Costed Action Plan for SADC Industrialization Strategy and Roadmap II. VALUE CHAINS AND INDUSTRIALIZATION STRATEGY 2.1 Introduction Value chain participation is a crucial driver of the Industrialization Strategy in view of its potential for expanding production possibilities and enhancing cross-border utilization of the natural and human resources of the region. This participation can be of regional or global nature. By nature, global and regional value chains involve the ‘unbundling’ of factories across international borders so that individual tasks are performed in different countries, which enjoy competitive advantage in a specific activity. A key element in the evolution of global and regional value chains is outsourcing by firms in mature economies of unskilled-labour-intensive activities and their relocation in low-wage economies. Typically, firms seek to retain high value-added tasks at home where the necessary skills and intangible capital are available. The focal point of the SADC Industrialization Strategy is participation in regional and global value chains. The strategy sets out three Resource-Based Industrialization (RBI) preferred growth paths towards industrialization in the region – agro-processing, minerals beneficiation and industry and service-driven value chains. The three paths are mutually inclusive, encompassing the combination of downstream value addition and backward integration or the upstream provision of inputs, intermediate items and capital equipment. The key challenge for corporate and government policymakers is to identify and prioritize entry points into value chains, which from a SADC perspective involves identifying tasks that can be undertaken competitively and how they might be shared within regional value chains in SADC. From an implementation perspective, the emphasis therefore needs to shift to some of the microeconomic elements underpinning future growth, with a particular emphasis on moving up regional and global value chains supported by procurement localisation; targeted domestic and foreign investment; technology transfer; skills development; and the development of a friendly investment and regulatory environment. Specific investment and industrial opportunities emerge from integrating value chains and ensuring specialisation across the region. Judicious and strategic development of domestic and regional value chains will also allow supply companies to increasingly explore export opportunities for higher value-added products and services, and a more effective entry into global value chains. 23