UN Economic Commission for Africa report on natural resources and inclusive growth in Southern Africa

UNITED NATIONS
ECONOMIC AND SOCIAL COUNCIL
ECONOMIC COMMISSION FOR AFRICA: SOUTHERN AFRICA
Twentieth Meeting of the Intergovernmental Committee
Of Experts of Southern Africa (ICE)
13-14 March 2014
Livingstone, Zambia
Making Natural Resources Work for Inclusive Growth and
Sustainable Development in Southern Africa
Distr.: GENERAL
E/ECA-SA/ICE.XX/2014/ 06
Original: ENGLISH

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Executive Summary
The exploitation of the region’s abundant natural resources has been at the heart of the high rate of economic growth since the economic and financial crisis due mainly to buoyant commodity prices. However, the impressive growth trends have not been accompanied by an improvement in human development conditions as poverty; inequality and unemployment remain high in Southern Africa. The growth has thus been described as jobless, poverty-insensitive and non-inclusive for its failure to be accompanied by a clear transition from natural resources wealth to economic well-being where the growing national output is reflected in rising productive employment, improved skills levels, access to services and a reduction in poverty and inequality.
This report on Making Natural Resources Work for Inclusive Growth and Sustainable Development in Southern Africa addresses the theme of the 20th Session of the Intergovernmental Committee of Experts (ICE) of Southern Africa. The main objectives of the report are to: (i) provide member States with an overview of the state of natural resources exploitation in the region; (ii) identify the resources value chains and operating challenges; and (ii) provide policy advice on how to deepen the role of the sector in addressing poverty, unemployment and inequality in Southern Africa. The report consists of five sections. Section 1 provides an overview of the importance of natural resources to the economies of Southern Africa and isolates the various dimensions of inclusive growth. Section 2 reviews the various natural resources sectors focusing on current production activities and activities along the value chains and identifies the challenges in each case. Section 3 outlines the possible strategies towards strengthening the role of the exploitation and utilization of the resources in inclusive growth and uses examples to illustrate how other countries have used natural resources revenues to diversify economies and strengthen growth, create jobs and provide economic opportunities for citizens. Section 4 presents the conclusion to the analysis. This is followed in Section 5 by sectoral recommendations for member States and for the SADC Secretariat and development partners..
Member States’ representatives and other stakeholders are invited to consider the analysis presented in this report and its recommendations. Delegates are specifically requested to provide additional information to strengthen the analysis and recommendations proffered in this report.

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Section 1: Background
1. The Southern African Development Community (SADC) is richly endowed with natural resources, a number of which are world class. The region has a land area of about 964.63 million hectares of which 23.4 percent is arable, 394 million hectares of forestry, 21.6 million hectares of inland and marine water resources, a wide array of industrial, precious, metallic and hydrocarbon minerals, high levels of wind speeds rising to as much as 9m/s onshore, high solar insulation levels averaging between 5.5 to 7 kWh/m2 per day (IRENA, 2014) and vast wildlife resources for tourism and other uses. The exploitation of these resources has been at the heart of economic development in the region. For example, agriculture currently accounts for 8 percent of the regional gross domestic product (GDP) and 66 percent of employment. The minerals sector directly contributes about 10 percent to regional GDP, 7 percent to employment and 35 percent to export earnings (SSY, 2012). However, the sectoral contributions vary significantly at country level. For example, copper alone accounts for about 80 percent of Zambia’s export earnings, 18 percent employment and 8 percent of government revenues (UKAid and World Bank, 2011). For Namibia, the minerals sector accounts for 11.5 percent of GDP and provides about 8,000 direct jobs (CMN, 2012). For Malawi, agriculture contributes 37 percent to GDP and 82.5 percent to export earnings (AfDB, 2013a). Furthermore, the fisheries sector accounts for 4 percent of Malawi’s GDP (Phiri et al, 2010).
2. Economic developments patterns in the region during the last decade have further demonstrated the importance of the resources sector in economic recovery. Generally, resource-rich Sub-Saharan African economies rebounded relatively quickly from the impact of the 2008-09 global financial and economic crisis compared to other regions on the continent due to a combination of sound macroeconomic policies and the upturn in commodity prices. For example, according to the SADC Databank of Economic Indicators (2012), the Zambian economy grew by 7.3 percent in 2012 up from 5.7 percent in 2008 and 6.8 percent in 2011. Growth rates in Namibia were 5.0 percent in 2012 up from 3.4 percent 2008 and 4.9 percent in 2011. Similar patterns are discernible in the case of DRC, Malawi and Tanzania. In the case of Botswana, economic growth has declined from 8.6 percent in 2009 to 3.7 percent in 2012 due to the sluggish demand in diamonds. Overall, the average regional growth rate has increased from 0.2 percent in 2009 to 4.3 percent in 2012 due mainly to improved commodity prices.
3. One of the major criticisms of the high growth rate in the region which, incidentally is natural- resources based, has been its failure to address socio-economic challenges. For instance, despite a decade of strong economic expansion, the pattern of unemployment in the region is high at 26 percent, thus making bleak the employment chances for the millions of young people annually entering the labor force. Part of the challenges for policymakers is to assure employment opportunities for the large youthful population. Furthermore, human development indicators in the region have remained comparatively poor despite the high growth rates in member States during the last five years. For example (AfDB, 2013b), undernourishment for the period 2010 – 2012 in total population in SADC stood at 26.7 percent, much higher than in ECOWAS (11.8 percent) and in North Africa (4.4 percent). Maternal mortality in 2010 was high at 382 for every 100,000 in SADC compared to 84 in North Africa. The literacy rate of 15-24 year-olds, women and men, in SADC was 74 compared to North Africa’s rate of 85 for the period 2009 – 2010. The Gender related development index (GRDI) in SADC was 0.560 in 2007 compared to 0.693 in North Africa and the human development index was 0.447 for SADC in 2012 compared 0.662 for North Africa. Based on UNDP’s Human Development Index (HDI), which is a “composite index measuring average achievement in three basic dimensions of human development—a long and healthy life, knowledge and a decent standard of living” and Inequality-adjusted HDI (IHDI), which is “HDI value adjusted for inequalities in the three basic

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dimensions of human development”, only Seychelles, Mauritius, Botswana, South Africa and Swaziland, in that order, have performed relatively well with these indices above 0.5 (UNDP, 2013).
4. Furthermore, access to electricity in Southern Africa is only 24 percent compared to 36 percent for East Africa and 44 percent for the West African power pools (IRENA, 2014). In some SADC member States, access to electricity in rural areas is lower than 5 percent. In addition, poverty in the region at an average of 45.4 percent, remains unacceptably high and the pace of its reduction within member States is also unacceptably slow.
5. These observations have led some analysts to describe growth in the region as ‘jobless growth”, ‘poverty-insensitive growth’ and “non-inclusive growth”. The positive economic growth has to be accompanied by a clear transition from wealth (in this case natural resources-based) to economic well- being, where the impacts of the growing national output are reflected in productive employment, improved skills levels, access to services and reduction in poverty and inequality if it is to be inclusive. The region’s high inequality hinders the transformation of growth into poverty reduction.
6. It is instructive to discuss the concept of inclusive growth so as to appreciate the challenges facing the region. Various definitions have been proffered. The European Union (EUfacts, 2010) defines inclusive growth as growth based on a high employment economy and that all groups in society participate in such a growth while also enjoying its benefits. In another view, the Asian Development Bank (AsDB, 2007) defines inclusive growth as growth with equal opportunities for all. The growth should focus on creating opportunities as well as making them accessible to all and growth is inclusive when it allows all members of a society to participate in and contribute to the growth process on an equal basis regardless of their individual circumstances. The AsDB has also constructed a composite inclusive growth index at country level and has identified suitable indicators for (i) growth, productive employment and economic infrastructure; (ii) income poverty and equity, including gender equity; (iii) human capabilities; and (iv) social protection. The African Development Bank (AfDB, 2013c) contends that inclusive growth should focus on both creating opportunities and making the opportunities accessible to all and should be a process whereby individuals are provided with improved opportunities to benefit from growth. Other definitions of inclusive growth have focused on the same broad parameters of productive employment and access to opportunities. At another extreme, inclusive growth is also sometimes loosely referred to as ‘growth that benefits everyone’, which appears to imply that growth should ‘benefit all segment of society, including the poor, the near-poor, the middle income groups and even the rich’.
7. Although in some literature the term ‘inclusive’ growth is often used interchangeably with a suite of other terms, including ‘broad-based growth’, ‘shared growth’ and ‘pro-poor growth’, we adopt the view that inclusive growth is about allowing people to contribute to and benefit from economic growth and together with sustainability encompasses being broad-based, shared and pro-poor. Overall, inclusive growth then is growth that reduces the disadvantages of the most disadvantaged while benefitting everyone.
8. Wealth from natural resources have propelled countries into inclusive growth path trajectory when such countries apply themselves well across the six areas of the resources value chain including (i) institutions and governance; (ii) infrastructure; (iii) fiscal policy and competitiveness; (iv) local content development, (v) spending the windfall; and (vi) economic development (MGI, 2013). As can be seen in Annex 1, the countries in the region that are in the top ten bracket are Botswana, Namibia and South Africa, all of them with various experiences in the minerals sector. In the case of Botswana, this is due to good fiscal policy, competitiveness and well deployed mineral windfall revenues.

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Namibia’s position is due to good infrastructure and South Africa’s ranking is due to prudent utilization of mineral windfall revenues and the development of local content and local linkages.
9. The remainder of this report examines how the exploitation of natural resources in the region could contribute to inclusive growth as broadly defined, i.e. address the challenges of the poor, while at the same time making everyone else better-off. In other words, how can SADC achieve material progress through economic growth while encompassing equity, equal opportunity, access the key markets and guaranteeing social protection for the most vulnerable in society.
Section 2: Exploitation of Natural Resources in the Region
10. In 2012, the estimated total regional GDP from the exploitation of natural resources, their products, and various services in the region amounted to US$629 billion and the GDP per capita (purchasing power parity) ranged from US$400 for DRC to US$25,000 for Seychelles1. Regional GDP is expected to grow by around 4 percent in 2013 and to accelerate to 4.6 percent in 2014 due to the buoyant commodity prices (United Nations, 2014)2. The following section focuses on the operations in the various resources sectors and the attendant constraints to sectoral contributions to inclusive growth.
2.1 Mineral Resources
11. The region produces various minerals including copper, chromium, cobalt, diamonds, coal, hydrocarbons, gold and platinum group metals (PGMs) at various scales from artisanal mining to large scale production. However, the extent of value addition to these minerals before export is relatively low. Generally, all minerals are exported in a semi-finished state and thus the region loses potential revenues from higher value finished products as well as from linkages created through domestic value addition. Overall, in 2012 mining contributed about 16 percent to regional GDP and accounted for US$23.545 billion in intra-SADC trade (SSY, 2012). Angola produces about 650 barrels of oil per day and is the second largest oil producer in Africa, after Nigeria. Botswana is a major global producer of diamonds and currently accounts for 28 percent of global production. In 2009, Congo DR accounted for 40 percent of the world’s cobalt production, 31 percent of industrial diamonds, 6 percent of gem quality diamonds and 9 percent of world tantalum production (E&MJ, 2013). South Africa is the 6th world producer of gold while Tanzania holds about 34 percent of gas reserves. As of January 2012, Mozambique had 126 billion cubic meters of proven reserves while Tanzania had about 6.5 billion cubic meters (Ernest & Young, 2012). Zambia currently ranks 7th in the world in copper production and is projected to rise to 5th with currently available reserves. Zambia hosts an estimated 2.8 billion tonnes of copper ore ranging between 0.6 percent and 4 percent copper3. South Africa and Zimbabwe account for about 89 percent of world platinum group metals production (POLINARES, 2012) and Zimbabwe currently hosts a quarter of the world’s diamond reserves (UKAid and World Bank, 2011). However, as is the case with other African countries, the region is relatively underexplored and with an average exploration expenditure of $5 per square km, compared with $65 per square km in Australia and Canada. The geological potential of the region is therefore still unknown.
12. In addition to medium and large scale operators, an estimated 1.5 million people in the region are engaged in the artisanal mining sub-sector and these support about 7.5 million people. The subsector is dominated by both women and the youth who work in hazardous conditions. The sector’s ease
1 www.cia.gov
2 Other observers such as UNDESA (in the ESCR), IMF and World Bank have different estimate; all are however pointing in the same direction
3 siteresources.worldbank.org. What Zambia needs its potential.

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of entry and exit as well as the low capital requirements has made it a haven during times of economic contraction and often attracts seasonal miners. The miners lack proper mining skills and competences, they use unsafe and environmentally unfriendly approaches; they have poor access to markets and contribute to deforestation and water pollution and are known to use child labour. Among the challenges hindering contribution of the small scale mining sector to inclusive growth is inefficient taxation, low value addition, access to mineralised ground, limited marketing skills, high mineral economic leakages and loss of revenues due to operational inefficiencies and losses and poor diversification of miner’s earnings into other more sustainable sectors, thus creating very little backward and forward linkages.
13. Mineral exploitation is a major source of state revenues through exports and through direct and indirect taxes on mining operations. It is these fiscal linkages which have been the focus of many policy interventions in the sector. However, apart from Botswana and South Africa, other mining countries in the region have high levels of inequality as shown by the poor human development index. This could be due to various factors including inefficient rent (tax) collection methods and the failure to utilize mining revenues for development needs. The transnational nature of mining company operations also complicate the efficiency of the taxation systems due to the challenges of transfer pricing. The capacity to negotiate contracts has also resulted in poor fiscal agreements between governments and mining companies. The enclave nature of the minerals sector in most countries and lack of linkages undermines the impact on inclusive growth. Linkages are associated with high paying jobs and higher incomes and hence greater prospects of contributing to poverty reduction.
2.2 Forest Resources
14. Forests (including natural and planted) in the region are diverse and cover an estimated area of 394 million hectares. They contribute towards the basic needs of communities and individuals in the form of fuel for cooking and heating, fodder for animals, medicine, resource for shelter and housing construction, mining support, treated poles for power lines, material for furniture, curios and agricultural tools such as yokes and hoes. There are also non-wood forest products such as medicinal plants, indigenous fruits, edible plants, edible insects, honey, bees wax, exudates and mushrooms derived from forest resources.
15. As the forest-based industry does not necessarily require large investments compared to mining industry and the technologies and skills are wide ranging from low level to highly skilled, the sector offers an opportunity to contribute to inclusive growth by providing employment opportunities at both artisanal and industrial level. At global level, the market for forest products is projected to grow to US$1.2 trillion by 20154. Although there is no disaggregated data on the contribution of timber-based industries to national output in most countries, anecdotal evidence shows that the sector is a major contributor to economic activity. Available data shows that in South Africa, the exotic forest plantation contributed 1.8 percent to the country’s GDP and employed about 110,000 people5. According to the same report, in Zimbabwe, the forestry sector employed 14,500 people and contributed 3 percent to GDP and in Swaziland, the forestry sector contributed 25 percent of the country’s foreign exchange earnings. Data by the Food and Agricultural Organization show that forestry contributed US$25 million to GDP for Mauritius and US$9 million for Tanzania in 2005 (FAO, 2010). The FAO reports that SADC exported US$33.149 million of wood charcoal, 57 percent of which, was by South Africa. The charcoal intra-trade was US$699,000 of which Malawi was responsible for 80 percent.
4 http://www.prweb.com/releases/forest_products_paper/wood_and_wood_products/prweb9190684.htm
5 http://www.fao.org/docrep/005/ac850e/ac850e07.htm

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16. The main classes of forest-based industries in SADC are wood/charcoal, timber and wood products, and non-wood forest products. More than 70 percent of the total energy consumed in the SADC region is from the wood/timber industries. An estimated 89.3 million cubic meters of wood are used in the region6. The value chain of the industry includes wood production, charcoaling, packaging, transportation and trading before charcoal reaches consumers. The timber and wood products industry is a major sector with a high degree of vertical integration (Imani Development, 2003). The non-wood forest products (NWFPs) sector is also important for communities in Southern Africa as it contributes to food security (Chidumayo and Gumbo editors, 2010).
17. The forestry sector in the region faces many challenges due to unsustainable practices, poor operating conditions and pressure from rapid rates of population growth and urbanization. Inadequate skills, lack of secure access to land, illegal wood harvesting and uncontrolled charcoal production and corruption are among other reasons the region is failing to maximize revenues from the wood-based forestry resources. For example, forgone tax revenues from clandestine charcoal production and trade in Tanzania, Kenya and Malawi are estimated to be about US$ 100 million, US$ 65 million and US$ 7 million respectively (Minten et al, 2010).
2.3 Wildlife Resources
18. Wildlife resources are a vital renewable resource in Southern Africa. Apart from tourism, wildlife supports local communities in several ways including traditional uses such as food and clothing. This growing industry has become increasingly important and has benefits to private sector tourism businesses and local people. Tourists are a growing market for leather products from the sector. Generally, tourism is a growing economic sector in the region. Recent World Bank data shows that world tourism amounted to an average of US$15.35 billion for the years 2006 to 2010, while data by the World Travel and Tourism Council compiled from country reports shows that direct and indirect jobs created in tourism industry in 2011 were more than 5.7 million7. Employment in the sector was projected to increase to more than 5.9 million by 2012. However, the region is losing revenues in the tourism value chain as tour packages are sold by operators either on the regional market or outside SADC as an add-on package to tourists in other African countries. For example, Quirimbas case study in Mozambique accounted for 19.2 percent, 16.4 percent and 64.4 percent of the published package price and 15.5 percent, 15.1 percent and 51.7 percent of total tourist expenditures respectively, leaving very little for the host countries of tourist attractions (IFC, 2006).
19. The industry faces various challenges which include poor skills for communities to meaningfully participate in wildlife conservation projects, poor local marketing skills by local tourism agents to package affordable tours in competition with international tour agents, inadequate resources to develop projects to fully blown commercial levels, lack of transparency in wildlife conservation projects and tourism hunting management system and unfair benefit distribution formulae such that benefits secured from wildlife for host communities are often lower than traditional livelihood activities for the same level of community effort.
2.4 Water Resources
20. The region hosts about 21.6 million hectares of inland and marine water resources and these water bodies sustain a rich diversity of natural ecosystems and are critical for meeting the basic needs such as water supplies for domestic and industrial requirements. Water food security, improving access
6 http://www.sardc.net/imercsa/programs/cep/pubs/cepfs/CEPFS12.htm 7 www.wttc.org

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and availability of energy through hydropower (both large and mini levels) and provides employment. Shared watercourses generate regional economic benefits. For example, the Zambezi Basin has eight regional member States and provides a source of livelihood along its course. Similarly, the ten countries (four in SADC) of the Congo Basin derive livelihood from the basin (Sakibede, 2012). Thus shared water resources can contribute to inclusive growth when harvested in a holistic manner. The regional policy on the management of transboundary water resources adopted in 2005 provides a framework for cooperation in the sector.
21. Aquaculture is an important economic activity that has hitherto not made full use of available water resources in the region. It can be easily integrated into farmers’ primary agricultural activities and products can be sold at the farm gates or local markets and thus provide another source of income which diversifies farmers’ income streams. Aquaculture production in the region is concentrated in Madagascar (black tiger shrimp), Tanzania (seaweed), Mozambique (shrimp), Namibia (shrimp) and South Africa (abalone). In 2004 aquaculture production in the region was 0.14 percent (US$97.556 million) of the world’s total of US$71,670 million (SADC Trade, 2007).
22. However, illegal fishing is a challenge in Africa. It is estimated that one in four fish in Africa is caught illegally and that specific losses to African economies could be around US$6-7 billion per year (NEPAD, 2013b). Fish processing activities in the region tend to be simple and rely on traditional methods such as drying, salting and smoking. Higher-value fish products, such as fresh fish, chilled or ground or frozen, canning, fish meal and oil are mostly produced by South Africa and Namibia.
23. In addition to low value addition due to capital constraints, the contribution of the fisheries industry to inclusive growth in SADC is hampered by conflicts between artisanal and industrial fleets, disagreement on management measures and the use of harmful fishing practices and poaching. There is also a potential source of conflict in fish harvesting especially in shared watercourses across national boundaries.
2.5 Renewable Energy Resources
24. Energy and in particular, green energy, is crucial in achieving sustainable inclusive growth because production and access to green energy have the potential to accommodate all strata of society. The region possesses vast natural resources from which to harness clean energy including a potential of 800 TWh/year from wind, 20,000 TWh/year from solar, 660 TWh/year from hydro, 17,700 MW/year from coal and also hydrocarbons and geothermal resources (IRENA, 2014). Other renewable energy (RE) sources which can be harvested for commercial and domestic use include wave energy, tidal range tidal currents, ocean currents, ocean thermal energy, salinity gradients and biomass power.
25. The region has the largest installed electricity generating capacity compared with other economic communities in Africa. Yet it has one of the lowest rates of electricity access, at 24 percent compared to 36 percent for the East Africa and 44 percent in West Africa FANR, 2013). In some countries, access in rural areas is lower than 5 percent. The region had a peak power demand of 53.8 GW against an available capacity of only 51.7 GW, which is 96 percent of the requirement. As a result many SADC member States are experiencing unreliable power supply leading to high economic costs in lost production.
26. Renewable energy has the potential to close the energy gap in the region but is constrained by poor quality of input data, inconsistent demand forecasts nationally and regionally, low capacities to speed up penetration of renewable energies, slow pace in implementing cross-border projects and cost

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of accessing RE technologies and micro-grids. The Africa Clean Energy Corridor launched in January 2013 at the Third Assembly of the International Renewable Energy Agency by twenty SADC and COMESA States aims to accelerate the expansion of renewable electricity production, taking advantage of the continent’s enormous untapped potential and helping to sustain future growth (IRENA 2014). The initiative will optimize the grid infrastructure and operations to support increasing shares of renewable energy utilization.
2.6 Agricultural Resources
27. Agro-resources include land/soils, water and sunshine. As noted earlier, the region possesses 964.63 million hectares of which 23.4 percent is arable. Agriculture is central to poverty reduction, inclusive growth, and food and nutrition security in developing countries (World Bank, 2011). The agriculture sector in the region provides livelihood and subsistence, employment, income and creates wealth. It is a major source of jobs and, in 2012, the sector contributed 8 percent to regional GDP and an estimated 82.8 million people or 66 percent of the regional labour force were employed in the agricultural sector8. The region has registered a positive agricultural sector annual growth rate of 2.6 percent against a population growth rate of 2.5 percent during the last decade (FANR, 2013).
28. The Comprehensive Africa Agriculture Development Programme (CAADP) goal is to achieve agricultural sector growth of 6 percent per year on average and halving poverty and hunger by 2015 (IWMI & ReSAKSS-SA, 2013). The region has domesticated CAADP through country compacts9. Unfortunately, in 2012 agriculture growth rates in the region were still lower than the 6 percent target with the exception of Malawi, Zambia and Zimbabwe. Fertilizer application in the region (especially in the low income countries) was still lower than the Abuja Declaration of 65kg/ha and the regional target under the Regional Indicative Strategic Development Plan (RISDP) target of 50kg/ha. Low income countries in the region allocate less than 8 percent of their national budgets to agriculture whilst the middle income countries allocated about 2 percent of their national budgets to agriculture (FARNPAN, 2009). Furthermore, the R&D expenditure as a share of AgGDP remains low and is still lower than the 1 percent of AgGDP aspired for under NEPAD. An average share of government spending on agriculture in the region in 2010 was 5.8 percent compared with an average 7.3 percent for West Africa. This is still lower than the Maputo Declaration target of 10 percent. However, as of February 2013, only seven10 out of fifteen SADC countries had signed national level compacts (NEPAD 2013c). Of these, only Malawi, Zambia and Zimbabwe have met budgetary targets.
29. The region remains a net importer of most agricultural products in spite of this positive performance and malnutrition and food insecure population remain high with child underweight above 26 percent in nearly all countries in the region. The agricultural sector has performed poorly due to low labour and land productivity (poor soils). Labour productivity in agriculture in the region is on average 30 times lower than in developed countries. However, productivity in commercial agriculture is comparable to international standards11. Similarly, land productivity in the region has grown by one percent per annum from the 1990s, yet it has more than tripled in other regions. In addition, cereal yields have remained between 1.5 and 1.7 Mt/Ha on average since 2000, with the low income countries accruing the lowest yields. This is below the Africa average of 2 Mt/Ha and 8 Mt/Ha for developed countries; and whilst intra-regional agricultural trade has performed better than other
8 www.cia.gov
9 www.nepad.org. Agricultural transformation 10 SADC countries that signed COMPACT by February 2013 include Congo DR (18/3/2011), Malawi (19/4/2010), Mozambique (9/12/2011), Seychelles (16/9/2011), Swaziland (4/3/2011), Tanzania (8/10/2011), Zambia (18/1/2011)
11 SADC Agricultural Policy

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sectors, overall intra-regional trade remains, at 10 percent of total trade, compared to 30 percent in the Association of Southeast Asian Nations (ASEAN) region.
30. Agriculture can be one of the key drivers of socio-economic development in the region through its potential to generate employment and backward and forward linkages along the value chain. Many of the world’s poorest people are themselves farmers and hence growth in GDP originating from agriculture can be effective at reducing poverty. Furthermore, women comprise about 41 percent of the agricultural workforce worldwide and thus issues of gender equality and income distribution can be addressed with increased incomes to farm workers and farmers. Women constitute more than 70 percent of those who are wholly reliant on agriculture as a livelihood in the region12. However, less than 1 percent of women own agricultural land and they can only access less than 10 percent of agricultural credit. Despite the good intentions of the SADC Protocol on Gender and Development on the empowerment of women and the elimination of discrimination and the pursuit of gender equality and equity through the development and implementation of gender responsive legislation, policies and programmes, challenges still remain in the agricultural sector and this is a threat to inclusive growth.
31. The sector consists of subsistence, small holder as well as large scale commercial farmers producing a variety of crops and animals. Generally, smallholder farmers in the region are poorly organized, own an average of one hectare of land, produce maize as the main crop, use only 20 percent of recommended/desired fertilizer levels, are unable to access finance and can only produce about 100 Kg/Ha. They often use uncertified seeds and are poorly mechanized. Furthermore, small scale farmers have problems with physical access to markets, they lack agro skills and they face challenges with accessing agro and market information. Yet they are responsible for over 80 percent of staple food crops in Africa (FARNPAN, 2009). In Sub Sahara Africa, they account for 70 percent agricultural labour force13, but unfortunately make up 80 percent of people living with HIV/AIDS. Furthermore, 75 percent of women living with HIV/AIDS are in sub-Sahara Africa (AfDB, 2013b).
32. Trade is the key driver for agricultural growth. Poor rural infrastructure makes moving produce from rural to urban areas difficult and knowledge of potential markets and market expectations is also limited. Small holder farmers suffer huge post-harvest losses due to poor infrastructure and challenges with accessing markets. The trend towards informal cross-border trade in SADC has accelerated in recent years, with an estimated business volume of US$17.6 billion per year14. Informal cross boarder trading requires appropriate attention to examine the role it can play in inclusive growth development in the region.
33. Under the Regional Agricultural Policy, the region endeavours to support agricultural development and enhance its role in regional development. As signatory to CAADP, the region is bound by the pillars of land and water management, market, food supply and hunger and agricultural research in its endeavours to promote agriculture-led development.
Section 3: How to Make Natural Resources Exploitation Contribute to Inclusive Growth
34. Inclusive growth is founded upon broad-based growth across all sectors of an economy, includes low- and middle-income groups and has a distributional aspect that aims to minimize income
12 www.southernafricatrust.org
13 http://www.fao.org/docrep/v4805e/v4805e03.htm#P119_22526
14 http://www.southernafricatrust.org/changemakers/

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inequality in society. The approach suggested here is to identify and promote natural resource based industries, with assured markets, that prioritize the participation of locals throughout the value chain as a bedrock for catalyzing inclusive growth path in the region. This will accord citizens economic comfort and create assured investments in diversified (and sometimes risky) areas of the economy. To enhance inclusive growth, citizens must be active along the value chain as entrepreneurs and skilled manpower.
35. The approach to classification is proposed as follows:
1. Renewable natural resource-based inclusive industries where SADC has local value chains and predictable local markets and therefore inherent shield/resilience against external shocks be considered Priority 1. This can stabilize incomes and ensure local participation in the exploitation of natural resources.
2. Non-renewable natural resource-based inclusive industries where the value chain is partly local but with predictable international markets will be Priority 2. The revenues from the assured regional market and internationally are the source of strength. They must be invested in promoting Priority 1 industries and in addressing challenges in Priority 3 industries.
3. Renewable natural resource-based inclusive industries where the value chain is partly or wholly in SADC but the market is volatile be considered Priority 3. Although the market volatility weakens the internal segment, they can be must be minimized by the region. These industries must be tackled in such a way that most of them progressively migrate to Priority 1.
4. Non-renewable natural resource-based (financially/technologically/market) restrictive industries where the value chain is partly in SADC, but the market is volatile/predictable be considered Priority 4. The resource is a strength to SADC, but the region must tactfully gain entry to these “steel gated” industries and the revenues will be required to promote and establish Priority 1 industries and to address challenges in Priority 3 industries.
3.1 Using Market Ascertained Renewable Natural Resources as a Catalyst for Inclusive Growth
36. Two examples used here to illustrate Priority 1 are biofuels and bamboo based industries.
3.1.1 Biofuels Industry
37. The region’s liquid fossil fuel consumption of more than 142 million litres per day (or 51.8 billion litres/year) provides an opportunity to tap into the sector for inclusive growth through substitution of gasoline with bioethanol. If the region introduced 100 percent biofuels mandates, this would create local business opportunities in both production and consumption of an estimated US$166 billion per annum while creating more than 6.1 million jobs, US$366 billion in new housing and US$14.6 billion of food economy annually due to the biofuels sector alone. Since biofuel production is largely rural based, this would increase rural incomes and contribute to food security as producers can support food production. Box 1 below is an example of the experience in Thailand with a cassava based bioethanol industry.

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Box 1: Bioethanol Industry Expands Cassava Market and Stabilizes Cassava Prices for Farmers in Thailand (Sriroth et al 2011). Cassava value chain includes land clearance, seedlings supply, cultivation, pre-processing, bioethanol conversion, transportation and dispensing. In Thailand, farmers before introduction of a bioethanol industry frequently experienced an oversupply of cassava that led to falling prices and farm incomes. Introduction of a bioethanol industry therefore opened up an expanded market for the farmers which has since stabilized cassava prices. According to FAO, Thailand is today the 3rd largest cassava producer in the world after Nigeria and Indonesia. Of the 40 licensed bioethanol refineries, 25 factories use cassava with a total production capacity of 8.59 million liters/day. In Thailand, cassava is considered as one of the most important economic crops with an annual production around 25- 30 million tons. Apart from bioethanol, cassava also serves as a subsistent cash crop for farmers, an industrial crop for the production of chips and starch, supply for food, livestock feed and other products. Consequently, the demand for cassava has been rising continuously in Thailand, thereby contributing to agricultural transformation and economic growth in the country.
3.1.2 Bamboo-based Charcoal Industry
38. As noted earlier, about 70 percent of people in the region rely mostly on wood/charcoal for cooking. The potential regional market for charcoal is worth US$3.4 billion based on an average expenditure of US$1/day for an average of 2.5 Kg charcoal (range up to 4 Kg/day), per 5-member family household (GTZ and Probec, 2008). Thus, based on this daily consumption per household and 0.3 persons employed per ton of charcoal consumed (Maltitz, 2013), about 2.6 million people would be engaged for production, transportation and retailing in the value chain. However, increasing15 charcoal consumption leads to the ‘mining’ of forest resources. This requires the implementation of sustainable charcoal policies including sound tree management practices coupled with the use of energy efficient technologies. The use of renewable biomass either planted or managed without a net loss of biomass stock associated with its consumption can make charcoal renewable. Box 2 shows an example of charcoal policies in Sudan.
Box 2: Sudan Experience Suggests Fuel Switching is a Complex Issue (Khennas et al 2013)
The Sudanese government is promoting private investment in charcoal production for foreign markets. Private forest owners are allowed to export their charcoal and, as a result, many companies are investing in the industry. The approach is that investors meet the cost of establishing and maintaining the plantations or forest regeneration. The government is also encouraging farmers to plant trees under the agro forestry land management system. In 1998, charcoal consumption exceeded the sustainable supply by 45 percent. The government therefore introduced policies to reduce consumption and increase the supply. One of the strategies was to promote the use of LPG by increasing the price of charcoal up to three times that of gas. However, this has not reduced the demand for charcoal, probably implying that fuel switching is a more complex issue which requires further understanding.
39. In addition to charcoal, the bamboo plant has a wide range of uses and products including construction materials, furniture, clothing, fences, handicrafts, pulp and paper, edible shoots, mats, walls, ceilings, room partitions, windows, baskets, trays, hats, lampshades, caps, lanterns and animal fodder. As noted earlier, more than US$3.4 billion can be earned from the internal charcoal business in the region and invested into diversified activities. Recently, there has been a dramatic increase in manufacturing industries utilizing bamboo worldwide. For most of its products, bamboo processing does not require high capital investments, but is labour intensive and therefore contributes significantly to employment creation. Over 600 million people around the world generate income from bamboo
15 Annual world charcoal production has risen from 24.8 million tonnes in 2003 to 31.0 million tonnes in 2009 (Khennas et al 2013).

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while hundreds of millions of people in the world live in bamboo houses (UNIDO, 2009). Box 3 is an example of bamboo based industry in China.
Box 3: Bamboo Industry in China (Yongde 2012) China is one of the distribution centers of bamboo products in the world. The country has 5.38 million hectares of pure bamboo forest, which accounts for 25 percent of the bamboo area in the world. The production of bamboo culms in China changed little from 1978 to 1990, but significantly speeded up during the next 20 years due to the industrialization of bamboo, especially from about 2000. Today China makes numerous products from bamboo including handicrafts, woven articles, scaffoldings, plywood, floorings, structural articles, mats, tooth picks, charcoal. In 2010, the bamboo industry recorded a US$13.8 billion production value and directly employed 5.6 million people.
40. Furthermore, bamboo can provide environmental benefits such as soil stabilization and erosion prevention on hill slopes and verges, conserving and protecting forests while creating enduring supplies for the wood and cellulose industries.
3.2 Making Non-renewable Mineral Resources Contribute to Inclusive Growth
41. Given that minerals are wasting assets, it is important that their extraction is sustainable. The region must maximize earnings from the resource and invest on building infrastructure and in diversified sectors and services industry which will broaden backward and forward linkages in the economy and create further employment opportunities in other sectors. Among the broad range of policy measures that can be used to increase the value of wealth derived from the minerals industry includes raising local content in mining activities, localizing sale of mineral commodities, undertaking exploration to increase the knowledge base for bargaining with investors and where possible, investing regionally in mining, and localizing downstream processing. An example of the benefits of well utilized mineral wealth is the diversification and infrastructure development due to the gold mining industry in and around Johannesburg in South Africa. Below are two different scenarios of how some countries are using mineral resources to contribute to inclusive growth.
42. 3.2.1 Optimizing Revenues: The collection of optimal revenues from the oil, gas and mining resources through appropriate taxation and increasing local content in the mining value chain can deepen the role of extractive industry in inclusive growth. The World Bank (2012) showed that increasing local procurement by the mining industry in West Africa generated significant benefits to a wide range of stakeholders. For example, mining companies could minimize their logistics and stock holding costs, reduce their lead times, increase security of supply as well as enhance their reputations and obtain a “social license” to operate. Local businesses, entrepreneurs and communities can benefit from increased access to business growth opportunities, increased stability and diversity of markets, and improvement of business capabilities, including access to capital, productivity, technology, health, safety and environment practices. Other benefits include increased employment and skills, increased domestic and foreign investment, technology and knowledge transfer from international companies, exports and foreign exchange and increased government tax revenues.
43. 3.2.2 Enhancing Linkages: Downstream Processing and Value Addition: Downstream processing is an important step in the natural resources sector as finished products are sold for higher prices and also value addition creates local business opportunities through backward and forward linkages which in themselves result in jobs and other industrial infrastructure benefits. Skills developed along the value chain can support other sectors. Box 4 below presents an example of an initiative in Botswana and the benefits this generates to the local economy. Botswana has created a Pula Fund from mineral sector proceeds.

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Box 4: Localization of Downstream Processing of Diamonds in Botswana (Tshetlhane 2013) Botswana set up a Diamond Hub in 2008 to facilitate the diamond industry in downstream activities. The Government has relocated the selling of diamonds from London to Gaborone and the first sight sale was on 11th November 2013. Diamond mining value added was 21 percent of GDP in 2011. Diamond polishing value added about 2 to 4 percent. There is also direct value added in the form of capital invested (equipment and buildings), labour (wages paid), taxes (from operations), interest (borrowing from local banks), indirect value added; ancillary services provided e.g. banking, security, transport, housing). Rough diamond trading value added is about 1 percent to 2 percent. Relocation of global sight holder sales from London to Gaborone has benefited other sectors such as transport, hotels, tourism and property development. In terms of employment, about 3,600 are directly employed in diamond cutting factories, representing a 29 percent addition to diamond industry employment (diamond mining employed 8,902 people in 2011) and 500 indirect employment due to cutting and polishing. Although direct value added with cutting and polishing is usually up to 5 percent, spillover effects from related sectors increases this figure in form of indirect value added.
44. The recent local auctioning of emeralds by the Zambian Government demonstrated the size of the domestic benefits of such a policy. In the latest auction, held in November 2013, a total of US$16.4 million was realized. This was direct inflow into the Zambian economy. However, local value addition and localization in the region faces many challenges including the lack of supportive policies, the small size of the regional markets (lack of economies of scale), infrastructure bottlenecks (energy, transport) and limited technical capacity and limited skills.
45. 3.2.3 Investing Revenues from Minerals in Economic Diversification: Chile has used its copper revenues to create a sovereign wealth fund as well as diversify into agriculture and the service industry. This can insulate economies from the challenges of cyclicality of commodity prices and also provide resources for diversification. Box 5 illustrates a world class example of how Chile has applied wealth from mainly copper to diversify her economy.
Box 5: Economic Diversification: Chile Diversifies her Economy Using Revenues from Copper (CORFO. 2013). In Chile the mining sector is the highest-earning industrial sector with nearly $18 billion in net profits in 2010. Copper-rich Chile has used mineral wealth to diversify her economy by investing in industrial clusters which has spurred forward and backward linkages in the country. There are now clusters on mining equipment and inputs, aquaculture (e.g. salmon and trout), forestry, agro-industry (e.g. raspberry, wine, fruits, cut flowers, coffee) and global services. The Chilean wine cluster has captured attention far and wide because of its meteoric rise in international markets. For example, in 2006, Chile exported 391,000 tonnes of wine, in 2008 exported US$2.4 billion worth of salmon and trout and in 2010, exported US$164 million worth of blueberries. Chile has also invested a significant part of the boom resources on training highly advanced human capital by allocating US$ 6 billion in windfall savings for the Development of Human Capital, with the goal of increasing the number of PhDs per capita. The returns of this fund will be used to give scholarships to Chileans who enroll into top world universities. The number of Chilean students abroad had increased from 172 in 2005 to 2,500 in 2009 and will keep on increasing. The World Economic Forum ranks Chile as Latin America’s most competitive economy. For the world competitive index, Chile is ranked 1st among Latin American Countries, for macroeconomic stability it is ranked 1st in Latin America and ranks 30th out of 133 countries globally. For the best place to do business in 2009 - 2013, Chile is ranked 1st among Latin American Countries, 4th among emerging countries and 15th overall ranking among 60 selected countries (CORFO 2013).

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46. Annex 3 shows that apart from agriculture, the growth elasticity of poverty reduction among the non-agricultural subsectors is typically higher in trade and transport and manufacturing than in mining and utilities, construction and finance and business.
3.2.4 Enhancing Economic Diversification for Inclusive Growth
47. Box 6 illustrates a case where an already diversified economy from renewable natural resources is enhanced by revenues from non-renewable mineral resources to raise inclusive growth profile. Malaysia’s good political stability in a diverse society coupled with good macroeconomic policies has helped the country to gain ascendance to global ranks of well managed economies.
Box 6: Economic Diversification: Enhancing a Diversified Malaysian Economy Using Oil Resources (Noh 2013) Malaysia has often been singled out as a success story when it comes to state performance. The country has successfully transformed its economy since gaining independence in 1957. Despite being endowed with tin, oil and gas, Malaysia has developed into a multi-sector economy driven by high technology and capital intensive industries. The Malaysian economy was already diversified with major revenues coming from primary products like tin, rubber and palm oil before oil and gas production became commercially viable. In fact, by 2009 the oil and gas sector contributed only 19 percent of Malaysia’s GDP. In 2011, Malaysia’s exports included electronics (34.5 percent), petroleum related products (9.9 percent), palm oil (9.3 percent) and chemical products (6.9 percent). Malaysia is also among the world’s 20 largest trading nations and its economic performance was ranked 7th of 59 countries in 2011. The World Competitiveness report of 2011 ranked Malaysia among the top five most competitive nations in Asia Pacific. Some reasons advanced for this success are Malaysia’s ability to manage consensual democracy in a highly plural society by: Tacit agreement between Malaysia’s politically dominant Malay actors and economically dominant Chinese actors. Under such an agreement the state (being Malay dominated) agrees not to over indulge in productive activities (Chinese domain) and in return the state is allowed to disburse resources to invest in the economic and human capital of the Malay majority. Malaysia’s ability to get its macroeconomic right, the state’s consistency in pursuing liberal market ideas and Malaysia’s competence in handling conflict in the post-colonial period.
3.3 Contribution of Forestry to Inclusive Growth
48. In addition to measures such as the bamboo example given above, policies that can stimulate contribution of inclusive growth in the region include secure access to land, reforestation programmes using economic plant species, investing in skills to curb wastage and export of raw wood, skills development in harnessing natural forest products such as honey, fruits, caterpillars and mushrooms. Some of the region’s forest products are unique and should be traded for their uniqueness. Box 7 shows initiatives by SADC Timber Association to use wood waste for charcoal production and Box 8 shows the challenges faced by the bee-keeping industry in Zambia.
Box 7: SADC Timber Association (STA) to Promote Whole Tree Approach (Makolosi 2013)
The STA would like to turn the current forest biomass waste in traditional timber milling which uses only the logs. Fifty (50 percent) of logs is converted into planks (timber). Outer slab, tops, lops and sawdust is just left around. This remnant biomass fuels forest fires during the dry season of the year. This biomass can be converted to briquettes and pellets to replace charcoal from indigenous forests. Honey and mushrooms from plantations can be exploited economically.

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Box 8: Beekeeping Industry in Zambia16
A study of the beekeeping industry in Zambia revealed that there were 45 honey producing districts in Zambia, yet the country lacked the regulatory framework. Beekeepers were paid less for their products due to lack of knowledge about the honey prices and markets. Beekeepers often lacked means of transporting their honey to the urban markets and lacked knowledge on modern honey production techniques. There were 23 honey buyers/traders, most of whom were not registered. Beekeeping in most areas of the country remained neglected as local people did not realize the benefits of this economic activity. Those with tertiary education had higher production using modern techniques of honey production compared to those with lower education that still depended on traditional beekeeping methods. Zambia exports natural honey and other honey products to Europe, America, China, Japan, Central Africa and Southern Africa, but contributes less than 0.1 percent to total national exports despite the large potential. Zambia Honey Council is currently partnering with government on determining the floor price of honey, collection of information on bee keeping and skills development.
3.5 Contribution of Wildlife and Tourism to Inclusive Growth
49. Wildlife and tourism are sources of employment, foreign exchange earnings and revenues. The region’s unique wildlife, culture, landscapes, water and other attractive natural resources, if well promoted, have a large potential to contribute to improving livelihoods. Community wildlife management programmes, such as Campfire, in Zimbabwe, for example, have contributed to spreading benefits to communities and well as strengthen environmental management and conservation. A policy environment which facilitates proper management of natural resources can increase regional tourist patronage and expand the volume of tourism business. Furthermore, political stability, professional and competitive packaging of tours and ease of travel are important ingredients for the promotion of tourism. Box 9 shows the benefits of ecotourism in South Africa. The Caribbean experience in Box 10 is also instructive.
16 http://www.zambiahoneycouncil.org.zm/index-2.html

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Box 9: South African Experience with Private Protected Ecotourism Areas (IUCN 2005). Based on a survey of seven ecotourism-based private protected areas in South Africa to identify key attributes and challenges, the following were the findings: 1) the top three attractions to private reserves were the wildlife, the scenery and the high quality accommodation/service; 2) establishing a reserve was a costly undertaking, requiring an average initial outlay of USD $4.6 million; 3) in changing from farming to wildlife-based ecotourism, employment numbers increased by a factor of 3.5, the average value of wages paid per reserve increased by a factor of 20 and the average annual salary more than quintupled from $715 to $4,064 per employee; 4) the reserves were contributing in excess of $11.3 million to the regional economy per year; 5) reserves were making a substantial contribution to biodiversity conservation; and 6) lack of support by government entities was the most pressing challenge facing reserve owners. The analysis points to ecotourism as an economically and ecologically desirable alternative to other land uses, while also highlighting the need for governments to provide assistance and support for both the establishment and management of private reserves.
Box 10: Culture as a Niche Market in the Caribbean17. The Caribbean had the earliest significant tourism, primarily from the USA and Canada in the pre-war period. This accelerated with the growth of mass tourism in the 1960s, with predominantly beach-based tourism on offer. The cruise-based industry has been the fastest growing tourism sector. More recently, the tourism product has developed to include niche markets that focus on heritage and culture for both land-based tourists and cruise passengers. Seventy-five (75) percent of adult visitors to the Caribbean engage in cultural tourism that includes events, festivals and activities, while cruise passengers are the largest market for heritage tourism. The Caribbean has long been known for its culture and this is becoming an increasingly exploitable area for niche tourism opportunities that benefit the local economy and communities.
50. The region can exploit the economic benefits along the value chain of the sector including provision of frontier service providers (visas and other entry permits); international and local tour operators and travel agents; international/local air transport and airport services; accommodation services (hotels, lodges, camp sites, etc); and other ancillary services.
3.6 Water Resources Contribution to Inclusive Growth
51. Water resources hold great potential to contribute to inclusive growth in SADC through fisheries harvesting, agriculture, water sports and cruises, transport, power generation and potable water industries. Some of these, such as fishing, are participatory where they exist and can play a major role in broadening opportunities for inclusive growth, as clearly demonstrated in the Chilean case in Box 4. One of the economic leakages resulting in the sector poorly contributing to inclusive growth is poaching. The region needs to strengthen measures to minimize this loss. Box 11 is an example of a commendable action taken by SADC member States against Illegal, Unreported and Unregulated Fishing (IUU) in marine waters. Policy measures to promote this resource should include skills development in water resource products and services.
Box 11: Regional Actions to Reduce IUU Fishing in SADC Marine Waters. Recently, encouraging SADC actions have been noticed that are taking place, including (i) the operational vessel monitoring system (VMS) data-sharing protocol between South Africa and Mozambique (Boto et al 2012), (ii) the bold capture of an illegal fishing boat, Antillas Reefer, by Mozambique, (iii) denial of port access to the suspected IUU fishing vessel F/V Premier by Seychelles (SIF, 2013) and publication of detailed information on Seychelles flag fishing vessels for 2013 and a list of licensed fishing vessels on the Seychelles Fishing Authority (SFA) webpage. The sharing of this information is in line with regional fisheries agreements and supports the objectives and results of
17 http://publications.thecommonwealth.org

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the FISH- iAfrica initiative.
52. In addition to policy challenges, the rather low profile accorded to water in CAADP also impacts on implementation of relevant programmes which impact on water and agriculture development in the region (Sullivan and Mashingaidze 2013).
3.7 Renewable Energies (RE) Contribution to Inclusive Growth
53. The power deficit and competitive costs of producing power from renewable (RE) sources create an immense opportunity for inclusive growth through independent power production and supply through micro-grids connected to main grid lines. The opportunity for decentralized power also increases accessibility to modern energies in rural areas where in some cases the access is currently less than 5 percent. Access to modern energy improves productivity and widens business opportunities such as downstream processing, cold-preservation of food and improved medical and educational services in rural areas.
54. The region is developing policies to elevate the role of REs in development. For example, Madagascar currently with a 57 percent share of electricity produced from renewable sources is to increase to 74 percent by 2020, South Africa’s 13 percent renewables target by 2020, Lesotho’s 35 percent RE targets focused on rural energy access by 2020 (Luxande and Schutze, 2012) and Zambia’s B5 and E10 blending targets by 2015 (Sinkala, 2013). There is co-generation in some sugarcane- producing countries in the region. Grid-connected bagasse CHP plants exist in Mauritius, Tanzania, Zambia and Zimbabwe. In Zimbabwe, a community-scale biogas plant is also being constructed in Harare to convert organic waste to heat and electricity. South Africa in 2012 began construction of a 50 MW solar power tower and a 100 MW trough plant while Namibia announced plans for a consolidated solar power (CSP) plant by 2015 (REN21, 2013). For residential use, the most common RE is solar, followed by biogas. Wind-based RE is also used mostly in farms and schools.
55. At regional level, management and costs of grid construction and power and delivery through main grids can be shared through the Southern African Power Pool (SAPP). The region has a large elasticity to localize production of inputs for renewable energy, but only South Africa has invested in localizing manufacturing of RE technologies. A regional strategy towards this could be adopted to benefit from economies of scale.
3.8 The Agricultural Sector and Inclusive Growth
56. Agriculture is one of the key sectors with high potential to contribute to inclusive growth in the SADC region. For the sector to be seen to play its rightful role in this regard, a number of measures are required including (i) access to secure land especially by small scale farmers and women who are currently disadvantaged, (ii) improving farm input support systems, (iii) improving agricultural infrastructure, (iv) improving market environment to reduce post-harvest losses and (v) access to affordable finance.
57. Furthermore, the use of geographic concentrations of interconnected companies, specialized, service providers and associated institutions in a particular field, will accelerate providing solutions to the agricultural sector. Countries such as the United States, India, Italy, Chile, Hong Kong, Colombia, South Korea and Sri Lanka have been able to establish globally competitive industrial clusters in textiles, software and computing, agricultural and seafood processing and financial services through clusters. Industrial clustering is seen as a key development tool in facilitating the development and

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improving the overall sustainability and competitiveness of key industrial sectors. Some of these sectors may have a strong export focus, as in the Chilean example in Box 12.

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Box 12: Salmon Industry Cluster in Chile (Ramsawak 2010) The Chilean Industry has made remarkable success over the last two decades. Chile is currently the world’s second producer of salmon and first producer of trout. The industry grew at an average rate of 22 percent over the last decade, the sector has contributed 4 percent of total exports and over 56 percent of total fisheries exports. The industry employs over 53,000 people (directly and indirectly). The salmon industry grew from US$538 million in 1997, to US$2.2 billion in 2006 more than a threefold increase in ten years.
58. The agricultural sector can utilize the abundant water available in Angola, Congo DR, Mozambique, Tanzania and Zambia and develop extensive aquaculture and irrigation activities which would significantly increase productivity, food security and provide export opportunities. However, the irrigation infrastructure in the region is poorly developed and needs strengthening. Furthermore, the policy environment is not conveniently configured to address the financial and technical constraints of small-holder farmers who incidentally account for more than 80 percent of staple agricultural foods in the region. Women dominate the small holder agricultural sector and constitute more than 70 percent of small farmers, yet less than 1 percent of them own agricultural land and they can only access less than 10 percent of agricultural credit (FARNPAN, 2009). Access to secure land, financial services, agricultural skills and information on markets is thus a key intervention.
59. Furthermore, policy measures to strengthen the inclusive growth potential of the extractive sector include local content to raise retained value of an investment in the country, sharing of information on good practices, product/service focused training to increase the ratio of productive skills, local/regional market development to increase the volume of business, quality assurance to broaden the market by increased product acceptability, access to collateral and finance to attract/raise investment funds, industry infrastructure to facilitate functional industry, industry transparency to unlock ideas and investment and research, development, demonstration and deployment to provide local solutions.
Section 4 Conclusions
60. The region possesses vast mineral, land, forestry, water and wildlife resources whose exploitation could contribute to inclusive growth and address the sub-region’s development challenges as has happened in other countries in the world. The resource-based industrialization experience of South East Asia and the resultant improvement in the living standards of the region’s population is well documented. Indeed, many countries in the world have deployed wealth from their natural resources exploitation to enhance the socio-economic status of their citizens. As noted earlier, these efforts have, among other factors, been supported by good institutions and good governance, conducive infrastructure, supportive fiscal policy frameworks, business competitiveness, well directed deployment of the revenue windfall and broad-based development programmes with full participation of citizens. Thus, a well-managed regional natural resources exploitation strategy represents a real opportunity to grow the regional economy and tackle poverty. The benefits of the current positive economic growth patterns should be harnessed to provide the basis for strengthening inclusive growth. The development of industrial clusters based on natural resource is crucial for the region to benefit from economies of scale.
61. Although minerals are wasting assets, they can be transformed into other forms of sustainable capital, including highly skilled human capital, through the prudent management of proceeds. Mining

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itself can provide employment, contribute to local infrastructure development, spur backward and forward linkages to other sectors (through value addition and beneficiation), stimulate the development of economic clusters, earn foreign exchange and government revenue and be the basis of industrialization and economic diversification. Forestry, wildlife, agriculture, water and renewable energies industries offer a myriad of opportunities for addressing development challenges as they are renewable. Industry based on these natural resources should therefore not be wasteful but take a long term view to ensure sustainability of the resource on which inclusive growth should be firmly grounded. The agricultural sector has the greatest potential to contribute to inclusive growth. Sectoral challenges such as access to agricultural marketing information and infrastructure, unpredictable markets, access to secure land, access to financing and access to affordable agricultural inputs need to be addressed in order to give impetus to the sector to contribute significantly to inclusive growth.
62. The regional infrastructure deficit requires collaborative efforts amongst all stakeholders. This can be through public private partnerships (PPPs) which can accelerate infrastructure development to facilitate industrial take off, especially of value addition and beneficiation industries Well-developed national and cross-border infrastructure is necessary to stimulate vibrant natural resource based industries in the region. This will require the harmonization of regional standards and the development of competitive quality regional products and services.
63. One of the key ingredients of inclusive growth is skills upgrade. Appropriate knowledge and skills are also important to efficiently convert natural resources into products and services. Skills development programmes should thus be a component of any inclusive growth strategy as skills improve the utilization of the resources. Agricultural skills enhance productivity just as much as industrial skills enhance value addition. Research, development and demonstration are necessary to provide local solutions, render support to industry and consider future industrial and socio-economic trends.
Section 5 Recommendations
64. The following policy recommendations are proffered for member States and other national stakeholders, SADC Secretariat and for development partners to help strengthen the contribution of natural resources exploitation to inclusive growth by taking advantage of natural resources where the region has strength to positively and sustainably transform its economic path and addressing the impediments in areas where the region has not performed well.
5.1 Actions by Member States
65. Member States need to invest in stabilizing the individual and household economies by prioritizing natural resource-based industries with predictable markets/earnings as a catalyst for inclusive growth development of the region to cushion citizens from the impacts of cyclical commodity prices. Where possible, establish distributed off-take (assured market) agreements according to geographical advantages and strengths to stimulate a wider access to business opportunities in the region focusing initially on geographical areas where resources exist. This requires an inventory of resources to determine the adequacy of the throughput. The creation of renewable natural resource-based industries will help broaden the basket of assured markets, which will in turn increase opportunities for the majority to be engaged in this sector.
66. Member States need to optimize revenues from the resources sector and utilize the revenues for product/service directed skills development, development of value addition industries and research and

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development. The creation of efficient tax systems which are flexible to capture windfalls is an important pre-requisite to the extraction of optimal rent. The creation of Sovereign Wealth Funds is a potent strategy for ensuring intergenerational equity and cushioning economies from volatility in commodity prices. The implementation of the SADC Regional Infrastructure Development Master Plan through collaboration between member States and the private sector through PPPs could help address the infrastructure gap. Furthermore, policy frameworks which link the development of natural resources to infrastructure development could help close the infrastructure gap. The optimal local retention of wealth in the region through local content policies which will support and spur backward and forward linkages around natural resources with an effect of increasing employment thereby strengthening the role of the sector in inclusive growth. Equally important will be the introduction of deliberate policies towards economic diversification and the exploitation of regional value chains.
67. For Mineral Natural Resources, member States should:
Invest in mineral exploration to delineate the mineral resources for medium and long term planning purposes including identifying areas amenable to ASM; where feasible this can be a regional strategy; Invest revenues from the minerals sector in infrastructure development and the diversification of the local economy; develop national policies on mineral beneficiation and value addition as part of the national industrialization strategy; Invest in developing the capacity of government institutions to audit the mineral value chain to minimize leakages; Strengthen corporate social responsibility frameworks to ensure that mining contributes to social inclusion through the creation of local business opportunities and capacity development; Develop and implement local content policies; and appropriately revise taxes and explore the use of windfall tax or resource rent to capture optimal revenues from mining; Introduce certification to help small scale miners to access better markets and capture greater returns for their mineral products; Develop the capacity of mining host communities on good mining practices and entrust them with monitoring mining activities to minimize degradation of environment and natural resources due to poor mining practices; and Develop the capacity of artisanal and small scale miners on alternative sources of livelihoods.
68. For Forestry, Wildlife and Tourism, member States should:
Strengthen management of forest resources of transfrontier conservation areas and ensure the full participation of neighbouring communities in the exploitation of the resources and management of revenues; Improve sharing of information on successful best forestry management practices and innovative instruments and strategies for community based participatory and sustainable management of indigenous forests; Develop and share practical toolkits for participatory development of community forest management plans to enhance performance of the industry; Increase investment in skills development on forest products and services and marketing; Promote and market the uniqueness of tourism features including forestry, wildlife and many other tourist attractions; Promote PPPs for the development of tourism infrastructure; and

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Promote value addition to wildlife products.
69. For Renewable Energy, member States should;
Establish regional targets for renewable energy use as part of the national energy package; Improve power interconnecting infrastructure to enable independent power producers access wider markets by selling their production to grids; Increase funding for renewable energy and broaden access to RE financing by increasing the role of financing institutions targeting RE; and Reduce import and export tariffs of RE technologies and fuels in the region.
70. For Agriculture and Water, member States should:
Establish public seed breeding programmes for indigenous seed varieties for the long-term sustainability of the seed sector and incorporate indigenous community seed preservation methods in these programmes; Invest in developing agricultural infrastructure including storage facilities to reduce post- harvest losses; Adhere to CAADP commitments including the Maputo Declaration on the sector; Sign and/or implement national compacts on CAADP; Provide incentives to promote development of agro-based clusters and use the clusters to stabilize markets for agro-produce which will also help producers migrate from small to commercial farming and spur increased forward and backward linkages in the sector; Strengthen the link between small and commercial farmers as well as food processors to facilitate toll processing and value addition; Strengthen regional and international cooperation to address poaching of fish resources Strengthen farmer support programmes including extension services, skills development, market information and inputs; Improve access to land, financial assistance, equipment by women and youth; Develop skills in communities and small businesses for packaging and marketing products and services; and Improve access to markets and marketing information to help improve their trading and operational performance.
71. For R&D and Skills, member States should:
Strengthen investment in education, skills development and capacity development; Invest in the training of scientists/engineers to enhance natural resource conversion capacity in collaboration with the private sector; and Establish national centres of excellence for research, development and demonstration to provide local solutions.

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5.2 Actions by SADC Secretariat
72. The Secretariat should:
Harmonies national policies and strategies in the exploitation of the various natural resources (including developing fiscal frameworks), for example, develop a beneficiation strategy for the minerals sector; Promote regional value chains in the various commodity sectors that can help address the constraints of smaller domestic markets and enable member States to benefit from economies of scale; Strengthen data collection and the creation of repositories to minimize economic leakages and maximize value-added contributions from natural resources, Commission studies to quantify the inventory of and the various natural resources to provide a basis to a region-wide exploitation strategy; Strengthen the role of African Peer Review Mechanism to monitor the national and regional performance of institutions and governance; Develop and/or strengthen the platform for sharing best practices in the various sectors e.g. Botswana’s success in the diamond sector could be show-cased and lessons learnt by other member States; Develop and/or strengthen a SADC-wide approach to capacity and skills development through accredited centres of excellence; and Accelerate the implementation of the SADC Infrastructure Master Plan through PPPs to address the constraints to value addition and beneficiation.
5.3 Actions by Development Partners
73. Development partners should:
Provide technical support for capacity development in member States – developing both human and institutional capacities; Facilitate inter-regional information sharing on best practices in natural resources exploitation and the management of resources revenues; and Assist the region in domesticating relevant international agreements impacting on natural resources development

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References
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Annexes
Annex 1: Countries performing well across the six areas of the resources value chain18
Figure A1: Human development index HDI(IHDI) in relation to GDP contribution by mining and quarrying in SADC region.
18 www.mckinsey.com. Reverse the curse

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Annex 3: Growth elasticity of poverty by agricultural and non- agricultural subsector, in four selected SADC countries (World Bank: Africa pulse)

UN Economic Commission for Africa report on natural resources and inclusive growth in Southern Africa

UN Economic Commission for Africa report on natural resources and inclusive growth in Southern Africa

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