Workshop on processes regarding regional integration

Meeting report

Workshop: Regional Integration processes
Chairperson’s introductory remarks
The Chairperson noted that the discussion around regional integration was a long-standing one, and regional integration had its roots in overcoming colonialism and supporting the liberation movements in Southern Africa. The objectives had now changed to socio-political integration, and acceleration of growth and development in the region.

The objective of the Southern African Development Community (SADC) was to harmonise relations between states in the Southern African region. Since 1990, South Africa had played a pivotal role in pushing for socio-economic development and political solidarity and stability in the Southern African region. This region was ready to partake in regional interaction, in order to play a role in international markets and harmonise relations on the rest of the Continent. South Africa must decide if there was a common agenda within SADC, scrutinise the interests of each member state, and at the same time ask what was achievable, and encourage others in driving the process.

Department of International Relations and Cooperation presentation
Ambassador Jerry Matjila, Director General, Department of International Relations and Cooperation, posed the question whether South Africa was on course for regional integration, and noted that it was indeed, but that it needed to develop clear strategies that served the interests of the country. South Africa was the backbone of economic integration and trade. There was 20% inter-trade in Africa, but 80% external trade – the opposite of the European situation – and this needed to change. South Africa was therefore advancing a developmental integration agenda which would combine trade integration, infrastructure development and sector policy coordination towards productive capacity across the region. South Africa supported acceleration of regional economic integration, and endorsed the roadmap of SADC. There was a need for integration, coupled with a will and commitment.

In order to realise these objectives, the SADC was prioritising the development of a comprehensive work programme leading to consolidation of the regional economic integration agenda. It needed to debate the status of the Southern African Customs Union, to consolidate the SADC Free Trade Agreements (FTA), to review the Regional Indicative Strategic Development Plan (RISDP) and the COMESA-EAC-SADC tripartite FTA processes.

The SACU Agreement of 2002 had not been fully implemented, as shown by negotiations on economic Partnership Agreements (EPAs) with outside countries. Revenue declines from the SACU revenue pool exposed the fact that some members states were over-reliance on SACU revenue for their own country’s budget, and lack of diversification. In order to address these challenges, SACU member states agreed to develop regional industrial policy, to review the revenue sharing formula, to develop the SACU institutions, to engage in a unified manner on international trade relations and to attempt to facilitate trade. Although there were plans for a SADC Customs Union in 2010, this was not realised, but the SADC Summit, at a meeting in August 2010, reaffirmed its commitment to establish an SADC Customs Union. This Summit also endorsed the decision of the Ministerial Task Force to appoint a High Level Expert Group (HLEG) on the SADC Customs Union. The HLEG would consolidate and refine previous work to try to reach agreement and common understanding on key elements. The Summit also adopted a comprehensive work programme, with concrete actions and timelines, to try to consolidate the SADC FTAs.

The HLEG met four times in 2011 and a report was submitted to the SADC Senior Officials Task Force in November 2011. This report would form part of deliberations at the Ministerial Task Force on Regional Integration, and SADC Council of Ministers Meeting in Luanda, Angola.

The RISDP identified the establishment of specific milestones in support of the regional economic integration agenda. A Free Trade Area was launched in 2008. A Monetary Union was not yet on the agenda. Currently, there was a focus on consolidating the FTAs. In March 2011, the Council of Ministers Meeting took a decision that member states should undertake a review of national development aligned to RISDP.

The COMESA-EAC_SADC Tripartite Free Trade Agreement advocated the establishment of the SADC-COMESA-EAC Tripartite Free Trade Area, following a decision taken in Kampala, in October 2008. This Tripartite FTA hoped to address issues of overlapping membership, improve opportunities for expansion of market access for South African products on the Continent, and to establish a building block towards eventual African economic integration, as envisaged in the African Union (AU) Abuja Treaty.

It was also agreed that the COMESA-EAC-SADC Tripartite FTA would be implemented in two phases. The first phase, divided into two periods, would run from June 2011 to June 2014. The second phase would cover negotiations on trade related issues, and would commence after completion of phase 1. Negotiations on the movement of business persons, as well as work programmes on infrastructure and industrial development, should be undertaken concurrently, but on separate tracks, during Phase 1. Some programmes could be pursued simultaneously if they were ongoing.

The AU/NEPAD Presidential Championing Initiative (PIC) was established by the 16^th AU Summit in January 2011. It would try to realise regional and continental integration.  South Africa should now advocate finalisation of the review of RISDP priorities and time-frames. Regional economic integration initiatives would then include consolidation of SADC FTA, promotion and strengthening of institutional cooperation between SADC and SACU, with SACU as the nucleus for regional economic integration. He also recommended the need to prioritise regional economic integration, with a focus on market integration, infrastructure development, and industrial development. The grand Tripartite FTA should be realized. There was a need for South Africa to develop clear strategies of engagement within various groupings, and to ensure that these were in line with the interests of the country and region.

Discussion
Ms L Jacobus (ANC) commented that SADC Parliamentarians should seriously look at the issue of regional integration and that a meeting should soon be convened to see how to take the process forward. In relation to interdepartmental coordination, she said that South Africa needed to consider how departments could play a role in regional integration, as it was necessary to consider internal matters first. She agreed that the region should try to reach a situation where 80% of products were exported and 20% imported.

Mr Matjila asserted that the inter-continental model that should be followed was that of China and India, but consultants tended to be funded by the EU. The region should take lessons from developments in Europe, and in this regard he said that South Africa had taken lessons from other countries’ fiscal and debt policies. The region should decide whether or not to change the models.

Mr Matjila noted that the AU Summit Report had dealt with boosting intercontinental trade. Common currency issues should be debated, but people needed first to be aware of the bigger picture; for instance, sharing revenue across a common border post.

Mr B Skosana (IFP) enquired what would be the centre to push the integration, and whether this would be South Africa. He also enquired about the role of big and small rivers in the South, with regard to infrastructure.

Mr Matjila indicated that South Africa should debate who was to foot the bill on regional integration. It had been agreed that Gaborone was going to be the centre of power, and that eight states, of which South Africa was one, should be the infrastructure champions. That is why it was important to consider the unequal economic development, and South Africa had been told to champion the regional economic development.

Mr Matjila said the question about rivers had been asked many times, and would be taken into consideration.

Mr B Holomisa (UDM) suggested the region should consider establishing a climate change body covering the SADC region, since one company may be compliant in one country, yet not another.

Mr Matjila stated the region should decide on whether to establish a sub-committee on the matter.  

Mr Holomisa said that it was important that if South Africa took fibre optic technology from local level to another country, that second country should be able and ready to take it forward in turn to its neighbours.

Mr Matjila responded that there must be concurrent planning, that should be harmonized, to create synchronism.

Mr Holomisa asked if all neighbouring countries were on the same wavelength regarding regional integration, and said that because some neighbouring countries were way ahead, there would no doubt be suggestions of federalisation.

Mr S Ngonyama (COPE) commented that the region relied on primary products, and this did not advance the causes advocated. He had not heard anything said about the issue. He added that a strong will and commitment was needed from bureaucrats. He too mentioned the need for an analysis of the unequal distribution of economies, and the need to reach agreement on tariff barriers. He said that the decline of living standards within SADC and this would have an impact on the progress.

Mr Matjila explained that if issues of beneficiation were thoroughly discussed and implemented, then the Gross Domestic Product (GDP) would triple in the region, that old factories could well be re-opened and that this would create more jobs, raise the economy and improve living standards.

Mr Matjila noted the comment about bureaucrats and said they were “created” creatures, who should be allowed to dream and do what they were good at doing.

Ms W Newhoudt-Druchen (ANC) stated that South Africa lagged behind in the ICT sector and broadband, and wanted to find out how best to improve locally, before regional connections.

Mr Matjila agreed that South Africa needed to work on improving broadband, and this needed to be expanded to local schools and hospitals; although some rollouts had occurred in Gauteng, this had to be extended to rural areas of great need.

SADC Secretariat presentation
Mr Paul Kalenga, Trade Advisor, SADC Secretariat, focused on the challenges to deeper integration. He indicated that SADC had not changed its cooperative style of working since its establishment, when it had a deliberate programme of action to develop regional linkages across differing economic sectors, focused on reducing economic dependence on South Africa, which was at that time an apartheid state. In 1992, the SADC Treaty began to redefine the basis for regional cooperation, into a legally binding regional integration arrangement. The SADC had no legal standing and could not enforce decisions, so the Southern region was now copying European models on integration.

The RISDP of 2003 was modelled on the European integration framework, but this posed challenges, because it presupposed the need to surrender sovereignty to a supra-national authority.

The FTA also had some challenges. Between 2000 and 2012 there was a “Twelve Tariff Phase-Down”, with the aim of liberalising 28% of trade by 2008, and the remainder, which comprised the “sensitive product” group to be liberalised by 2012. Angola, Democratic Republic of Congo (DRC) and Seychelles were trading with the rest of SADC on an MFN basis, but had not acceded to FTAs. Malawi had fallen behind, and by the end of 2011 it had liberalised about 46% of its tariff offer. Zimbabwe was granted derogation, and annual reductions were to resume in 2012. Tanzania was on schedule, but in 2010 it unilaterally reintroduced 25% duty on sugar and paper products, and these would be phased out in 2015. Mozambique had a differentiated offer with regard to South Africa, which would be completed in 2015, and the rest of SADC in 2012.

The gains from the FTA were yet to be seen. There had been low intra-SADC trade flow, a non-diversified range of goods and services, and a lack of vertical integration in production. There were still tariff barriers, non-tariff barriers, supply side constraints, and inadequate trade and production related infrastructure.

Mr Kalenga outlined the challenges and constraints facing the SADC Customs Union. He reiterated that this included overlapping membership, but also mentioned economic imbalances, divergent trade policies and strategies, customs revenue dependence and varied tariff structures.

He also noted that the SADC FTA still faced implementation problems in areas like revenue, import competition, and reversals of commitments. It was also decided a tariff policy should be surrendered as a Common External Tariff (CET) was still to be adopted.

He emphasised that a common market should be achieved by 2015. SADC states would need to surrender sovereignty on other policies, including finance and immigration, but this was seen as a politically difficult move. He also noted the need to consider a monetary union and single currency, and to identify the need for common interest rate policies, fiscal policies, and others. It was not yet known whether RISDP would form the basis of the deeper integration, and there were still unanswered questions on the 2012 RISDP Review, particularly whether it would offer an opportunity to forge regional consensus on an appropriate approach to regional integration in SADC.

He set out some alternative approaches. These might be a focus on effective implementation of the FTA, in order to address tariff and non-tariff barriers to trade in goods and services, or focusing on reducing the costs of doing business in trade and investment facilitation and maintaining effective cross-border linkages. The former SADCC spirit of infrastructure and services could be maintained.

The COMESA-EAC-SADC Tripartite mechanism offered prospects for addressing key trade and investment impediments, and these included market integration, infrastructure, and industrial development.

Mr Kalenga concluded that market integration would focus on effective implementation of the SADC FTA and establishment of the Tripartite FTA in terms of tariff and non-tariff barriers. Inadequate regional infrastructural challenges in SADC and the wider African markets would be addressed. Inclusive regional integration processes would be forged, so as to foster stakeholder participation, especially economic agents.

Discussion
Ms Jacobus commented that there should be a broader community participation, and that this Committee could drive many issues, including issues around xenophobia and discussions on regional integration. SADC Parliament should be encouraged to buy in, especially for matters not already on that agenda. The priorities in South Africa might well differ from other countries. Although infrastructure development was a priority in South Africa, there may be a problem, particularly for matters such as cross-border roads or bridges. She was not, however, suggesting that every other country’s priorities must be aligned to those in South Africa.

Mr Skosana agreed with Mr Kalenga that South Africa must review its approach, with a major emphasis on cooperation. He agreed with Ms Jacobus on matters of public participation.

Mr Holomisa supported the campaign to engage the public, but cautioned that South Africa must work out carefully what it was going to say to the public. The debates must start internally, and take into account public concerns, such as foreigners allegedly taking jobs from locals. South Africa could be seen as the “big brother” and that would be problematic. Some countries were intransigent. He also cautioned the need for consensus as to who would pay. He suggested that the region should borrow from the World Bank and all countries affected must sign a commitment.

Mr Ngonyama suggested the involvement of citizens of the region, and civil society, to ensure that their interests were taken into account. Regional integration would only happen effectively with a mandate and support from the public, whose interests it must serve.  South Africans should move forward and redefine their interests, and find a way to crystallise the process. He noted that nothing had been mentioned about the role of the business fraternity, and stressed that government could not drive infrastructure development alone. He reiterated that there must be meaningful and practical engagement with ordinary people.

Trade Law Centre (TRALAC) presentation
Ms Trudi Hartzenberg, Executive Director, Trade Law Centre, noted that she would examine the trade policy scope of South Africa, the implications of membership of a customs union, and South-South relationships, namely the Brazil, Russia, India, China and South Africa (BRICS), SACU-India and SACU-China.

She agreed that there were challenges with implementation of the SACU 2002 Agreement, and that the future strategy should focus on a deeper integration agenda towards economic activity, and a broader regional agenda

The trade agenda of South Africa currently focused on the National Development Plan of November 2011, the Trade Policy and Strategy of May 2010, and the Foreign Policy White Paper of May 2011. The National Development Plan (NDP) was launched in November 2011, following a Diagnostic Report of June 2011 on the achievements and shortcomings since 1994. This Report pointed to challenges of pervasive poverty, inequality, unemployment, and poor quality of education, and the NDP aimed to develop a more capable state that would create jobs, improve infrastructure and provide better education and training. The second phase of the NDP aimed to give South Africa a world stage. South Africa must first deepen its role in regional integration, then its role in continental integration, then its participation in BRICS, the South-South partnerships, and global value production and value chains.

The Foreign Policy White Paper focused on the promotion of Pan Africanism and South-South partnerships, stressing the importance of partnering, at trade and investment level, with emerging markets and on engagement at the AU to champion continental integration for peace and conflict resolution. It also encouraged strengthening of governance and institutional capacity at the SADC. The Department of Trade and Industry (dti) trade policy emphasised support on multilateralism, commitment to the African integration agenda and South-South partnerships, and a strong focus on industrial development and job creation.

She noted, in respect of the South-South relationships, that South Africa was a member of SACU but it did not have its own tariff. It therefore became a member of BRIC in December 2010, despite the fact that the other BRIC countries competed with it in clothing and textiles. South Africa entered into no rules-based agreements, where only Memoranda of Understanding (MOUs) were signed.

South Africa signed a Memorandum of Understanding with China in August 2010, which focused co operation on services sectors, and changing the structure of bilateral trade. China was a no rules-based regime in relation to Free Trade Agreements.

The SACU-India FTA was actually a preferential trade agreement in the sense that there was very limited liberalisation. In February 2011, India requested tariffs on 1 050 tariff lines, or 15,7% of the SACU tariff book. SACU did not want services or other trade related issues to be included.

Ms Hartzenberg stated that there should be a strong focus in trade strategy in relationships with developing countries, and South Africa should focus on trade in goods.

Prof Gerard Erasmus, Researcher, TRALAC, indicated that it was  important to map out the role that South Africa should play in the region. It would be unfair and impossible for South Africa to prosper in isolation. Matters of climate change, water and energy must be taken into consideration in regional integration initiatives and South Africa should share information. He also emphasised the need for certain government departments to be involved in the process, in sectors such as health, energy, the environment, public works and education, because the process was ongoing, dynamic and overlapped several issues, although trade issues could be complex. Some complicated and sensitive issues and interrelationships needed to be nursed, which would require well-thought through execution processes, and good use of available resources. The Parliamentary oversight role was particularly important.

Discussion
Ms Jacobus commented that she understood the importance of South-South relations, but could not understand that when foreign countries invested, they failed to use locals to do the work. For instance, Ethiopia had numerous construction sites, but the construction workers were all Japanese and Chinese, with no locals involved in the programmes. She said that even if South Africa had agreements with China, it should insist that, although there could be limited foreign expertise brought it, for the most part, locals must do the work, in line with South Africa’s own obligations to create jobs. The country must examine its own priorities as part of the agreements.

Ms Hartzenberg suggested that South Africa should be selective as to what industries should be allowed in to the country. South Africa needed to have a common development services agenda with its trading partners.

The meeting was adjourned.