SADC second Industrialisation Week: built-market implications for regional operators

July 31, 2017

Advertise Here | By Cabanga Africa Group

An industrial strategy that targets a rise in manufactured exports from roughly 3% to 50% of the total by 2030 is, whether or not its authors describe it this way, an infrastructure strategy. Value chains do not move on policy language; they move on corridors, ports, rail lines, power connections and border posts. SADC's second Industrialisation Week, which opened in Johannesburg on 31 July 2017 under the theme "Partnering with the Private Sector in Developing Industry and Regional Value Chains," set out the industrial ambition. What it did not set out, at least not in the public record of the event, is which physical networks are expected to carry it.

The gathering was convened by South Africa's Department of Trade and Industry, the Department of International Relations and Cooperation, the SADC Secretariat and the Southern African Business Forum, with opening remarks from Mr Kgabo Mahoa, South Africa's Director-General in the Department of International Relations and Cooperation. For property and infrastructure operators, the interesting question sits one layer beneath the summit communique: where does the built environment need to change for these targets to be reachable at all.

The corridor gap behind the industrial target

SADC's industrialisation strategy names three priority growth paths, agro-processing, mineral beneficiation and downstream processing, and service-driven value chains, each of which carries a distinct infrastructure footprint. Agro-processing requires cold storage, packing facilities and reliable road or rail links between farm and processing site. Mineral beneficiation requires power-intensive processing plants sited near both ore bodies and export or domestic-market rail connections. Service-driven value chains require digital and logistics infrastructure that is far less capital-intensive to build but no less dependent on cross-border regulatory alignment.

SADC's own account of the Johannesburg gathering describes the event as an annual public-private engagement platform for intra-regional trade and investment, without naming specific corridor, port or energy projects tied to the three growth paths. For infrastructure operators and financiers, that is the immediate evidentiary gap: an industrial roadmap without a published capital-projects list attached to it.

Mineral beneficiation and the infrastructure it demands

Of the three growth paths, mineral beneficiation carries the heaviest fixed-asset requirement, and it is the one most directly relevant to South Africa's existing mining and metals base. Downstream processing of ore into refined metal or components requires steady, high-volume power supply, dedicated rail capacity to move both inputs and outputs, and in many cases new or upgraded processing facilities sited close to both resource and market. None of these can be commissioned quickly, which means any serious push toward the strategy's 2030 targets implies infrastructure decisions that would need to begin now, in 2017, to be operational within the strategy's own timeframe.

This is where the property and infrastructure sector has a legitimate stake in an event framed around trade and industrial policy. A beneficiation target set by SADC's Secretariat is, in practical terms, a demand signal for engineering, procurement and construction firms and for the power and rail utilities across the member states expected to host new processing capacity.

Where infrastructure operators can position

The SADC Industrialisation Strategy and Roadmap, adopted by the Summit of Heads of State and Government in 2015, sets a regional GDP growth target of at least 7% annually alongside its manufacturing and export goals. Growth of that magnitude, sustained across the region, is difficult to reconcile with current cross-border infrastructure capacity, given that intra-regional trade remains at only about 20% of the total, a figure that reflects border, logistics and connectivity constraints as much as it reflects trade policy.

For a property or infrastructure operator, the practical read on this event is that it establishes political intent without yet establishing a capital-projects pipeline. The decision to invest, supply, finance or partner around specific industrial parks, special economic zones or corridor upgrades should wait for evidence that named projects, not aggregate targets, have been tied to specific sites and sponsors.

Cross-border logistics as the real integration test

SADC's own framing of the strategy's purpose is to move the region from a commodity-driven growth path toward what it terms value-adding, knowledge-based industrial economies. That transition is only physically possible if goods, components and processed materials can cross SADC's internal borders with the same ease with which policy language crosses summit stages. Border-post efficiency, one-stop border facilities and harmonised customs procedures are the unglamorous infrastructure layer beneath every value chain the strategy names.

Regional business associations, including the Southern African Business Forum convening this event, have long argued that cross-border logistics friction, rather than a lack of industrial ambition, is the binding constraint on regional value chains. Until that constraint is named specifically in relation to this platform's outputs, it remains the single largest unaddressed variable for any operator assessing entry into SADC's industrial corridors. [TK]

What comes next

The test for infrastructure and property operators is whether the weeks following this Johannesburg gathering produce a published pipeline, named corridors, power projects, industrial parks or border-post upgrades, tied explicitly to the three priority value chains. A strategy document with 2030 targets is not, on its own, a construction mandate.

Until specific projects and financing arrangements are named, the prudent position for a regional infrastructure operator is to treat Industrialisation Week as an intent-setting event, useful for identifying which corridors and sectors SADC intends to prioritise, but not yet sufficient evidence to commit capital to a specific site.