With a score of 0.175, Botswana has the second lowest level of productive integration in the Southern African Development Community after Lesotho.
In terms of the African Regional Integration Index Report, whose latest edition just came out, productive integration is determined by three indicators. The first measures the share of intra-regional intermediate goods exports, which is the percentage of intra-regional exports of intermediate (semi-finished) goods compared to the total of intra-regional goods exports. The second measures the share of intra-regional intermediate goods imports, which is the percentage of intra-regional imports of intermediate (semi-finished) goods compared to total intra-regional goods imports. The third measures the Merchandise Trade Complementarity Index. The latter is an indicator calculated by UNCTAD which measures the total in absolute value of the difference between the share of imports and the share of exports compared to other member states of a regional economic community (REC).
Productive integration matters for purposes of creating an economic base that is more resilient to shocks and more diverse. It is also important for building a more skilled regional labour force that adds value to goods and services while raising people’s incomes on the ground. The latter includes opportunities with mining and manufacturing which, according to the African Union Commission, the African Development Bank and the United Nations are now shifting to Africa’s advantage.
“As consumer purchasing power rises, intermediate goods that are used by a business in the production of finished goods or services will be important for Africa’s internal market. This links to industrialization, which is a key goal in the African Union’s Minimum Integration Programme. Building industrial clusters goes together with access to regional trade corridors that get goods moving and with promoting more regional electricity to power production. Making production work better for the continent across different sectors, by being part of regional and global value chains, will be at the heart of Africa’s economic success model. Whether on agriculture or industrial production, regions need to unlock their productive potential, inject investment, overcome bottlenecks and make sectors more competitive,” says the African Regional Integration Index Report 2016.
The report adds that the priorities for the continent and the regions, from regional hubs to landlocked least developed countries, will be to move beyond low value production and deal with non-tariff barriers to make trade work faster and cheaper: “That way, when commodity prices fluctuate and financial crises are nearby, the ‘made in Africa’ brand will become part of the solution.”
The East African Community is the highest performing REC on productive integration. All told, there is a total of 30 high performing countries across the eight RECs on productive integration.