Drivers of Regional Integration: Value Chains, Investment and New Forms of Co-operation

This collection of papers analyzes regional integration efforts in three key areas: South America, Southern Africa, and Russia. It argues that while traditional trade-led integration has often stalled, new drivers such as regional value chains (RVCs), energy pooling, and strategic investment shifts offer paths toward deeper cooperation. In South America, the report finds a lack of a clear 'hub country' and significant infrastructure gaps hindering RVCs. In Southern Africa, it highlights the potential of the Southern Africa Power Pool (SAPP) and the dual role of South Africa as both a catalyst and a diverter of regional investment. In Russia, the analysis focuses on a strategic 'turn to the East,' shifting investment focus from Europe toward the Asia-Pacific region and the Eurasian Economic Union (EEU).

• South America lacks a clear 'hub country' similar to Germany in the EU or the US in NAFTA, which hinders the creation of regional value chains (RVCs).
• Brazil's potential to lead South American productive integration is obstructed by a history of inward-looking economic policies, a bias toward vertical integration, and inadequate physical and institutional infrastructure.
• Brazil's infrastructure investment in 2013 was 2.45% of its GDP, which is below the estimated 3% of GDP required just to cover the depreciation of existing capital stock.
• The South African power system is the dominant force in the Southern Africa Power Pool (SAPP), accounting for 80% of the region's total capacity.
• SADC possesses significant untapped renewable energy potential, including geothermal resources in the Great Rift Valley estimated at 9,000MW.
• The Grand Inga hydropower project in the Democratic Republic of the Congo has the potential to generate up to 40,000MW, which could power half of Africa.
• Russia is shifting its strategic investment focus from Europe toward the Asia-Pacific region (APR) and the Eurasian Economic Union (EEU) due to the crisis in Russia-West relations following the conflict in Ukraine.
• Inward FDI to Russia is highly concentrated, with nearly 70% of 2013 inflows directed at Moscow, the Moscow region, St Petersburg, and the Leningrad region.
• Russia has implemented 'rapid development territories' in the Far East to attract FDI by offering tax and administrative regimes competitive with APR countries, such as a profit tax target of 10%.
• South Africa's investment policy can act as both a catalyst for regional investment and a diverter of investment from its neighbors, as seen in the failure of the Motor Company of Botswana due to South African protectionist measures.
• The Motor Industry Development Programme (MIDP) is considered a success in South Africa, increasing finished light automobile exports by a factor of 25, though it relies on trade barriers to function.
• South Africa's Industrial Development Zones (IDZs) are widely viewed as failures, having cost the national government ZAR 5.3 billion while stimulating ZAR 11.8 billion in investment.
• Mercosur's sustainability is challenged by institutional weakness, a reliance on inter-governmentalism over supranational structures, and a high rate of non-enforcement of approved decisions.
• Argentina and Brazil have increasingly used protectionist measures and non-tariff barriers since the 2008 crisis, leading to trade disputes within Mercosur and complaints at the WTO.

APA

South African Institute of International Affairs (2015). Drivers of Regional Integration: Value Chains, Investment and New Forms of Co-operation. https://saiia.org.za/wp-content/uploads/2015/12/Drivers-of-Regional-Integration-Value-Chains-Investment-and-New-Forms-of-Co-operation.pdf

Chicago

South African Institute of International Affairs. Drivers of Regional Integration: Value Chains, Investment and New Forms of Co-operation. 2015. https://saiia.org.za/wp-content/uploads/2015/12/Drivers-of-Regional-Integration-Value-Chains-Investment-and-New-Forms-of-Co-operation.pdf.

Wikipedia

{{cite report |author=South African Institute of International Affairs |title=Drivers of Regional Integration: Value Chains, Investment and New Forms of Co-operation |date=December 2015 |url=https://saiia.org.za/wp-content/uploads/2015/12/Drivers-of-Regional-Integration-Value-Chains-Investment-and-New-Forms-of-Co-operation.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{southafricaninstituteofinternationalaffairs2015drivers, author = {{South African Institute of International Affairs}}, title = {{Drivers of Regional Integration: Value Chains, Investment and New Forms of Co-operation}}, institution = {South African Institute of International Affairs}, year = {2015}, month = dec, url = {https://saiia.org.za/wp-content/uploads/2015/12/Drivers-of-Regional-Integration-Value-Chains-Investment-and-New-Forms-of-Co-operation.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }