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

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)

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

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

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

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?

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?

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)

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)

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