1 4 S O U T H E R N A F R I C A N D E V E L O P M E N T C O M M U N I T Y 2.2.2.9 main problems and challenges posed by the prevailing External Debt and Aid economic development framework to SADC cooperation Most SADC countries have experienced an increasing and integration agenda. The main challenge is clearly to external debt burden over the last two decades. In several overcome the underdeveloped structure of the regional countries, the debt burden has become extremely onerous. economy, improve macroeconomic performance, political The stock of external debt in SADC stood at $69.12 billion in and corporate governance and thus, unlock the untapped 2001. External debt in relation to GDP has more than potential that lies in both the region's human and natural doubled in Angola, the DRC, Mozambique and Zimbabwe. resources. In sum, the main economic challenge facing On average, over the period 1992-2000, it represented 173 the region is the development of an environment percent of GDP in Angola, 175 percent in DRC, 124 percent conducive to regional integration, economic growth, in Malawi, 116 percent in Tanzania, 202 percent in Zambia poverty eradication and to the establishment of a and 238 percent in Mozambique. It is important to note, sustainable path of development. More specific however, that in a few SADC Member States, notably in challenges on the overall regional development Botswana, Namibia and South Africa, external debt framework for cooperation and integration in the SADC remained stable at relatively low levels in relation to GDP. region include the following: Due to their debt positions, access to external sources of funds, other than official sources on highly FDI and project finance, associated with privatisation and 2.3.2 Adjustments in the Economic Structures and Convergence of Member States public-private provision of infrastructural services, have The proportion at which different sectors contribute to been the main means for filling the savings-investment total output is a major indicator of the level of gap in these countries. But they remain highly dependent development of different economies. The standard on ODA for this purpose. pattern of development of modern economies is one concessional terms, remains limited. Resource-seeking Consistent with that outcome, aid dependence in SADC where higher proportions of output originate from the remains high at almost the same level in 1999 as in 1980 as most dynamic sectors of the economy, viz. manufacturing measured in net ODA per capita. Given some of the countries' aid- and services. dependence and high debt-burdens, maintenance of sound Available indicators show that in the last two macro-economic policies in these countries may, for the decades, there has been a great deal of de- foreseeable future, depend heavily on massive debt write-downs industrialisation in the SADC region, notably in Zimbabwe and very large continued aid flows. and Zambia. If the region is to develop faster and take Five of SADC Member States are eligible to the Highly advantage of regional integration and globalisation, Indebted Poor Countries Initiative (HIPC). To date two of Member States will need to address the constraints facing them, namely Mozambique and Tanzania have reached the supply side of their economies, including those the completion points, another two, Malawi and Zambia, related to inadequate regional infrastructural linkages. have reached the decision points and the DRC is under A structural restructuring of SADC Member States consideration. The HIPC initiative is expected to relieve should be orientated to more diversified economies and considerable levels of resources which may be applied to significant reduction in the Member States over depen- directly in poverty reduction areas of development in the dence on primary commodities. This would also contri- concerned SADC Member States. bute to increases in the volume of intra-regional trade. Equitable and balanced development of Member 2.3 ECONOMIC CHALLENGES States is one of the objectives of SADC. If this objective is to be achieved the widening in the gap between Member States incomes discussed above needs to be reversed in 2.3.1 Overview a reasonable time frame. Indeed deeper integration of the From the foregoing discussion it is possible to identify the and not divergence amongst Member States. regional economy should lead to economic convergence