South Africa’s Role in Building the Region: SACU as a Pivot? Dr Mills Soko Senior Lecturer, UCT Graduate School of Business SAIIA Research Associate

Overview 1. Purpose of paper. 2. SA’s regional policy objectives. 3. SA’s regional role. 4. New SACU Agreement. 5. Prospects for SACU expansion. 6. South Africa as Pivot: Constraints.

Purpose of Paper  Part of study initiated in April  Explore whether it was possible to expand SACU beyond current member states and, if so, whether such expansion could contribute towards South Africa’s African development strategy.

South Africa’s Regional Policy Objectives  Promote economic development through regional integration.  Use regional integration as tool of global econiomic integration.  Advance regional democracy, peace & security.

South Africa’s Regional Role  One of key features of post-apartheid SA growing political and economic role in region (and wider continent). –Champion of African Renaissance and NEPAD. Democracy, rule of law, political & economic independence. Revived Pan-Africanist vision married to neo-liberal ideology. –Active role in conflict resolution (Burundi, Congo, Ivory Coast etc.). –Significant investor in Africa & key source of African imports.  Africa’s development the driving foreign economic policy vision & impetus.

New SACU Agreement  2002 SACU Agreement reflects political & economic policy priorities of democratic SA. –Creation of democratic structures: fundamental change. Council of Ministers, Secretariat, Tariff Board, Customs Union Commision, Ad Hoc Tribunal. –Adoption of common policies: Part 8 of Agreement. Industrial development policy (balanced development?). Agricultural policy. Competition policy. Unfair trade practices.

New SACU Agreement  Central decision-making authority. –Responsible for overall policy direction & functioning of SACU institutions.  Decisions made on a consensual basis, before decisions resided with SA. –Political & economic predominance of SA, so unclear how works in practice. Role of power? –Too early to assess decision-making trends conclusively but past experience demonstrates achieving consensus on sensitive matters difficult.

New SACU Agreement  The Secretariat is entrusted with a range of responsibilities: –Day-to-day administration, coordination & monitoring of the implementation of decisions, harmonisation of national policies & strategies, etc.  Unclear how going to execute responsibilities. –Will require pro-active coordination & capacity building, as well as ability to institute corrective measures. This will demand technical capabilities.  Concerns about whether Secretariat has sufficient resources to underpin its work.

New SACU Agreement  New Agreement exhorts SACU countries to conduct future trade relations & negotiations with third parties as a single entity. –Commits SA to cede sovereignty over trade policy formulation & implementation to new inter-governmental institutions. –The issue is whether states will exploit the opportunities provided by the evolving institutional architecture to proactively shape the customs union’s trade agenda.

Prospects for SACU Expansion  Idea of expansion first mooted by apartheid regime to extend SA hegemony & undercut SADC.  Quantitative analysis argues that SACU enlargement could benefit region (Stern & Stevens).  Argument for swallowing of SADC by SACU – solution to ‘spaghetti bowl’ problem?  Mozambique & Zambia flagged as primary contenders for inclusion.

Prospects for SACU Expansion  Difficulties with expansion: 1. Do not ignore specific history of close integration of BLNS states into SA political economy. Historically administered as virtual economic regions of SA. Thus, SACU not set up to promote integration. History of SACU does not apply to rest of Southern Africa. 2. Admission of new members would raise issue of revenue formula. Any new formula weighted in favour of less developed countries? Extending weighted formula would have fiscal implications for SA & would complicate negotiations on revenue sharing.

Prospects for SACU expansion  Difficulties with expansion : 3. Democratisation of SACU & extension of membership imply complex negotiations: countries at different levels of development & different interests in CET.  Key questions: –On what criteria would selection of new members be based? –What impact would increased membership have on revenue- sharing formula?

South Africa as Pivot? Constraints  In theory, SACU structures democratic, but would SA cede power if national interests threatened?  Political dynamics in region highlight limits of SA’s role (Zimbabwe & Angola).  SA’s domestic social and economic pressures will increasingly influence SACU trajectory.

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