Regional economic integration and the Presidential Infrastructure Championing Initiative: Department briefing

Meeting report

Briefing by the Department of International Relations and Cooperation (DIRCO) on Regional Economic Integration 

The delegation from DIRCO comprised of Ambassador Lenin Shope, Chief Director: Africa Multilateral; Ambassador Ghulam Asmal, Director: NEPAD and International Partnerships and Adv Doc Mashabane, Director: United Nations. Ambassador Shope undertook the briefing.

On regional economic integration in Africa specific milestones and timelines had been set. The aim was to have a Southern African Development Community (SADC) Free Trade Area (FTA) by 2008 and it had been achieved. However the rest of the milestones like having a SADC Custom Union by 2010, a SADC Common Market by 2015 and a Monetary Union by 2016 had not been achieved. Regional integration was slow with only 15% of trade being intra-regional. Members were provided with figures on SADC imports and exports with major trading partners being the European Union, the USA, China and Japan. It was realised that the SADC and the SA Customs Union (SACU) were primary vehicles to regional economic integration and were key building blocks to realising the Tripartite FTA and the Continental FTA. Challenges of the SADC FTA were that SADC intra-regional trade  remained relatively low with SA’s share in exports accounting for just over 46% and its share in imports accounting for just over 17% of the trade and over 50% of the region’s Gross Domestic Product. Another challenge was that there was uneven trade, a lack of industrialisation, insufficient infrastructure and member states producing the same commodities. There were furthermore requests for derogations from members and multiple memberships with Regional Economic Communities (RECS). A challenge identified with the SACU was that anything imported into that region went into one kitty and a revenue sharing formula was in place. Attempts to review this were being made. Attempts were also being made to move the SADC from an FTA to a customs union.

The Committee was given insight and an overview into the Tripartite FTA. The Tripartite FTA involved 26 countries and its final objective was to achieve duty free and quota free treatment on all products without quantitative restrictions on goods that met the Tripartite rules of origin. Challenges that affected the Tripartite FTA were that most economies in Africa were weak, historical divisions were still prevalent, lack of institutional capacity, overlapping membership, low levels of industrialisation, insufficient infrastructure, uneven levels of development, lagging market integration, a lack of popular participation in the integration process, the perceived/ suspicion of SA’s market dominance, low levels of intra-trade, extreme low levels of diversification, high prevalence of the informal sector and a lack of political will of member states to adhere to appropriate regional agendas. On the way forward SA would continue to participate in the SADC Ministerial Task Force on Regional Economic Integration as well as other SADC structures geared towards the formalisation of the Tripartite FTA. SA would also continue to use both bilateral and multilateral fora to advocate for the conclusion of negotiations by June 2017. 

Members were given a brief introduction to the Grand Inga Hydro Power Project in the Democratic Republic of the Congo. In 2011 SA had signed a Memorandum of Understanding (MOU) with the BRT, which set the basis for a Treaty between the two countries on the Grand Inga Hydropower Project. The Project aimed to generate more than 40 000 megawatts of electricity. In terms of the Treaty SA had conditionally committed to buying 2500 megawatts from the first phase and also secured a right of first refusal in regard to buying 30% of power from any subsequent phases. SA had capability to generate 39 000 megawatts but its consumption was 43 000 megawatts. The Project could even be earmarked to supply Southern Europe with electricity.

Discussion

The Chairperson noted that much of the questions on regional integration should be directed to the leadership of Africa

Adv Shope said in the real world what mattered most was national interest. It went way beyond Anglophone and Francophone. National interest was what reigned supreme.

Mr L Mpumlwana (ANC) said that colonialists had subdivided Africa and hence artificial boundaries separated countries. The consequence of this was that the same ethnicity of people was to be found in neighbouring countries. He asked why African countries had dual memberships with organisations when there could only be one strong grouping.

Adv Shope, on the boundaries created by the colonialists, said that the AU had taken a decision to leave the boundaries as they were. It would be disrupting to realign boundaries. Countries held dual memberships for national interests. It was all about gaining the most for your country. For example Mozambique had joined the commonwealth for the sake of its national interest. 

Mr B Radebe (ANC), on regional integration, asked who advised heads of states on targets that were set. Some of the targets like having a monetary union by 2016 were highly impossible. If FTAs were difficult to deal with, what about customs unions? The needs of countries differed. Realistic targets were needed. He pointed out that the SADC was more integrated than other groupings of countries. On the Grand Inga Hydroelectricity Project he said that electricity would have to pass through Botswana to reach SA. How would the sustainability of the supply of electricity from the Democratic Republic of Congo to SA through countries be ensured over the long term? He emphasised that in order for regional integration to take place the economies of countries needed to be uplifted. As integration took place SA should have greater imports and exports. He was disappointed that the Committee had not received a full-blown presentation on the Grand Inga Hydroelectricity Project, as it could be a game changer. It was an opportunity for the DRC to supply the rest of Africa with electricity. SA had made commitments to the Project but had not fulfilled its commitments.

Adv Shope said that annually the AU held two summits and the SADC one. A great deal of work was being done at leadership level to push agreements for integration. Perhaps one of the problems with the AU was that it took too many decisions but lacked to implement them. Ministers and ambassadors advised heads of state. The targets referred to had been set way back in 2008. At the time there had been euphoria to speed up integration. National interest always prevailed and hence agreements were reneged on. He remarked that there was a narrative that stated that perhaps a linear model should not be followed. The European Union integration had been selective and had criteria that had to be met. The AU integration was regional and continental. He conceded that some of the targets set were due soon, some as early as 2017. Negotiations on the Continental FTA were to begin. There were no predictions that things would get better.

Ms D Raphuti (ANC) agreed that the Grand Inga Hydroelectricity Project had great possibilities to create jobs for Africa. The DIRCO was asked what projections had it made on job creation for Africa and the SADC Region.

Mr S Maila (ANC) said the interest of colonial masters during the Berlin Conference was to see Africa divided. What was the role of the western powers in Africa? He asked whether they were assisting or whether they were doing something else. Africa was running out of time. Plans were optimistic but implementation was the problem. If there were problems on the Tripartite FTA how was movement towards a Continental FTA going to happen. Perhaps problems needed to be dealt with before proceeding further.

Ms O Hlophe (EFF) said Africa was not moving forward. African leaders lacked political will. The Committee needed a comprehensive presentation on the African Union. Africa was divided into countries that had English, French and Portuguese speaking people. Africa unfortunately was not united. She referred to page 4 of the briefing document and said that inter-regional trade being only 14% was not good enough, more work was needed. Infrastructure was a challenge. Africa could not run away from the fact that the west had a role to play in Africa. Implementation was not taking place in Africa.

Adv Shope on the role of western powers noted that the AU had an operational budget and a programme’s budget. On the programme’s budget contributions by member states was only 3%. Western countries made up the remaining 97%. At an AU Summit member states were encouraged to increase their contribution on the programme’s budget from 3% to 70%. In addition to increase their contributions to the peace and security budget from 2% to 25%. SA’s contribution to run AU programmes would also increase significantly. In order to implement programmes financing was required. Lack of political will once again came down to national interest taking precedence.

Mr S Mokgalapa (DA) said that the comments and questions of members needed to go to political leadership. It went beyond bureaucrats. Much was always said about western influence but the truth of the matter was that Africa was its worst enemy. There were fourteen nations in the SADC Bloc but three languages ie English, French and Portuguese, were spoken. Leaders lost sight of the job at hand at multilateral forums. The challenge was that there was a trust deficit amongst African leaders. SA also could not shake off the big brother role and at times SA perpetuated it. If integration was what was wanted then sacrifices had to be made. African countries could not even agree on what currency should be used in Africa. SA wished to use the Rand. Zimbabwe felt the US dollar was best. Botswana supported the use of the Pupa. Namibia even called for the use of the Namibian dollar. A further challenge was the lack of domestication of protocols and agreements. Countries in Africa agreed on protocols but did not domesticate them. He asked what the status of the Grand Inga Hydroelectricity Project was. There should be protocols and agreements in place on the Grand Inga Hydroelectricity Project. He asked why the SADC Infrastructure Programme was not happening. He was pleased that the South African Customs Union (SACU) was being reviewed as it was just in place to sustain Lesotho and Swaziland.

Adv Shope responded that the domestication of treaties was about political level will. On integration and the speeding up thereof there was a process to look at alternative sources of funding. He understood that perhaps it was time for SA to relinquish its role as big brother and be seen as just another kid on the block. The trust deficit in Africa also tied in with national interest. Many countries had wished to host the SADC Regional Fund. The benefit of hosting it was also in national interest.

Ms S Kalyan (DA) asked for clarity on the SACU. Where was the SACU based and who coordinated it? The Tripartite FTA had noble intentions on duty free and quota free products. What the view of the textile industries on job losses? She asked the DIRCO why SA had not signed the Tripartite FTA. What were the reasons? The Committee did not have detail and should be provided with such. Was it only SA that that had not signed? The DIRCO was asked whether there were timeframes by when SA would sign.

Adv Shope said that the Secretariat of the SACU sat in Namibia. It was a member state union. When the revenue sharing formula was signed SA had not been at the table. SA was only there as a member state. National Treasury usually dealt with these processes. The reasons for SA not signing the Tripartite FTA were listed. Agreement could not be reached on what procedures should be in place. SA needed to be satisfied on how conflict resolution was to be dealt with in the Tripartite FTA. Tax based negotiations were supposed to start.

Mr D Bergman (DA) noted that if the Tripartite FTA involved 26 countries, how much weight SA packed on it in terms of SA’s Gross Domestic Product and on its exports and imports. He asked who the biggest players on the Tripartite FTA were. The Tripartite FTA was an opportunity for Africa to find common ground. It was easier to negotiate country to country than region to region.

Adv Shope pointed out that SA was the biggest economy in the Tripartite FTA. Other big players included Egypt and Angola. There was a Tripartite FTA narrative that said you need to go with those who were prepared to go. Likeminded countries should stick together.

Ms D Raphuti (ANC) noted that SA’s foreign policy was trying to address challenges.

Mr M Lekota (COPE) emphasised that there were real problems in Africa. 

The Chairperson, on Grand Inga Hydroelectric Project, said he did not hear when it was conceptualised. Which countries were involved? He asked when it was conceptualised, which countries were in involved discussions of financing. Was the World Bank or the International Monetary Fund (IMF) considered to fund the Project? He was also concerned that security in the Democratic Republic of Congo (DRC) was not stable. There was a possibility that rebels would want to attack the Grand Inga Dam. Perhaps a multinational garrison was needed to protect it. The DIRCO was asked whether the skills needed for the Grand Inga Hydroelectricity Project had been quantified. He recommended that the Tripartite FTA, the Grand Inga Hydroelectricity Project and Agenda 2063 needed further discussion. The Department of Energy should be part of discussions. The SONA 2016 laid emphasis on economic development and even the Budget Speech 2016 had said that things in the economy should come right. The challenges on the Tripartite FTA were clear. The DIRCO was asked to whom the Committee should take the challenges to for them to be overcome. It was fact that Africa had problems of divisions that hampered countries to work together. He pointed out that most African countries had been free for over fifty years and in comparison SA’s freedom was fairly young at only twenty-two years. If Africa placed the sins of the west behind them what had Africa been doing on leadership since being freed? African leaders could not continue to complain all the time. He said that ex-President Thabo Mbeki had identified illicit flows as a weakness of Africa. The newspaper Business Day had run an article on illicit flows the very morning of the meeting. The problem was about repatriating money and property. Indians all over the world sent money back to India, which made India grow. Africans all over the world could similarly invest in their own countries. Africa had a low industrial base. No study had been done to direct that the Common Market for Eastern and Southern Africa (COMESA) should perhaps focus on the building of certain industries and that the SADC should focus on something else. The study would have helped by identifying the money and skills that were perhaps needed. There was also poor infrastructure in Africa on rail, air and roads. Rail and roads were needed between African countries. Much of the questions and issues raised by members were addressed to leadership rather than officials.

Adv Shope noted that on industrialisation in Africa when the Committee was to be briefed in full on the Tripartite FTA he suggested that the Department of Trade and Industry (DTI) be called to the briefing as well. The DTI could shed light on what was needed for regional integration. The Department of Energy could speak to the Grand Inga Hydroelectricity Project. He apologised for Mr Edward Makaya, Deputy Director General: Africa. for not being able to attend the meeting. Mr Makaya was the DIRCO’s expert on the matters being discussed. President Jacob Zuma had taken Mr Makaya along with him on a state visit to Nigeria. On the Grand Inga Hydroelectricity Project he said that Mr Makaya together with the Department of Energy could shed light on the issue. SA’s Minister of Energy, Ms Tina Joemat-Pettersson, on many occasions travelled to the DRC only to be told that her counterparts were unavailable. On the financing of the Grand Inga Hydroelectricity Project, the treaty was fairly new. China could possibly fund the Project. On the instability of the DRC it was something that needed to be addressed. The process on the outcomes of the Diaspora Summit should begin. He was not sure what level of success was expected.

Adv Mashabane added that it was all about national interest. After 20 odd years of democracy SA needed to have a foreign policy that placed its national interest first. He conceded that some of the targets set were close to their deadlines.

The Chairperson stressed his concern over illicit flows. Too much of Africa’s funds were being shipped out of the continent. It was an issue that the Committee should be briefed on.  

Briefing by the Department of International Relations and Cooperation (DIRCO) on the Presidential Infrastructure Championing Initiative (PICI)

The Chairperson asked what the difference between the Programme for Infrastructure Development in Africa (PIDA) and the Presidential Infrastructure Championing Initiative (PICI) was.

Ambassador Ghulam Asmal said there were more than 200 programmes under PIDA. It was realised that these programmes needed to be championed. The decision was made to form the PICI that would identify key projects. The PICI was a substructure of the PIDA. It was intended to go beyond national interests into regional. When the New Partnership for Africa’s Development (NEPAD) was conceptualised in 2002 the geopolitical landscape of Africa was different. Africa was marginalised but had political will to take responsibility for it. In 2016 there was economic optimism. Africa was being wooed as a centre for economic growth.  However it had to be remembered that the political circumstances had changed in Egypt, Nigeria and Senegal. Much had earlier been said about national interest and there was no getting away from the geography of Africa.  SA’s neighbours would always be its neighbours. It had to be remembered that NEPAD and the DIRCO were not implementing agencies. They could not create roads and infrastructure. What could be provided was the intellectual foresight to look beyond national interest on how national interest projects could have benefits nationally and regionally.

Ambassador Asmal continued with the actual briefing. The NEPAD Heads of State and Government Orientation Committee (HSGOC) in Kampala, Uganda established the PICI in July 2010. President Zuma was the Chairperson of the PICI. The objectives of the PICI were the championing of priority projects for high impact results. The PICI initiative was directly linked to the African Union/NEPAD Programme for Infrastructure Development in Africa (PIDA). Amongst the PICI projects championed by President Zuma were the North-South Road and Rail Development Corridor. The PICI comprised of eight heads of state from SA, Algeria, Benin, Egypt, Nigeria, the DRC, Rwanda and Senegal. Each head of state championed one of the industry sectors i.e. transport energy, information communication technology, water and sanitation, agriculture, construction, road and rail and lastly gas pipelines.  Even though Africa’s economic outlook looked promising Members were given a wide array of facts and figures on why infrastructure development was needed. Some of which was that the road access rate in Africa was only 34% compared to 50%in other parts of the developing world. Only 30% of the African population had access to electricity compared to 70%-90% in other parts of the developing world. The African Internet penetration rate was only 6% compared to an average of 40% elsewhere in the developing world. Furthermore Africa traded very little with itself, the share of intra-African exports in total merchandise exports was 11% compared to 50% in developing Asia, and 21% in Latin America and the Caribbean.

The Committee was given insight into the process that was put in place to support President Zuma on his North-South Corridor Road/Rail Project. The DIRCO also listed the projects undertaken by other countries. The North-South Corridor Road/Rail Project incorporated a range of sub-projects to upgrade infrastructure and remove bottlenecks to trade flows, including regulatory and administrative constraints to transport and transit systems. The North-South Corridor Road/Rail Project covered East and Southern Africa involving regional economic communities like the COMESA, East Africa Community (EAC) and the SADC, and was in effect a regional North-South Corridor rather than a trans-continental corridor. Members were provided with a list of priority projects on the North-South Corridor. These included work at Durban’s Port and a road between Harare and Beitbridge. In conclusion on SA’s role it was stated that the PICI addressed the socio-economic deficit of the region and the continent. SA’s involvement helped to diversify economies and attract investments for industrialisation and beneficiation.

Discussion

Mr Maila on the North-South Corridor said that it went back to Adv Shope’s earlier comment about staying away from the linear approach. The issue was also about when there had been regime changes since 2010 in African countries; the implementation of projects could suffer as a result.

Mr Lekota pointed out that what made the African continent vulnerable was the unevenness of development of countries. Former colonial powers had huge influence in their previous colonies. And it was the choices of those African countries for it to be so. African countries were largely dependent on donor funding. Donors objected if their funds were used for something else other than what the funds had been earmarked for. On the Grand Inga Hydroelectricity Project African countries wished to come on board but were worried about what their old colonial masters had to say if they did. It was in the end all about choices. He stressed that Committee recommendations on issues should be forwarded to SA’s Executive for consideration. Funds had to be found to fund projects. The DIRCO was asked how many of the African countries had huge debts with institutions like the IMF. To what extent could countries free themselves from such obligations? He asked what recommendations the Committee could make to its Executive. The DIRCO was asked what the problems with the North-South Corridor were.  How many countries could not make financial contributions on the North-South Corridor?

Mr Radebe, from the South African perspective on the implementation of the North-South Corridor projects, asked how much funds had been spent already. Who was in control of the funds? The issue of regional integration in Africa was long overdue. The DIRCO was asked whether infrastructure funding could be ring-fenced. He also asked whether the Forum on China Africa Cooperation (FOCAC) had ring-fenced funds. Creative funding efforts were needed. China had funded some things.

Ms Kalyan asked where the funds were coming from. Given the state of the global economy how was progress of projects affected. She asked whether donor funds were conditional. What was the role of the National Development Bank (NDB) on everything?

The Chairperson pointed out that rail, roads and air infrastructure in African countries had been mainly to serve their colonial masters. Most African countries had been independent for over 40-50 years. The problem was that Africa traded too little with itself. The DIRCO was asked why no figures on intra-African trade had been provided. He pointed out that according to Agenda 2063 intra-Africa trade was 12% and 43% was with countries outside. The Committee needed information from the DIRCO in terms of how much funding was needed and also what skills were needed. The DIRCO was expected to make these determinations. As recently as the 2010 FIFA World Cup people from abroad were brought in to build SA’s stadiums. He asked what were unblocking political bottlenecks in Africa. Africa should know better than to take loans from the IMF and the World Bank. He was not sure whether African countries were considering a self-financing model. If there were such a model who was going to host it? Africa needed to create its own kitty and should not depend on the IMF, the World Bank or even the NDB. Africa could not cry and complain forever. Countries like Japan, China and India had all been colonised at one point in time.

Adv Shope said that financing was the central issue. Large infrastructure projects did not use public funds. There was the Development Bank of SA (DBSA) and the Project Preparation and Development Facility (PPDF) to take projects to bank ability. If a project operated and was profitable then it was bankable. Countries abroad had been displeased when SA had signed the Grand Inga Hydroelectricity Project with the DRC. SA had almost ring-fenced money for the Project. There were many countries out there that wished to derail the process.

The Chairperson asked whether it was not possible for a group of countries to do self-financing. Were there groups of countries that were attempting to fund a project?

Ambassador Asmal responded that discussions on the politics of financing could take the whole day so complex was the issue. Infrastructure was investment in the African continent. Financing had been used for subjectification for political reasons. It was difficult to generalise on projects, there was a 40-page detailed document that listed all the projects under the PICI. It would be forwarded to the Committee. Finance was a major hindrance. On whether a change in government could mean the end of a project he said that most projects were national projects that had been expended. Banks had institutionalised projects. He pointed out that the younger leaders in Africa had realised that Africa had to depend on itself and not on donor funding. He agreed that intra-Africa trade was important.

The meeting was adjourned.