OUTCOMES OF THE EXTRAORDINARY SADC SUMMIT ON REGIONAL ECONOMIC INTEGRATION BRIEFING TO THE SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS 30 MAY 2007

SCOPE Background Extraordinary SADC Summit Outcomes Progress since Midrand Progress within SACU South Africa’s role

BACKGROUND The 2006 SADC Summit in Maseru brainstormed on the need to scale up implementation of the SADC integration agenda, due to lack of progress towards full integration in the region. The Summit reaffirmed that the Regional Indicative Strategic Development Plan (RISDP) and the Strategic Indicative Plan for the Organ (SIPO) are the main instruments for scaling up regional integration in both the economic and political spheres. The RISDP indicates the stages of the integration process: –Free Trade Area by 2008; –Customs Union by 2010; –Common Market by 2015; –Monetary Union by 2016 and –Single Currency by The Maseru Summit reiterated the importance of achieving these milestones to comply with continental integration and ensure meaningful participation in the world economy.

In addition, the following areas were endorsed as the main priorities of SADC’s integration process: –Politics, Defence, Peace and Security; –Trade and Economic Liberalisation; –Regional Infrastructure and Services; and –Special Programmes with regional dimensions such as food security, HIV and AIDS and gender equality. In order to expedite the integration process, a Task Force was established comprising of Ministers of Finance, Investment, Economic Development and Trade and Industry, together with the SADC Secretariat. The Task Force was further mandated to spearhead the SADC Customs Union preparations and report to an Extraordinary Summit to be held no later than October 2006.

EXTRAORDINARY SADC SUMMIT ON REGIONAL ECONOMIC INTEGRATION The Extraordinary SADC Summit held in Midrand on 23 October 2006 was convened for the specific purpose of: –reviewing the status of regional economic integration in Southern Africa, and –to propose measures to accelerate the implementation of the SADC economic integration agenda. The Summit reaffirmed its commitment to regional economic development and underlined the need to mobilise resources in order to address issues of infrastructure, food security and other supply side challenges within the Southern African region. The Extraordinary Summit considered the report and recommendations of the Ministerial Task Force, particularly the following –Free Trade Area by 2008 –Customs Cooperation and Trade Facilitation; –Preparations for a Customs Union by 2010; –Implementation of the Protocol on Finance and Investment;

–Macroeconomic Convergence; –SADC Development Fund; and –Institutional framework to accelerate implementation of the integration agenda It was noted that it is through the development of supportive infrastructure that the regional trade potential can be harnessed to the benefit of the people of the region The Summit also noted that SADC’s trade patterns consisted mainly of commodities, hence the need to diversify the economies of SADC member states and increase intra-regional trade and growth. To this end, the Heads of State and Government reiterated their commitment and underscored the need for SADC to complete its Free Trade Area by 2008 and to achieve a Customs Union by 2010, as planned for in RISDP.

Of particular significance, the Summit concluded that the SADC Free Trade Area programme was on course and that it will be launched, as planned, by It was noted that the Ministerial Task Force and the Secretariat would undertake and finalise, by March 2007, a study that will evaluate an appropriate model for the SADC Customs Union, as well as a road map towards the SADC customs union.

RESOLUTIONS OF THE EXTRAORDINARY SUMMIT Heads of State and Government: directed the Ministerial Task Force on Regional Economic Integration to fast track adoption and implementation of custom instruments (common customs documentation, common tariff nomenclature, SADC Transit Management Scheme, Common customs training modules etc) by member states; directed the Ministerial Task Force to finalise the road map of the SADC Customs Union, to undertake and finalise a study evaluating an appropriate model for such a Customs Union and submit both to Summit at its next meeting in August 2007; directed the Ministerial Task Force and the Secretariat to speed up the establishment of the Macroeconomic Surveillance and Performance Unit by June 2007 and to ensure that macroeconomic reports are presented to Summit annually; re-affirmed its decision on the establishment of the SADC Development Fund; and directed the Ministerial Task Force and Secretariat to accelerate the feasibility studies and modalities for establishing this Fund;

Mandated the Ministerial Troika to consider a temporary waiver of the quota system in the recruitment of positions that require highly specialised competencies and qualifications. This would enable the Executive Secretary to expeditiously recruit experts for positions of particular importance to regional economic integration; and Urged Member States to strengthen their capacity at national level including the SADC National Committees to implement the Regional Economic Integration agenda During the Summit 3 member states signed the Finance and Investment Protocol, namely Botswana, Swaziland and Zimbabwe. Other issues discussed included SADC position on an African Union Government, elections in the Democratic Republic of Congo (DRC) and East African Submarine Cable System (Eassy) plan.

Following the Extraordinary Summit, President Mbeki suggested that, within SADC, any programme to promote greater trade integration in Southern Africa must be complemented by programmes of sectoral cooperation focused on the creation of conditions that will enable producers to emerge in member states. This will enable member states to take advantage of the additional market access opportunities that regional integration would create. To this end, President Mbeki articulated the priority areas within SADC as follows –Promotion of macro-economic convergence around agreed indicators; –Progress in terms of infrastructure development cooperation programmes, Spatial Development Initiatives and sectoral programmes; –Achievement of some level of harmonisation of industrial development strategies and competition policies, as called for in the SADC Trade Protocol; and, –Elaboration of a detailed and realistic Activity Matrix necessary to create the SADC Free Trade Area, to include processes to achieve balanced, mutually beneficial regional economic integration.

PROGRESS SINCE MIDRAND SADC Free Trade Area by 2008: The region is on track towards the achievement of the FTA since only the DRC has to accede to the Protocol on Trade and Angola has to submit a tariff offer. Madagascar’s tariff offer has been accepted pending the positive outcome of consultations with Namibia. Audit of Member States gazetted tariff reduction schedules which commenced in February 2007 and will be completed by the end June 2007; The customs instruments will be discussed by the SADC Customs Cooperation Sub-Committee scheduled to meet in April 2007 in Angola; The study on the impact of FTA on trade patterns in SADC Member States is expected to be completed in July 2007; The experts’ group meeting on the revised and more flexible rules of origin will submit final recommendations to the next TNF scheduled for end June 2007and there after to the Ministers of Trade for adoption at their next meeting in July 2007;

With respect to the SADC Monitoring Mechanism, assistance has been secured from the Southern African Global Competitiveness Hub and the Trade Hub to set up a SADC Monitoring and Information unit at the Secretariat. Consultancies studies on details of mechanism are underway following the signing of the MOU with the Secretariat; The exercise to develop an action plan for monitoring and elimination of Non Tariff Barriers (NTBs) is funded by the Regional Trade Facilitation Programme (RTFP) and commenced on 1st February 2007 to update the 2004 Inventory Reports on NTBs in SADC Custom Union Progress: The studies on the customs union and compatibility of national trade policies as well as the customs union roadmap will all be finalised at the end of June 2007.

Other developments: –the establishment, by June 2007, of the Monitoring, Surveillance and Performance Unit (MSPU) to monitor macroeconomic convergence in the region. –the development of terms of reference for the SADC Development Fund. The Ministerial Task Force will present a comprehensive report on the entire regional economic integration process to Summit at its next meeting in August 2007 in Lusaka. South Africa is represented on the Ministerial Task Force by Minister Mandisi Mpahlwa, Minister of Trade and Industry, and Minister Trevor Manuel, Minister of Finance.

DEVELOPMENTS IN SACU SACU also established its own Task Team to develop a SACU position on the SADC customs union. SACU is also addressing the issue of its consolidation, by completing the institutional makeup of SACU necessary to enable it to function and deliver the required outcomes assigned by the SACU Agreement. Under the SACU revenue sharing arrangements, the BLNS members have received a significant proportion of total government revenue from the revenue sharing mechanism. South Africa, which accounts for over 90 percent of SACU GDP, receives only slightly more than half of the total revenue pool, whereas the revenue shares of the BLNS far exceed their shares of SACU economic activity. The review of this mechanism is thus needed, particularly within the context of a future SADC customs union.

SOUTH AFRICA’S ROLE As a key stakeholder in the process of economic development and integration, South Africa has a responsibility to drive economic integration in Southern Africa and to this end has taken the initiative to put together a national Regional Economic Integration Task Team comprising of the Department of Trade and Industry, Department of Foreign Affairs, National Treasury, South African Revenue Service (SARS) and the Department of Agriculture. The work of the national task team will feed into the SACU task team and then into the SADC Task Force which will make recommendations to the SADC Ministerial Task Force. This exercise is meant to give impetus and leadership to the work of the SADC Task Force and endeavours related to the SACU and the AU regional integration processes. The Southern African regional integration process will be aligned to the continental integration process of establishing an African Economic Community. The framework for this process is contained in the Abuja Treaty which states that the process of regional integration will take place in six stages over a period of 34 years