Leveraging SADC’s extractive sector for inclusive economic transformation

Lazarus Sauti

The extractive sector is a driving force of many economies, particularly those in the developing world. In many Southern African Development Community member states, mining plays a major role in the economy.

It employs just 5 percent of the population but contributes 60 percent to the foreign exchange earnings and 10 percent of gross domestic product for the region.

Roughly half of the world’s vanadium, platinum, and diamonds originate in the region, along with 36 percent of gold and 20 percent of cobalt.

Despite being endowed with these minerals, the region remains one of the least known geological regions in the world; the full extent and value of its unearthed mineral reserves remains guess work, according to Dr Carlos Lopes, Executive Secretary of the Economic Commission for Africa at the level of United Nations Under-Secretary General.

He goes on to say that if recent discoveries of minerals in Tanzania and Mozambique are anything to go by, the region’s abundant extractive resources can be a key source of revenue for SADC’s transformation agenda.

“Minerals can be a game changer, if they are transformed to embrace real human development breakthroughs,” expresses Lopes, adding that “Africa still looks like the next future frontier for extractives.”

Lopes further says that the paradox, however, is that some of the richest resource countries in Africa to be general and the SADC region to be specific rank amongst the lowest on the Human Development Index.

For instance, he says: “Angola has one of the world’s highest maternal mortality rates, Equatorial Guinea is one of the countries with the highest child mortality rates, and the Democratic Republic of the Congo lurks at the bottom of the index on almost all fronts. The largest exporter of uranium, Niger, trails the index.”

For the record, the poor performance in mineral rich economies in most SADC countries can be linked to differing factors: weak integration of SADC member states’ extractive sector into national socio-economic activities; commodity exports with little or no value added; weak forward and backward linkages to the rest of the economy; and poor legal and regulatory frameworks.

Because of these challenges, the region has been deprived of huge financial resources that could transform its economic face.

Accordingly, as SADC leaders gather for their 34th summit in Victoria Falls under the theme “SADC Strategy for Economic Transformation: Leveraging the Region’s Diverse Resources for Sustainable Economic and Social Development through Beneficiation and Value Addition”, they must settle for effective ways in which the region can effectively leverage its extractive sector for inclusive economic growth.

One effective way for the region is to maximise demand for its mineral commodities. In line with the summit’s theme, leaders should impose local beneficiation and value addition.

“Botswana is a leading example that can be emulated; it enjoyed nearly half a century of uninterrupted economic growth on the back of a diamond revenues, generated through increased value addition from its joint venture with De Beers.

“Diamonds remain the primary driver of Botswana’s economy, and generate consistently around 70 per cent of Botswana’s export earnings, 50 per cent of government revenue, and 40 per cent of GDP,” notes Lopes.

SADC member states should also take advantage of globalisation and leverage opportunities by inserting themselves into a part of the global value chain, building capabilities in specific tasks, on a globally competitive basis, or as part of a broader diversification strategy out of resource exports.

To leverage opportunities, Lopez urges leaders to harness opportunities that create modern and sustainable jobs, stimulate inclusive growth, upgrade necessary skills and capabilities, as well as provide access to knowledge, infrastructure and technologies.

This, he believes, would facilitate SADC’s entry into new markets that offer productive employment opportunities as well as leverage global value chains out of countries like China, Taiwan and India.

It is also crucial for SADC countries to come with clear policies and strategies as credible blueprints for mineral reforms in the region.

These policies and strategies should call for transparent, equitable and optimal exploitation of mineral resources to underpin development, and they should also promote local processing and value addition of raw materials to build human, financial, and institutional capital that can outlast the exhaustible currency of mining.

At the same time, policies and strategies should call for greater fiscal space and responsive taxation to allow SADC member states to optimise accompanying rents for development and by adding value through beneficiation, as well as a multi-sectoral approach to mineral development policies.

Southern Africa, without doubt, is a strategic mineral location and probably the most richly endowed sub-region when it comes to minerals considered as strategic for industrial purposes.

Therefore, leaders must leverage the region’s extractive sector for inclusive social and economic transformation.