Introduction

Access to transport and communication networks is a precondition for trade liberalization to result in increased trade. By the same token, access to telecommunication networks, and freer international flows of capital and labor are preconditions for liberalization of trade in services to give rise to increased trade. Finally, recent developments towards globalization of production networks and supply chains, driven by advances in technologies and competition, require information, goods and services to flow up and down the supply chains and across the production networks as effectively as possible.

Japanese companies gained an early leading edge in managing supply networks. Thus, in the 1980s, Japanese management techniques and business practices became the envy of the world. The until then leading industrial nations, particularly the US, prepared themselves for a relative decline in prosperity, a mood captured in Paul Krugman’s bestseller, "The age of diminishing expectations" (Krugman 1990). Productivity improvements in the US and Europe were dismal while Japan was forging ahead. During the 1990s, however, several elements of Japanese industrial and management practices were adopted worldwide. The most celebrated are quality circles, continuous improvement, zero deficiency and just-in-time supply. Combined with the diffusion of information and communication technology and well-functioning markets, this has revitalized the US economy and the EU economies appear to follow suit. Indeed, restructuring of business practices was necessary in order to fully exploit the opportunities that new communication and information technology brought.

The management principles first developed in Japan not only applied within the firm, but also in relation to upstream suppliers and downstream marketing. As the firms in the supply chain to an increasing extent are located in different countries, just in time delivery and decentralization of quality control became common in international trade and transactions. Electronic media has become an increasingly important and efficient channel for exchanging and sharing information and transacting business. These developments have generated a need for international agreements in the area of telecommunications and a number of other services. Largely for this reason, services were included in the Uruguay Round under the World Trade Organization (WTO), where the most significant achievements were made in the telecommunication sector, e.g., the agreement on basic telecommunications included in the fourth GATS protocol of February 1997.

This paper discusses the opportunities that the diffusion of information technology and opening up to trade and investment in telecommunications bring to the SADC area. Our focus is on the role information technology plays in determining the way business transactions are undertaken and the way production networks and supply chains are organized. Evidently, the extent to which new developments in information technology affect the SADC countries depends strongly on to what extent the communications hardware, software and infrastructure are in place. In addition, poor transport infrastructure is probably a serious obstacle for just in time delivery, while poor electricity infrastructure is an obstacle to effective use of modern equipment in the SADC area outside South Africa, Mauritius and perhaps Botswana and Namibia.

The purpose of this paper is first to analyze trade and investment patterns in the Southern African Development Community (SADC) in order to get an indication of to what extent they participate in local, regional or global supply chains or production networks. We also present data on the cost and quality of transport and communication services in order to assess some of the obstacles to taking advantage of trade liberalization through the participation in international production networks on the part of SADC firms. But first section 2 provides a theoretical backdrop where recent research in location theory, network economies and supply chain management is reviewed together with some relevant empirical studies. Section 3 provides data on the structure and cost of the telecommunication and transport services in the SADC area, while section 4 presents data on trade and investment patterns in the SADC area. In section 5 we discuss policy implications and conclude.