Greater regional integration would support economic diversification and industrialisation in Southern Africa by expanding markets for consumers and capital goods as well as drawing together capacities from different of countries. It would, however, require a greater degree of specialisation between nations to permit economies of scale. In this context, the concept of regional value chains proves useful in identifying opportunities for more integrated industrialisation. On the one hand, it underscores the potential for enhancing economic integration based on improved specialisation and competitiveness in the partner economies; on the other, it provides a framework for systematic analysis of factors that prevent investment and growth.
This working paper outlines the evolution of the value-chain concept as a way to understand opportunities for industrialisation. Using the value chain framework in the regional context shifts the focus away from global demand and partnerships to local and regional markets and relationships. It underscores the importance of managing the difficult trade-offs involved in deepening the regional division of labour. The second section of the paper describes the Southern African economy, which was unusually unequal and dependent on commodity exports. It also reviews existing trade in continental SADC. It evaluates the effects of freight transport as a cross-cutting constraint. A case study of copper manufacturing illustrates the utility of value chains to guide analysis. This section points to key blockages to diversification, notably the difficulty of improving coordination between national policies and challenges around reshaping the division of labour to promote regional industrialisation without excessive costs to South African producers.
This Working Paper is a draft for a chapter in a book: Fortunato, P. ed. (Forthcoming). Productive Transformation and Regional Value Chains in Southern Africa. UN: New York and Geneva