New regionalism in southern Africa: functional

developmentalism and the Southern African Power Pool

Harry Stephan* and Angus Fane Hervey**

*Department of Political Studies, University of Cape Town
** Centre for the Study of Global Governance, London School of Economics
(Corresponding author: hstephan@iafrica.com)

Abstract
This article is a treatment on how southern Africa might best develop a regional
response to mitigate the vagaries of globalisation. It opens with a review of
the literature set on regionalism. The authors then explain that in southern
Africa regional interaction is at present best characterised by what is known
as market-driven or open regionalism. Although this form of regionalism
has resulted in both external and internal increases in trade and investment,
it is not sustainable. As a consequence, the authors argue that the South
African government is leading a new thrust within the region in the form of
developmental regionalism that marries the state to the market. After tracking
the theoretical developments of this new departure, they demonstrate clearly
how change is taking place in practice, by looking at the case of regional
electricity generation.

Keywords: developmental integration, market integration, open regionalism,

political spill-over, regionalism, regional theory, southern Africa, Southern African
Development Community, southern African power, Southern African Power Pool.

1  An Introduction to Regional Theory

The World Trade Organization estimated that by the end of 2005 the number of
regional trading agreements in place worldwide exceeded 300. In many ways,
this increasingly prevalent phenomenon evokes a certain sense of déjà vu –
the early successes of European integration efforts in the wake of the Second
World War inspired a similar wave of enthusiasm for regionalism in the 1960s
and 1970s, yet in the end, most of these came to nothing. Today, however, the
context in which regionalisation takes place is markedly different. The rules have
changed and it seems that what is now called the ‘new regionalism’ is a very
different creature from the ‘old regionalism’ of the post-war years. Increasingly,

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regionalism is viewed by many states as a solution to many of the ills engendered

by a new international economic order. For most states, the pressing question now
is not whether regionalism is desirable, but rather how its potential may best be
harnessed.
From a South African perspective, regional integration has been a cornerstone
of the post-apartheid government’s foreign policy since 1994. In the initial post-
apartheid years, the government repeatedly advocated the establishment of closer
political and economic ties with neighbouring states in southern Africa, although
this was later superseded by a focus on regionalism at the continent-wide level,
culminating in the formation of the African Union (AU) and the creation of the
New Economic Partnership for Africa’s Development (NEPAD) in 2000. Once
again, attention is now returning to the priorities of regionalism closer to home,
no doubt brought about by the stalling of pan-African regional initiatives and a
newfound appreciation for the need to create a strong southern African regional
organisation before attempting integration on a continental level.
World-wide, regionalism is most often talked about as taking the form of
market integration, which is designed to move through progressive stages of free
trade agreements, customs unions and monetary unions, before culminating in
overall economic and political integration. The Southern African Development
Community (SADC) is no exception. In 2004, the SADC Executive announced
the Regional Indicative Strategic Development Plan (RISDP) that sets out a time
frame for the economic integration of the region. The main economic targets are
a free trade area by 2008, a SADC customs union by 2010, and a SADC common
market by 2015, culminating in a monetary union in the SADC region by 2016.
Nevertheless, elements of what can be referred to as ‘developmental regionalism’
have remained within SADC, and evidence, spelt out below, proves that these
are fast becoming the new drivers of southern Africa’s regional development
strategy.

2 Old Regionalism
In the modern era, Europe provides the most successful example of regionalism
at work. Early theories of regionalism were almost entirely Eurocentric, and
many of the ideas which first emerged in response to the European experience
are still influential today. In particular, Haas’s (1958 and 1964) concept of
functional spillover represents a watershed in the development of the literature,
and, as we argue later, is still of central importance to the case of southern African
regionalisation.

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Haas is generally regarded as the ‘father’ of a theory called neo-functionalism.

His theory (and its theoretical antecedent, functionalism) arose out of the European
integration experiences in the early post-war years. The idea of a united Europe has
historical roots that predate the twentieth century, but in its modern form, it began
as the European Coal and Steel Community (ECSC) in 1951, which expanded to
become the European Economic Community (EEC). The original intent of the
ECSC was to stabilise the production of steel across Europe in order to prevent
ruinous competition during the 1950s, and its importance was two-fold. First, by
creating solidarity between governments, the possibility of war would become
extremely improbable. Second, the joint regulation, and the ending of tariffs and
border controls, laid out a model for the rest of Europe where national interests
could still be met by giving up regulation to a supra-national authority (Jones
1996: 9–10).
While functionalism was limited to the formation of non-political institutions,
neo-functionalism built on it to eliminate the artificial separation of politics from
economics, by including the notion of ‘functional spillovers’. Haas (1958 and 1964),
using the framework of functionalism and building on the theories of Deutsch,
Sidney and Kahn (1958), suggested that increased trans-border exchanges and
cooperation in technical areas (such as the production of coal and steel) would lead
to increased transnational interdependence and in turn create functional spillovers
into other realms, essentially allowing the integration process to be driven under
its own steam. Haas (1964: 38) noted that ‘certain kinds of organizational tasks
most intimately related to group and national aspirations can be expected to result
in integration even though the actors responsible for this development may not
deliberately work towards such an end’.
According to the theory, initial cooperation on the creation of common
institutions in non-political (and hence non-controversial) policy areas is, over
time, not only deepened, but also widened to include the realm of other connected
policy areas. The deliberate design of institutions is seen as the most effective
means for solving common problems, and these, in turn, are instrumental to ‘the
creation of functional as well as political spill-over and ultimately to a redefinition
of group identity around the regional unit’ (Fawcett and Hurrell 1995: 59).
Importantly, governments of member states are locked into the integration process
and have little room to maneuver. The structural and functional implications of
trans-border exchanges inevitably coerce national governments into greater
degrees of cooperation, coordination and integration.

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3 The Old Regionalism in the Developing World

Early attempts at south–south cooperation produced organisations such as the
G-77, the Non-Aligned Movement, the United Nations Conference on Trade
and Development (UNCTAD) and the Organisation of African Unity (OAU);
all operating under the similar notion that organising regionally was one way to
improve their economic lot in the global order. Significantly, these organisations
were grounded in the preferred method of state industrialisation at the time,
namely import-substitution strategies. Accepted wisdom suggested that the
optimal route to economic development lay in the imposition of strong regional
tariff barriers which would, over time, allow industries to grow strong enough
to compete internationally. For developing countries, regionalisation seemed to
offer protection from the ‘cold winds of intensifying world-market competition’
(Arrighi, Silver and Brewer 2003: 23), while allowing infant industries to take
advantage of expanded regional markets behind high protectionist barriers.
A case in point is early attempts at regional integration by Africa.1 For African
countries in the wake of liberation from colonial powers, the need to regionalise
seemed obvious. Given their weak economies and overwhelming dependence on
the export of low-cost primary commodities for trade, it was argued that only
through integration and cooperation could Africa hope to achieve the benefits of
larger markets, economies of scale and functional spillovers from cooperation.
Countries could pool benefits arising from a greater exploitation of comparative
advantage, and Africa’s highly mobile labour forces would be freed from the
artificial barriers to movement imposed by colonialism. Also, solidarity would
allow for cooperation on the international stage, and give Africa a much stronger
voice in bargaining with powerful developed economies. The economic and
political rationale for regionalism was further reinforced by the apparent success
of European integration, and at home, given impetus by the popular ideology of
‘pan-Africanism’ – the prospect of reuniting and knitting together all African
peoples artificially separated by cultural and geographical borders imposed during
colonial rule.
Despite a proliferation of well-intentioned regional initiatives by African leaders
proclaiming the need for regional integration, the historical track record reveals an
overwhelming preponderance of failed or ineffective organisations. The blame can
be partially attributed to the structural characteristics of post-liberation African
economies, which had extremely low levels of industrialisation and technological
capability. This meant that opportunities to create technological spillover effects
and economies of scale by integrating common productive processes were scarce,

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and hence the spillover of political cooperation from technical cooperation

predicted by functionalist and neo-functionalist theories failed to materialise.
Another major factor in the failure of early African schemes was their reliance
on ‘inward-looking’ regionalism. Elements of this approach, justified by popular
dependency theories, suggested that African countries could liberate themselves
from the exploitation to which they had been subjected during colonialism by
closing themselves off to outside countries and relying on the expansion of a large
internal market to generate growth and development. Individual African countries,
however, were so small in economic terms that even when taken as a whole, entire
regions were relative lightweights compared to developed countries. In addition,
the reliance of African countries on north–south trade was too great to allow for
isolation.
Finally, there was what some have called the ‘central problem of regionalism’.
Quite simply, regionalism requires member countries to cede some level of
authority and sovereignty to the regional level. In Africa, initial attempts at
integration usually intensified rather than reduced differences between countries.
This was because in non-core countries, such as those in Africa, socioeconomic
conditions were quite different from those in Europe. The decision to engage in
areas of low politics, as described by neo-functionalism, was highly politically
charged, as national governments were required to concede certain degrees of
autonomy over domestic matters, even if they were primarily technical (Axline
1979: 5).

4 Regionalism and the End of the Cold War

A number of changes in the international political economy of the 1980s saw a
worldwide resurgence of interest in regionalism, concurrent with the rise of neo-
liberal economic theory as the dominant new force in the global economic system
and changing global power relations. This second wave of regionalism was given
added impetus with the end of the Cold War and the new wave of democratisation
which swept through Eastern Europe, Africa and Latin America in the late 1980s
and early 1990s. Elsewhere, this ‘second wave’ is referred to as new regionalism
– a multi-faceted approach to regional integration which moves away from
the conventional state-centric and formalistic notions of old regionalism. New
regionalism has seen the development of new roles for civil society, market forces,
transnational activist networks, informal cross-border networks, and professional
and business associations (Hettne 1999: 45).
There is considerable debate, however, on how to characterise new regionalism.
In the case of southern Africa, two main perspectives dominate. The first is market-

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led neo-liberal regionalism, also known as ‘open regionalism’. This perspective

owes much to the original economic theories of market integration and enjoys a
dominant status within policy-making circles today. The second is more in line with
critical theories on regionalism, and is best labeled ‘developmental integration’,
which suggests that while integration can occur through the operation of market
forces, there must be explicit political cooperation both before and during the
process. In this regard, it has much in common with theories of the developmental
state, in that it brings the political back in and places the emphasis on state-led,
rather than market-led processes of integration.

5 Market-Based Theories of Regionalism

Since the 1980s, regional integration theory has been dominated by a focus
on its effects on trade, financial flows and economic integration, as well as
increasing concern over its relationship with forces of economic globalisation
and multilateralism. The debate over this aspect has been of particular concern to
economists, especially with regard to the patterns of interaction between regional
and global trade. Theories on regional market integration (often grounded in the
tradition of neoliberal economics) thus play a central role in the contemporary
debate on regionalism, as they focus attention on the formation of preferential
trading agreements commonly termed ‘trading blocs’ – the most common form of
regional organisation in the modern international system.
Extending this theory to the new wave of regionalism, the economic school
defines it as having taken the form of what has been called ‘open regionalism’. This
is a form of market integration which extends and applies the central assumptions
of neo-liberal economics at the regional and global level. Unlike old regionalism,
which was protectionist, inward-looking and relied on collective strategies of self-
reliance, new regionalism is open, outward-looking and inclusive (Mistry 1999:
123). It prescribes that policy should be directed towards the incorporation of the
region into the world economy – a goal best achieved through the elimination
of obstacles to trade and investment. Emphasis is placed on export-led growth,
and greater priority is given to extra-regional, rather than intra-regional trade.
Thus integration is consistent with ‘an outward-oriented strategy that promotes
incentives, that is neutral between production for the domestic market and export’
(Oden 1999: 18). In line with neo-liberalism, the main concern of open regionalism
is with economic efficiency or, more broadly, with ensuring economic growth
through participation in global wealth-creating activities (Nesedurai 2003: 237).
Open regionalism, then, views regionalism as a means via which neo-liberal
economic policies can be implemented, and its appeal lies in its ability to allow

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countries to integrate more fully into the global economy through the twin processes
of trade and investment. This is in line with the ‘stepping stone’ argument that
regionalism represents an important step to global economic integration (Bhagwati
1991). This process is driven by the private sector and market forces, hence
‘neo-liberal regional integration shifts emphasis from an imagined historical and
political community to a spontaneous, self-selected and self-interested market-
driven community of states and non-state actors’ (Ideheru 2003: 154).
While market integration and associated theories of open regionalism have
tended to be the predominant forms of new regionalism and have dominated
the debate among regional organisations such as the Southern Common Market
(MERCOSUR) and the Association of Southeast Asian Nations (ASEAN), they
have tended to come under fire from analysts for their tendency to over-emphasise
the potential benefits of market reform, without taking into account the often
detrimental effects that rapid liberalisation can produce, especially in developing
countries. Unlike governments, the market is an impersonal force which cannot
be voted out of power because of the harm it causes, and while market forces
certainly hold the potential for significant gains, it should be remembered that when
left to function on their own, they often tend to widen the economic differences
between less and more developed areas (Haarløv 1997: 30). While authors tend
to differ on the degree to which the market or state should be held responsible
for the polarising effects of globalisation, there is general agreement in the post-
Washington Consensus era that a major shortcoming of development policy was
its ‘one-size-fits-all’ approach – the idea that all economies are fundamentally
the same, and that a universal set of good policies exists for all countries, no
matter how big or small (Stiglitz 2003). Thus, it is important to identify actors and
motives, outside of the economic sphere, that have an interest in regionalism.

6 Developmental Integration
The developmental integration model derives from the notion of the developmental
state, and encapsulates the idea of state intervention in markets to promote national
development agendas (Leftwich 1996). Like open regionalism, it is based on the idea
that market expansion can create opportunities for firms to become internationally
competitive, but seeks to redress many of the problems associated with openness.
Specifically, it has been proposed as a corrective to the static character of the
market approach and its sole focus on trade creation and trade diversion, and
open regionalism’s one-sided goal of market liberalisation and tendency to widen
economic differences between lesser and more developed areas. In this sense it
has much more in common with new regionalism than with market-based theories

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of integration. It also goes beyond more popularly accepted theories of the ‘new
regionalism’ in carving out a far greater role for the state. It acknowledges that
social and political forces matter, but that the state is still seen as the driving force
behind regional projects.
The developmental integration approach is characterised by a number of central
propositions. First, the objective of the integration process is economic and social
development – a major departure from other economic models of integration,
with their emphasis on efficiency maximisation (Lee 2002). For countries with
low levels of industrialisation and little productive capacity, increased efficiency
through regional market expansion is often meaningless. Instead, integration
is more likely to further exacerbate underdevelopment by removing the few
remaining barriers protecting domestic industries. Unable to compete on a
level playing field with other regional and international industries, what little
productive capacity a country has is either absorbed by firms with headquarters in
other countries, or migrates elsewhere in the region. While this might result in the
enhancement of total regional efficiency and expansion in production, the reality
is that most of the benefits accrue to those areas of the region which are already the
most developed, and not those most in need of development. In order for domestic
industry to take advantage of expanded markets, productive capacity must first be
enhanced through such measures as improved infrastructure, policy coordination,
state loans, and subsidy incentives.
Since regionalisation often results in a polarising effect between member states
with differing levels of industrial capability, developmental integration includes
the implementation of compensatory and corrective measures to redress the balance
(Lee 2002: 24–27). Such compensatory measures include financial transfer and
tax transfer mechanisms, while corrective measures include planned regional
industrial development, priority loans, improved conditions for development,
and differing reductions on tariffs and common fiscal incentives to invest. This
requires an approach to integration with greater state involvement in economic
and social matters, in order to allocate industry and development funds within a
liberalising regional economy.
The need for the redistribution of gains and the enhancement of productive
capacity suggests a further departure of developmental integration from traditional
economic models, namely the role played by explicit political commitment and
state involvement in the regionalisation process. In contrast to open regionalism,
developmental integration views these factors as the ‘backbone’ of the process
(Mittleman 1999: 48). Both intra- and inter-governmental cooperation is
required to establish adequate redistributive mechanisms and coordinate policy.
For example, a major feature of developmental integration is planned regional

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industrial development, often in the form of economic ‘zones of development’,

‘development corridors’, or ‘growth triangles’ which may transcend state borders
and rely on a combination of public and private capital, and intergovernmental
partnerships to succeed. Industries are allocated to specific areas of the region
on the basis of comparative advantage, not only to supply the needs of the region
on a more efficient basis, but in the process to result in employment creation,
technology transfer and infrastructure development. Developmental regionalism is,
therefore, neither complete resistance to globalisation, nor complete acquiescence
to global market forces. Instead, it encompasses a period of temporary and limited
resistance to aspects of globalisation during which capacity is enhanced to ensure
that domestic businesses can eventually participate in global market activities
(Nesedurai 2003: 214).

7 Regionalism in the Southern African

Development Community (SADC)
In 1992, SADC was established and in 1994 South Africa became a member
following the collapse of apartheid. Mauritius, Namibia, and the Democratic
Republic of Congo (DRC) joined the organisation later. The inclusion of South
Africa in SADC transformed its original purpose and signalled a gradual shift in
emphasis towards market integration in the region. Lee (2002) has pointed out a
number of reasons for this change, amongst which is the realisation by member
states that they could no longer adhere to the major objective of decreasing their
dependence on the apartheid regime. Also, SADC had to diminish its reliance
on outside funding from international partners whose emphasis was on trade
liberalisation, and there was a growing perception that market integration was
necessary to avoid further marginalisation from the world economy.
While many of the developments over the past decade indicate that regional
integration in SADC has followed the tenets of open regionalism, there have been
other elements to its approach which have led Oden (1999: 170) to label SADC
a ‘two-track organisation’ – on the one hand following the principles of open
regionalism in the areas of trade, investment and capital flows; and on the other,
following more regionally based activities in regional goods sectors, security,
environment and energy – a strategy more strongly rooted in new regionalism and
developmental integration approaches.
Overall, the argument presented here is that for most of the 1990s and the
early years of this decade SADC policy has largely followed the dictates of
market integration, but elements of developmental integration have remained
in place which are now increasingly coming to the fore. The evidence suggests

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that regionalism seems to work best in southern Africa when it is driven by

cooperation between states, in technical sectors such as transport, water, energy,
and telecommunications. Progress in this area may be termed ‘developmental
functionalism’ – a model of integration which, we argue, will increasingly
play a central role in southern Africa’s future attempts at regional integration,
development and growth. The model returns to Haas with his notion that economic
integration will result in political spill-over. However, whereas Haas’s theories
rely on the action of technical markets for economic integration, the thrust of
southern Africa’s development will be derived from government-led initiatives.

8  South Africa, Open Regionalism and SADC

South Africa, the most dominant economy in Africa, has seen significant expansion
in its trade and investment flows into the continent as a result of the emphasis on
trade liberalisation and the relaxation of controls on foreign investment during the
1990s. South Africa’s exports to the rest of Africa grew between 1990 and 2004,
and currently exceed those to the United States and the European Union, typically
accounting for about 15 to 20 per cent of total exports. For many South African
companies such as, for example, MTN, Vodacom, Shoprite, Anglo American
and SABMiller, Africa has provided the springboard for global expansion. Their
success has paved the way for the expansion of other companies to the rest of the
continent in the areas of mining, civil engineering and construction, agriculture,
tourism and hotels, manufacturing, services, transport, telecommunications, and
the oil and gas sectors (Business Day 13 April 2004). Some African countries have
also hosted South African investments in the commercial and retail sectors. In
2004, the top Johannesburg Securities Exchange-listed companies doing business
in Africa had profit margins two or three times higher than the profit margins in
their South African operations (Games 2004: 11). Over the past ten years, the
number of companies with operations in Africa has more than doubled, and these
companies now have a presence in 27 African countries and between them employ
more than 70 000 people.
South Africa was also the largest investor in the rest of Africa during the period
1990 to 2000, with investments averaging about US$1.4 billion annually, or a
total of about US$12.5 billion over the decade. Much of this investment was
in the second half of the 1990s, and the South African Reserve Bank estimates
that South African foreign direct investment (FDI) to the rest of the continent
tripled from ZAR0.8 billion in 1996 to ZAR2.6 billion in 2000.2 This is a trend
which has continued into this decade. In 2004 alone, South African FDI into
Africa was US$4.1 billion. Furthermore, this investment has been concentrated

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primarily in the SADC region. In a recent survey, only one non-SADC country,
Kenya, featured in the top destinations (United Nations Conference on Trade and
Development 2005). In 2004, the World Investment Report estimated that South
Africa’s investment in the continent grew to seven per cent of its total FDI abroad
in 2002 (Business Day 1 June 2005). The increase in South African investment
in Africa over the past four years, from three per cent to seven per cent, shows
that although South African investors do not necessarily assess risk in Africa that
differently from overseas investors, there is growing confidence in the region’s
prospects. In addition, the fact that South African companies have made more new
investments in Africa between 2002 and 2005 than in the five years before 2002
suggests that these cross-border investments have yet to peak.
However, neo-liberal reforms on the continent have largely failed to live up to
their promises. Although they have certainly been successful in creating stable
macroeconomic conditions and freer markets in southern Africa they have not been
accompanied by significant increases in FDI or increased growth. A combination
of continued marginalisation from the global economy, and the lack of many of the
conditions necessary for effective market integration, as laid out in the literature,
has meant that open regionalism has largely been to the exclusive benefit of private
companies, and there has been little evidence of trickle-down effects. For SADC,
two key problems may be identified. The first is the lack of significant levels of
intra-regional trade, while the second is the skewed nature of that trade.
In 2003, trade among sub-Saharan African countries accounted for 12 per cent
of sub-Saharan exports, up only three per cent from 1989. The major established
regional arrangements did not contribute to the increases – their shares of
Africa-to-Africa trade were either stagnant or declining between 1989 and
2003 (Economic Commission for Africa 2003: 38). The result has been that the
touted benefits of expanded trade, in accordance with normal trade integration
theory, have failed to materialise. Quite simply, if there is little demand among
regional partners for each other’s goods, then the lowering of barriers to trade will
not, by itself, lead to dramatic increases in volumes of cross-border trade. The
problem is further compounded by other structural weaknesses. Yeats (1998), in
an exhaustive analysis of African and southern African trade, has shown that the
exchange of intra-regional trade preferences does not appear to have the potential
to make an important impact on these countries’ trade, due not only to low levels
of pre-existing trade, but also to the high non-complementarity of the regions’
exports and imports, and the lack of appropriate infrastructure to support this
exchange. He concludes that, given the structural characteristics of typical SADC
countries, liberalisation purely at the regional level will invariably lead to trade
diversion, rather than trade creation. Yeats’s findings support a general consensus

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in the literature that static gains from regionalism are unlikely to have much of an
impact in Africa.
The other major problem for SADC is South Africa’s hegemonic status. It
maintains a trade surplus with every country in SADC, and its economic power
grossly outweighs that of its neighbours. At the sub-regional level, some attempts
have been made to mitigate the negative effects for smaller countries of dependence
on South Africa in the form of the renegotiated Southern African Customs Union
(SACU) agreement, which encompasses South Africa, Botswana, Namibia,
Swaziland and Lesotho, and provides the latter four with a disproportionate share
of tariff revenues (Kirk and Stern 2005; McCarthy 2003). The prospect, however,
of extending a similar arrangement to the SADC-wide level is not a viable option
right now. What is needed is a change in trade patterns – a substantial increase in
intra-SADC trade flows, and a reduction in the trade imbalances between South
Africa and its neighbours.3 And, as the literature has shown, leaving this to the
markets alone is not a viable solution. Increased trade flows will only come about
through increased government support of industries, higher levels of foreign
direct investment and inter-governmental cooperation on major developmental
projects.
Private-sector-led expansion into Africa and southern Africa has also delivered
mixed results. On the one hand, South African investment clearly has some positive
effects, such as increasing revenue generation for governments, transferring
technology and business skills, ensuring the reindustrialisation of some economies
through the acquisition and revitalisation of over-regulated and inefficient state-
owned enterprises, creating employment, introducing good corporate practice,
and boosting investment confidence from other foreign investors who have piggy-
backed on South African FDI (Business Day 1 June 2005). On the other hand, South
Africa is often accused of economic neo-colonialism. The growing perception
that South African companies act in a high-handed manner and prey on weaker
domestic industries, has resulted in something of a backlash in SADC and the
rest of Africa. This poses a significant challenge to the South African government
to manage increasingly negative attitudes towards South African business on the
continent. Where contracts were once easy to win, they are now much harder, and
include strict provisions on equity and local partnerships. This begs the question
of what form regional strategy will take, given the growing realisation that open
regionalism alone is not sufficient.

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9 Developmental Integration in Southern

Africa
Making SADC policy just about trade and economics and leaving political
reform out of the equation is like trying to perform Hamlet without the Prince.
– Gerrit Olivier4
Thus far we have looked only at how open regionalism has played out in southern
Africa. Theory, however, tells us that the new regionalism in southern Africa may
also be characterised by what is known as developmental integration, which criticises
the failure of open regionalism to correct for market failures and for not placing
enough emphasis on the role played by states in the regional process (Thompson
2000). SADC has seen, in addition to the open regionalism measures described
earlier, the implementation of important regional projects which have involved
states, rather than markets, as the main driving force. In southern Africa a strong
case may be made for the assertion that states are the main actors in new regionalist
blocs, ‘sometimes responding to the demands generated within society, sometimes
in response to external pressures, and sometimes as a result of a particular regionalist
vision of relatively autonomous state elites’ (Grugel and Hout 1999: 4). The state
remains a central coordinator, quite capable of derailing or promoting the regional
cooperation of other actors.
There are numerous examples of southern Africa’s innovative approach to
maintaining state agencies, including cooperation on drought relief and food
supply, regional environmental security in the form of water management,
infrastructural coordination on telecommunications, tourism, postal services
and transport, the creation of transport corridors and related spatial development
initiatives (SDIs), and cooperation on regional security, including interventions
and conflict resolution management in Lesotho and the DRC. However, the
degree to which these projects have enjoyed success has varied. In some cases,
the commitment to cooperation – as spelled out in SADC documents – has turned
out to be worth little more than the paper it is written on, while in others – most
noticeably in the areas of regional security and in SDIs such as the Maputo Corridor
– there have been some significant achievements.5 With regard to the latter,
however, there is some debate on whether SDIs are not merely outgrowths of the
South African government’s Growth, Employment and Redistribution: A Macro-
economic Strategy (GEAR), given the high levels of private sector involvement,
and the emphasis on growth over development in those macro-regions that have
been identified as possible economic hubs (Söderbaum and Taylor 2003; Bond
2000; Taylor and Williams 2001).

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 New regionalism in southern Africa: functional developmentalism and the Southern
African Power Pool

There are areas of inter-governmental cooperation, however, in the regional

power sector, which have received a lot less attention in the literature despite
universal acclaim for their achievements. This next section takes a closer look
at the development of the regional southern African power grid over the past ten
years. The goal is to identify a form of regional integration in which many of the
problems that have hampered other efforts, have been circumvented. The idea is to
demonstrate why this might be a more effective form of regional integration, and
why we might possibly see a lot more evidence of moves by state-led companies
into the region in the near future.

10 Regionalism and the Power Sector in

Southern Africa
The need to accelerate development in Africa is widely recognised, and access
to clean, reliable energy is vital to developmental schemes: it improves the
standard of living in underdeveloped areas, stimulates the establishment of small-
scale enterprises, and eliminates the health hazards and environmental problems
associated with wood fuel (still by far the most common energy source on the
continent). Yet Africa, while being home to 13 per cent of the world’s population
and producing seven per cent of its commercial energy, accounts for only two per
cent of the world’s gross domestic product (GDP) and three per cent of global
commercial energy consumption (World Energy Council 2003: 3). Much of the
commercial energy Africa produces is exported to other continents, sometimes
with minimal benefit to local populations. Moreover, the commercial energy that
is used is generally expensive by world standards.
For southern Africa, resources required for the provision of cheap and efficient
energy are in abundant supply, with significant deposits of coal, water, gas and
uranium. The massive flows of the Zambezi and Congo rivers carry an estimated
150 000mW of generating capacity between them. Projections for the Inga Dam in
the DRC suggest that it has the potential to generate 50 000mW alone – an amount
equal to Africa’s entire current electricity needs. The Kudu gas fields in Namibia
and the Tamane and Pande fields in Mozambique contain significant deposits in
excess of 50 billion cubic metres. Further south, South Africa is blessed with
abundant coal reserves. It is responsible for around 90 per cent of coal production
in Africa, generating almost 50 per cent of the continent’s electricity needs (The
Times 16 February 2005). Thus the potential for power generation in the region
is overwhelming, and provides SADC member states with a strong incentive for
the exchange of electricity. According to the World Energy Council (2003: 4),
regional electricity trading schemes make sense, for the following reasons:

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 Harry Stephan and Angus Fane Hervey

• As the geography of energy supply options in no way corresponds to

political boundaries, the cheapest and cleanest energy source for a given
area may well lie just across the national border, rather than in a distant area
of the same country;
• Many national markets in southern Africa are too small to justify the
investment needed to develop particular energy supply opportunities.
In the DRC, for example, local demand alone would not justify further
development of the Inga scheme. Joining national markets can provide the
economy of scale to overcome this;
• Cross-border energy supply often also provides greatly enhanced
diversification of the energy source – a key component of energy security;
• In a regional power pool, countries like the DRC and Mozambique would
derive enormous revenues by selling hydro power to South Africa which
would, in turn, enjoy major economic benefits from the lower costs
involved. For example, suppose a dam could generate electricity for two
cents a kilowatt hour, and South Africa were generating electricity at ten
cents a kilowatt hour. If South Africa were able to strike a deal such that
it could buy electricity from the new low-cost power source at six cents a
kilowatt hour, the suppliers would make four cents and South Africa would
save four cents;
• Less tangibly, but importantly, joint energy project development can
help build closer ties between countries through closer collaboration and
increased interdependence.

11 The Southern African Power Pool (SAPP)

On 28 September 1995, the Southern African Power Pool (SAPP) came into effect
with these reasons in mind, and moved towards implementation in December
1995 when the national utilities of nine SADC members signed an Inter-Utility
Memorandum of Understanding. It was the first formal international power pool
established outside Europe or North America. In terms of its constitution, only
utilities, not individual power stations, are allowed to join. At present its members
are the utilities and ministries involved in energy usage in the 12 member states.6
The SAPP is based on cooperative principles, i.e. the utilities coordinate and
cooperate in the planning and operation of their systems to minimise costs and
maintain reliability, and there is full recovery of costs and equitable sharing of
profits (O’Leary, Charpentier and Minogue 1998). In June 2001, SADC Energy

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 New regionalism in southern Africa: functional developmentalism and the Southern
African Power Pool

Ministers also supported the proposal for the establishment of a Regional

Electricity Regulatory Association (RERA) for the SADC region. The objectives
of the association cover three main areas: capacity building, coordination of
regional policy/strategy/legislation, and regulatory cooperation (World Energy
Council 2003: 36).
Regional cooperation on electricity supply has allowed for the furtherance of
a long-held vision in the electricity supply industry – the Southern African Grid.
An ingenious and effective way of countering crippling shortages of electricity by
moving power around the sub-continent, the Southern African Grid has long been
seen as a vital tool to improve relations between African states and encourage
economic and social advancement. To date, most of the efforts have focused on
increased transmission capacity, and there has been significant progress. Currently,
every country in the southern African region is connected either directly or
indirectly to all other member states, and the volume of regional electricity trade
has grown by 20 per cent a year since 1998.
The benefits from the regional power grid have been significant. Coal-fired
power stations in South Africa, hydro power on the Zambezi River (Zambia–
Zimbabwe border), the Kunene River (Angola–Namibia border), and on the
Congo River, potential oil and gas-fired stations in Angola, and gas in Namibia
and Mozambique, provide a diverse mix of primary energy resources. This should
help free electricity supply in the SAPP countries from the impact of drought and
other natural disasters, particularly as the interconnections allow for the routing
of power under almost all circumstances. In drought periods, for example, cheap
coal-fired power from South Africa has been used to save water in Kariba Lake,
with the Kariba Power Station being used at such times for peaking purposes
only.
Technical coordination and cooperation are already at an advanced stage. For
example, the Mozal Aluminium Project in Mozambique required the construction
of a line from Mpumalanga in South Africa to Mozal near Maputo. The line is
owned jointly by South Africa’s power utility, Eskom, the Swaziland Electricity
Board, and Electricidade de Mozambique, and the shortest route was through
areas of Swaziland that need power. Substations were created on the line to divert
electricity for Swaziland’s power needs, and the same happened along the line
from South Africa to Zimbabwe, extending to Botswana with a similar spin-off
(Nevin 2001). Another good example is South Africa’s provision of technical and
other support for the refurbishment of the Hwange Power Station, designed to
reduce Zimbabwe’s dependence on power purchases from its neighbours (World
Energy Council 2003: 35–36). Potential for future benefits is equally impressive.
A twenty-year generation and transmission plan has been developed, which

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 Harry Stephan and Angus Fane Hervey

indicates that a saving of some US$3 billion can be achieved through coordinated
planning.

12 The SAPP and Political Spill-over

The potential impact of regional cooperation in the electricity sector on the overall
regionalisation process in SADC is of particular significance. The establishment
of the SAPP required explicit political commitment on behalf of all member states
at the outset – a task which was made much easier by the sector’s technical nature.
The shades of Haas’s neo-functionalism are unmistakeable. Electricity generation
is relatively uncontroversial in terms of African politics, and because there was
overwhelming consensus for the provision of cheap and reliable electricity, the
idea of a regional electricity grid went from conception to practice remarkably
quickly. Once all the state utilities had embarked on the process, coordination
and cooperation devolved from the state level to that of the utilities themselves,
insulating sectoral development from later regional security problems and personal
rivalries between African leaders. A case in point was the 1998 crisis in the DRC,
in which a number of SADC member states found themselves involved in opposing
alliances. At the time, the situation posed a serious threat to the existence of SADC
itself (The Economist 1 October 1998). Despite frigid diplomatic relations between
their countries, though, utilities from all member states continued to work on the
furtherance of the regional power grid. The result was an unprecedented situation
where SADC technicians found themselves cooperating on daily exchanges of
electricity through the power pool, while their respective military forces were
engaged against each other.
Another way in which the SAPP represents an important element of the
regionalisation process is in its capability to create new trade and investment
flows between SADC member states, while encouraging investment from outside
Africa. The scale of some of the bigger projects such as Inga in the DRC and
CahoraBassa in Mozambique requires cooperation between two or three utilities
from the region. With a regional power pool in place, there is greater incentive for
cross-border investment. The Inga III project, for example, is being undertaken by
a joint venture company called the Western Power Corridor (Westcor), to be owned
by Eskom, the Botswana Power Corporation, Empresa Nacional de Electridade of
Angola, Namibia’s power utility, NamPower, and Société Nationale d’ Electricité
of the Congo. There has also been significant involvement from Siemens and the
French state power utility, Electricité de France.
Once other SADC member states bring their potential generating capacity
online, there will be an opportunity to generate significant revenue through the

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 New regionalism in southern Africa: functional developmentalism and the Southern
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export of power to other member states connected to the power pool, as well
as countries outside the pool in northern Africa and Europe. With its current
projected levels of capacity, South Africa should be a net importer of electricity.
If the country is able to source more electricity from beyond its borders, this will
hopefully go some way towards alleviating the chronic trade imbalances between
SACU and the rest of SADC, and encourage other forms of regional trade in
which non-SADC countries have significant comparative advantages.

13 Conclusion
While the main purpose of this article has been to provide a literature review of
regional theory which is of relevance to the dynamic process of new regionalism
in southern Africa, the idea has also been to suggest that we are likely to see a
particular ‘way forward’ for southern African regionalisation that is quite different
from what has taken place over the past decade or so.
A point which has been repeatedly driven home throughout this discussion, is
that regionalism in Africa has yet to live up to its promise. Whether it has been
the failure of older inward-looking schemes, or the inability of African countries
to take advantage of newer outward-looking ones, the point is that regionalism
in Africa, in all its manifestations, seems to have always been approached in the
wrong way. Despite past failure, though, there is still consensus that regionalism
is an important and viable strategy for achieving development, and African
leaders and governments still espouse it as an important goal. Policy documents
for NEPAD and the AU consistently refer to the need to promote regional and
African economic strategies, yet there is little in them which lays down guidelines
on how this is supposed to occur.
One tried and tested strategy has been to promote regionalism through the
integration of markets. In southern Africa, as in many other places, there is a strong
case for saying that over the past decade or so regional strategy has been driven by
the idea of ‘ever-expanding circles of free trade’ – the idea of open regionalism.
The message has been simple: liberalise regional barriers to trade and investment,
set loose the forces of the market, and watch the regional economy grow. This
article has reviewed the theory behind such a move and demonstrated why, in the
case of Africa and southern Africa, such a narrow focus on trade and investment
is simply not enough. It might be true that open regionalism has been good for the
private sector, especially in South Africa, but if the government is serious about
a regional development strategy, then regionalisation can no longer continue in
this way. Continued reliance on the forces of the market to bring about regional
development on its own will ultimately result in increased antipathy from other

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 Harry Stephan and Angus Fane Hervey

African states towards South African business, and will do little to boost the low
levels of existing intra-SADC trade and investment.
However, this article has also shown that SADC might best be termed a ‘two-
track organisation’, since it has followed strategies rooted in the theory of
development integration while still managing to adhere to a neoliberal agenda.
Cooperation in the southern African power sector has been examined in order
to demonstrate how explicit political cooperation in a common technical sector
between countries can promote a regional agenda, even during security tensions
between member states. This is not a new idea; it is the same premise on which
the old theories of functionalism and neo-functionalism in Europe are based.
Theoretical and practical antecedents exist for what we suggest may be an
increasingly important element of regional initiatives in southern Africa.
In the future, it seems likely that we will see greater cooperation between
southern African governments in technical sectors, especially in infrastructure,
power, water and telecommunications. South African industry and expertise will
play a central role, and a key feature will be the involvement of South African
parastatals in regional projects, specifically companies like Eskom, Transnet
and oil company SASOL. The priority is to now make these organisations more
competitive and efficient, with the purpose of using them as engines for future
growth.
In the past, South Africa adhered strictly to a neoliberal mode, but with the
change to an investment model via parastatals in southern Africa, this could be the
blueprint for investment in SADC. The beauty of such a move is that the South
African government controls both sides of the spill-over effect. On the one hand,
by heavily involving parastatals and driving economic rationalisation, it can more
tightly control how the spill-over effect occurs. Also, side payments in the form
of new forms of employment might help ease pressure on the government from
its coalition partners, and major regional infrastructural projects will certainly
create a large number of jobs. At the same time, government reaps the benefits of
political integration in the form of greater policy credibility and the furtherance of
a crucial element of the pan-Africanist vision – the consolidation of the southern
African region and the establishment of a strong regional entity which provides a
model for the rest of Africa.
Finally, we can argue that the South African-led strategy has the potential
to mitigate the core restraints that are marginalising Africa in general. Core
development projects like the Inga dam on the Congo River will bring much-
needed investment into the region, primarily through international financial
institutions (IFIs), but also increasingly through commercial institutions. The
IFIs are intent on bridging the equality gap within the SADC region, and this

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is a sure way to create the necessary trade flows that are so skewed in South
Africa’s favour. Second, the constraints on trade that are in place through the
institutional bias within the World Trade Organisation (WTO) can be reduced by
creating more intra-regional trade. By developing a whirlpool effect within SADC,
southern Africa can play a more strategic game with the developed countries in
terms of its strategic minerals. Given the interest and ever-increasing investment
by China, SADC can trump OECD (Organisation for Economic Cooperation and
Development) intransigence on agricultural subsidies and finesse better terms of
trade through the WTO. Third, by creating a stronger internal market across the
region, southern Africa can finally settle the problem of small markets that has
been such a stigma or legacy of colonialism.

NOTES
1. Regional initiatives are certainly nothing new to Africa. Two of the oldest regional
organisations, the Southern African Customs Union and the East African Community,
can trace their roots to the beginning of the twentieth century, while early post-Second
World War efforts saw the creation of the Southern Rhodesian Customs Union in 1949;
the African Common Market linking Algeria, Egypt, Ghana, Guinea, Mali and Morocco
in 1962, and in the same year, the Equatorial Customs Union of Central African States,
joining Cameroon, the Central African Republic, Chad, Congo and Gabon. Two of the
historically more important African regional organisations, the Organisation of African
Unity and the East African Community (comprising Kenya, Tanzania and Uganda)
began in 1963 and 1967 respectively, and 1975 saw the establishment of the Economic
Community of West African States (ECOWAS) which was intended to create a single
economic bloc extending across 15 states. In 1980, the OAU formulated the Lagos Plan
of Action, which promised to bring about an African Common Market by 2000.
2. This figure represented only three per cent of South Africa’s global foreign direct
investment (FDI), as many South African firms are still investing predominantly in
Europe, the United States and Asia. But the figure does exclude significant investments
over the past four years, including the expansion of the Mozal aluminium smelter
(US$2,2bn); the laying of the Sasol pipeline (US$1,2bn) in Mozambique; the AngloGold
Ashanti merger (US$1,4bn); and the continental expansion of banks, retailers and
telecommunications companies such as MTN and Vodacom.
3. There is certainly scope for this to occur – a study undertaken by the International Trade
Centre of UNCTAD has determined that significant potential for increased trade exists
between SACU and the non-SACU SADC countries. However, this would require
SACU countries to source competitive products from their neighbours instead of the
US and the EU.
4. Gerrit Olivier of the University of Johannesburg, Johannesburg, South Africa,
5. The Maputo Corridor provides a good example of what can be achieved with partner-
ships between the public and private sector, political will, and commercial demand for
services. Started in August 1995, the corridor involves upgrading road and rail links

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 Harry Stephan and Angus Fane Hervey

between South Africa and Mozambique and dredging the port of Maputo. The corridor
has spurred other developments such as the Mepanda-Unca hydro-electric project on
the Zambezi River, to be developed at a cost of US$200 million to supply electricity
to Mozambique. Another is the joint venture effort involving the electricity utilities of
Mozambique, Swaziland and South Africa, to supply power to the new Mozal plant
in Mozambique through the construction of two 440 Kv lines at an estimated cost of
$105 million. The Mozal Aluminium Smelter plant is a huge investment valued at $1.3
billion. In total, the Maputo Corridor has 180 projects at an estimated cost of $7 billion.
Already, $2 billion has been committed with 8 000 new jobs. There are numerous spin-
offs to both the formal and informal, sector resulting in increased incomes. The corridor
is considered a model for other development corridors in the region. The fact that the
project has been able to move so quickly from conceptualisation to actualisation is
testimony to the momentum of projects driven by partnerships between the public and
private sectors, and political commitment at the highest level.
6. Botswana Power Corporation (BPC); Electricidade de Mocambique (EDM); Angola’s
Empresa Nacional de Electricidade (ENE); Electricity Supply Commission of Malawi
(Escom); South Africa’s Eskom; Lesotho Electricity Corporation (LEC); Namibia’s
NamPower; Swaziland Electricity Board (SEB); the Democratic Republic of Congo’s
(DRC) Société Nationale d’ Electricité (SNEL); Tanzania Electric Supply Company
(Tanesco); Zimbabwe Electricity Supply Authority (ZESA) and Zambia Electricity
Supply Corporation (ZESCO).

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