Southern African Customs Union Agreement 2002: Annex on Institutionalisation of SACU Summit: Department of Trade and Industry briefing

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Meeting Summary

The Department of Trade and Industry briefed the Committee on the Annex to Institutionalise Heads of State within the Southern African Customs Union Summit (SACU) and the purpose of such an institutionalisation. The Department gave a brief history of SACU which had come into being around 1910 as an agreement between countries in the region. It had been reconstituted under a new agreement in 1969 and then again in 2002, under the current agreement. However, even that had been rather limited; although a new formalised Secretariat and structure had by now been created, based in Namibia, it was realised that there was at times the need to have political guidance from Heads of State of the member countries, particularly when there were issues on which the Council of Members could not make a decision. This had been raised during a meeting of the Heads of State on the occasion of the Centenary Celebrations of SACU in 2010. Further summits of Heads of State were then held in the following years, and out of that came the idea that SACU should also be moving towards a developmental agenda, similar to what SADC did. The Annex to the SACU 2020 agreement now aimed to institutionalise the summits that had been held and to make provision for the decisions from these summits to be regarded as decisions of the body itself. The decisions previously taken had been adopted by the Council to take the agreement forward to this point. As with any other international agreement, the Department, as the lead department, was asking Members to recommend ratification to the House.

The Chairperson also gave quite a comprehensive overview of the agreement, what it entailed, the benefits that SACU provided to South Africa as a member state, and some of the latest developments, which included cost-free transfer of money between other member states in the SACU, setting of consistent tariffs for importation of goods, an extension to services as well as tangible products, better free movement of goods, better controls in respect of live animal movement and other internationally acceptable standards and overall benefit to every country. He emphasised that this should not be seen as an agreement providing a benefit only to South Africa, for its must be recognised that although South Africa had the highest GDP of the countries in the region, it also benefitted enormously from trade and exports to them, as well as deriving benefits from the labour of their nationals. He was also at pains to emphasise that trade was not only about goods but involved lives and so it was important to bear human rights principles in mind and to apply fairness.

Members asked questions about the costs for the building and maintenance of the headquarters in Namibia and it was explained that this had been financed from a top-slicing of a small percentage of the pool of excise duties that would be split between all the countries, so that there was equal contribution. It was also explained that the countries would take it in turns to host meetings and the same would no doubt apply to the Summits of Heads of States.

Meeting report

Southern African Customs Union (SACU) agreement of 2002: Annex on the Institutionalisation of the SACU Summit: Department of Trade and Industry briefing
Mr Phemelo Marishane, Acting Chief Director: Africa Multilateral, Department of Trade and Industry, briefed the Committee on the Annex on Institutionalisation of the Southern African Customs Union (SACU) Summit. This was to form an addendum to the SACU Agreement of 2002.

He gave some background on the SACU, noting that it in fact pre-dated 1910. Prior to that time, Zimbabwe, Zambia and other countries were protectorates of the British Empire. In 1910 a formal agreement was entered into as the Union of South Africa. Following that, another agreement was entered into in 1969, after some of the countries in Southern Africa had just obtained independence. It was re-negotiated again in 1994, and the current agreement was made after further renegotiations, in 2002. It entered into force on 15 July 2004, so it was relatively new. The 1969 agreement had been lacking in several respects  - not least that there was no secretariat. Different Member states would be called upon to chair and produce notes of the meetings.

That had changed with the 2002 agreement, which created more formal structures, such as the Council of Ministers which was the highest body, and a Secretariat was established and hosted by the Republic of Namibia, where a new beautiful building was erected, which would be inaugurated around November.

When SACU celebrated its centenary, in 2010, Heads of States who were signatories to the SACU agreement by then came together and held a summit. The point was made that there was always a need for Heads of State to give more political guidance, particularly on occasions when the Council of Members might hold different views. The same argument had been applied in negotiations in the Southern African Development Community (SADC). The 1969 agreement had been largely limited to questions around trade and finance, but it was felt that this should perhaps be taken through to a more developmental stage. The difficulty with that was then that an institution for the Heads of State would be necessary. Many of the initial summits had been less formal, and further informal meetings were held again in 2011. In 2013, Heads of State had met in strategic meetings in Botswana. Over time, a decision by the Council had already basically be taken to try to institutionalise the summits of the Heads of State, but the question of how to do so had still to be settled. Legal experts had been called in to enter discussions to see how sections of the original agreement might be amended. In the end, it was decided to have a formal structure, and it should meet more or less in the same way as did SADC.

However there was one difference in that SACU had a more limited agenda than SADC. SACU currently focused more on trade and revenue sharing and the intention was now to see how to scale that up to consider a more developmental agenda.

He cited an example of a programme discussed by Heads of State in 2011, to try to deal with trading of services rather than just trading of goods – which obviously then needed to be part of the developmental agenda and be formalised. In order for this to happen, the agreement by the Heads of State would have to be formally incorporated, by way of an Annex.

He indicated that the process of getting the agreement developed had followed the usual internal processes as applied to other international agreements. The Department of Justice and Constitutional Development advised that this was something that would have to be ratified by Parliament. It had been tabled before Cabinet. The process was being coordinated by the Department of Trade and Industry (dti) and it was therefore asking for approval for the ratification of the Annex by South Africa.

The Chairperson thanked Mr Marishane and said that the Committee did not go into too much detail on the agreement itself because the agreement was tabled and it was assumed  Members had familiarised themselves with its content. It had been important to highlight a couple of aspects. This morning, Members had received an e-mail on the agreements of the financial institutions within these countries, which noted that a person could now freely transfer money within other SACU member states without incurring any additional costs on the transfer of the money.

He highlighted that the agreement would not only help in dealing with trade in products and goods but in services. One of the difficulties previously was that traders may decide to fly their goods into Lesotho, because Lesotho had a lower tariff, and then bring goods from there to South Africa. The SACU agreement would now specify that there should be a standard tariff imposed by all SACU members, for imported goods, and then free movement of those goods between them.

There had been problems with agriculture as it was well known that part of the difficulty in dealing with live animals was that diseases could easily be transferred from one country to another. The SACU would ensure that the movement of these goods would be subject to  international standards of testing to ensure that those products were free from any diseases. Whilst agriculture may not be as prime to South Africa's economy as it was to some of its neighbouring states, food security and sovereignty was. SACU would now ensure that there would be space for movement of agricultural products but that there was going to be some type of coordinated approach to ensure there would not be a situation where, hypothetically, Botswana would send all its cattle to South Africa and not provide for the needs of the people in Botswana.

 The Chairperson added that Mr W Faber had, on the previous day, raised an important point about water resources. South Africa was largely dependent, particularly for Gauteng, on the Highlands Water project in Lesotho. A formalised agreement was important to ensure that South Africa was not the big brother in this approach and that it benefitted Lesotho as well. Finally, he raised a point about the economic partnership agreements and said that these should not be contradictory with SACU agreements. For instance, the EU might agree with Swaziland that it would buy Swaziland's cotton on certain agreed terms, but then have something completely different with another RSA member. The SACU agreements now said that one country would negotiate along the same lines as others – and that was also important in relation to the Heads of State agreement, since Heads of State would ensure that international trade by their countries, particularly with the EU, would not result in positions that would disadvantage other countries.

Mr W Faber (DA, Northern Cape) agreed and thanked the Chairperson for,  his clear input. He commented that Mr Marishane said that a new and beautiful office was built in Namibia, but wanted to know who was to pay for this.

The Chairperson clarified to Mr Marishane that any questions asked should also be relayed by him back to the dti, so that they maintained a full understanding of what the particular concerns of the Committee had been.

Mr Marishane appreciated that, and said that the SACU agreement made provision for a revenue sharing arrangement. That was essentially where all customs and excise duties were put into one pool and it was divided amongst member states. When it was first anticipated that the new structures would need to be housed somewhere, the suggestion was made that a portion of the common duties would be set aside for this project until it had been completed, and then maintenance and upkeep estimates would be similarly dealt with, so all money came from the revenue pool.

Ms Z Ncitha (ANC, Eastern Cape) commented that she appreciated the presentation. She found standardisation of prices and duties to be satisfactory, because the last thing these countries needed was to compete on prices. She was also appreciative of the fact that international standards were being pursued.

The Chairperson said he hoped that more would be heard about the very special wool that was produced in the Eastern Cape and said that many people were not aware enough of the huge potential of wool production to the country.

Mr J Londt (DA, Western Cape) stated that in principle, anything that would facilitate more trade was good. Before starting with his questions, he wanted to talk about how the Committee was using its time, saying that although the Committee had a programme, it was not able to look at the work of all the entities, so that when shorter times were set for meetings, it might be useful to look at whether that time could be taken up in other issues as well.

He asked what was the legal standing of the meetings of Heads of State and the decisions of the four previous summits, since at that time they were not taking decisions in terms of the SACU Agreement in force at that time. He questioned why it was only in 2010 that SACU felt the need to have the Heads of State meet for the first time. He wondered if this was now institutionalised, and how the additional cost of having institutionalised meetings would be funded.

The Chairperson said that he would come back to the question of using time in the meetings, but wanted Mr Marishane to respond in the meantime.

Mr Marishane said that the Heads of State had first decided to meet during the Centenary Celebrations of 2010, when invited to the country celebrations, and in the course of those meetings they had started to talk about how to take SACU to the next level. For instance, when South Africa invited Heads of other states to Pretoria, the discussions would start with how to take processes forward.  In terms of the legal standing, he would think that the previous decisions of the Heads of State would have to be endorsed in the meetings of the Council, so that they would then be regarded as decisions of the Council. That was how the instruction had been given to the officials to start drafting additional articles and the Annex into the SACU Agreement, to make specific provision for  a formalised structure of Heads of State. In terms of the hosting, he said SACU did not host from the common revenue pool, because there was rather an arrangement where meetings were held on a rotational basis; so it might be that the four meetings of Council would be held in four different countries – so that the cost was evenly distributed. If the Heads of State were to meet annually, the costs would again be borne by the hosting country but the responsibility would be shared between countries over time. A similar process would be followed for SADC meetings.

Mr Londt thanked dti for the clarification but wondered if South Africa was not perhaps giving away any of the advantages that it might have in the region. South Africa contributed a large amount of GDP to the Region. He worried that South Africa was now giving away some of the management of a situation and also commented that it was difficult to reach the country hosting the entity. He was not sure of the rationale behind this change at the present time, and wondered what the cost would be for South Africa, as against the benefit that it would derive.

Mr Marishane stated that SACU should be looked at from two angles. He said that he agreed that South Africa’s GDP was bigger in SACU, and also in SADC, than in other countries. However, one should also consider that, for instance, about 80% of the products in Botswana came from South Africa so that South Africa did derive a large commercial benefit through its exports to Botswana.

He added to the comments made earlier in relation to the costs of hosting. Because the hosting took place alternately between the member states of SACU, the cost of keeping the Secretariat amounted to only about 30 employees in total, and their employees must be drawn from all SACU member states. This was therefore of no particular benefit to Namibia. Small administrative and cleaning duties might be contracted to local Namibians, but there was no large benefit to that country, nor a significant cost. He stressed again that the costs for running the Secretariat essentially were skimmed from the top of the joint revenue pool before the remainder of the money was distributed to member states, and this probably did not even constitute 5% of the total.

The Chairperson followed up on this point. The proportionality of costs must be considered. Parliament yesterday had held discussions with the South African Revenue Services and the administration around the collections cost round 0,97% - compared to the global standard of around 3%. This Committee must beware that costs did not rise too high. The other factor to bear in mind was the political side. Colonial boundaries had been drawn to demarcate different countries, but those were now sovereign states with mineral and human resources. The point was to try to ensure that those resources were used to the maximum benefit of those countries in a globalised environment. The AU had taken a decision to divide the Continent into four regions and in SADC, historical opportunities like SACU already existed. It was possible to look at the participation in the 2016 Agenda as a SADC question participation and here it was looking at an existing trade agreement. , so the decision by the AU was to say let us look at dividing the continent into the four regions. Questions that could be asked were why other protectorates like Mozambique, Zimbabwe and Angola were not included – but the point was rather to try to ensure significance in SACU and benefit of each country.

He cautioned that Members should not make the mistake of thinking that SACU should benefit South Africa alone. Scores of workers who had migrated from Swaziland and Lesotho were making major contributions to the economy of South Africa and this should not happen at the expense of the revenue base within those countries. That was perhaps a different conversation but he wanted to emphasise that trading opportunities should not be seen only for the benefit they offered to one country and they should certainly not prejudice another country in the region. South Africa's economic development should benefit the people of South Africa but there should be spin-offs also to benefit, say, the people of Namibia through the SACU arrangement . The more South Africa engaged with China, the more it found that some business people in China were also looking at how they could get maximum profit for themselves out of the opportunities in the Southern African region, so South Africa had to make sure that Africa would also benefit. South Africa could stand its ground, but it should recognise that there were other countries that perhaps did not have the same political clout. The question was then – how would South Africa help to support those countries, so that refugees would not leave those countries to seek assistance in others. For instance, development must also happen in Zimbabwe, and social development must be promoted. There was also a human rights element to trade, and it was important that SACU be seen not only in terms of trade, but in terms of people,

Mr Marishane said that he could add another example. The Chairperson had alluded to the economic partnership agreements and so far this agreement provided that when it comes to tariffs, common and external tariffs must be negotiated as one. That would mean that SACU would have a common position in relation to all airports. It had helped to streamline the Agreement of Trade, Development and Cooperation (TDCA) with the EU and to harmonise it. He emphasised again that the spirit behind these countries working for over 100 years in a trading union must be respected.

Committee Business: Use of time
The Chairperson returned to the issue of time management in the Committee, as raised by Mr Londt. He noted that the programme was constantly being changed. Today, for instance, there was supposed to be a workshop with the NCOP, but when that was cancelled, the dti had been asked at the last minute to bring this matter forward – and he was grateful to the dti and Mr Marishane for being able to oblige.  In the next week there could also be a problem for the Department of economic Development noted that it was having some difficulty in brining forward the presentation. These exigencies were often unavoidable. There would be a combined meeting on the following day at 09:00.

He noted that in this term, the Committee would receive reports from dti, Department of Tourism and Department of International Relations.

He added that the Committee had received an invitation to an event; Members had been informed of this and should contact the Committee Secretary by Friday if they wished to attend.

Leadership of the NCOP had asked the Select Committees to assess whether expectations and promises made during Taking Parliament to the People were being met.

The meeting was adjourned.


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