THE SADC PROTOCOL ON TRADE Noncedo Mviko 21 September 2018

Overview - Background Trade Implementation Challenges - Conclusion

Background The SADC Trade Protocol (TP) is an agreement between 13 SADC Member States to reduce customs duties and other barriers to trade on imported products Signed in 1996, and came into force in 2000, following a ratification process SADC FTA launched in 2008 – when 85% of intra-SADC trade achieved 85% duty free status

Background SACU, Mozambique, Tanzania, Zambia and Mauritius fully compliant: Tanzania derogation application Malawi (at 90.5%) Zimbabwe (non compliant by a considerable extent)+-1000 tariff lines . Seychelles ( 91,2% compliant, 6.3 % over 12 years and 2.5 % excluded

Background Angola, Comoros and DRC are not signatory parties to the FTA Angola initiating accession process- studies and consultations to understand benefits and the extent of liberalization These countries charge MFN duties To resolve non-compliance in the implementation of tariff phase down commitments, engagements are undertaken both at bi-lateral level with the countries concerned and at multi-lateral level in various SADC fora, from technical to Ministerial level;

Trade SADC is a key export market for SA, total trade in 2017 was R344 billion Significant growth in South African exports realized with the entry into force of the SADC Protocol on Trade Whilst imports from the rest of SADC have increased, they remain much lower than South African exports to the region This could largely be attributed to the diversified nature of the South African export basket hence development integration approach and deepening of integration : Trade in Services –Negotiations on transport, financial, telecommunications and tourism finalised. Negotiations on energy and construction services underway.

TRADE TREND

South Africa's exports to SADC Product code Product label Value 2017 in Rands 'TOTAL All products 269 443 304 '2710 Petroleum oils and oils obtained from bituminous minerals (excluding crude); preparations containing ... 19 130 324 '2716 Electrical energy 8 582 346 '8704 Motor vehicles for the transport of goods, incl. chassis with engine and cab 8 472 427 '2610 Chromium ores and concentrates 7 693 419 '7102 Diamonds, whether or not worked, but not mounted or set (excluding unmounted stones for pick-up ... 6 914 332

South Africa's imports from SADC Product code Product label Value 2017 in Rands 'TOTAL All products   78 213 977 '2709 Petroleum oils and oils obtained from bituminous minerals, crude 17 638 388 '3302 Mixtures of odoriferous substances and mixtures, incl. alcoholic solutions, based on one or ... 5 069 189 '7108 Gold, incl. gold plated with platinum, unwrought or not further worked than semi-manufactured ... 3 976 995 '2711 Petroleum gas and other gaseous hydrocarbons 3 581 510 '1701 Cane or beet sugar and chemically pure sucrose, in solid form 2 786 828

Implementation challenges Non Compliance vs Annex X Derogation provision Dispute Settlement Industrialization Rules of origin Non tariff barriers

Where there are more lines, the MS are operating outside the TP Non-compliance Annex X makes provision for derogation , where member states feel the need to exclude 5 or less tariff lines for development purposes Where there are more lines, the MS are operating outside the TP Other recourse measures : safeguards Derogation granted to – Tanzania on sugar Safeguards - Mauritius on spreads Zimbabwe requested to submit application for a special dispensation – bilateral engagements

To date no MS has ratified the Protocol Dispute resolution No Tribunal New Protocol on Tribunal to solve trade disputes between Member States (MS) adopted and signed by 11 MS during the 2014 Summit. Will enter into force when two thirds (2/3) of MS (9) have ratified the Protocol. To date no MS has ratified the Protocol Process of ratification by SA is coordinated by the Department of Justice

Industrialization Developmental integration approach: industrial and infrastructure development to combat limited productive capacity, improve diversification and linkages SADC embarking on an industrial development program : Industrialization Strategy and Action Plan Priority sectors agro-processing, pharmaceuticals, mineral beneficiation) Objective: Creation of regional value chains Stakeholder consultation underway on specific projects identified

Rules of origin Certificate of origin obtained from SARS A constant complaint that SADC rules of Origin are stringent Disregards the fact that the rules represent industrialization capabilities and ambitions of the region Targeted sectors include clothing and textiles Calls to comprehensively review SADC rules of origin stalled by recent study arguing that SADC rules are comparable to other regional blocks’ TFTA and AfCFTA used to further the narrative for flexible rules Rules ignored in exchange for revenue at borders- SA companies turned at borders Joint verification by SARS and foreign counterpart – the wait can be very costly

Non-tariff barriers The Agreement calls for removal of all trade barriers to facilitate free flow of trade Online reporting of NTBs www.tradebarriers.org- includes COMESA and EAC related NTBs National focal points oversee resolution Challenge with recording of complaints that can be resolved locally instead of cross border complaints e.g a South African company not contacting SARS directly Improvements to include and SMS tool for ease of access Database of NTMs in the TFTA region

Conclusion Regional integration remains a critical component of the continent’s efforts to ensure sustainable economic and inclusive growth. Bilateral engagement is key to resolution of challenges; taking into consideration economic conditions in the region SADC a good foundation for negotiations at TFTA and AfCFTA level

Contact Details For more information on trade in the SADC region please contact the following dti officials: Ms Noncedo Mviko Email: NMviko@thedti.gov.za Tel: 012 394 3050 2. Ms Noma-Efese Mxi – Email: NMxi@thedti.gov.za Tel: 012 394 1601 3. Mr Shonisani Madzivhe Email: SMadzivhe@thedti.gov.za Tel: 012 394 5805