Growing trade ties between SADC and Italy

Growing trade ties between SADC and Italy

COMMENTARY

Dr Peya Mushelenga

Deputy Minister of International Relations and Cooperation

I am delighted to join you at the South-Africa Italy summit under the theme “Building a community of growing enterprises in the two continents.” This summit does not only discuss bilateral relations between the two countries, but it also discusses a broader framework of cooperation between the EU and African regions. The topic “Revitalising growth in the changing global geo-economic scenario” that I am asked to make an intervention on is relevant to contemporary international trade, where some countries still face challenges to attain economic growth.

The economy of sub-Saharan Africa has experienced economic slowdown over the years, with the real per capita growth floating under 1% and annual growth rate of exports lagging behind not only that of developed countries, but also that of developing countries outside the sub-Saharan African region.

Handley et al  aver that when countries in sub-Saharan Africa introduced economic growth policies in the form of targeted inflation, privatisation and liberalised trade policies, these measures failed because they did not address fundamental problems inherent to African institutions. African economies faced unequal competition in the world market, resulting from, inter alia, developing countries subsidising products. This caused suffering to African products in both local trade and commerce, as well as in export markets.

Urbanisation has taken its take on economic growth, with its rate increasing, as many young people migrate to towns looking for employment. The United Nations (UN) projects that by the year 2025, the total percentage of urbanisation in sub-Saharan Africa will be 49, with the southern Africa region having the highest rate of 62% urbanisation.  Such influx requires intensive economic activities that can sustain the living conditions in urban areas. Torado and Smith  state that there is a link between urbanisation and economic development, with agglomeration economies providing cost advantages to producers and consumers.

Sub-Saharan Africa’s trade relations with the EU is carried out within the framework of the Economic Partnership Agreements (EPAs). These agreements provide the region with access to European markets. Namibia’s exports to Italy have largely been fisheries products, mainly horse mackerel, sardine and hake, amounting to the value of N$450 million annually over the past years.  However, most of these fish products are exported without value addition. In 2015, the Namibian Parliament adopted the Growth at Home policy, which emphasises industrialisation. Further, the National Development Plan (NDP 4) sets industrialisation as one of the four priorities. We believe that the development of the manufacturing sector will result in the realisation of value addition to Namibian fisheries products.

A concern in the Namibian fisheries sector has further been expressed with regard to ownership structure in the fishing industry. Many Namibians own fishing quotas, but ownership of vessels is foreign-dominated. Against this state of affairs, leading Namibian economist Robert Sherbourne  states: “[F]oreign ownership places limits to the degree to which Namibia can [ensure] more of the value chain for itself and become involved in the larger business of packaging, branding, marketing and distribution rather than just catching with a minimal amount of onshore processing.”

Apart from realising value addition in the fisheries sector, cooperation between the EU and Africa in the agricultural sector focusing on agricultural technologies is vital for economic growth on the continent. In his article appearing in the United Nations Environmental Programme (UNEP) magazine, The Planet, Mandivamba Rukuni  from the Kellog Foundation in Pretoria, South Africa, suggests capital investment in the agricultural sector in the form of new technology resulting from public private partnership; human capital with managerial and technical skills; improved husbandry of crops; institutional improvements in areas like marketing; and supportive economic policy and environment. Changes in agricultural production methods resulting from increased agricultural technology do increase production and stimulate growth in the sector. Adaptation to institutional and technological changes in the agricultural sector is particularly necessary, given the unprecedented climate change effects that have prevailed in the region in recent years.

There exist opportunities for the SADC region to venture into trade relations with Italy in the agricultural sector. As one of the largest agricultural producers and food processors in the EU, with a diversified industrial economy, Italy has managed to develop a brand for her agro-exports and established a reputation of high quality products.  Italy is in a position to share her agro-processing technology with the SADC region with which she shares commonalities of mountainous terrains that are unsuitable for farming. Within the southern Africa region, the Southern Africa Development Community (SADC) EPA trade preferences extended to EU member states will be extended to other SADC member states.  The EPAs have further harmonised import tariffs imposed on goods originating from the EU member states by SACU member states.

There are stories of success in improving agricultural production elsewhere in the sub-Saharan Africa region. Under the Africa Rice Centre in Benin, the New Rice for Africa (NERICA) was successfully introduced in Benin, The Gambia and Uganda, impacting advantageously on women farmers in the rural communities. Namibia started rice production in recent years at the Kalimbeza Rice Project in Zambezi Region, under the auspices of the University of Namibia. With the EU cooperating in the areas of increased agro-production and introduction of agronomic industries, the region will be able to attain food self-sufficiency.

The landlocked economies in the SADC region depend on their coastal neighbours for exports. Accordingly, Namibia offered dry port facilities to her landlocked neighbours like Botswana and Zambia. To facilitate efficient movement of goods within the region, it is important that infrastructure development is promoted. This is essential for broadening and deepening regional economic integration, and enhancing the region’s competitiveness in the global market. Accordingly, the Harambee Prosperity Plan (HPP) adopted by the Namibian government at the beginning of this year (2016) identify the development of infrastructure as one of the five pillars that it focuses on. The plan further underscores the significance of infrastructure development in driving the Namibian economy.

Finally, I would like to state that the prices of products offered in the global market and market efficiency in general determine trade between countries. Italy and the EU should, therefore, maintain a conducive market for SADC products. Namibia produces 60 000 metric tons of beef, of which the larger portion goes to the South African market and the EU. As market diversification is important for any country’s products, Namibia is currently exploring the Asian and US markets for her beef products. Last month, Namibia sent her first consignment to Hong Kong, becoming the first African country to export beef there. Namibia will maintain her European markets and look forward to further growth opportunities for her economy, resulting from increased export markets in that region.

  • This was the paper that Dr Peya Mushelenga, the Deputy Minister of International Relations and Cooperation of the Republic of Namibia presented at the 2016 South Africa-Italy Summit on 18 October in Johannesburg, South Africa.

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