. This will accord citizens economic

comfort and create assured investments in diversified (and sometimes risky) areas of the economy. To

enhance inclusive growth, citizens must be active along the value chain as entrepreneurs and skilled

manpower.

35. The approach to classification is proposed as follows:

1. Renewable natural resource-based inclusive industries where SADC has local value chains and

predictable local markets and therefore inherent shield/resilience against external shocks be

considered Priority 1. This can stabilize incomes and ensure local participation in the

exploitation of natural resources.

2. Non-renewable natural resource-based inclusive industries where the value chain is partly local

but with predictable international markets will be Priority 2. The revenues from the assured

regional market and internationally are the source of strength. They must be invested in

promoting Priority 1 industries and in addressing challenges in Priority 3 industries.

3. Renewable natural resource-based inclusive industries where the value chain is partly or wholly

in SADC but the market is volatile be considered Priority 3. Although the market volatility

weakens the internal segment, they can be must be minimized by the region. These industries

must be tackled in such a way that most of them progressively migrate to Priority 1.

4. Non-renewable natural resource-based (financially/technologically/market) restrictive

industries where the value chain is partly in SADC, but the market is volatile/predictable be

considered Priority 4. The resource is a strength to SADC, but the region must tactfully gain

entry to these “steel gated” industries and the revenues will be required to promote and

establish Priority 1 industries and to address challenges in Priority 3 industries.

3.1 Using Market Ascertained Renewable Natural Resources as a Catalyst for Inclusive

Growth

36. Two examples used here to illustrate Priority 1 are biofuels and bamboo based industries.

3.1.1 Biofuels Industry

37. The region’s liquid fossil fuel consumption of more than 142 million litres per day (or 51.8

billion litres/year) provides an opportunity to tap into the sector for inclusive growth through

substitution of gasoline with bioethanol. If the region introduced 100 percent biofuels mandates, this

would create local business opportunities in both production and consumption of an estimated US$166

billion per annum while creating more than 6.1 million jobs, US$366 billion in new housing and

US$14.6 billion of food economy annually due to the biofuels sector alone. Since biofuel production is

largely rural based, this would increase rural incomes and contribute to food security as producers can

support food production. Box 1 below is an example of the experience in Thailand with a cassava

based bioethanol industry.

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Box 1: Bioethanol Industry Expands Cassava Market and Stabilizes Cassava Prices for Farmers in Thailand

(Sriroth et al 2011).

Cassava value chain includes land clearance, seedlings supply, cultivation, pre-processing, bioethanol conversion,

transportation and dispensing. In Thailand, farmers before introduction of a bioethanol industry frequently

experienced an oversupply of cassava that led to falling prices and farm incomes. Introduction of a bioethanol industry

therefore opened up an expanded market for the farmers which has since stabilized cassava prices. According to FAO,

Thailand is today the 3rd

largest cassava producer in the world after Nigeria and Indonesia. Of the 40 licensed

bioethanol refineries, 25 factories use cassava with a total production capacity of 8.59 million liters/day.

In Thailand, cassava is considered as one of the most important economic crops with an annual production around 25-

30 million tons. Apart from bioethanol, cassava also serves as a subsistent cash crop for farmers, an industrial crop for

the production of chips and starch, supply for food, livestock feed and other products. Consequently, the demand for

cassava has been rising continuously in Thailand, thereby contributing to agricultural transformation and economic

growth in the country.

3.1.2 Bamboo-based Charcoal Industry

38. As noted earlier, about 70 percent of people in the region rely mostly on wood/charcoal for

cooking. The potential regional market for charcoal is worth US$3.4 billion based on an average

expenditure of US$1/day for an average of 2.5 Kg charcoal (range up to 4 Kg/day), per 5-member

family household (GTZ and Probec, 2008). Thus, based on this daily consumption per household and

0.3 persons employed per ton of charcoal consumed (Maltitz, 2013), about 2.6 million people would be

engaged for production, transportation and retailing in the value chain. However, increasing15

charcoal

consumption leads to the ‘mining’ of forest resources. This requires the implementation of sustainable

charcoal policies including sound tree management practices coupled with the use of energy efficient

technologies. The use of renewable biomass either planted or managed without a net loss of biomass

stock associated with its consumption can make charcoal renewable. Box 2 shows an example of

charcoal policies in Sudan.

Box 2: Sudan Experience Suggests Fuel Switching is a Complex Issue (Khennas et al 2013)

The Sudanese government is promoting private investment in charcoal production for foreign markets. Private forest

owners are allowed to export their charcoal and, as a result, many companies are investing in the industry. The

approach is that investors meet the cost of establishing and maintaining the plantations or forest regeneration. The

government is also encouraging farmers to plant trees under the agro forestry land management system. In 1998,

charcoal consumption exceeded the sustainable supply by 45 percent. The government therefore introduced policies to

reduce consumption and increase the supply. One of the strategies was to promote the use of LPG by increasing the

price of charcoal up to three times that of gas. However, this has not reduced the demand for charcoal, probably

implying that fuel switching is a more complex issue which requires further understanding.

39. In addition to charcoal, the bamboo plant has a wide range of uses and products including

construction materials, furniture, clothing, fences, handicrafts, pulp and paper, edible shoots, mats,

walls, ceilings, room partitions, windows, baskets, trays, hats, lampshades, caps, lanterns and animal

fodder. As noted earlier, more than US$3.4 billion can be earned from the internal charcoal business in

the region and invested into diversified activities. Recently, there has been a dramatic increase in

manufacturing industries utilizing bamboo worldwide. For most of its products, bamboo processing

does not require high capital investments, but is labour intensive and therefore contributes significantly

to employment creation. Over 600 million people around the world generate income from bamboo

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while hundreds of millions of people in the world live in bamboo houses (UNIDO, 2009). Box 3 is an

example of bamboo based industry in China.

Box 3: Bamboo Industry in China (Yongde 2012)

China is one of the distribution centers of bamboo products in the world. The country has 5.38 million hectares of

pure bamboo forest, which accounts for 25 percent of the bamboo area in the world. The production of bamboo

culms in China changed little from 1978 to 1990, but significantly speeded up during the next 20 years due to the

industrialization of bamboo, especially from about 2000. Today China makes numerous products from bamboo

including handicrafts, woven articles, scaffoldings, plywood, floorings, structural articles, mats, tooth picks,

charcoal. In 2010, the bamboo industry recorded a US$13.8 billion production value and directly employed 5.6

million people.

40. Furthermore, bamboo can provide environmental benefits such as soil stabilization and erosion

prevention on hill slopes and verges, conserving and protecting forests while creating enduring

supplies for the wood and cellulose industries.

3.2 Making Non-renewable Mineral Resources Contribute to Inclusive Growth

41. Given that minerals are wasting assets, it is important that their extraction is sustainable. The

region must maximize earnings from the resource and invest on building infrastructure and in

diversified sectors and services industry which will broaden backward and forward linkages in the

economy and create further employment opportunities in other sectors. Among the broad range of

policy measures that can be used to increase the value of wealth derived from the minerals industry

includes raising local content in mining activities, localizing sale of mineral commodities, undertaking

exploration to increase the knowledge base for bargaining with investors and where possible, investing

regionally in mining, and localizing downstream processing. An example of the benefits of well

utilized mineral wealth is the diversification and infrastructure development due to the gold mining

industry in and around Johannesburg in South Africa. Below are two different scenarios of how some

countries are using mineral resources to contribute to inclusive growth.

42. 3.2.1 Optimizing Revenues: The collection of optimal revenues from the oil, gas and mining

resources through appropriate taxation and increasing local content in the mining value chain can

deepen the role of extractive industry in inclusive growth. The World Bank (2012) showed that

increasing local procurement by the mining industry in West Africa generated significant benefits to a

wide range of stakeholders. For example, mining companies could minimize their logistics and stock

holding costs, reduce their lead times, increase security of supply as well as enhance their reputations

and obtain a “social license” to operate. Local businesses, entrepreneurs and communities can benefit

from increased access to business growth opportunities, increased stability and diversity of markets,

and improvement of business capabilities, including access to capital, productivity, technology, health,

safety and environment practices. Other benefits include increased employment and skills, increased

domestic and foreign investment, technology and knowledge transfer from international companies,

exports and foreign exchange and increased government tax revenues.

43. 3.2.2 Enhancing Linkages: Downstream Processing and Value Addition: Downstream

processing is an important step in the natural resources sector as finished products are sold for higher

prices and also value addition creates local business opportunities through backward and forward

linkages which in themselves result in jobs and other industrial infrastructure benefits. Skills developed

along the value chain can support other sectors. Box 4 below presents an example of an initiative in

Botswana and the benefits this generates to the local economy. Botswana has created a Pula Fund from

mineral sector proceeds.

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Box 4: Localization of Downstream Processing of Diamonds in Botswana (Tshetlhane 2013)

Botswana set up a Diamond Hub in 2008 to facilitate the diamond industry in downstream activities. The

Government has relocated the selling of diamonds from London to Gaborone and the first sight sale was on 11th

November 2013. Diamond mining value added was 21 percent of GDP in 2011. Diamond polishing value added

about 2 to 4 percent. There is also direct value added in the form of capital invested (equipment and buildings),

labour (wages paid), taxes (from operations), interest (borrowing from local banks), indirect value added; ancillary

services provided e.g. banking, security, transport, housing). Rough diamond trading value added is about 1 percent

to 2 percent. Relocation of global sight holder sales from London to Gaborone has benefited other sectors such as

transport, hotels, tourism and property development. In terms of employment, about 3,600 are directly employed in

diamond cutting factories, representing a 29 percent addition to diamond industry employment (diamond mining

employed 8,902 people in 2011) and 500 indirect employment due to cutting and polishing. Although direct value

added with cutting and polishing is usually up to 5 percent, spillover effects from related sectors increases this

figure in form of indirect value added.

44. The recent local auctioning of emeralds by the Zambian Government demonstrated the size of

the domestic benefits of such a policy. In the latest auction, held in November 2013, a total of US$16.4

million was realized. This was direct inflow into the Zambian economy. However, local value addition

and localization in the region faces many challenges including the lack of supportive policies, the small

size of the regional markets (lack of economies of scale), infrastructure bottlenecks (energy, transport)

and limited technical capacity and limited skills.

45. 3.2.3 Investing Revenues from Minerals in Economic Diversification: Chile has used its

copper revenues to create a sovereign wealth fund as well as diversify into agriculture and the service

industry. This can insulate economies from the challenges of cyclicality of commodity prices and also

provide resources for diversification. Box 5 illustrates a world class example of how Chile has applied

wealth from mainly copper to diversify her economy.

Box 5: Economic Diversification: Chile Diversifies her Economy Using Revenues from Copper (CORFO.

2013).

In Chile the mining sector is the highest-earning industrial sector with nearly $18 billion in net profits in 2010.

Copper-rich Chile has used mineral wealth to diversify her economy by investing in industrial clusters which has

spurred forward and backward linkages in the country. There are now clusters on mining equipment and inputs,

aquaculture (e.g. salmon and trout), forestry, agro-industry (e.g. raspberry, wine, fruits, cut flowers, coffee) and

global services. The Chilean wine cluster has captured attention far and wide because of its meteoric rise in

international markets. For example, in 2006, Chile exported 391,000 tonnes of wine, in 2008 exported US$2.4

billion worth of salmon and trout and in 2010, exported US$164 million worth of blueberries.

Chile has also invested a significant part of the boom resources on training highly advanced human capital by

allocating US$ 6 billion in windfall savings for the Development of Human Capital, with the goal of increasing the

number of PhDs per capita. The returns of this fund will be used to give scholarships to Chileans who enroll into top

world universities. The number of Chilean students abroad had increased from 172 in 2005 to 2,500 in 2009 and

will keep on increasing. The World Economic Forum ranks Chile as Latin America’s most competitive economy.

For the world competitive index, Chile is ranked 1st among Latin American Countries, for macroeconomic stability

it is ranked 1st in Latin America and ranks 30

th out of 133 countries globally. For the best place to do business in

2009 - 2013, Chile is ranked 1st among Latin American Countries, 4

th among emerging countries and 15

th overall

ranking among 60 selected countries (CORFO 2013).

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46. Annex 3 shows that apart from agriculture, the growth elasticity of poverty reduction among

the non-agricultural subsectors is typically higher in trade and transport and manufacturing than in

mining and utilities, construction and finance and business.

3.2.4 Enhancing Economic Diversification for Inclusive Growth

47. Box 6 illustrates a case where an already diversified economy from renewable natural resources

is enhanced by revenues from non-renewable mineral resources to raise inclusive growth profile.

Malaysia’s good political stability in a diverse society coupled with good macroeconomic policies has

helped the country to gain ascendance to global ranks of well managed economies.

Box 6: Economic Diversification: Enhancing a Diversified Malaysian Economy Using Oil Resources (Noh

2013)

Malaysia has often been singled out as a success story when it comes to state performance. The country has

successfully transformed its economy since gaining independence in 1957. Despite being endowed with tin, oil

and gas, Malaysia has developed into a multi-sector economy driven by high technology and capital intensive

industries. The Malaysian economy was already diversified with major revenues coming from primary products

like tin, rubber and palm oil before oil and gas production became commercially viable. In fact, by 2009 the oil

and gas sector contributed only 19 percent of Malaysia’s GDP. In 2011, Malaysia’s exports included electronics

(34.5 percent), petroleum related products (9.9 percent), palm oil (9.3 percent) and chemical products (6.9

percent). Malaysia is also among the world’s 20 largest trading nations and its economic performance was

ranked 7th

of 59 countries in 2011. The World Competitiveness report of 2011 ranked Malaysia among the top

five most competitive nations in Asia Pacific. Some reasons advanced for this success are Malaysia’s ability to

manage consensual democracy in a highly plural society by:

Tacit agreement between Malaysia’s politically dominant Malay actors and economically dominant

Chinese actors. Under such an agreement the state (being Malay dominated) agrees not to over indulge

in productive activities (Chinese domain) and in return the state is allowed to disburse resources to

invest in the economic and human capital of the Malay majority.

Malaysia’s ability to get its macroeconomic right, the state’s consistency in pursuing liberal market

ideas and Malaysia’s competence in handling conflict in the post-colonial period.

3.3 Contribution of Forestry to Inclusive Growth

48. In addition to measures such as the bamboo example given above, policies that can stimulate

contribution of inclusive growth in the region include secure access to land, reforestation programmes

using economic plant species, investing in skills to curb wastage and export of raw wood, skills

development in harnessing natural forest products such as honey, fruits, caterpillars and mushrooms.

Some of the region’s forest products are unique and should be traded for their uniqueness. Box 7

shows initiatives by SADC Timber Association to use wood waste for charcoal production and Box 8

shows the challenges faced by the bee-keeping industry in Zambia.

Box 7: SADC Timber Association (STA) to Promote Whole Tree Approach (Makolosi 2013)

The STA would like to turn the current forest biomass waste in traditional timber milling which uses only the logs.

Fifty (50 percent) of logs is converted into planks (timber). Outer slab, tops, lops and sawdust is just left around.

This remnant biomass fuels forest fires during the dry season of the year. This biomass can be converted to

briquettes and pellets to replace charcoal from indigenous forests. Honey and mushrooms from plantations can be

exploited economically.

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Box 8: Beekeeping Industry in Zambia

16

A study of the beekeeping industry in Zambia revealed that there were 45 honey producing districts in Zambia, yet

the country lacked the regulatory framework. Beekeepers were paid less for their products due to lack of knowledge

about the honey prices and markets. Beekeepers often lacked means of transporting their honey to the urban markets

and lacked knowledge on modern honey production techniques. There were 23 honey buyers/traders, most of whom

were not registered. Beekeeping in most areas of the country remained neglected as local people did not realize the

benefits of this economic activity. Those with tertiary education had higher production using modern techniques of

honey production compared to those with lower education that still depended on traditional beekeeping methods.

Zambia exports natural honey and other honey products to Europe, America, China, Japan, Central Africa and

Southern Africa, but contributes less than 0.1 percent to total national exports despite the large potential. Zambia

Honey Council is currently partnering with government on determining the floor price of honey, collection of

information on bee keeping and skills development.

3.5 Contribution of Wildlife and Tourism to Inclusive Growth

49. Wildlife and tourism are sources of employment, foreign exchange earnings and revenues. The

region’s unique wildlife, culture, landscapes, water and other attractive natural resources, if well

promoted, have a large potential to contribute to improving livelihoods. Community wildlife

management programmes, such as Campfire, in Zimbabwe, for example, have contributed to spreading

benefits to communities and well as strengthen environmental management and conservation. A policy

environment which facilitates proper management of natural resources can increase regional tourist

patronage and expand the volume of tourism business. Furthermore, political stability, professional and

competitive packaging of tours and ease of travel are important ingredients for the promotion of

tourism. Box 9 shows the benefits of ecotourism in South Africa. The Caribbean experience in Box 10

is also instructive.

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Box 9: South African Experience with Private Protected Ecotourism Areas (IUCN 2005).

Based on a survey of seven ecotourism-based private protected areas in South Africa to identify key attributes

and challenges, the following were the findings: 1) the top three attractions to private reserves were the wildlife,

the scenery and the high quality accommodation/service; 2) establishing a reserve was a costly undertaking,

requiring an average initial outlay of USD $4.6 million; 3) in changing from farming to wildlife-based

ecotourism, employment numbers increased by a factor of 3.5, the average value of wages paid per reserve

increased by a factor of 20 and the average annual salary more than quintupled from $715 to $4,064 per

employee; 4) the reserves were contributing in excess of $11.3 million to the regional economy per year; 5)

reserves were making a substantial contribution to biodiversity conservation; and 6) lack of support by

government entities was the most pressing challenge facing reserve owners. The analysis points to ecotourism as

an economically and ecologically desirable alternative to other land uses, while also highlighting the need for

governments to provide assistance and support for both the establishment and management of private reserves.

Box 10: Culture as a Niche Market in the Caribbean

17.

The Caribbean had the earliest significant tourism, primarily from the USA and Canada in the pre-war period.

This accelerated with the growth of mass tourism in the 1960s, with predominantly beach-based tourism on

offer. The cruise-based industry has been the fastest growing tourism sector. More recently, the tourism product

has developed to include niche markets that focus on heritage and culture for both land-based tourists and cruise

passengers. Seventy-five (75) percent of adult visitors to the Caribbean engage in cultural tourism that includes

events, festivals and activities, while cruise passengers are the largest market for heritage tourism. The

Caribbean has long been known for its culture and this is becoming an increasingly exploitable area for niche

tourism opportunities that benefit the local economy and communities.

50. The region can exploit the economic benefits along the value chain of the sector including

provision of frontier service providers (visas and other entry permits); international and local tour

operators and travel agents; international/local air transport and airport services; accommodation

services (hotels, lodges, camp sites, etc); and other ancillary services.

3.6 Water Resources Contribution to Inclusive Growth

51. Water resources hold great potential to contribute to inclusive growth in SADC through

fisheries harvesting, agriculture, water sports and cruises, transport, power generation and potable

water industries. Some of these, such as fishing, are participatory where they exist and can play a

major role in broadening opportunities for inclusive growth, as clearly demonstrated in the Chilean

case in Box 4. One of the economic leakages resulting in the sector poorly contributing to inclusive

growth is poaching. The region needs to strengthen measures to minimize this loss. Box 11 is an

example of a commendable action taken by SADC member States against Illegal, Unreported and

Unregulated Fishing (IUU) in marine waters. Policy measures to promote this resource should include

skills development in water resource products and services.

Box 11: Regional Actions to Reduce IUU Fishing in SADC Marine Waters.

Recently, encouraging SADC actions have been noticed that are taking place, including (i) the operational vessel

monitoring system (VMS) data-sharing protocol between South Africa and Mozambique (Boto et al 2012), (ii) the

bold capture of an illegal fishing boat, Antillas Reefer, by Mozambique, (iii) denial of port access to the suspected

IUU fishing vessel F/V Premier by Seychelles (SIF, 2013) and publication of detailed information on Seychelles flag

fishing vessels for 2013 and a list of licensed fishing vessels on the Seychelles Fishing Authority (SFA) webpage.

The sharing of this information is in line with regional fisheries agreements and supports the objectives and results of

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the FISH- iAfrica initiative.

52. In addition to policy challenges, the rather low profile accorded to water in CAADP also

impacts on implementation of relevant programmes which impact on water and agriculture

development in the region (Sullivan and Mashingaidze 2013).

3.7 Renewable Energies (RE) Contribution to Inclusive Growth

53. The power deficit and competitive costs of producing power from renewable (RE) sources

create an immense opportunity for inclusive growth through independent power production and supply

through micro-grids connected to main grid lines. The opportunity for decentralized power also

increases accessibility to modern energies in rural areas where in some cases the access is currently

less than 5 percent. Access to modern energy improves productivity and widens business opportunities

such as downstream processing, cold-preservation of food and improved medical and educational

services in rural areas.

54. The region is developing policies to elevate the role of REs in development. For example,

Madagascar currently with a 57 percent share of electricity produced from renewable sources is to

increase to 74 percent by 2020, South Africa’s 13 percent renewables target by 2020, Lesotho’s 35

percent RE targets focused on rural energy access by 2020 (Luxande and Schutze, 2012) and Zambia’s

B5 and E10 blending targets by 2015 (Sinkala, 2013). There is co-generation in some sugarcane-

producing countries in the region. Grid-connected bagasse CHP plants exist in Mauritius, Tanzania,

Zambia and Zimbabwe. In Zimbabwe, a community-scale biogas plant is also being constructed in

Harare to convert organic waste to heat and electricity. South Africa in 2012 began construction of a

50 MW solar power tower and a 100 MW trough plant while Namibia announced plans for a

consolidated solar power (CSP) plant by 2015 (REN21, 2013). For residential use, the most common

RE is solar, followed by biogas. Wind-based RE is also used mostly in farms and schools.

55. At regional level, management and costs of grid construction and power and delivery through

main grids can be shared through the Southern African Power Pool (SAPP). The region has a large

elasticity to localize production of inputs for renewable energy, but only South Africa has invested in

localizing manufacturing of RE technologies. A regional strategy towards this could be adopted to

benefit from economies of scale.

3.8 The Agricultural Sector and Inclusive Growth

56. Agriculture is one of the key sectors with high potential to contribute to inclusive growth in the

SADC region. For the sector to be seen to play its rightful role in this regard, a number of measures are

required including (i) access to secure land especially by small scale farmers and women who are

currently disadvantaged, (ii) improving farm input support systems, (iii) improving agricultural

infrastructure, (iv) improving market environment to reduce post-harvest losses and (v) access to

affordable finance.

57. Furthermore, the use of geographic concentrations of interconnected companies, specialized,

service providers and associated institutions in a particular field, will accelerate providing solutions to

the agricultural sector. Countries such as the United States, India, Italy, Chile, Hong Kong, Colombia,

South Korea and Sri Lanka have been able to establish globally competitive industrial clusters in

textiles, software and computing, agricultural and seafood processing and financial services through

clusters. Industrial clustering is seen as a key development tool in facilitating the development and

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improving the overall sustainability and competitiveness of key industrial sectors. Some of these

sectors may have a strong export focus, as in the Chilean example in Box 12.

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Box 12: Salmon Industry Cluster in Chile (Ramsawak 2010)

The Chilean Industry has made remarkable success over the last two decades. Chile is currently the world’s

second producer of salmon and first producer of trout. The industry grew at an average rate of 22 percent over

the last decade, the sector has contributed 4 percent of total exports and over 56 percent of total fisheries

exports. The industry employs over 53,000 people (directly and indirectly). The salmon industry grew from

US$538 million in 1997, to US$2.2 billion in 2006 more than a threefold increase in ten years.

58. The agricultural sector can utilize the abundant water available in Angola, Congo DR,

Mozambique, Tanzania and Zambia and develop extensive aquaculture and irrigation activities which

would significantly increase productivity, food security and provide export opportunities. However, the

irrigation infrastructure in the region is poorly developed and needs strengthening. Furthermore, the

policy environment is not conveniently configured to address the financial and technical constraints of

small-holder farmers who incidentally account for more than 80 percent of staple agricultural foods in

the region. Women dominate the small holder agricultural sector and constitute more than 70 percent

of small farmers, yet less than 1 percent of them own agricultural land and they can only access less

than 10 percent of agricultural credit (FARNPAN, 2009). Access to secure land, financial services,

agricultural skills and information on markets is thus a key intervention.

59. Furthermore, policy measures to strengthen the inclusive growth potential of the extractive

sector include local content to raise retained value of an investment in the country, sharing of

information on good practices, product/service focused training to increase the ratio of productive

skills, local/regional market development to increase the volume of business, quality assurance to

broaden the market by increased product acceptability, access to collateral and finance to attract/raise

investment funds, industry infrastructure to facilitate functional industry, industry transparency to

unlock ideas and investment and research, development, demonstration and deployment to provide

local solutions.

Section 4 Conclusions

60. The region possesses vast mineral, land, forestry, water and wildlife resources whose

exploitation could contribute to inclusive growth and address the sub-region’s development challenges

as has happened in other countries in the world. The resource-based industrialization experience of

South East Asia and the resultant improvement in the living standards of the region’s population is

well documented. Indeed, many countries in the world have deployed wealth from their natural

resources exploitation to enhance the socio-economic status of their citizens. As noted earlier, these

efforts have, among other factors, been supported by good institutions and good governance,

conducive infrastructure, supportive fiscal policy frameworks, business competitiveness, well directed

deployment of the revenue windfall and broad-based development programmes with full participation

of citizens. Thus, a well-managed regional natural resources exploitation strategy represents a real

opportunity to grow the regional economy and tackle poverty. The benefits of the current positive

economic growth patterns should be harnessed to provide the basis for strengthening inclusive growth.

The development of industrial clusters based on natural resource is crucial for the region to benefit

from economies of scale.

61. Although minerals are wasting assets, they can be transformed into other forms of sustainable

capital, including highly skilled human capital, through the prudent management of proceeds. Mining

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itself can provide employment, contribute to local infrastructure development, spur backward and

forward linkages to other sectors (through value addition and beneficiation), stimulate the development

of economic clusters, earn foreign exchange and government revenue and be the basis of

industrialization and economic diversification. Forestry, wildlife, agriculture, water and renewable

energies industries offer a myriad of opportunities for addressing development challenges as they are

renewable. Industry based on these natural resources should therefore not be wasteful but take a long

term view to ensure sustainability of the resource on which inclusive growth should be firmly

grounded. The agricultural sector has the greatest potential to contribute to inclusive growth. Sectoral

challenges such as access to agricultural marketing information and infrastructure, unpredictable

markets, access to secure land, access to financing and access to affordable agricultural inputs need to

be addressed in order to give impetus to the sector to contribute significantly to inclusive growth.

62. The regional infrastructure deficit requires collaborative efforts amongst all stakeholders. This

can be through public private partnerships (PPPs) which can accelerate infrastructure development to

facilitate industrial take off, especially of value addition and beneficiation industries Well-developed

national and cross-border infrastructure is necessary to stimulate vibrant natural resource based

industries in the region. This will require the harmonization of regional standards and the development

of competitive quality regional products and services.

63. One of the key ingredients of inclusive growth is skills upgrade. Appropriate knowledge and

skills are also important to efficiently convert natural resources into products and services. Skills

development programmes should thus be a component of any inclusive growth strategy as skills

improve the utilization of the resources. Agricultural skills enhance productivity just as much as

industrial skills enhance value addition. Research, development and demonstration are necessary to

provide local solutions, render support to industry and consider future industrial and socio-economic

trends.

Section 5 Recommendations

64. The following policy recommendations are proffered for member States and other national

stakeholders, SADC Secretariat and for development partners to help strengthen the contribution of

natural resources exploitation to inclusive growth by taking advantage of natural resources where the

region has strength to positively and sustainably transform its economic path and addressing the

impediments in areas where the region has not performed well.

5.1 Actions by Member States

65. Member States need to invest in stabilizing the individual and household economies by

prioritizing natural resource-based industries with predictable markets/earnings as a catalyst for

inclusive growth development of the region to cushion citizens from the impacts of cyclical

commodity prices. Where possible, establish distributed off-take (assured market) agreements

according to geographical advantages and strengths to stimulate a wider access to business

opportunities in the region focusing initially on geographical areas where resources exist. This requires

an inventory of resources to determine the adequacy of the throughput. The creation of renewable

natural resource-based industries will help broaden the basket of assured markets, which will in turn

increase opportunities for the majority to be engaged in this sector.

66. Member States need to optimize revenues from the resources sector and utilize the revenues for

product/service directed skills development, development of value addition industries and research and

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development. The creation of efficient tax systems which are flexible to capture windfalls is an

important pre-requisite to the extraction of optimal rent. The creation of Sovereign Wealth Funds is a

potent strategy for ensuring intergenerational equity and cushioning economies from volatility in

commodity prices. The implementation of the SADC Regional Infrastructure Development Master

Plan through collaboration between member States and the private sector through PPPs could help

address the infrastructure gap. Furthermore, policy frameworks which link the development of natural

resources to infrastructure development could help close the infrastructure gap. The optimal local

retention of wealth in the region through local content policies which will support and spur backward

and forward linkages around natural resources with an effect of increasing employment thereby

strengthening the role of the sector in inclusive growth. Equally important will be the introduction of

deliberate policies towards economic diversification and the exploitation of regional value chains.

67. For Mineral Natural Resources, member States should:

Invest in mineral exploration to delineate the mineral resources for medium and long term

planning purposes including identifying areas amenable to ASM; where feasible this can be a

regional strategy;

Invest revenues from the minerals sector in infrastructure development and the diversification

of the local economy;

develop national policies on mineral beneficiation and value addition as part of the national

industrialization strategy;

Invest in developing the capacity of government institutions to audit the mineral value chain to

minimize leakages;

Strengthen corporate social responsibility frameworks to ensure that mining contributes to

social inclusion through the creation of local business opportunities and capacity development;

Develop and implement local content policies; and appropriately revise taxes and explore the

use of windfall tax or resource rent to capture optimal revenues from mining;

Introduce certification to help small scale miners to access better markets and capture greater

returns for their mineral products;

Develop the capacity of mining host communities on good mining practices and entrust them

with monitoring mining activities to minimize degradation of environment and natural

resources due to poor mining practices; and

Develop the capacity of artisanal and small scale miners on alternative sources of livelihoods.

68. For Forestry, Wildlife and Tourism, member States should:

Strengthen management of forest resources of transfrontier conservation areas and ensure the

full participation of neighbouring communities in the exploitation of the resources and

management of revenues;

Improve sharing of information on successful best forestry management practices and

innovative instruments and strategies for community based participatory and sustainable

management of indigenous forests;

Develop and share practical toolkits for participatory development of community forest

management plans to enhance performance of the industry;

Increase investment in skills development on forest products and services and marketing;

Promote and market the uniqueness of tourism features including forestry, wildlife and many

other tourist attractions;

Promote PPPs for the development of tourism infrastructure; and

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Promote value addition to wildlife products.

69. For Renewable Energy, member States should;

Establish regional targets for renewable energy use as part of the national energy package;

Improve power interconnecting infrastructure to enable independent power producers access

wider markets by selling their production to grids;

Increase funding for renewable energy and broaden access to RE financing by increasing the

role of financing institutions targeting RE; and

Reduce import and export tariffs of RE technologies and fuels in the region.

70. For Agriculture and Water, member States should:

Establish public seed breeding programmes for indigenous seed varieties for the long-term

sustainability of the seed sector and incorporate indigenous community seed preservation

methods in these programmes;

Invest in developing agricultural infrastructure including storage facilities to reduce post-

harvest losses;

Adhere to CAADP commitments including the Maputo Declaration on the sector;

Sign and/or implement national compacts on CAADP;

Provide incentives to promote development of agro-based clusters and use the clusters to

stabilize markets for agro-produce which will also help producers migrate from small to

commercial farming and spur increased forward and backward linkages in the sector;

Strengthen the link between small and commercial farmers as well as food processors to

facilitate toll processing and value addition;

Strengthen regional and international cooperation to address poaching of fish resources

Strengthen farmer support programmes including extension services, skills development,

market information and inputs;

Improve access to land, financial assistance, equipment by women and youth;

Develop skills in communities and small businesses for packaging and marketing products and

services; and

Improve access to markets and marketing information to help improve their trading and

operational performance.

71. For R&D and Skills, member States should:

Strengthen investment in education, skills development and capacity development;

Invest in the training of scientists/engineers to enhance natural resource conversion capacity in

collaboration with the private sector; and

Establish national centres of excellence for research, development and demonstration to

provide local solutions.

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5.2 Actions by SADC Secretariat

72. The Secretariat should:

Harmonies national policies and strategies in the exploitation of the various natural resources

(including developing fiscal frameworks), for example, develop a beneficiation strategy for the

minerals sector;

Promote regional value chains in the various commodity sectors that can help address the

constraints of smaller domestic markets and enable member States to benefit from economies

of scale;

Strengthen data collection and the creation of repositories to minimize economic leakages and

maximize value-added contributions from natural resources,

Commission studies to quantify the inventory of and the various natural resources to provide a

basis to a region-wide exploitation strategy;

Strengthen the role of African Peer Review Mechanism to monitor the national and regional

performance of institutions and governance;

Develop and/or strengthen the platform for sharing best practices in the various sectors e.g.

Botswana’s success in the diamond sector could be show-cased and lessons learnt by other

member States;

Develop and/or strengthen a SADC-wide approach to capacity and skills development through

accredited centres of excellence; and

Accelerate the implementation of the SADC Infrastructure Master Plan through PPPs to

address the constraints to value addition and beneficiation.

5.3 Actions by Development Partners

73. Development partners should:

Provide technical support for capacity development in member States – developing both human

and institutional capacities;

Facilitate inter-regional information sharing on best practices in natural resources exploitation

and the management of resources revenues; and

Assist the region in domesticating relevant international agreements impacting on natural

resources development

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Annexes

Annex 1: Countries performing well across the six areas of the resources value chain

18

Figure A1: Human development index HDI(IHDI) in relation to GDP contribution by

mining and quarrying in SADC region.

18

www.mckinsey.com. Reverse the curse

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Annex 3: Growth elasticity of poverty by agricultural and non-

agricultural subsector, in four selected SADC countries (World Bank:

Africa pulse)