SADCC - the realistic hope for Southern Africa

by Colin STONEMAN and Carol THOMPSON

With the imminent demise of white minority rule in South Africa, apartheid will be dismantled, and the 'power house' of the region will once again be able to play its natural role in Southern African development. Under the leadership of the 'New South Africa', the other countries will abandon the corrupt, statist, one-party policies which have destroyed most of their economies. Free-market capitalism will replace failed socialist experiments along with the 'Afrikaner socialism' of apartheid, and foreign capital and aid will flow in, as Southern Africa is reintegrated into the world market.

Or at any rate, this is broadly the view of a powerful coalition of interests centred on the US and UK Governments and the international financial institutions (IFI), in particular the World Bank and the IMF.

A less optimistic view foresees the danger of marginalisation of Southern Africa along with the rest of Africa and much of the Third World, when, following the failure of the Uruguay Round of GATT, the world retreats into three large trading blocs- North America, Europe and East Asia. Southern Africa will be forced into its own defensive and protectionist bloc, grateful for what crumbs it can still get from the vestiges of once hopeful (but with hindsight merely cold-war inspired) initiatives like the Lomé accords with the EC.

We will argue that neither of these scenarios-which we will refer to as the 'world market' and 'world bloc' models-is desirable; and neither need occur, if development-oriented people at both European and Southern African ends can build a mutually beneficial strategy based on the model that SADCC has been developing, partly with European support, over the last 12 years.

The inheritance

Both the 'world market' and the 'world bloc' models are flawed by ignorance of the history of Southern Africa. The former in particular downplays the role of South African destabilisation in the region's current problems. This programme of brutal intervention was made possible by the US policy of 'constructive engagement' with the death throes of the apartheid regime. Who can now doubt that stronger sanctions, coupled with resolute political opposition from the Western powers, would have forced the regime down its present path years (if not decades) earlier, saving more than a million lives in Angola and Mozambique and avoiding the destruction of two economies and the decimation of several others.

Both models also ignore the real successes achieved by SADCC and some countries of the region despite destabilisation. The most spectacular success, that of Botswana's sustained 10% annual growth, depends too much on the abundant diamond resource to provide general lessons, beyond perhaps the importance of sensible planning, including the role of the state in ensuring Botswana a fair share in the proceeds through the Debswana joint venture with De Beers. More significant, and systematically misrepresented for that reason, is the modest success of Zimbabwe in the 1980s after it withdrew from an IMF programme in 1984 and instituted its own partially planned adjustment to very difficult circumstances.

The lesson from Zimbabwe

Zimbabwe experienced one of the highest economic growth rates in Africa in the 1980s; about 4.2% annually, rising to about 5% after the drought of 1987. This was achieved despite destabilisation, droughts, world recession and breaking with both the IMF in 1984 and its main bilateral aid donor, the USA, in 1987. It has nevertheless met all its debt servicing obligations without rescheduling, entailing an annual capital outflow equal to about 5% of GDP.

Although in some respects Zimbabwe has always had 'reformed policy', in that the exchange rate remained realistic and markets continued to operate, it nevertheless retained tight foreign exchange and trade controls, and industry continued to develop behind high protective barriers. Not only did the volume of output of manufacturing industry rise some 35% in the 1980s (it now contributes nearly 30% to GDP), but output diversified and under government incentives became significantly oriented to export markets. Industry earns about 20% of foreign exchange, or 40% including ferro-alloys, steel and cotton-lint. Zimbabwe thus exhibited another example, albeit in a much less favourable environment, of the successful 'NIC' strategy of state-sponsored export promotion in the context of a protected home market.

The colonial model

Zimbabwe's success was only modest, for two reasons: a very unfavourable regional environment and rather poor policy conception and implementation. But the motivation for the policy and its main characteristics derived from a sound analysis, which is applicable also to South Africa, and is even more relevant to other ax-colonies in the region. This analysis departs from the observation that the typical colony was tightly integrated with its imperial power. In other words, a backward, primary commodity producer in a free-trade zone with a more advanced, usually industrial power which exported manufactures to it. Where industry existed (as in India) the outcome was deindustrialisation; where it did not, little if any arose. Only in colonies with local political power was it possible for the state to play a role and introduce policies in the interests of the country rather than the metropole. South Africa clearly had this power and, beginning in the 1920s, developed an industry based on protection and import substitution. The only other regional example is colonial Zimbabwe, where, in 1923, the settlers gained economic power and eventually followed South Africa's example. State initiatives resulted in steel and cotton textile industries, both of which were successful, and in the UDI period (the unilateral declaration of independence by the settlers in 1965 which caused international sanctions), import substitution reached new levels.

On independence, the new government saw no reason to abandon the successful aspects of an economic policy which had made Zimbabwe the third industrial power in sub-Saharan Africa, with the best balanced economy of all and, despite World Bank expectations, quite efficient industries. Since then, it has been forced into line with the new orthodoxy which sees success as arising from integration into the world market and a minimal role for the state. Our contention is that this recipe represents little more than a 'multilateralisation' (one neo-colony/ several metropoles, instead of one colony/one metropole) of the former colonial relationship which prevented development. But even if this argument is rejected, the recipe is nevertheless still only an experiment, with no track record of success. By contrast, the common ingredient in all successful industrialisations, from mid-19th century Germany to late 20th century South Korea, has been an active state role, associated with the protection and nurturing of infant industry. This has usually implied a willingness to ignore contemporary market signals (dictating static comparative advantage) in the face of good evidence of what future markets could become with good planning and the development of local capacity.

In the 1970s and 1980s, many African countries failed in a similar strategy. Most of them were probably too small to provide a realistic hope that such policies would work, many implemented their plans poorly, allowing inefficiency and corruption to eat away the benefits, and all fell victim to the debt crisis caused by the oil price rise and the monetarist remedies imposed by the West, which reduced other primary commodity prices. Such failures (but not the more significant successes) were blamed on state-led infant industry policies as such, so justifying the imposition of the current free-market orthodoxy, which we see as a reversion to the type of policies imperial powers imposed on their colonies.

SADCC

The founding members of SADCC saw their countries' problems in the light of an analysis similar to the above. Market forces were explicitly seen as inadequate to solve the problems, or as actually harmful. Interventions in the market- by colonial powers and by South Africa, both economically and through destabilisation-had produced inappropriate levels of dependence, which could only be reversed through opposite interventions. This is because markets work through whatever wealth and income distributions-and the resulting patterns of effective demand-they are given (and so ignore people and economies on the fringes of the market).

From its inception, the philosophy of SADCC has contained several ingredients of which three are particularly significant:

- the avoidance of over-ambitious plans dependent on regional bureaucracies;
- the reduction of dependence 'particularly, but not only, on the Republic of South Africa' and;
- the need for coordination rather than competition.

As SADCC Executive Secretary, Dr Simba Makoni stated at a business conference in Harare in February 1988: 'Our approach to increased trade in the region is not based on the orthodox trade liberalisation strategies... we have observed that reduction or even elimination of tariffs and other barriers to trade does not always yield increased trade... for how can tariffs inhibit trade when there is nothing to trade?... the greatest single barrier to trade is lack of production. Hence our motto: Let production push trade rather than trade pull production'.

Destabilisation nullified many of SADCC's efforts, but significant progress was nevertheless made in integrating the region's transport and communications networks, with some progress evident in power and water planning, and there was growth of cooperation in other areas such as agricultural research and training, animal disease control and education. Very little progress was made, however, in the coordination of industrial investment, partly because of the lack of external support in this area.

Contrary to many other international organisations and some of its own national governments, the EC has supported SADCC from the start, providing $192 m over the period 1980-87 (11 % of the total for this period). This support has been through the regional funds of the Lomé Convention, of which all SADCC countries are members.

Other regional organisations

By contrast, the Preferential Trade Area for Eastern and Southern Africa (PTA), despite wider long-term aims, has concentrated on trade promotion through tariff reductions.

The main distinction between the PTA and SADCC, therefore, is that the former is primarily trade-driven while the latter aims first at coordinating production. The PTA has had some success in that its Clearing House is said to be handling about 70% of intra-PTA, and the proportion settled in hard currency has decreased from 87% in 1985 to 47% in 1989. However, despite some successes, intra-PTA trade remains stuck at about 6% of the member countries' total trade and one member country recently cancelled tariff reductions in protest at the growth of non-tariff barriers.

The Southern Africa Customs Union (SACU) has integrated the economies of Botswana, Lesotho and Swaziland with South Africa for over 80 years and Namibia has been a de facto member for 60 years (and de lure since just after independence). The almost total lack of industry in these countries, and their treatment as little more than suppliers of raw materials and as markets for South African industry, stand in marked contrast to the growth of industry in Zimbabwe.

Scenarios

The market model: Regional integration, with market forces dominant in determining trade and investment flows throughout Southern Africa, including South Africa, is now the outcome favoured by the IFIs and the leading industrial powers. 'Integration' is to be understood to apply internally in this market sense, but it is primarily seen as just a step in the process of integration with the world economy.

Regional trade integration in Southern Africa as a whole would primarily benefit South Africa and leave little room for SADCC's type of development coordination or for national industrialisation strategies. It can by no means be taken for granted that South Africa could become a member of the PTA, but, if it did, it is possible that the whole area's development towards a free trade area (let alone a customs union) would actually be slowed, as national governments were driven to defend their economies against its impact. What is more likely is that the weight of EC and IFI aid and the associated conditionality would push in the direction of a narrower, purely Southern African region, integrated around a South African core. This would probably require Europe to grant South Africa at least associate status, although not full Lomé membership. Such a scenario would be opposed by Zimbabwe and other members of SADCC which have realistic hopes of some degree of autonomous development, for the benefits of participation in a wider market would, at best, trickle down in the long run, whilst the consequences of competition causing deindustrialisation would be felt in the short run. There can be little doubt that the present extreme bias and fragility of the Namibian economy, with less than 5% of GDP arising in industry, is a warning of the consequences for small economies of integration with a larger one in the absence of a regional policy or significant compensatory flows (such as through the EC's regional funds).

The SADCC regional coordination model: The SADCC Council of Ministers meeting in February 1991, attended by representatives of the two main South African liberation movements, issued a joint communique stating 'Council and the representatives of the liberation movements reaffirmed the position that the current dominance of South Africa over the rest of the region would be both undesirable and unacceptable even with a democratic South Africa as a member of the organisation'. Nelson Mandela and Walter Sisulu of the ANC have supported this view. The latter referred at the SADCC annual meeting in Maputo in January to 'a historic obligation to cooperate with our neighbours... we must reject the... hegemonic principles... of P.W. Botha's Consas, and terms like "regional power", "power house of the region"...'

In fact, after South Africa is free, its economic weight will provide even stronger arguments for the SADCC development coordination approach to the region as a whole. A SADCC with South Africa as a member would have a mechanism for balancing development throughout the region through consensual agreements on priority investments, first in infrastructure (where national self-interests often coincide), and then in agriculture and industry.

Europe could help to promote such a coordinated development through granting South Africa Lomé membership if it becomes a signatory to the proposed new treaty for a Southern African Development Community. Lomé membership for South Africa would actually benefit other countries in the region as well, for, although the Convention guarantees duty- and levy-free access to ACP countries' manufactured exports, these are in fact seriously restricted at present by the 'rules of origin'. Thus many Zimbabwean and Botswanan manufactures now fail to qualify as they contain too much value added that was added in South Africa before local processing, an exclusion which would fall away once South Africa was also a member. Similar considerations apply to procurement of goods and services within any ACP country for EC-funded projects or programmes.

A wider SADCC model should be beneficial not only to existing SADCC countries but also to South Africa itself, as the regional market would be enlarged by successful industry in a number of areas. Likewise Europe would eventually benefit from the larger market of a successful wider SADCC, linked through a region-to-region agreement, avoiding the stagnation implicit in either a neocolonial relationship or mutually exclusive protectionist markets.

Conclusion

Whichever model or compromise emerges, it remains clear that the message to a free South Africa of the SADCC experience, and especially the Zimbabwe experience inside SADCC, is that sustained development, not simply shortterm profit maximisation, is only assured through regional cooperation which addresses the historical inequities of the region. It is furthermore a message close to what the anti-apartheid movement is saying inside South Africa: a century of legislated white privilege and black deprivation must be directly addressed and transformed; they will not disappear with one person-one vote. As SADCC moves towards formalisation of its procedures, its particular relevance to South Africa is that it can draw on twelve years of practice at addressing regional questions, much of it in cooperation with Europe.

C.S. & C.T.