Challenges for Deeper Integration in SADC

1. Challenges for Deeper Integration in SADC Workshop: Parliamentary Portfolio Committee – International Relations and Cooperation Paul Kalenga email: pkalenga@sadc.int Cape Town, South Africa 29 February 2012

2. Introduction • SADCC (1980) - deliberate programme of action to develop regional linkages in a number of economic sectors (mostly infrastructure), primarily to reduce economic dependence on then apartheid South Africa • SADC Treaty (1992) – redefining the basis for regional cooperation from a loose association into a legally binding regional integration arrangement - Protocols (an institutional challenge) • Development integration approach – to address factors that make it difficult to raise and sustain economic growth (production, infrastructure and efficiency barriers to growth and development) – formalized through the RISDP (2003)

3. Introduction (cont.) • The RISDP articulates the roadmap for SADC’s integration and provides for the establishment of: - a free trade area (FTA) by 2008; - a customs union in 2010; - a common market in 2015; - a monetary union in 2016; and - the introduction of a single currency in 2018. • The RISDP – modelled on European integration framework – represents fundamental challenges as it presupposes the need to surrender sovereignty / national policy space to a supranational authority - it is increasingly becoming a challenge for deeper integration in SADC

4. SADC FTA: complications emerging • Twelve tariff phase down periods, 2000 – 2012: with substantially all trade liberalised (85%) by 2008. Remaining products constituted the ‘sensitive product’ group whose tariff elimination is to be completed by 2012 • Angola, DRC and Seychelles have not acceded to FTA, trading with rest of SADC on MFN basis • SACU has completed its phase down • Malawi has fallen behind – end 2011 it has liberalised about 46% of its tariff offer • Zimbabwe has been granted derogation, annual reductions to resume in 2012 • Tanzania was on schedule but in 2010 unilaterally reintroduced 25% duty on sugar and paper products to be phased out in 2015 • Mozambique has a differentiated offer – w.r.t. South Africa the offer will be complete in 2015, while with rest of SADC in 2012

5. Gains from FTA still remain to be seen • Low intra-SADC trade flows • Non-diversified range of goods (and services) • Vertical integration in production still lacking • Tariff barriers, non-tariff barriers, supply-side constraints, inadequate trade / production related infrastructure

6. SADC Customs Union – Challenges & Constraints • Tariff policy should be surrendered as a CET is to be adopted • Challenges: overlapping membership; economic imbalances, divergent trade policies and strategies, customs revenue dependence, varied tariff structures, etc. • SADC FTA still facing implementation problems – revenue, import competition, reversals of commitments ( A CU is a FTA + CET) • Is a SADC Customs Union possible or should there be a rethinking of such an approach?

7. Other deeper integration milestones? • Common market (2015) – the need to surrender sovereignty on other policies such as financial, immigration, etc – politically a difficult move • Monetary union & single currency: the need for common interest rate policies, fiscal policies, etc (consider the Eurozone crisis) • Can the RISDP (in its current form) still the basis of the region’s deeper integration framework? • RISDP Review (2012) Can it offer an opportunity to forge regional consensus on an appropriate approach to regional integration in SADC?

8. Are there alternative approaches? • Focusing on effective implementation of the FTA (addressing tariff & non-tariff barriers to trade in goods and services) • Prioritizing reducing the costs of doing business (trade & investment facilitation / effective cross-border linkages) • A competitiveness agenda (services, infrastructure, regulatory reform, quality infrastructure, supply-side measures to produce goods and services competitively) • Re-inventing the SADCC spirit (infrastructure and services)

9. Emerging intra-African initiatives • The COMESA-EAC-SADC Tripartite mechanism does offer prospects for addressing key trade & investment impediments: - market integration (FTA) – negotiations launched in two phases (goods, services, and trade-related issues); - infrastructure (development corridors – especially transport facilitation / ports); - industrial development (regional value chain strategies, domestic level supply side interventions)

10. Conclusions • Focusing market integration on effective implementation of the SADC FTA and establishment of the Tripartite FTA (tariff / non-tariff barriers) • Addressing inadequate regional infrastructural linkages in SADC and the wider African markets (landlocked-ness, efficient access to exit and entry points to global markets – ports; competitiveness – a services agenda) • Re-thinking a regional economic integration approach in support of the above strategy –(SACU, SADC –RISDP, Tripartite FTA and related pillars) • Forging an inclusive regional integration process – stakeholder participation, especially economic agents