One of the core objectives of the Southern African Development Community (SADC) is to enhance the quality of life of people in southern Africa through regional integration. What role can the private sector play in achieving this?
The private sector is considered a critical partner and stakeholder in SADC’s regional integration agenda, and in the region’s efforts to enhance the quality of life of its people. The role of the private sector is pivotal in a number of sectors, including driving industrialisation and infrastructure finance through Public-Private Partnerships (PPP). This is critical as it enables the region to mobilise the necessary resources for its socio- economic development in order to improve the quality of lives of its people. As an engine of growth the role of the private sector is also vital in the area of job creation in order to address the wide spread problem of unemployment in the region, and ultimately to address the problem of poverty. To underscore the importance of the private sector, the theme for the 37th SADC Summit of Heads of State and Government which takes place in August this year, is ‘Partnering with the private sector in developing industry and regional value-chains’. This will focus on promoting private sector involvement in the region’s prioritised industrialisation agenda.
The World Economic Forum’s Global Competitiveness Report (2014-2015) shows that the lack of access to finance and to human capital, and underinvestment in Infrastructure, are among the main inhibitors of growth in SADC countries. With the exception of South Africa, lack of access to finance remains the most endemic issue. What is the root of the problem and how can you open up better access to finance through SADC?
The availability and appropriateness of financial products and services (access to finance) in the SADC region remains a major challenge, particularly for small and medium- sized enterprises (SMEs). The SADC Strategy on Financial inclusion and SME’s access to finance was developed to complement Member States’ Financial Inclusion Strategies for purposes of integrating and supporting Member States. Financial inclusion, if properly implemented, has the potential to address the challenge.
The root problem of lack of access to finance in the region is mainly due to low formal employment prospects, high costs of formal financial products, stringent process and requirements to access financial products as well as proximity, low financial literacy levels and trust issues with financial institutions.
To address this challenge, SADC continues to assist Member States to develop programmes that will assist its citizens to access financing. One flagship programme in the region is the Making Access Possible programme (MAP). MAP is a multi- country initiative to support financial inclusion through a process of evidence-based analysis feeding into a financial inclusion roadmap jointly implemented by
a range of local stakeholders. It is ongoing in seven countries namely Botswana, DRC, Lesotho, Malawi, Mozambique, Swaziland and Zimbabwe.
Regarding infrastructure financing, the SADC region has, for the most part, relied on multilateral and bilateral institutions to fund regional infrastructure projects.
The persistent problem of accessing capital resources for infrastructure development is primarily the lack of well-conceived and properly prepared projects. To address this challenge, SADC has established the Project Preparation and Development Facility (PPDF) through which projects are prepared and made bankable in readiness for financing and investment. SADC has also finalised an agreement to establish a SADC Regional Development Fund, which will prioritise infrastructure development and industrialisation windows.
A regional approach to infrastructure development as embodied in the SADC Regional Development Fund (RDF) and the PPDF will go a long way to alleviate the problem of access to funding. Not only would the RDF access resources on international capital markets but, through co-funding with and direct lines of credit to investors in infrastructure, but would also assist in reducing the associated individual country risks and crowd in much needed private sector participation in infrastructure. Through enhancing project preparation and development, in order to bring projects to bankability and develop a project pipeline for take-up by investors, it is expected that in the long term, the SADC region would address the challenge of underinvestment in infrastructure.
The SADC Regional Development Fund is on the whole a means of (i) funding some of the region’s social and economic infrastructure needs; (ii) supporting adjustment measures in less developed Member States; and (iii) supporting the region’s integration process in general. SADC Member States are already benefiting for project identification and appraisal from the resources of two major facilities, namely the PPDF and Infrastructure Investment Program for South Africa (IIPSA).
Given the limit to public sector funding for infrastructure development, private sector funding becomes critical to bridge the gap. This therefore calls for enhancement of private sector involvement and finance by creating first an enabling and conducive environment. There is also need for the deployment of instruments for efficient leverage; risk mitigation; mobilisation and catalysation of private finance, i.e. blending both public and private funds to bridge the infrastructure gap.
Are development finance institutions doing enough to help investors drive money into southern Africa’s highest-risk countries, particularly Angola, Zimbabwe and Malawi, all of which according to the World Bank rank lowest in the ease of doing business scale?
The region’s development finance institutions are not adequately resourced to deal with the ever increasing needs of the region, which ultimately results in Member States seeking finance from multilateral organisations such as the African Development Bank and the World Bank. In order to attract investors, Member States should continue to vigorously implement economic and structural reforms, adopt prudent fiscal and monetary policies, and take measures to improve their ease of doing business.
The DFIs can play a significant role in the development and stimulation of capital markets, particularly through domestic bond issuance for financing much needed development projects that are aligned to national development plans in the respective SADC member countries.
In addition, DFIs should play a stronger subsidiary institution of SADC is testimony to SADC recognising the importance of the DFIs. National DFIs under the umbrella of the SADC DFI Network, coupled with the ongoing implementation of the Protocol on Finance and Investment, whose goal is the liberalisation of the investment and financial sectors across the region, will see development finance institutions play an increasing role in financing infrastructure development in SADC.
Many southern African national currencies are significantly depreciated against the US dollar. How is this affecting the scope for more projects to be financed through local capital markets in the region?
This would depend on the projects to be financed–if they are local projects and they are financed with the local currency–imports will become more expensive and affect projects that use imported inputs. The impact would be on inflation, which is likely to spike and the project becomes more expensive.
Taking into account the success of mobile payment companies in other African countries such as Kenya and Nigeria, what is technology doing to improve people’s lives and integrate SADC countries?
Mobile payments is one of the critical pillars of financial inclusion. SADC recognises the importance and role that technology plays in the provision of services, especially in the mobile-to- mobile space. The SADC business model caters for transfers to be initiated either by customers of mobile network operators or banks and the funds to be available to customers of mobile network operators or banks. The proposed business models and the technical solutions are still at a pilot stage. The SADC Secretariat in collaboration with key stakeholders has also initiated and completed a regulatory framework by developing mobile money guidelines. Member States have adopted the guidelines to regulate their operations.
Tax revenues are a valuable resource for development in Africa, and both Botswana and Zimbabwe have experienced some benefits from foreign tax inspection programmes in the last 18 months. Angola, however, is severely under-performing in tax collection. What can be done to ensure all SADC member countries, not just some, capture adequate tax revenues for development?
There is a need for Member States overhaul their tax administrations and revenue collection processes. There is also a need to foster financial inclusion. Those Member States with large mining sectors should review their mining regulations to ensure that the mining sector contributes its due share to fiscal revenue. There is also a need to foster financial inclusion and tackle the underground economy (informal sector) which hinders progress in a number of areas, including revenue collection and bank lending/credit allocation; and represents an opportunity cost for the governments in revenue mobilisation.
South Africa is the dominant destination for all inbound and outbound trade with the SADC’s remaining member countries. What is being done to alleviate these countries’ collective dependency on trade with South Africa, and how can trading be distributed more evenly among member states?
The only answer to the above scenario is through transformation of SADC Member States economies, through industrialisation of the region. That is why SADC has adopted an Industrialisation Strategy and Roadmap 2015-2063 aimed at developing and transforming the industrial sector of the region including development of regional and global value chains, and clusters.
You are the first woman to enter the position of executive secretary for SADC secretariat. You now plan to mainstream gender in all SADC programmes. How do you propose to do this, especially where sourcing human capital is such a fundamental challenge for southern African businesses?
SADC has always been committed to placing gender equality firmly on the SADC Programme of Action and Community Building. Since I joined SADC, the institution has leveraged existing regional instruments, including, among others, the SADC Protocol on Gender and Development, the SADC Gender Policy, and the SADC Declaration on Gender and Development, and international agreements such as the Convention on the Elimination of all Forms of Discrimination Against Women (CEDAW), Beijing Declaration and its Platform of Action, the Protocol to the African Charter on Human and Peoples’ Rights on the Rights of Women in Africa, and the Millennium Development Goals (MDGs) to promote gender mainstreaming and women’s empowerment in the region. The region has undertaken a review and alignment of the SADC Protocol on Gender and Development with the post-2015 Sustainable Development Goals and targets, African Union Agenda 2063 and the Beijing Declaration and Platform for Action. The adoption and subsequent signing of the Revised Protocol will ascertain that all Member States commit towards enhanced gender mainstreaming. We are also vigorously using the gender barometer to measure progress in achieving gender equality in our Member States through the SADC Gender and Development Index. Findings from the Barometer help Member States to assess the extent of gender balance and in decision making where to target additional efforts.
SADC is also in the process of developing the Regional Multidimensional Women’s Economic Empowerment Programme. It is hoped that the programme will facilitate the implementation of regional and international instruments in promoting gender mainstreaming and the empowerment of women. The 2016 Barometer features the first ever Southern Africa Gender Attitude Survey and indicates that, much as we have policies, laws and budgets on gender, long-term and lasting change depends on changes in attitudes that continue to systematically undermine the gains we are making.