Common use of SWOT Analysis Clause in Contracts

SWOT Analysis. This section of the paper focuses on the SWOT analysis of the regional value chain between South Africa, Zambia, and Zimbabwe, in the electrical equipment industry. The analysis highlights the strengths of the value chain’s capacity, opportunities for industry growth, weaknesses that identify deficiencies, and threats that reveal limitations to regional and global competitiveness. The SWOT analysis in Table 7 shows that these countries have manufacturing capacity. Zambia is the largest copper producer in the region, which is a key input into insulated wire and cables. Increasing demand for electrical equipment is evident in existing, transforming, and emerging industries such as mining, construction, automotive, and energy. Emerging new energy vehicles seeking to replace internal combustion engine vehicles require battery inputs. Electric equipment is used by power utilities and IPPs to carry out electrification projects. Localisation policies, particularly in South Africa, stimulate demand for products manufactured in the country. Countries in the region export raw materials due to limited technical capacity and skills, which limits value addition. The dominant players in the global value chain are large-scale foreign competitors with established supply chains, giving them significant influence compared to regional and domestic players. Global competitors often receive subsidies that give them an advantage in the global value chain. Meanwhile, regional manufacturers produce lower value-added products while global competitors produce higher value-added products. South Africa’s exports see limited global demand for electrical machinery and equipment, with the US and the UAE being the only exceptions among the country’s top 10 export markets in 2022; all the others are SADC countries. The region faces logistical constraints, as discussed in the supply-side constraints section. While South Africa has adequate logistical performance, this is not the case for Zambia and Zimbabwe. Logistical constraints including border delays make it harder to trade within the region. Countries within the region lack aligned localisation policies. The capital-intensive nature of the electrical equipment industry limits job creation. There is a pressing need for increased investment to finance the establishment of the manufacturing of electrical equipment inputs and products. The projected demand for electrical equipment is increasing due to the shift towards renewable energy and electrification projects in the region, as discussed in the trends in demand section. Structural transformation within the regional and global context sees the demand for electrical equipment for green industrialisation including electrical vehicles, batteries, and new transmission lines that are planned to be constructed by national power utilities and IPPs within the region. This presents an opportunity to produce electrical equipment to supply both regional and global markets. AfCFTA presents an opportunity for regional governments to align their demand. This agreement would enable countries to establish a division of labour within the region, leading to economies of scale. The AfCFTA will also help facilitate free trade within the region. The region can increase value addition by improving the downstream part of the value chain, creating employment opportunities, and greening electricity generation across the region. The region has an opportunity to increase export finance and insurance, particularly for regional trade. The trends in the demand section showed that the region relies on low-cost imports, particularly from China, presenting a threat to the regional market. Regional integration is limited because the region cannot align localisation policies and procurement strategies, which is needed to achieve economies of scale to compete with imports. The lack of technological capacity and skills limits the expansion of electrical equipment manufacturing. The lack of financing for electrification projects hinders the growth of demand for new power generation. - Manufacturing capacity. - Copper (mostly in Zambia). - Demand from mining; construction; automotive; electricity utilities. - Localisation policies in South Africa. - Technical capacity and skills are limited . - Large-scale foreign competitors with established supply chains. - Demand is limited compared to global demand. - Logistics and electricity are short across the region, especially in Zimbabwe and Zambia. - Localisation policies unaligned in the region. - Capital intensive (not creating a lot of jobs). - Lack of financing for investment in generation limits demand. - Lack of financing for new manufacturing investment limits growth in the industry. - Demand from electrification projects and shift to renewables and electric vehicles (copper products and batteries) - Demand for electrical equipment products and inputs - AfCFTA and regional alignment of government demand (e.g., align localisation programmes). (requires division of labour within the region to get to economies of scale/competitiveness plus buy-in for lower barriers to trade within the region) - Maximise the employment impacts by growing downstream (equipment) and by improving and greening electricity across the region - Increase export finance/insurance, especially for regional trade - Lower cost imports - Cannot align localisation policies/national procurement strategies so cannot achieve economies of scale to compete with imports - Lack of technological capacity and skills to expand the manufacture of electrical equipment - Inadequate export finance and insurance - Unable to get financing for the new generation, so demand does not materialise