Industrial regionalization critical for SADC member states

In about two weeks-time the 39th Summit of Heads of State and Government of the Southern African Development Community (SADC) begins in Dar es Salaam.

President John Magufuli, who is currently the deputy chairperson of SADC, will take over the rotating leadership of the regional organization from his Namibian counterpart Hage Geingob at the Summit.

The theme for this year’s meeting is on the focus of the past four SADC Summits that sought to advance industrial development and takes into account the need for sufficient infrastructure to support industrialisation and the need to engage the youth, who are no question the bulk of the SADC population and headache for those responsible to come up with way to absorb them efficiently in economic undertakings.

I recognize contributors would love to have their voices head, from presentations that will look at encounters and prospects in financing infrastructure projects that are key in stimulating industrialization program to those who might contemplate on openings for developing regional value chains within SADC and their benefits in stimulating intratrading within the region et cetera.

As I join other contributors I would like to re-examine industrial development in Tanzania and what would take to make it take off swiftly in the prevailing business environment that is increasingly becoming very competitive.

To begin with, I would like to examine the possibilities requirements and nature of industrialisation suitable for SADC member states with a clear understanding of the nature and magnitude of Tanzania’s journey to middle income and the determination of the leadership and the people to move out of this dilemma and to build a new society that would create wealth for the nation as whole.

With respect to the first problem it should be noted that in any economy, the nature and magnitude of underdevelopment manifests itself in dependency relationships between nation’s productive structures settings and relations of production with the metropolitan economies.

In these relationships, anybody would agree with me that the most important dependency relations are technological dependency, market dependency and managerial and entrepreneurial dependency.

These dependency relationships are reproduced and deepened by a productive structure inherited from proceeding system but perpetuated by a neo-colonial investment pattern which reveals a lack of symmetric between the structure of production and structure of consumption and structure of needed appropriate investment.

To-date and under determined 5th phase government, it can clearly be noted that Tanzania has already made great strides in deciding the institutional framework in which the industrialisation process is to take place.

To my view, this is of great significance and must be borne in mind when devising an appropriate strategy to sustain infrastructure being established.

The institutional framework is also important because it raises the basic questions regarding the purpose of any industrial strategy namely; industrialisation for whom, by whom and who makes the choices?

In the Tanzanian context and of course to other 15 SADC members states, the answer to the above questions is quite clear: industrialisation must be geared to raise the overall level of social, economic and cultural development of the masses; and it must be guided by the party and carried out by the all, especially private sector engagement.

Any important discussion of the difficulties of industrialisation, where nations get things wrong and what countries need to do to move forward productively and efficiently must come to terms with yet another problem of time horizon, specifically the expected period of changeovers.

This is because, many of the issues of industrial choice vis. investment choice and priority, choice of techniques and modes of operation including public private partnerships etc. are crucially dependent on the time horizon chosen.

In my opinion, decision making must among other things, must distinguish between short run versus long runs factor; must also distinguish industrialisation issues that can be solved during the period of recreating efficient system from those that can only be solved after the period of transition is over i.e. in the jurisdictions of free creativities.

Given the above framework, what can we say about the role of industrial exports; the structure of value additions; the pattern of investment choices and priority, the generation of indigenous technology, managerial know how and entrepreneurial ability and the role of appropriate financing structure and the role of small scale industries knowing that small scale industries are the engine of economies when incentivised properly?

To-date, the present pattern of some SADC member state’s export is such as to continue fragmenting the national economy thus widening the gap between the structure of production and the structure of consumption.

Almost all exportable have no home-base, i.e. they are not an extension of the internal market. They are rather specifically produced for external market.

This is no doubt the major cause of unequal exchange and its manifestations viz. worsening terms of trade, violent fluctuations of exports price etc. In my opinion, in order to rectify this pattern and having examined Tanzania context, we must endeavour to have exports that are an extension of the domestic market as much as possible in the future.

The policy with regards to exports therefore isn’t one of reducing total exports in total product, or that of inward looking. The proper policy will in my view have to look at the nature of the export themselves. With respect to existing game, we should try to find as much domestic use as is technologically possible.

A value chain study will reveal that there are many such possibilities and opportunities that have not been exploited largely because our concern has been directed to the traditional export oriented markets.

Traditional export oriented mentality i.e. exporting raw material without value addition or beneficiation is draining SADC countries not only wealth creation but more importantly job creation opportunities and skill development and innovation career by creating job opportunities and their multiplier effect elsewhere.

What is the very purpose of industrialisation, i.e. industrialisation for whom? Compared to other SADC member states, Tanzania has so far tried to produce such commodities viz. cheap textiles, housing materials, shoes etc.

To reap more benefits, there is a need to expand these goods as well as collective consumptions goods viz. water, health and education. New industries must endeavour as much as possible to be mass based instead of serving the interest of a few.

For, these are some of basic goods, basic in the sense that they are used directly or indirectly in the production of all the other goods. Amidst this approach the tactical problems lie in the short run.

Which basic instruments should be produced? In my assessment there is no doubt that part of the answer depends on the resource endowment and taking an example of Tanzania, here one must point out that we know relatively little or we lost truck on the approach. Mineral surveys of the country have just begun and will hopefully be speeded up to benefit Tanzanians. Our forest potential had hardly been exploited efficiently.

It is only recently that we began a serious study of our water resource potential i.e. blue economy. We have so far examined our animal resources from tourist perspective.

Resource surveys must be accorded top priority if we are to allocate our available resources sensibly and in accordance with our needs in the region.

Above all, apart from resource consideration, it is my opinion that we should embark on machinery tools industry. A need for machine tools industry hardly needs further justifications.

It is an industry that is the backbone of any industrial society. In input-output terms, it is in the last row of a triangularized capital matrix thus indicating its basicness.

The output mix of the machine tools industry must of course correspond to the structure of financing and structure of consumption goods. The last issue want to bring to your attention is concerns on how crucial role of small scale industries as an enabler towards industrialisation get-up-and-go.

Without going into detail, the significance attached to the class of small scale industries can be broadly placed under two category sociopolitical consideration and techno-economic justification on which the case for small-scale industries rests.

Whereas it is not possible to Marshall all the necessary evidence and arguments it is hereby suggested that a decentralised pattern of industrial development, while reducing local and regional unemployment and rural underemployment, may also be instrumental in distributing income among regions thereby contributing to the emergence of an economically balance constitutionally society.

In other words, industrial decentralisation through a system of small scale industries, apart from rectifying the phenomena of a regionally unbalanced economy with pockets of industrial concentration surrounded by vast depressed areas, bring about an all-round rise in per capital income and living standards as well as a wider devolution of economic and political power among masses-an essential ingredient of economic active society. S

eeing it differently, small scale operation is capable of mobilising local savings, entrepreneurial ability and taking into account local conditions of employment.

All along, i have been attempting to show that the major questions of industrial policy must be examined in a specific context, a framework that reflects SDAC’s member states objectives at this historical juncture.

If countries don’t do this, might find reproducing the Latin American and most third world industrial entourage experience that may not necessarily fit into regions business environment.

OUR article of last week completed the ...

Author: Dr Hilderbrand Shayo

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