Globalization and competitiveness are some of the greatest challenges facing African countries, including Southern Africa, in this new century. According to World Economic Forum (2000), out of the 11 Southern African member countries covered by the Centre, which were surveyed, the competitiveness index indicates that four countries were high ranking (Mauritius tops the ranking, followed by Botswana, Namibia and South Africa); five countries were middle ranking (Swaziland, Zambia, Lesotho, Mozambique and Malawi); and only one country, Zimbabwe, was low ranking. This suggests that "… while some countries still seem caught in critical difficulties, most of them are changing swiftly for the better judging from the pace of democratic elections and economic reform programs. The perception that Africa is one entire quagmire of poverty, inefficiency and instability is not correct."

An uneven economic performance across the countries cannot be avoided. Annual economic improvement or deterioration should, therefore, not be regarded as an overall strength or weakness for a particular country in a particular year. This, however, calls for a serious review and assessment of past and present development policies as well as a thorough examination of new perspectives and possibilities with a view to promoting sustainable economic growth and development and structural transformation of the economy.

The overall policy stance should focus on laying the foundation for buttressing growth and poverty reduction. In this regard, Southern Africa's policy framework should aim at sustaining the economic and structural reforms that have already been undertaken while at the same time addressing other impediments including institutional weaknesses, governance as well as the establishment of an enabling environment for the private sector. Southern African economies will need to consolidate macroeconomic stability by continuing to undertake sound fiscal and monetary polices including realistic exchange rates and interest rates. In this connection, there will be a need for fiscal consolidation, which would, among other things, involve strengthening tax and customs administration as well as the rationalization of expenditures to social and development sectors such as education, health and infrastructure.

More importantly, there will be need to establish safety nets for addressing poverty and the adverse consequences of economic reforms especially on the poor segments of society. At the same time, and given the limited revenue resources, there will be need to develop incentives to attract the participation of the private sector in the provision of some of the basic social services such as infrastructure, education and health. In the provision of health and education, attention should be paid to the quantity, quality and the equity of these services. More specifically, the expenditure policies need to address the question of equity as regards women and young children who bear the greatest burden of poverty.

Some countries have already begun to diversify and make themselves more attractive for private sector investment. The challenge is to sustain the momentum of diversification in some cases and to jumpstart it, in other cases. This requires removal of the remaining policy distortions and inconsistencies that influence the flow of trade and investment. Specifically, there will be need to speed up the harmonization of economic and financial policies towards the creation of a uniform trade and investment policy environment in the whole sub-region. In addition to harmonization, there will be need for continued coordination of economic policies in order to avoid any distortions that may adversely affect some of the member States. The coordination and harmonization of such policies will be important not only to encourage trade flows among member States, but also, and perhaps more importantly, to provide a wider platform to attract investment.

Progress towards the realization of regional cooperation and integration continued to be dominated by some key impediments, prominent among which is the fear of domination by the member States who are economically stronger. These fears stem mainly from concerns that as the process of integration intensifies through the creation of a uniform investment and trade environment, investors will tend to be attracted to the larger economies and away from the weaker ones. This threatens the sustainability of the whole integration initiative. In order to address these concerns, there will be need to implement specific policies to ensure that the relatively weaker economies gain from the integration initiative. For example, member States could consider cross-border investment from stronger to weaker economies.

Another impediment is the concern of some member States regarding revenue losses that are likely to occur as a result of lowering duties within the sub-region as well as the eventual establishment of a Common External Tariff (CET). This is, in many ways, a short-term problem because as the integration process takes root, there will be dynamic gains that will lead to increased output and thereby widen the revenue base of all the economies. While the revenue loses may not be a problem in the long run, the short term loses are indeed real for some members and therefore need to be addressed. In this regard, it will be important to explore some limited compensatory mechanisms that can be phased out as the benefits of integration spread to all the members.

In addition, some member States are delaying implementation of agreed protocols. This is due partly to constitutional and legislative technicalities. In this connection, where such constraints are an impediment to the process of integration, the respective member States need to amend relevant laws and constitutional provision in order to facilitate integration. For example, the SADC Protocol on Transport, Communications and Meteorology, which came into force in July 1998, sets forth the objectives of the Community in regard to transport, communications and meteorology, and specifies the policies and strategies by which these objectives are to be attained. Prompt ratification and effective implementation of the Protocol is required in order to bring those services up to international standards.

Given the increased labour and illegal migration in the sub-region, there is need for member States to adopt common policies addressing these issues.

The success of the whole integration initiative depends on the establishment of peace and political stability in the entire sub-region and indeed in the whole of Africa. As noted earlier, conflicts and instability affect the development of not only the states concerned but also their neighbors as well as their economic partners. In this regard, it is important to intensify efforts towards the restoration of peace and stability in the context of the SADC initiative. At the same time there will be need to devise mechanisms for preventing conflicts by identifying the key triggering factors and dealing with them before they escalate into an all out conflict. Some of these triggering factors include land distribution, perceived discrimination (regional, ethnic, etc.), as well as perceived unequal share of development benefits especially from natural resources.

Prospects for 2001 would be driven by developments at the international as well as at the domestic levels. At the international level, the main factors include developments in commodity prices, such as oil, minerals and agricultural products, and external debt.

A continued increase in oil prices could have serious implications on the global economy as a rise in inflation could lead to significant tightening of monetary conditions as well as fiscal policy, which could threaten the momentum of global growth. In Southern Africa, stronger oil prices would, no doubt, benefit Angola, the only oil producing country in the sub-region, but would adversely affect the terms of trade for the majority of countries that import oil.

Prospects for non-fuel commodity prices firming up in year 2001 are mixed mainly due to a high level of stocks of most agricultural commodities that are likely to slow down the price increases. In the case of metals, the world economic growth will increase consumption demand and therefore prices would be expected to rise. While prospects for 2001 appear somewhat positive for developing countries that depend on primary commodities for a substantial share of their export revenues, commodity price volatility poses real challenges particularly as these countries try to reduce poverty.

At the domestic level, a key factor will be the maintenance of political stability and peace, which are critical to establishing a conducive business and investment climate. Efforts would be required to develop more democratic systems that are genuinely pluralistic and ensure that parliaments represent the needs of diverse ethnic groups. Political changes such as those would do much to empower people and communities and help energize the development process.

Other factors at domestic level include weather conditions and effective implementation of sub-regional policies and programs. However, in the absence of unforeseen exogenous shocks, including the vagaries of weather and unstable world commodity prices, the overall prospects for 2001 is bright and encouraging. Preliminary estimates, as reflected in Table I.2 of Annex I, indicate some degree of recovery. GDP is expected to average 5.5 per cent in 2001, which positively compares with the growth rate of 4.5 per cent in 2000.