Africa’s regional economic integration could be achieved through industrialisation, but a “back-to-basics” approach was required, particularly for South Africa, Department of Trade and Industry (DTI) director-general Lionel October said.

He said that Africa’s underdevelopment was partly owing to the lack of integration, the division between its 54 countries and the resultant subscale sectors in the economy.

Europe had the “optimal” trade position with intra-European trade of about 80%. Only 20% of goods were exported out of the region.

Africa currently had only 10% regional trade, and while this had grown from 3% in 1994, it was a fraction of what the continent should be trading regionally, October said at the DTI/University of the Witwatersrand third economic policy dialogue, in Midrand, on Monday.

He added that South Africa should examine the role it could play in leading Africa into intra-regional trade.

Pan African Capital Holdings CEO Dr Iraj Abedian said that mineral beneficiation and industrialisation were two critical, inseparable elements that could be used to boost intra-African trade and ensure the growth and development of Africa.

But, to achieve a competitive advantage sectors, such as water, education and energy, besides others, should be examined and channels for beneficiation and value-addition should be unlocked.

About 80% of the potential core beneficiation opportunities of the value chain were in the energy, water, logistics and ports, research and development, construction, engineering, telecommunications and transport industries, as well as the general value addition of resources.

Abedian pointed out that the vast mineral resources in Africa provided an opportunity to develop an equipment manufacturing hub, for instance, and eliminate the “exportation of the continent’s industries” through the importation of the required machinery and equipment.

However, the limitations of the electricity supply sector hampered beneficiation opportunities and deindustrialised the continent, including South Africa.

A lack of sufficient electricity blocked beneficiation within the manganese sector, and the resultant development of a ferrous manganese industry. The chrome sector had also been stifled as selected operations were halted in State-owned power utility Eskom’s buy-back programme.

Under the buy-back programme, Eskom provides compensation to companies that are able to reduce their demand for electricity temporarily, while sustaining employment levels and meeting existing contractual commitments.

Engineering News previously reported that Eskom spent R1.8-billion between mid-December 2011 and the end of May on buying back power from industrial customers, many of which were in the ferrochrome sector. Over this period, Eskom secured over 1 000 MW of capacity allocated to participating large customers.

October said that the high electricity tariffs – with an application for a 16%-a-year rise over the next five years pending – also discouraged manufacturing and beneficiation, suggesting that the sector should be granted a lower pricing structure.

Abedian believed that the demonopolisation of Eskom and the entry of independent power producers could provide a more competitive market, and enable the use of the country’s abundant solar and hydro resources.

The duo agreed that South Africa, along with the rest of the continent, had significant industrialisation potential, but obstacles fragmenting and slowing growth remained, including the lack of intergovernmental policy coordination; a lingering “colonial” mindset, which did not encourage diversification; ineffective institutional coordination; inefficient legislative and policy coordination and alignment; underdeveloped capital markets; and slow and sluggish infrastructure development, besides others.

Africa’s industrialisation and integration required urgent action and not just political statements, said Abedian.