Regional Integration Agenda for SADC "Caught in the winds of change" Problems and Prospects

• Author: Amos Saurombe
• Position: North West University, South Africa asaurombe@yahoo.co.uk
• Pages: 100-106

Page 100

1. Introduction

The Southern African Development Community¹ is set to launch a Free Trade Area (FTA)² on the 17th of August 2008. The path to integration does not end with the creation of a FTA. According to the Regional Indicative Strategic Plan3, SADC plans to follow this up with a Customs Union in 2010, a Common Market in 2015, a Monetary Union in 2016 and a single currency in 2018. The private sector and politicians in the region strongly support the promotion of intra-SADC trade and investment. However they disagree on the sequence and intensity of the integration agenda. The private sector is of the opinion that it is unrealistic to introduce a Customs Union4 until the FTA has been fully and successfully implemented5. There is disagreement among member states on the best way of achieving an integrated market for the region as was evident in the SADC meeting of July 2008. These bottlenecks are only a symptom of the ever present problem of a failed institutional transformation from SADCC to SADC in 1992. This transformation saw the redefinition of regional cooperation from a loose association towards a legally binding arrangement that seeks integration. This transformation was not accompanied by appropriate institutional framework for integration. This paper seeks to expose the extent of the difficult path SADC is on in trying to achieve integration objectives. The aim is to reach a conclusion that under the prevailing scenario an integrated market for the region is unachievable.

2. Background

The SADC is made up of fourteen member states⁶. Before the formation of the SADC in 1992, the block was called SADCC⁷, whose focus was on functional cooperation in key sectors. The main objective of SADCC was to reduce dependence on apartheid South Africa. This cooperation was dominated by the frontline states whose focus was political liberation of the region8. SADCC had decentralised structures, with different sectors allocated to each member state. The institutional framework of the organisation comprised of the Summit, Council, and Standing Committee of officials and a Secretariat. This structure was oriented towards a cooperative and not integration approach.

The 1992 SADC Treaty redefined SADCC to SADC changing the organisation from a loose association towards a legally binding arrangement. Geopolitical changes included the independence of Namibia from colonial rule as well as the promise of a new dawn of democracy in South Africa. From a distance the end of the cold warPage 101 meant that there was need to focus on responding to challenges of globalization, competitiveness and enlarged regional markets. The treaty of establishing the African Economic Community had just been concluded in 1991 and Regional Economic Communities (RECS) were perceived as a key development strategy.

The organisation started to address the agenda on development integration focussing on infrastructure and efficiency barriers to development. Trade liberalization became pivotal as members became aware of regional imbalances among member states. The organisation continued to grow with the joining of Namibia in 1990, South Africa in 1994, Mauritius in 1995, Seychelles and Democratic Republic of Congo (DRC) in 1997. The size of membership of SADCC and a tendency to expand was not necessarily conducive to a new integration approach. This transformation from SADCC into SADC was not accompanied by appropriate institutional framework for integration.

3. Responding to the forces of change

The restructuring process for SADC institutions started in 2001 through a slow process. 21 sectors were grouped into clusters under 4 directorates at the Secretariat. The integration agenda was conceptualised under the Regional Indicative Strategic Development Plan (RISDP) in 2003. However institutional challenges remained as SADC was still rooted in a cooperative framework rather than rules based mechanism. In lay mans' terms the policy organs in form of the Summit and Council, assumed a role of both a player and referee in the integration game. The Secretariat was still not adequately transformed to suite the new approach. The decision to leave the task of driving integration to national committees was not the best since national governments had failed to drive integration. Legislative bodies of national parliaments were weak and there was no clear oversight by parliaments.

3. 1 Towards a Free Trade Area (FTA), first deadline and a serious test

The launch of SADC FTA was scheduled on the 17th of August 2008. This is the first step in a sequence of scheduled developments in the integration agenda of the region. The SADC Protocol on trade was signed in the year 2000. Currently the protocol is focusing on trade in goods with the draft Protocol on trade in services still to be negotiated. The FTA is facing implementation problems. On the other hand, it remains a shallow integration of goods market only. Member states are not willing to lose national sovereignty on trade policy. Development of regional trade in services can make a valuable contribution to development. The challenge is that it intrudes in national policy space. The FTA will have to comply with applicable WTO rules. This can only be achieved by compliance with Article XXIV of the General Agreement on Tariffs and Trade (GATT).

3.1. 1 Implementation challenges

Member states are not at the same level of preparedness. Malawi, Mozambique, Tanzania and Zimbabwe are not up to date. Non-Southern African Custom Union ⁹ members back loaded their tariff preferences offers and are faced with the possible tariff revenue declines this year. Outside SACU, most intra-SADC trade takes place either under Common Market for East and Southern Africa¹⁰ or bilateral trade agreements. Following the trade protocol, some countries renewed dormant bilateral trade agreements or formed new ones. This shows that the trade protocol is not attractive.

3. 2 The SADC Customs Union, 2010

A Customs Union is an FTA with a Common External Tariff¹¹ This will result in the loss of national sovereignty on external trade policy. The evolution of the FTA into a CU is planned for 2010. The challenge for the realisation of a CU relates to the vast differences in the Most Favoured Nation12 (MFN) tariff structures of member states. The MFN principle provides that any advantage, favour or privilege which a contracting party extends to products which originate in or are destined for another country, must be extended immediately and unconditionally to any like products which originate in or are destined for the territories of all other contracting parties.

Compromising on a CET will be a challenge. Examples show that the tariff levels for Mauritius are 3.1%, Zimbabwe's stand at 16.2% and maximum rates for the block range from 20% to 108%. The SACU rate is 8.2%. Since SACU is already an established CU, it will be difficult for them to bend their rules. On the other hand, the rest of the block with higher tariffs would be parting with a source of huge revenues by lowering tariffs. MemberPage 102 states have wide differences on objectives and rationales behind tariff structures and policies. WTO...