South African Customs Union Agreement, Protocol on Amendments to Constitutive Act of African Union; Annual Committee Report: fin

Meeting report

ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE
4 February 2004
SOUTH AFRICAN CUSTOMS UNION AGREEMENT, PROTOCOL ON AMENDMENTS TO CONSTITUTIVE ACT OF AFRICAN UNION; ANNUAL COMMITTEE REPORT: FINALISATION

Chairperson: Mr B J Tolo

Documents handed out:
Protocol on the Amendments to the Constitutive Act of the African Union
SACU Revenue-Sharing Arrangements (New Agreement)
Explanatory Memorandum on the New Southern African Customs Union (SACU) Agreement,2002
Purpose of the Tariff Board and National Bodies Annexes
Objectives of the New SACU Agreement
Annual Report
Ratification of the Protocol on the Amendments to the Constitutive Act of the African Union

SUMMARY
The Committee discussed the SACU Agreement. Department of Trade and Industry briefly summarised the key functions of the SACU Agreement. Thereafter the SACU Agreement was adopted by the Committee. The Annual Report was adopted. Ambassador Mamabola briefed the Committee on the Protocol on the Amendments to the Constitutive Act of the African Union, tabled in terms of section 231(2) of the Constitution of South Africa, which Protocol the Committee adopted.

DISCUSSION
The Chairperson advised that the Committee that they will deal with the SACU Agreement first and thereafter the Protocol on the Amendments to the Constitutive Act. It was agreed at the previous meeting that the Agreement and Amendments will be finalised.

SACU AGREEMENT:
Mr Seth Mogapi (Department of Trade and Industry) advised that they had already discussed the important issues at the previous meeting but would focus on some of the key issues. The new SACU Agreement is essentially about democratising the institutional arrangements within the Customs Union. It was therefore essentail that new structures be established to assist in the democratisation of the Customs Union. SACU in the past operated loosely and lacked cohorence. Some of the new key structures are the Secretariate, Secretary Board and the Council of Ministers. The Council of Minister would be the highest decision-making body. The Secretary Board would not be a decision-making body but would consider applications and make recommendations to the Council of Ministers. The SACU Secretariate would deal with institutional matters. The new-sharing formula would bring about some sustainability for the revenue generated form tariffs. The provision for agriculture and industrial policies provide for harmonisation between the different levels of concern.

The Chairperson referred to article 13(5) and asked what the rational is behind it?

Mr Seth Mogapi answered that the article would be used as a last resort where parties to an dispute would be allowed to choose members to sit on the tribunal and adjudicate the dispute.

The Chairperson suggested that it would be better if SACU members that are not part of the dispute were to choose the people who would be sitting on the tribunal. The reason being that anyone would choose a person who wwould favour him.

Mr Seth Mogapi advised that initially there would have been a list of names which the Council of Ministers would have approved from which members could choose from. However this has not been done.

The Chairperson asked what the word "ad verlorium" meant?
Mr Ghandi Hattingh (Department of Trade and Industry) advised that the word means a duty is placed by means of monetary value. The word is well known within the Customs Community. For example 5% of the duty or value of a motor vehicle as it leaves the factory. The word "ad velorium" means by value and has always been used.

The Chairperson was adamant that he does not understand the word.

Dr EA Conroy (NNP) referred to article 18(1) and asked Mr Hattingh what is meant by "goods produced and manufactured" which are made from raw materials of another country. In the past there was a restriction on the dairy products. For example if Swaziland wanted to manufacture ice cream and there was restriction or a high duty on diary products. Swaziland would then purchase milk products from Canada as it would be cheaper than purchasing it from South Africa which is across the boarder. The ice cream manufactured by Swaziland would then be sold to South Africa. Asked the Department of Trade and Industry to explain how that would work.

Mr Ghandi Hattingh explained that there was a problem with diary and wheat products and that they have been struggling with it for many years. Swaziland or the BLNS states as they are known can import as many diary products under rebate of duty whereas in South Africa duty was payable. The same applies to wheat. The only exception would be if a country has a Bilateral Agreement in which case products would be able to enter a country free of duty. South Africa has a bilateral Agreement with Malawi in terms of which everything comes in free of duty. These are the only exceptions that can be applied. A Swaziland producer would therefore pay the same duties as any other country with the exception of a Bilateral Agreement.

Mr T Setona (ANC) referring to article 31, in terms of trade relations with third parties. The article states that existing Bilateral Trade Preferential Agreements would be allowed to continue and no member state would be allowed to enter into a new Bilateral Trade Preferential Agreement. Asked what guarantees are there to ensure that such Agreements would not have a negative impact on the SACU Agreement. Secondly wanted to know what would be the policy implications on NEPAD?

Mr Seth Mogapi answered that article 31 is important to the new constitutional arrangements. Existing Trade Agreements would be honored however they made certain that such agreements did not undermine the spirit of the new SACU Agreement. It would be appropriate that member states assess their Agreements and make amendments thereto. So far there have been co-operation amongst the member states with regard to making amendments to their Agreements. With regard to NEPAD, no specific problems have been identified. It is understood that as there would be integration amongst the member states it would have a positive effect on NEPAD.

Ms Constance Nduna (ANC) referring to article 26, protection of infant industries. There are an understanding that there are developed and under developed states. What happens when it comes to trading, where for example a developed industry trades with an under developed industry. Although there are consensus amongst the Council of Ministers that infant industries needs to be protected, how are the infant industry going to survive within the developed industry?

Mr Ghandi Hattingh answered that the article stems from the 1969 Agreement. The article does provide the infant industry with an opportunity to protect its product for at least 8 years. It was discovered that infant industries made use of the provision. For example Botswana have made use of the provision with regard to soap and flour and Namibia have made use of the provision with regard to UHT milk, broilers and pasta. If an infant industry like Botswana wants protection from South Africa, they can place a prohibitive duty on a product such as soap. By doing so keep the bulk of soap out of South Africa. However soap would of course still come into South Africa but on a very high duty. It gives the factory in a infant country an opportunity to protect their product. South Africa is a very strong industry with regard to industrial development. The provision is there for infant industries to use.

Mr Seth Mogapi added that this another example of trying to find a balance between trade and development. The SACU Agreement does recognise the different levels of development. The Department of Trade and Industry have tried to find a balance between trade and development.

The SACU Agreement was adopted.

ANNUAL REPORT
The Chairperson advised that he has not completed the comment to the Report. This was due to his high workload.

Dr Conroy agreed that the Committee not only has high workload but also that their work was of a specialised nature and the Members of the Committee should not be involved with other Committees.

Mr Setona suggested that the Committee should leave some matters to administration.

The Annual Report was adopted.

AMENDMENTS TO THE PROTOCOL ON THE AMENDMENTS TO THE CONSTITUTIVE ACT OF THE AFRICAN UNION, TABLED IN TERMS OF SECTION 231(2) OF THE CONSTITUTION
Ambassador Mamabola (Ministry of Foreign Affairs) informed that they had a Constitutive Act that was adopted in Libya and forms the basis of what is now known as the African Union. At the previous meeting had briefed the Committee as to why there was a need for the Amendments to Constitutive Act. The reason being that the Charter of the Organisation of the African Union (OAU) has been overtaken by a world that is globalising, etc. It was also imperative for the African countries not only think about political union but also economic integration. It was necessary to change the Charter of the African Union and come up with something that was more applicable to the changing circumstances that Africa finds itself. With regard to the Constitutive Act some members of the African Union were not satisfied with some of the provisions thereby proposing that amendments should be made. Most countries proposed technical changes.

Referring to the Amendments to the Constitutive Act, article 3, the need to incorporate Diaspora. The original proposal by the Senate was that Diaspora be incorporated as a 6^th region of the Continent. The amendment that was made does not incorporate Diaspora as a 6^th region but invites and encourages the full participation of Diaspora in building the African Union.

The amendment to the Permanent Representative Committee (PRC). The reason for the amendment was that the Heads of State were concerned that the Committee interfered with the work of the Commission. The amendment ensures that the PRC remains but its functions are prevented from interfering with or dictating to the Commission.

Article 6(5) provides for a Chairperson to be elected each year. Libya proposed that the person elected as Chairperson continue to remain for his or her term, that being a year but that in "exceptional circumstances" that such person be allowed to stay for another year. The aim of the amendment being to relax the stringent requirements.

The Chairperson asked whether the amendments before the Committee constitutes all the amendments?

Ambassador Mamabola confirmed that all the amendments are before the Committee. Advised that most of the objections came from Libya and it was technical objections.

Dr Conroy referred to article 6(5) and asked whether if a Member state refused to accept the idea of the Chairperson running for another term would it slow down the process of creating the African Union.

Ambassador Mamabola answered that there are two schools of thought. Both are working towards a union of some kind. The one says that the process should move faster while the other cautions that they are moving too fast and that it would be impossible to integrate at such speed. For example it has taken the European Union more that 50 years to build to come to the stage where they are now. It was clear that all African states want the same thing they only differ as to the pace that integration should occur.

The Chairperson said that Leader wants integration to happen in his lifetime in order that there will be a chance for him to be elected as Head of the African Union.

Mr Setona referring to article 6(5), said that it sound technical and asked whether there are ways to measure what "exceptional circumstances" are?

Ambassador Mamabola advised that it was a loophole. A way to relax the stringent requirements of article 6(5).

Mr Setona asked whether there will be guidelines for some of the clauses. Advised that the guidelines should be spelt out as there will not be consensus as to what will be exceptional circumstances.

Chairperson agreed and added that what is exceptional to one person may not be so for another.

Chairperson referred to article 11, particularly "any other African language" and asked whether this includes the 11 official languages of South Africa? Also asked why Spanish was included?

Ambassador Mamabola advised that there was only one African state that had Spanish as their official language and they had insisted that their language be included in the Constitutive Act. If a country wants a copy of the Act then they will have to bear the expenses thereof. The Act will be in English. A country can request a copy of the Act in their official language but will have to pay for it themselves.

The Protocol to the Amendments of the Constitutive Act was adopted and it was agreed that Dr Conroy will do statements for both Acts.

The meeting was adjourned.