South Africa has pledged to help Nigeria make the automotive sector the West African nation’s flagship industrial target. Currently German car manufacturer BMW has a plant at Rosslyn near Pretoria. About 80 percent of the BMWs produced there are for the international market. Credit: John Fraser/IPS

The lack of economic diversification throughout sub-Saharan Africa means that despite South Africa’s pledges to help Nigeria make the automotive sector the West African nation’s flagship industrial target, it may be difficult to do so, experts say.

Earlier this month, South African Trade and Industry Minister Rob Davies announced the initiative during a visit here by Nigerian President Goodluck Jonathan.

It is a move that is seen as an important milestone in inter-African industrial cooperation. However, Peter Draper, a research fellow at the South African Institute of International Affairs, questioned whether this collaboration would develop into economic integration.

“The real question is whether such cooperation could ultimately evolve into meaningful, broader, economic integration rather than the network of mostly hollow shells that currently masquerade as free trade agreements,” he told IPS.

“I think that Nigeria and the Southern African Customs Union should negotiate a complementary Free Trade Area agreement to promote closer economic relations – as the complementarities are strong, and it would bring the two countries closer together politically.”

Draper said that the African Union (AU) has already developed a number of initiatives for specific sectors, but more needs to be done.

“Actually there are quite a few sectoral policies covering, inter alia, energy, communications, transport, and various other integration initiatives. The problem remains implementation, not a lack of plans,” he said.

He said that it seemed to be commonly accepted that the AU’s role was to develop and coordinate implementation of a continental “master plan” that integrates these various initiatives.

“I think there is a role for a broader continental perspective, but I prefer the notion of ‘subsidiarity’ – pioneered in the European Union – where implementation is left to the lowest possible level of government.”

Draper said that the cooperation between South Africa and Nigeria could be an important mentoring initiative for South Africa.

“South Africa has been (involved in) auto industry policy development since the mid-1920s and has a lot of experience to draw on and share,” he explained.

“It reminds me of cooperation in Latin America, which historically evolved through sectors, involving the auto industry particularly. The European Community (which became the EU) also started out through a network of sectoral collaboration – iron and steel in particular.”

Minister Davies told the Business Day newspaper that discussions on automotive cooperation with Nigeria were still at an early stage.

But while some manufacturers, such as Nissan, might be willing to set up plants in Nigeria, others are more cautious.

Bodo Donauer, the managing director of BMW South Africa, said that in his group “production follows the market” and he does not currently envisage a BMW plant being established in Nigeria.

“Local production plants make it easier to access and develop new markets with long-term growth potential. Having a local plant also makes the company a ‘local player’ and boosts acceptance of the products locally and underscores our good corporate citizen approach,” he said.

“The success of this strategy has been proven by positive sales trends since the ramp-up of production plants, for example in the Unites States, in China, in the United Kingdom and, of course, in South Africa.”

He said that around 20 percent of BMWs produced at the Rosslyn plant near Pretoria are sold on the local market in South Africa “with more than 80 percent exported to markets around the world, including one percent to certain markets in the rest of Africa.”

“Given the current size of the new premium car market in the rest of Africa, we believe the BMW Group is well-placed with its current global production network to meet any additional demand in markets like Nigeria without the necessity for additional production locations,” he said.

Peggy Droidskie, an advisor to the South African Chamber of Commerce and Industry, said that the initiative between South Africa and Nigeria was very welcome, as regional integration in Africa remains high on the development agenda.

“Nigeria is a large market, and it is closer to Europe. This proximity to Europe implies that it would be logical for European connections to be used.

“The fact that South Africa is preferred (as a partner for Nigeria) indicates that South Africa is very competitive and can accommodate the requirements of Nigeria. It also provides South African manufacturers with an additional footprint in Africa,” she said.

Droidskie predicted that some manufacturers who currently operate in South Africa would become interested in setting up in Nigeria.

“Agreements of this nature are driven by politicians,” she noted. “The politicians believe that the agreements that they enter into benefit the private sector, which is often, but not always, the case.”

She said that South African vehicle manufacturers are already exporting a significant number of vehicles to Nigeria.

“Last year, the number was nearly 15,000. Nigeria is therefore currently a lucrative market for South African vehicle manufacturers. It is therefore very likely that the manufacturers will take advantage and come to the party.”

And she predicted that this cooperation could expand to other industrial sectors.

“If the profile of Nigeria’s imports is taken into account, there is considerable room for an increase in South African exports to Nigeria. For instance, there is room for greater trade in electrical and electronic equipment and machinery.

“With the development of the Tripartite Free Trade Agreement between the three regional economic blocs in sub-Saharan Africa, there is considerable potential for cooperation to expand to other countries and to other sectors.”

The newly completed African Union building in downtown Addis Ababa. Credit: Mekonnen Teshome/IPS

As the African Union celebrates its 50th anniversary this year, it is still younger and less integrated than the 56-year-old body that is now the European Union, and, according to politicians and diplomats, has a big advantage over the Europeans as it charts its own path of integration.

Africa can see where Europe has tried to move too far, too fast.  But it can also see where the Europeans have succeeded, as it plans its own path towards greater integration.

“Africa in particular has a need to integrate to take advantage of its massive resource economies of South Africa, Angola, Ethiopia, the Sudans and probably the whole Sahel area – and growing populous economies such as Nigeria and the Democratic Republic of the Congo,” former South African Trade and Industry Minister Alec Erwin told IPS.

Erwin negotiated his country’s trade, cooperation and development accord with Brussels, and has extensive experience in dealing with the EU.

There can be no doubt that the EU is willing to share the lessons it has learnt, and there is a regular dialogue between the European and African Unions.

European Commission President José Manuel Barroso and six of his commissioners travelled to Ethiopia’s capital Addis Ababa from Apr. 25 to 26 to meet their AU counterparts as part of the preparations for the EU-Africa Summit that will be held next year.

While the themes of cooperation and partnership will no doubt ring out, the recent crisis over the Euro, when Greece and some other members needed bailouts to keep their economies afloat, serves to highlight the way integration between sovereign nations can bring pitfalls as well as benefits.

However, while Europe has succeeded in many technical areas, the recent Euro crisis shows how political goals were pursued without the necessary backbone of economic and financial integration.

“The greatest caveat has emerged only recently and it came from the macro and monetary integration process,” Erwin said.

“Despite attempts to force a degree of harmonisation – with the Maastricht Treaty which established the European Union – it became clear that in fact the economies were too disparate in size, efficiency, and economic stability to survive a crisis.”

He said there is a clear lesson for Africa in that there has to be a systematic plan toward economic integration.

“We run the risk of running into problems with trade liberalisation,” he warned.

“Whilst this is important, it can backfire seriously if handled incorrectly. Trade liberalisation requires good trade facilitation between the economies and responsive economies.

“Both of these requirements essentially revolve around affordable and accessible energy, logistics and communications. In addition, there are a host of institutional trade facilitation reforms that have to be made.

“So like the EU at the outset we should be focusing on infrastructure and trade facilitation as key projects.”

Erwin said that in the past, Nigeria, Algeria, Ethiopia, Tanzania and South Africa cooperated more closely, and big progress was made in African development.

“It is this cooperation that is now most glaringly absent,” he said. “It requires diplomacy and tact since no one likes to think that the African world is going to be ruled by its giants.”

EU Ambassador to South Africa Roeland van de Geer told IPS: “If there is anything to be learnt from European integration it is that the road to union is a bumpy one – integration does not take place in isolation, and internal as well as external factors will place obstacles along the path.”

Former South African Ambassador to the EU Professor Eltie Links echoed this message, telling IPS: “My caution to Africa is to not try and emulate the Europeans in every aspect of the integration path.

“We have the benefit of their experience over the last couple of years and especially the last few months in trying to understand fully the way to manage the vast, enlarged EU in all of its spheres.

“These clearly point us to be more cautious in our own need to integrate, especially with regard to the speed and the depth of integration that we as Africans talk so easily about.”

Links said that the levels of development were so different in Europe, let alone in Africa, that talking of lumping countries together in an economic or monetary union without the necessary and thorough preparation would be a grave mistake.

Former South African diplomat John Mare, who served in his country’s Brussels Embassy, suggested that a lot of the more detailed harmonisation of standards and rules, which the EU has undertaken, could serve as a model for Africa.

“The AU has much to learn from the EU in terms of various forms of technical integration – such as getting similar standards for educational qualifications, road signs, environmental standards, food safety standards, infrastructural roll-out and so on,” he told IPS.

“It can learn how to delegate coordinated activities aimed at improved regional integration to sub-regional entities that firstly produce improved results, and secondly cut out duplication.”

However, Links suggested that Africa could learn not just from the practices of the EU, but also from its values.

He said three had stood out during his dealings with Brussels, namely respect for human rights, respect for the rule of law, and good governance, with the latter basically referring to corruption.

“Living in South Africa today these principles of democracy have become very obvious and imperative in our struggle to achieve our full potential as a democracy,” he said.

“Sometimes the source from where the advice comes clouds our willingness to accept it as good for us. We can do a lot more for the people of Africa if we strive diligently towards respecting and practicing these fundamentals in our society.”

Mare suggested that the AU should focus on areas of cooperation which are realistic and which will bring benefits.

“A key lesson is for the AU not to waste too much time on regional topics such as coordinated foreign affairs for the AU, or on a common monetary union – just think of the Euro,” he concluded.

A woman gets her hair done on the pavement in Mbare, Harare. Roadside salons are becoming a common feature in the city. Credit: Angela Jimu/IPS

Mollin Siyanda, 46, a single mother of three from Harare’s low-income suburb of Hatcliffe, is scared of being arrested by the council police as she sells fruit, vegetables and second-hand clothes on the pavement of the city centre without a permit.

“I take the (fruit and clothes) to the city centre to resell on the street pavements during evenings at peak hours as people are rushing back home,” she says of the goods she purchases every day at Mbare Musika, a major market in Harare.

“But I’m always operating under constant fear of council cops who often accuse me of being an illegal vendor,” Siyanda tells IPS.

Selling goods without a licence from the Harare council authorities is illegal here.

But a licence costs 20 dollars, which is a large sum to the many working in the informal economy who earn on average between two to five dollars a day.

According to Philip Bohwasi, chairperson of the Council of Social Workers in Zimbabwe, the country’s unemployment rate is 84 percent. As a result, a great majority of people currently work in the informal sector, and hundred of vendors have set up their stands at undesignated points across the city.

Siyanda’s story is one example of the situation that a number of Zimbabwe’s working women constantly face.

According to the Zimbabwe Congress of Trade Unions (ZCTU), over 60 percent of Zimbabwean women working in both the formal and informal sector are now the breadwinners in their families, as their husbands have succumbed to HIV/AIDS or were retrenched from their jobs.

“It’s true that women have become breadwinners. Some women have been widowed or their husbands left for greener pastures or were retrenched, leaving their wives to venture into the informal sector,” says Fiona Magaya, gender coordinator for ZCTU.

Ahead of May 1, International Workers’ Day, women trade unionists in this Southern African nation have called for government leaders to recognise informally-employed women.

Magaya tells IPS that the trade union has asked the Zimbabwe Chamber of the Informal Economy Association to persuade local authorities to allow informally-employed women to “to carry out their jobs without being nagged by police.”

“There is need for proper recognition of the informal sector and the role it is playing in the country’s economy, and government should move swiftly to regulate the informal economy, which employs the bulk of women,” Magaya adds.

Hillary Yuba, from the Progressive Teachers Union of Zimbabwe, echoes Magaya’s sentiments.

“Women clung to their small jobs even after dollarisation came, but scores of men lost theirs. Hence we now find women turning into breadwinners,” Yuba tells IPS. In 2009, Zimbabwe introduced a multi-currency regime, where transactions are now carried out in the United States dollar, South African rand and Botswana pula, to beat hyperinflation under the Zimbabwean dollar.

“Government is certainly not looking into these problems,” she says.

ZCTU information officer Khumbulani Ndlovhu says poor remuneration in the formal economy has forced women to venture into informal businesses.

“Even formally-employed women are in the informal sector, working in casual jobs to supplement their wages,” Ndlovhu tells IPS.

She says that the government should implement comprehensive economic empowerment policies that would give women access to the resources needed and would boost projects that “assist them in attending to bread and butter issues in their families.”

However, the government says a shortage of funding has hampered its efforts to economically empower women in both sectors.

“There is a lack of prioritisation of funding of key ministries like the ministries of women affairs, gender and community development …. and small and medium enterprise development,” a top government official from the ministry of women affairs, gender and community development tells IPS on the condition of anonymity.

A veteran female trade unionist from the Zimbabwe Union of Journalists, Sheila Mahlathi, says: “The fact that women have become major breadwinners calls for leaders to recognise they should also be given positions of authority, not through affirmative action, but by realising that, just like their male counterparts, women can also achieve extraordinary things.

“Authorities should make sure there are designated places for women to work unhindered as they fend for their families in the informal sector,” Mahlathi tells IPS.

One successful female entrepreneur in the informal sector, 34-year-old Ashley Zijena from Harare’s Southertorn middle-income suburb, urges women to remain resilient in the face of challenges.

Zijena, who operates eight flea market stalls selling imported clothes in Harare’s Machipisa low-income suburb, tells IPS that on average she makes between 60 to 80 dollars a day.

“Women should stand up and occupy as many political and economic positions as possible,” she says.

Nasro Elmi at her material store in the main Bakara Market in the Somali capital Mogadishu. She is one of a growing number of women in this traditionally conservative Muslim country who are going into business. Credit: Abdurrahman Warsameh/IPS

In the Hamarweyne market, Mogadishu’s largest, 24-year-old Maryama Yunis is finding success with her tiny cosmetic store. The young Somali entrepreneur has been in business for two years, selling everything from soaps and shampoos to lipsticks and eyeliners, and now she’s turning a decent profit.

“As more and more young women in Somalia grow increasingly aware of their looks and like to take care of themselves, the cosmetics business has naturally grown and I took the plunge to meet that demand,” Yunis told IPS in Mogadishu.

Yunis is one of a growing number of women in this traditionally conservative Muslim country who are going into business because of the opportunity to attain financial independence and upward mobility.

Even educated women in this Horn of Africa nation are expected to focus on raising families, but attitudes are shifting alongside women’s role in society, says Hawa Dahir, a social activist in Mogadishu.

“Times are changing in Somalia and people are now more aware of the entrepreneurial potential of women and are more accepting of the role women can play in the economy of the family and the country as a whole,” Dahir told IPS in Mogadishu.

Yunis herself is a university graduate. She studied nursing but opted to pursue her dream of becoming an entrepreneur instead.

“With my mother’s help, I managed to convince my father to allow me to follow my dream and start the store. With the money I am earning, I am becoming more independent by the day and I’ve become an inspiration for many young women,” Yunis said.

But for many women, entering the world of business is not a choice but a necessity forced on them by the death or unemployment of their husbands, according to Dahir, who studies women in business.

Faduma Maow has a shop in the Bakara market in Mogadishu, where she has been working as a clothes trader since the death of her husband three years ago.

The mother of four told IPS that she takes her children, aged between seven and 15 years, to school before heading to the market.

“It is tough being a working parent, but it can also be rewarding. I am financially independent and pleased to say I am making progress towards my goal of raising a family and building a stable future for myself and my children,” Maow said.

Dahir said that while there are no reliable statistics on Somali women entrepreneurs, their presence in the country’s small business scene is “palpable”.

“Many women have started businesses here in Sinai and other markets in Mogadishu,” Rahmo Yarey, owner of a teashop in this busy market, told IPS. “I also hear that the same thing is happening in markets in the regions. Women are becoming breadwinners for many families in our country.”

Women are involved in a range of small businesses, selling clothes, cosmetics, fruit and vegetables, or khat – the leaves of the Catha edulis shrub, chewed as a stimulant in Somalia.

Women can also be found selling fuel in open-air markets and on street corners in Mogadishu.

And they are doing it all with very little assistance.

Somali businesswomen say working as an entrepreneur has its challenges. Firstly, it is nearly impossible to raise capital to start a business.

Local and international financial institutions closed down following the collapse of the central government in 1991 that marked the beginning of two decades of civil war.

A couple of local banks have now been established but one handles only savings and remittances from Somalis in the diaspora. The other does offer loans, but only to those who can put up collateral, which few women have.

“It is not possible to get money to start up a business – even more so if you are a woman,” Aisha Guled, a khat trader in Mogadishu, told IPS.

Guled herself got her start only thanks to support from a relative. She said that she has been struggling to make ends meet since she started selling khat.

“Most of us have started with the little we could get and struggled up the ladder. Some don’t make it, others remain stuck in the beginning, but some are lucky enough to break even and make a profit soon and expand,” she said.

Though the Somali government says it is trying to do all it can to help businesswomen working to support their families, one official told IPS that the government cannot at this stage offer financial support to businesswomen. “The provision of a secure environment for women to operate in is a key priority in supporting women in business,” the official said on the condition of anonymity.

“Despite all the challenges that women entrepreneurs face in Somalia, the country’s womenfolk are showing that they are up to the challenge of being shrewd business operators, while maintaining their roles as mothers and wives,” Dahir said.

She called on academics to study the rise of Somali women in the business sphere as well as in politics and other fields in society.

Yunis said that as Somali society’s views and attitudes towards women’s role change, she expects more and more women to take up roles not only as entrepreneurs, but in academia and politics as they prove themselves to be equal to men in every aspect of life in Somalia.

“It is just a matter of time before we see many women join men in equal measure in rebuilding our country because our society is changing thanks, in part, to the changing times; women will be more equitable to men in every area,” said Yunis.

An electricity pylon in Somaliland being repaired by Edwin Mireri. Somaliland’s first Electricity Energy Act will be launched this year and it will be the country’s first legal and regulatory framework aimed at managing energy production and distribution. Credit: Ed Mckenna/IPS

A wind turbine, situated some 20 kilometres outside of Somaliland’s capital Hargeisa, has become a significant totem of the country’s changing energy landscape.

The breakaway semi-autonomous region that was once part of Somalia has struggled to develop its economy despite dilapidated energy infrastructure that makes it almost impossible for businesses to function.

But later this year, Somaliland’s first Electricity Energy Act will be launched. It will be the country’s first legal and regulatory framework aimed at managing energy production and distribution, with a focus on piloting alternative energy solutions, including wind farms in four major cities.

“Businesses have been unable to operate to their full potential as there is no regular or reliable supply of electricity in Somaliland. This is slowing economic activity and development in the region. We need to look at alternative and renewable sources of energy to reverse this trend,” Minister of Mining, Energy and Water Resources Hussein Abdi Dualeh told IPS.

Somaliland has one of the world’s highest electricity rates. While the rest of the world pays an average 15 to 30 cents per kilowatt hour, Hargeisa’s residents pay one dollar per kWh. High energy prices and a lack of an energy policy framework have blocked competition and stifled investment in the region’s private energy sector. Investors have little confidence in any long-term financial return due to limited regulation.

Local businessmen frequently complain that high energy bills are causing fewer products to be produced in Somaliland, giving foreign imports an unfair competitive advantage.

“When so much of our income is spent on electricity bills, we lose our ability to compete with foreign imports in the local market,” Faisil Wadani, the owner of a small factory, told IPS.

The streets of Hargeisa are densely populated with kiosks and vendors who pay independent power providers approximately 10 dollars a month to run a single 100-watt light bulb. For the majority of these small kiosks their improvised lighting system has no switch and the bulb is likely to burn all day and night unless unscrewed.

After the collapse of Somalia in 1991, the new Somaliland government retrieved wires, poles and generators from the bombed debris in Hargeisa to try and assemble a functional, albeit crude, infrastructure for generating electricity for its citizens.

Independent power providers quickly began to appear when it became apparent that the government had no funds to invest in the power grid. This rapidly gave rise to an unregulated system that has endured since 1991.

Somaliland’s antiquated electricity infrastructure is now run by a decentralised network of local power providers in Hargeisa, which involves neighbours paying neighbours for electricity.

The lack of government support for power creation has compelled many of Hargeisa’s wealthier residents to import diesel generators from the Middle East to power their homes and businesses. The majority of Hargeisa’s power is now generated by diesel generators and transmitted through the capital city’s hazardous electricity network.

A disorganised supply of electricity in the hands of independent power providers makes consumers vulnerable to high costs and erratic power access, said Dualeh.

“The government manages only 20 percent of the electricity market while independent providers are responsible for the majority of Somaliland’s electricity. Somaliland rates are very high due to this spaghetti network of independent power providers where each has their own grid using outdated equipment,” he said.

According to the government, 40 percent of electricity is lost due to the poor electric infrastructure used to generate and distribute energy.

To help Somaliland draft its first Electricity Energy Act, the United States Development Agency (USAID) has been working closely with the Ministry of Mining, Energy and Water Resources, local power providers and consumers to expedite the process of creating a more regulated electricity supply.

This has created a mood of confidence among the business community that they will soon be able to be open for business for longer periods of time without interruption from frequent power cuts.

“A supply of affordable electricity without frequent daily interruption will increase my business activity and make my job less of a daily fight for financial survival,” said Wadani.

The Electricity Energy Act is expected to standardise the sector’s infrastructure and establish safety standards by building on the existing electric grid infrastructure in Hargeisa.

“We cannot guarantee that the new electricity law will reduce costs but we can expect the supply of electricity to be more efficient. It is more often than not to do with inefficiency that electricity rates are so high in Somaliland,” Suleiman Mohamed, head of USAID partnership programme, told IPS.

But Dualeh said that the new electricity regulations “will support more efficient distribution, enhanced safety in the sector and higher levels of investment from the private sector, as they will have greater confidence in the energy market.”

Wind power in Somaliland is also rapidly emerging as a promising alternative source of energy. The government has realised that the potential for renewable sources of energy should be exploited to help revitalise the region’s power supply and provide a cost-effective alternative.

“We must seriously look at sources of renewable energy such as solar and wind power, especially when Somaliland has over 340 days of sun and some of the fastest wind in the world,” says Dualeh.

To confront Somaliland’s ongoing energy crisis, with the support of USAID the Ministry of Mining, Energy and Water Resources has erected five turbines worth over 350,000 dollars on a wind farm pilot project near the Hargeisa International Airport. Wind data stations have also been installed across the country, to offer investors information about wind power potential.

Somaliland’s independent power providers are also learning about the economic benefits of generating renewable energy.

The Abaarso Tech Secondary School in Hargeisa had a wind turbine in their storage room for nearly three years before finally setting it up in January 2012. Once fully operational, the 20 kW turbine provided enough electricity to run the high school. The city government subsequently came up with an income-generating plan for the school to sell the surplus electricity it generated to neighbouring villagers.

In the long term, harnessing alternative energy solutions such as wind power should have higher returns for consumers and providers than using diesel would.

“We just spent 240,000 dollars on new diesel generators. After seeing the projected returns for wind energy, I wish we could have spent that money on wind turbines and saved on diesel costs. Diesel is the past, wind is the future,” Yusuf Aaaden, a local Hargeisa independent power producer, told IPS.

Wine on Sale in a South African Supermarket. Wine is one of the product ranges which could benefit from a new liberalising trade deal between the EU and Southern Africa. Credit: John Fraser/IPS

There is growing optimism that the countries of Southern Africa are within months of concluding negotiations with the European Union on a major new trade deal, after years of hesitant progress and frustration.

The EU ambassador in Pretoria, Roeland van de Geer, told IPS that the agreement would form part of the bloc’s strategy of clinching regional trade pacts, known as Economic Partnership Agreements or EPAs.

“This could be the breakthrough year,” he said.

He recalled that once South Africa became a democracy under Nelson Mandela’s African National Congress, the EU negotiated an accord, which took a major step towards free trade with the African nation. This was done in a deal known as the Trade, Development and Cooperation Agreement (TDCA), which entered into force in May 2004.

Meanwhile, there are different EU trade arrangements for South Africa’s neighbours, depending on their degree of development, with the greatest access accorded to the least developed states.

Some of these arrangements are due to expire towards the end of next year, and will need to be replaced. And the EU is also hoping to update its trade relations with South Africa, going further down the road of trade liberalisation, while also ensuring that there is a more coherent accord covering the Southern African region as a whole.

If a deal is struck, there will be provisions to ensure that the poorest Southern African nations, which currently enjoy the best export access to the EU market, would retain such access.

The European Union ambassador in Pretoria, Roeland van de Geer says they are within months of concluding negotiations with Southern Africa on a major new trade deal. Credit: John Fraser/IPS

Van de Geer predicted that if there is a deal this year, it will boost South Africa’s access to the EU for fruit and vegetable products, some of which are excluded from the free trade provisions of the TDCA.

He said that agriculture is a labour-intensive sector of the South African economy, and any benefits that can be given to it will translate into more employment.

“If I could give South Africa two things, it would be jobs and basic education,” said Van de Geer.

“At the moment 90 percent of what South Africa exports to Europe is quota and tariff free, and we want to see how much farther we can go.”

The negotiations are currently very detailed, with product-by-product discussions.

“We are also looking at other related issues, such as Geographic Indications (GIs),” Van de Geer said.

GIs are a way of protecting niche agricultural products such as specialty meats, cheeses, wines and teas, and have not figured largely in South Africa’s trade strategy to date, outside the wine sector.

“We in Europe have more GIs than South Africa, as we are a far larger market of 500 million people,” explained Van de Geer.

“South Africa has fewer GIs, but can protect them in a larger market (the EU market) for products such as rooibios tea, honeybush tea and lamb from the Karoo region.”

The EU has traditionally found it difficult to make trade concessions because of its strong farm lobby. Van de Geer suggested that this is also the case in South Africa, where farmers are nervous about large surges in imports from the EU, and he gave the example of the South African poultry producers, who are calling for more protection against imports from Europe and elsewhere.

He stressed that the EU remains South Africa’s largest trading partner, accounting for around 25 percent of the country’s exports.

“If you take all of South Africa’s BRICS (Brazil, Russia, India, China and South Africa) partners together, you are still not at the level of the EU (in terms of exports from South Africa),” he stressed.

The deputy director-general for International Trade and Economic Development at South Africa’s Department of Trade and Industry, Xavier Carim, would not endorse the prediction that trade talks with the EU will wrap up this year, but he did not rule it out.

“We have made steady progress in the negotiations,” he told IPS.

“We have systematically been dealing with all the outstanding issues and have narrowed the gaps quite well. There are still a lot of outstanding issues, but the EU recently has been a lot more constructive in its approach.”

He confirmed the painstaking, detailed nature of the discussions, and said that there is a range of issues on which there is discussion.

“We are trying to improve South Africa’s market access to the EU, mainly in agricultural products – fruit, vegetables, wine and sugar.  There are 21 or so products we have been requesting,” Carim explained.

“The EU is prepared to consider this, but they want improved access to the markets of South Africa and the Southern African Customs Union.”

Carim said that if such access were given to Europe, it would be on the condition that action could be taken if there is a surge in exports from the EU.

There are also discussions on trade classifications known as rules of origin – which cover goods where one or more inputs come from outside the country of manufacture – and also on how to handle EU insistence that if South Africa gives any other trade partner better access than that currently enjoyed by the European bloc’s exporters, the concession would also extend to the EU countries.

Catherine Grant, the programme head for Economic Diplomacy at the South African Institute for International Affairs, a Johannesburg think tank, said it is in the interests of South Africa and of its regional neighbours to seek a better trade deal with the EU.

“South Africa has its own agreement with the EU; others have different arrangements,” she told IPS.

“This is a useful opportunity to get all our ducks in a row as one bloc.”

She said that South Africa stands to win better access to the EU market for its exports of processed agricultural products, such as canned food, when a new deal is struck with the EU.

She pointed out that the EU has a more generous trade regime towards Chile than it does with South Africa, and said South Africa should aim to close the gap.

“That would mean better access for South Africa, and I hope it will not be terribly opposed by European lobby groups,” she concluded.

South Africa’s motor manufacturing sector is highly automated and workers often need to be highly skilled and trained. Courtesy: Toyota South Africa

If job creation is South Africa’s major social and economic priority, the country should be investing in people rather than in robots that populate the country’s highly-automated automotive manufacturing sector, according to local economists.

South Africa’s automotive manufacturing sector is the country’s flagship industrial support sector, with about two billion dollars having been pumped into it through a series of subsidy schemes. However, as the industry is capital intensive, some commentators are worried that the South African government has been assisting a sector that does not do enough for job creation.

“If we look at the big picture, there are other industries which would do more for job creation than the automotive sector – such as textiles, agriculture, food processing, furniture making and tourism,” independent economist Mike Schussler, chief executive officer of the consultancy economists.co.za, told IPS.

Aid has traditionally been channeled through the long-established Motor Industry Development Programme, which was updated and re-branded as the Automotive Production Development Programme (APDP) in 2013.

“The capital requirements of the motor industry are very high, and so we need to give a lot of subsidies to attract investment. It is a problem when you have an industry where you employ assembly-line robots, not people,” Schussler said.

He explained that while automotive workers often need to be highly skilled and trained, there are other industries where a less sophisticated workforce is needed.

“We can create jobs more cheaply, and in rural areas where they are really needed, in sectors such as tourism,” he said.

While trade and investment consultant Duane Newman of Cova Advisory told IPS that it was important for South Africa to have a globally respected automotive sector, and that the government was right to retain a support scheme for the industry, he said it could be argued that the industry was given more support than it should be.

He said support for the industry was around two billion dollars a year – about 20 percent of the support the South African government gives to all local industries.

“Clearly, the automotive sector does not account for 20 percent of the GDP of South Africa – it’s nearer to six percent – so it could be argued that the industry is being given three times the support it should receive.

“However, key players in the automotive sector say that the industry is far larger than just its car assembly element, and that its importance to the country goes far wider than its role as an employer,” he said.

Johan van Zyl, president of Toyota in South Africa, chief executive officer of Toyota Africa and president of the National Association of Automobile Manufacturers of South Africa, told IPS that government support has been critical for the expansion of the industry since the end of apartheid in 1994.

“We believe that government support – regulatory and otherwise – was critical in enabling an inefficient and inwardly-focused sector to modernise and compete on a global stage. Much of the inefficiencies of the pre-democratic era were the result of regulation,” he said.

“The auto industry is the largest manufacturing sector in South Africa. It is a key source of new technology and investment and, importantly, of skilled employment,” Van Zyl said, adding that this aligns perfectly with the government’s goals of developing the economy away from traditional areas where there is little local knowledge transfer and value addition.

Johan van Zyl, president of Toyota in South Africa and the National Association of Automobile Manufacturers of South Africa, says that government support has been critical for the expansion of the industry. Credit: John Fraser/IPS

He rejected Schussler’s suggestion that too few jobs are being created in the industry.

“Jobs and opportunities are created up and down the value stream. One should also consider the fact that employment in this industry has remained stable despite the economic downturn, so I would say the criticism is unfounded.”

Jeff Osborne, the chief executive officer of the South African Retail Motor Industry Association, which represents car dealers, panel-beaters and other consumer-focused branches of the automotive sector, shared this view.

“We have seen high levels of investment by automotive manufacturers in South Africa, and this can be seen as a vote of confidence in the country,” he told IPS.

“Fourteen percent of South African exports are made up of automotive and related goods – and that’s higher than the value of our gold exports,” he argued.

He said that while auto manufacturing accounts for around 25,000 jobs, the auto component sector employs 60,000 people, and the retail side of the motor trade gives employment to a further 30,000 workers.

“You need to look at the whole of the industry when you discuss job creation, and not just limit this to manufacturing,” he insisted.

A major challenge, which the APDP was intended to address, is the degree to which South African-produced components are used in vehicle assembly, making up what is known as local content.

“At the moment we use 60 percent imported components and 40 percent local contents, and that should be reversed,” Osborne argued.

“This is also good for jobs, as component manufacture involves a lot of smaller businesses, and these tend to be less automated.”

Jonas Mosia, industrial policy coordinator for the Congress of South African Trade Unions, agreed that the automotive sector should be looked at from a wide perspective, and not just in terms of its manufacturing arm.

“We need industrial investment, and therefore in terms of industrial policy you identify sectors to anchor investment,” he told IPS.

“That will revive other linked sectors, such as the automotive component sector. We are talking of leather seats for vehicles, electronics and so on. That sector has a lot of local content and therefore we are creating jobs in South Africa.”

However, Roger Pitot, the chief executive officer of the South African Automotive Components Industry, expressed concerns, in a written analysis to industry members, that there were insufficient incentives for auto manufacturers to boost local content.

He said that while he supports the incentivisation of vehicle assembly in South Africa through the APDP “there is little incentive for (manufacturers) to increase localisation of components.

“Without higher localisation, it may become increasingly difficult to justify producing some vehicles in South Africa, and thus the target of continually increasing production may be unachievable, particularly with the scenario of lower global vehicle volumes likely to remain for the foreseeable future.”

South African rooibos (Afrikaans for red bush) is caffeine-free, high in anti-oxidants and minerals, and traditionally grown in the Cederberg region, 250 kilometres to the north of Cape Town. Credit: John Fraser/IPS

A trademark system which is used to protect Europe’s finest wines, cheeses and hams could soon brew up benefits for a humble tea from a remote region of South Africa.

The trade protection system called Geographic Indications (GIs), which is highly favoured by the eurocrats of Brussels, could be used to protect a South African red tea, locally known as rooibos (Afrikaans for red bush) as French firm Compagnie de Trucy is trying to secure the exclusive rights to market it in France.

“GIs are increasingly important in the global trade arena, although it is wrong to think they offer enormous bulk trade opportunities,” Pretoria-based trade consultant John Maré told IPS.

This form of food copyright already applies widely to specialty products, which can be linked to a specific region – such as French champagne, Parma ham and many types of cheese.

“They (GIs) open-up niche markets for increased value add products, which taken together can total something significant.

“In addition, they involve cutting-edge frontiers in trade that largely rely on intellectual property rights for value, and are also linked to trade issues regarding brands and logos,” he said.

South African rooibos is caffeine-free, high in anti-oxidants and minerals, and traditionally grown in the Cederberg region, 250 kilometres to the north of Cape Town.

It is growing in popularity worldwide due to its healthy properties, which helps to explain Compagnie de Trucy’s move to obtain marketing rights.

The issue has been elevated to diplomatic level between the European Union and South Africa at a time when both parties hope to finally conclude negotiations on updating their wide-ranging trade framework, after more than a decade of discussion.

While China as a country is South Africa’s biggest trading partner, the EU as a bloc is more important in value terms, and there are powerful arguments that both sides should expand GIs in their future relations.

Soekie Snyman, the spokeswoman for the South African Rooibos Council, which represents rooibos producers, told IPS that the red tea needed to receive official trademark status in South Africa itself before it could qualify as a GI.

“We have heard from the EU ambassador in Pretoria that they support the protection of indigenous crops,” she said.

“Their main requirement is that the product must be protected in its country of origin, and we are nearly ready to file for trademark protection in South Africa.”

She argued that rooibos is part of South Africa’s heritage. “It is a unique plant, coming from the Cederberg mountain area. It is a caffeine-free beverage.”

The EU ambassador in Pretoria, Roeland van de Geer, confirmed in a news release in March that he received a request from South Africa’s Minister of Trade and Industry Rob Davies “for the protection of South African food product names as Geographic Indications in the EU.”

As well as rooibos, there have been requests for Honeybush, which is another type of tea, and for lamb from the Karoo desert region.

“The development of a GI system for South African farmers will reinforce the uniqueness and quality of South African products,” he said in the statement.

“South African wine makers have used the GI system for many years and have found it an effective way to protect famous names like Paarl and Stellenbosch.”

Maré noted that the GI system has enabled EU countries “to clinch niche markets for brands such as champagne, which have enormous growth potential on a global basis.

“As specialised high value items they have been linked to an EU strategy in global marketing of quality rather than quantity.”

He suggested that South Africa should expand its GI portfolio “to help give new opportunities for South Africa to diversify current exports into new added-value products, also to grow such products.

“It helps growth in rural regions, and they help strengthen a good perception of all South African products as ones having quality and differentiation in the international globalised economy.

“They help drive prices of South African products upwards and improve overall perceptions of South Africa.”

Snyman said that the current problems with the French market have wider implications, and that is why it is important for rooibos to secure global GI protection. She recalled that there had been a similar problem in the past in the United States market.

“This could affect South African exporters in any international market,” she warned. “But I believe we will achieve our goal.”

Trade consultant Francois Dubbelman, who specialises in trade protection issues, agreed that there is a global aspect to the issue. “A GI name should be protected,” he told IPS.

“If you neglect it, you could lose it forever, so you do need to put up a fight.”

There is a range of other South African products that might also be eligible for GI protection, such as ostrich and springbok meat, and the marula fruit from which the Amarula liquor is made. Meanwhile, the same criteria could apply to produce from other countries of the Southern African region – such as Mozambican prawns, Botswana beef and Namibian oysters.

“It is important for South Africa to penetrate world markets, and we must look at niche products like rooibos,” Dubbelman said. “That’s the future of trade – it’s where you make your money. Rooibos is important for the rural economy, and it is a health product, so there is a growing market for it.”

A combination of an abundance of bamboo and eager foreign investment is making Ethiopia a frontier for the bamboo industrial revolution in Africa, according to this country’s government.

“Ethiopia has the resources, the investment, a rapidly-developing manufacturing industry and a strong demand for our bamboo products from foreign markets. We have what we need. The expansion of Africa’s bamboo sector has begun,” Ethiopia’s State Minister for Agriculture and Rural Development Mitiku Kassa told IPS. 

Ethiopia currently has the largest area – one million hectares – of commercially untapped bamboo in East Africa, making it attractive to investment partners from the bamboo industry. However, the Ministry of Agriculture and Rural Development told IPS that they were unwilling to disclose any figures on the bamboo economy, but added that there had been no formal bamboo economy in Ethiopia until 2012.

“The market potential of bamboo in Europe is massive. We believe that there can be a reliable and effective supply chain built here in Ethiopia to create a bamboo manufacturing industry,” said Felix Boeck, an associate engineer at Africa Bamboo PLC, a public-private partnership set up with Ethiopian partners and supported by the German Development Cooperation in 2012.

The partnership plans to invest 10 million euros over the next five years in their Ethiopia-based manufacturing operation, which will supply competitive flooring products to European and United States markets. The company plans to export 100,000 square metres of bamboo flooring products by 2014. By 2016 this figure is expected to rise to 500,000 square metres.

“The fastest-growing market in Europe for the wood industry is flooring and outdoor decking. We expect our products to play a large role in this market,” Boeck told IPS.

In comparison to soft wood trees that can take 30 years to reach maturity, bamboo is a fully mature resource after three years, making it commercially and environmentally sustainable.

Sub-Saharan Africa has three million hectares of bamboo forest, around four percent of the continent’s total forest cover. Ethiopia plans to increase its bamboo cover to two million hectares over the next five years.

Small-scale Ethiopian bamboo farmers like Ghetnet Melaku are enthusiastic to participate in the development of the bamboo sector, if investment in its expansion is inclusive of small farmers.

“I am just making enough money to subsist by producing bamboo for the local craft market and, if I had the opportunity, I would like to increase my capacity for skilled production and a better financial return,” Melaku told IPS.

The International Network for Bamboo and Rattan (INBAR) is an intergovernmental organisation that assists governments, businesses and local communities to identify innovative bamboo-based opportunities for human development.

It is helping sensitise African governments to the high potential of bamboo as a versatile and renewable resource that can generate sustainable development. According to INBAR, one billion people around the world use bamboo in their daily lives as housing material, fencing and food, and in craft production, etc.

“If properly managed, this highly versatile resource could spur economic growth in a world export market valued at two billion dollars in 2011, reduce deforestation and cut carbon emissions,” INBAR director general J. Coosje Hoogendoorn told IPS.

Deforestation has ravaged Africa’s environment – the carbon emissions from burning timber on the continent alone are expected to reach 6.7 million tonnes by 2050. As 90 percent of the population in sub-Saharan Africa use firewood or charcoal to cook, the development of an alternative resource like bamboo has become essential.

“Sourcing fuel for cooking food is integral to food security,” said Hoogendoorn. “Rice, maize and pulses all require heat to become edible. Renewable alternatives like bamboo can help minimise deforestation caused by the logging of soft timber wood for cooking fuel and house materials.”

Ethiopia’s government has prohibited the creation of charcoal from burnt wood for retail and is actively advocating sustainable alternatives such as bamboo.

“Bamboo is a major untapped resource for Ethiopia. We are pushing to grow and conserve our bamboo resources. We are starting to work with farmers and enterprises to encourage and develop this sector for the country’s economic and environmental benefit. We are working to undo unsustainable practices and advocate new alternatives,” State Minister Kassa told IPS.

Although Ethiopia has one of the highest deforestation rates in Africa, it has increased its national forest cover to seven percent from three percent a decade ago, out of an original 40 percent. Hoogendorn said that governments needed to make financial resources available to enterprises that wished to develop Africa’s bamboo industry.

“We want governments to put structures in place that offer financial support such as micro finance and that remove any hindrance for investors in the bamboo market, so that when companies want to set up a bamboo industry they have access to financial support,” he said.

High demand for Ethiopia’s agricultural output such as bamboo can drive growth and development for the country’s poor if it generates employment opportunities and remains non-exploitative towards farm workers and the land, said research fellow Steve Wiggins from the Overseas Development Institute (ODI). The ODI is the United Kingdom’s leading independent think tank on international development and humanitarian issues.

“It is good if there is another source of demand for farm produce, so long as the economics of bamboo offer decent returns to land and labour, equitable deals can be struck in the supply chain, and the crop is environmentally sustainable,” Wiggins told IPS.

While bamboo production in Asia carries connotations of unsustainable forestry practices and illegal logging, INBAR is working to share lessons learnt and bring bamboo production in Africa’s market up to the highest standards.

“Sustainable management of a country’s bamboo sector is extremely important to the future of a country’s market, especially if that country is wanting to export its products to the European market where laws stipulate conformity to high sustainability standards,” Hoogendoorn said.

As the industrial development of bamboo in Africa is in its infancy, investors have until recently been cautious about ploughing large amounts of money into a market whose dividends are relatively unknown.

“We are ready for the same industrial revolution in bamboo development that Ethiopia is currently experiencing,” Andrew Akwasi Oteng-Amoako, the chief research scientist at the Forestry Research Institute in Ghana, told IPS.

He lamented that although his West African country had an abundance of bamboo, it failed to secure the same investment as Ethiopia.

“We anticipate a revival of investment interest in Ghana’s bamboo industry in the near future thanks to Ethiopia’s success,” Oteng-Amoako said.

A five-star hotel being built on Jijiga's main road in Somali Region. Credit: William Lloyd-George/IPS

For over two decades Somali Region, in eastern Ethiopia, has been devastated by a grueling insurgency. Trapped in a time warp, it has been forgotten and underdeveloped. But in the last few years, thanks to the increased security here, a five-star hotel, eco-tourism ventures and even a large abattoir are being built by the former diaspora community.

This comes after the regional government encouraged people to return and support development in this Horn of Africa nation through global campaigns conducted in countries like the United States and the United Kingdom.

“For years, I just thought it was too dangerous to return,” Zara Wale Abas, who had settled in Denmark, told IPS. “When the region’s vice president came and showed us the development going on, I was really surprised and wanted to return and check it out for myself.”

For many who remember Jijiga as a forgotten, war-torn region, photos of new hospitals, roads, schools and bridges – though still very few in number – have inspired many to take what they felt to be a brave step: to return home to see the development for themselves. In the last two years, over 300 people have returned, part- and full-time, to work on various projects.

In 2011, Abas came to Jijiga and ended up building an eco-tourist hotel, which she hopes will attract the diaspora and tourists. “It might still be just a few people who have returned but considering the insecurity the region endured for so long, this is a huge step for our people.”

According to Axmed Maxamad Shugri, head of the government’s Regional Diaspora Office, which assists those returning, the main reason for so many staying away from the region for so long is the misinformation spread by the Ogaden National Liberation Front or ONLF.

“The ONLF tell the diaspora that Somali Region is a war zone,” he told IPS. “For years no one even thought about coming back, so it really is significant that people are starting to. It is just the beginning and we need everyone to come back to help the region develop.”

As a result, various aid agencies were restricted from working in the region, where the residents endured several devastating droughts. Many of the five million people who inhabit the region live simple pastoralist lives, and the lack of peace and water severely disrupted their fragile existence.

But a regional police force or state militia, the Liyu Police, which is made up of soldiers from the local communities, has managed to severely decrease the ONLF’s strength in recent years, according to the regional government. In the face of criticism by activists for human rights abuses, Liyu leaders told IPS they are making efforts to reform the force.

Ahmed Haybe Mohamoud, a businessman who lived in Frankfurt, Germany for the last 30 years and moved back recently, told IPS: “For years the insurgency was too strong (for me) to even consider coming back and living in peace. But now the major cities are protected and I feel it is the right time to invest in the region and help my people.”

Mohamoud has pooled together investment from his extended family, who have sought asylum across the world, and is building Jijiga’s first five-star hotel.

The same sentiment was shared by another recently-returned investor, Jamal Arab. He and his family sought asylum in the state of Minnesota in the United States, where he worked in a manufacturing company until recently.

In Fafan, a village 30 kilometres away from Jijiga, Arab and four other investors are building a huge abattoir.

“This will bring a decent income to many people in the region,” Arab told IPS. “As well as increasing the amount of meat being bought and exported from the region, we will also be hiring a huge number of staff.”

Arab added that nothing would have been possible without the new road which runs through the village, connecting it with Jijiga and major cities close to Ethiopia’s capital.

Through the centre of Jijiga runs a wide modern highway, fitted with tall efficient streetlights. Building projects are dotted all the way along it, through the length of the city. Shopping centres, five-star hotels, and new restaurants are being planned, with construction having started on many.

The city now has a new hospital and a university, and regional government officials say it is a new beginning for the region.

“Now you can see we are booming, the region is safe, it is time for everyone to come back, invest in their home, and help their people,” Abdullahi Yusuf Werar, the region’s vice president, told IPS.

It’s not only investors who are moving back. A number of people have returned to begin setting up NGOs, or to bring other skills to the region, which they acquired abroad.

Dr. Mahad Musse, who grew up and studied surgery in Finland, has come back to set up a surgery clinic in Jijiga.

“This, and one other hospital in Addis, will be the only two places offering this quality of surgery,” Musse told IPS. “For a while I did not think I could even come here myself, but after speaking to many people who had recently come back, I discovered there was a chance to do something and I have been very encouraged by our progress so far.”

The region, however, remains impoverished. Drought is expected again this year, which would have lasting effects for people in the region. While most of the recent developments might benefit those in the cities, the vast majority of the five million people who populate the region still live far from water sources, and have no electricity.

The rebels may have been pushed out of the cities and now operate in smaller numbers, but they remain present throughout the region. The momentum of development will depend on the dedication of the regional government, the skills of the diaspora, and the willingness of the ONLF and the Ethiopian government to find peace before the region can really develop in a way that will benefit all.

One local professor, who did not wish to be named, told IPS: “There is still a long way to go, but just to have the diaspora coming back is a huge boost for the region’s residents who have long felt forgotten.”