Regional Economic Integration Summit: Department of Foreign Affairs briefing

ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE
30 May 2007
REGIONAL ECONOMIC INTEGRATION SUMMIT: DEPARTMENT OF FOREIGN AFFAIRS BRIEFING

Chairperson: Ms N Ntwanambi (ANC, Western Cape)

Documents handed out:
Outcomes of the extraordinary SADC Summit on Regional Economic Integration

SUMMARY
The Department of Foreign Affairs briefed the Committee on the outcomes of the Southern African Development Community Summit. It gave a full introduction to the Southern African Development Community (SADC) and noted that South Africa had the most dominant economy in the region. Each of the countries was named, and a brief indication given of its main trade and rate of progress. SADC was regarded as the most peaceful economic region in Africa.

The Department then briefed the Committee on the recent discussions and outcomes of the SADC Summit on regional integration. The presentation touched on the need to speed up progress, the launch of the SADC Brigade as a peace-keeping force, the need to improve regional infrastructure, to address xenophobia and have a unified and coordinated approach to HIV and Aids interventions. It was noted that free trade was linked to free movement of people. There was a need to address food security and address weaknesses in the supply chain. SADC had revised its policy requiring better representation of women in all sectors. It was noted that weaknesses still existed on the supply chain. The Free Trade Area sought to have 6 000 products at zero-tariff rates by 2008, agreements had been made on rules of origin and SADC was addressing the influence and influx of Chinese goods. A single form would be used for transit of goods. There were negotiations about a single customs union. The mutual defence pact was well advanced, and there were health and education protocols. Border control and management had achieved success. There was a need to set up a development fund. Challenges were identified in recruiting people to work at SADC offices and institutions.

Members asked questions around the SADC Parliamentary Forum, information on the Customs Unions, the potential that South Africa would be seen as the “big brother” who wanted to take control, the situation in Lesotho, illegal immigrants, any projects to integrate the youth, the problems of xenophobia, border control matters, and the criteria to assess Least Developed Country status. Further questions were asked around the joint forces, the scope of integration, the illegal traffic through the Zimbabwe and Malawi borders, and the profile of science and technology.

MINUTES

Introduction on the Economic Growth Rate of the Southern African Development Community (SADC): Briefing by Department of Foreign Affairs (DFA)
Ms Jessie (Y) Duarte, Deputy Director General, DFA, noted that the SADC had 200 million citizens and 50 economic states at various stages of development. South Africa had the most dominant economy in the region. There had been other economies, such as Angola, that had begun to show rapid growth rate because of its oil, for which China and US were the main market. However, this was not progressing as it should owing to the huge war declaration programme and high levels of unemployment. Botswana had had a steady growth rate and this was influenced by its small population, and there would be a need to diversify the economy because it was currently mainly a beef and diamond export economy. The Democratic Republic of Congo (DRC) could be seen as having the most potential in the region and could be the supplier of all the electricity in our region if both phases of the force project could be rapidly advanced. Lesotho had the least developed country status and DFA had been instructed by Cabinet to look at programmes that would assist in developing this economy. Initiatives included the opening up of the Sunny -Park road to enable tourism to flourish and assisting with dams to supply water to people of the towns. South Africa currently received most of its water from the Lesotho highlands.

Zambia was fairly stable, both economically and politically, and was growing slowly but steadily. Mozambique was at 11% due to the anchor project, was a supplier of aluminium to Australia and the fishing industry was picking up rapidly. Malawi had not grown over the past 20 years, although currently the fishing industry had been picking up, and it was stable politically. It had been a victim of drought and at the moment this was creating a huge problem, with further problems anticipated over the next crop year. Ms Duarte mentioned that Namibia was politically stable except for suggestions of some difficulties within the ruling party. The economy was growing as it was a diamond producing country and there would be a potential for agriculture as well. Mauritius and Swaziland had similar growth rates, although the Swaziland growth rate had 18% to 19% income coming from transfers to the Southern African Customs Union (SACU) transfer programme and it was dependent on the South African economy for its survival. Furthermore Mauritius was stable and had begun to diversify its market. Previously this country was heavily dependant on sugar export and export of fresh textile goods, but the Mauritius textile factory closure had posed a huge problem. It was beginning to look at tourism as a portion of diversity, and at fishing. Tanzania had been fairly stable politically and showed a steady economic growth. Seychelles had the highest Gross Domestic Product (GDP) in the consolation of countries. This was possibly due to its small population of 90 000 people and it was focusing on tourism, which was high. It had recently readjusted its economic policy programme, and was very pragmatic about what it could and could not do and tourism was the main stream of income. Madagascar was the new member to SADC and the analysis was that, despite the small size of the country, it would probably be the better of the islands from an economic point of view. It was stable, and DFA was also anticipating a good outcome. Zimbabwe was the difficult country at present due to the 0% growth rate and 2000% official inflation rate. However, the SADC had been regarded both continentally and internationally as the most peaceful economic region in Africa.

SADC Summit on Regional Economic Integration: Briefing by DFA
Ms Jesse Duarte, Deputy Director General, DFA, mentioned that at the SADC summit it had been realised that there was slow progress due to the lack of feedback. The Strategic Indicative Plan of the Organ (SIPO) was an organ that took care of political stability, issues of conflict that might arise, cross border crime, and the impact of inter- continental crime. The Regional Summit reaffirmed that SADC and SIPO were the two programmes of action that needed to be followed. When SADC spoke in any international forum it spoke as one voice. In August there would be the launching of a SADC brigade, which was meant to bring together the national defence forces of various countries in readiness for participation in peace-keeping missions. South Africa and Mozambique were the only countries that had been partaking in peace-keeping initiatives, and this had been a huge responsibility. There was a need to upload the regional infrastructure and services, as there had been very few roads that linked the SADC and bridges that linked for free movement. Xenophobia was also a challenge faced by this region, and the lessons and redress steps would have to be learnt from other regions that had been successful. It was also noted that there could not be free trade without freedom of movement. A further challenge was that the region would struggle, every three years or so, to produce enough grain crops to meet the national consumption of the entire region for national consumption, with the exception of South Africa, which was the only exporting country in this regard. This year difficulties were anticipated in Malawi, Zimbabwe and Tanzania and SADC would have to look at how it could respond as a region. A further difficulty was the fight against HIV/AIDS, which would only be addressed if all countries could work together as a region, due to the transfer rate of this particular disease. Last year SADC had identified a programme that would be followed on HIV/AIDS that would combine awareness and treatment. A further policy developed by SADC related to representation of women, and the initial policy called upon countries to attempt to achieve 30% of women represented in all sectors. That had recently been reviewed. The demographics were interesting; although on the continent women represented 53% of the population, they represented 58% in the SADC. The Heads of State decided to have a task force established that would provide constant feedback on progress of integration. The weakness of the region was on the supply side chain, as it generally lacked the instruments for manufacturing industries, and was also hampered by unstable energy generation.

In terms of the Free Trade Area (FTA), it had been decided that by 2008, 6000 products should be zero rated for tariffs between SADC countries. This implied that there had to be a compromise on certain essential trade products. Sugar was one of those contentious issues as no country wanted to let go of their percentage in tariffs, even within the region. South Africa was protective of its textile industry but the negotiations were going quite well. SADC was also looking at how to manage the influence and influx of Chinese goods to the region, and was also dealing with the Rules of Origin directly. There had been an agreement on these rules of origin, and it was decided that it was possible to start manufacturing a product in one SADC country and finish it in another for export purposes, which would be regarded as integrated industry across the region. This was already happening in about 2% of cases. Many countries were relying on government industries to keep people in jobs. There had been an agreement to have a single form, to be used by all SADC countries for transporting goods, with the exception of Angola whose customs regime was based on Portuguese standards. Angola would have to re-engineer its whole system to meet the SADC standards. Many members of states had dual membership of SADC and Customs Unions, and this added to the complexity of negotiating in preparation for the customs union in 2010. Furthermore, six SADC countries had not signed. Those countries with major economic growth had signed. The smaller economies felt threatened by a more rapid, wider, and free movement in trade. There were several policies that had started to be negotiated on a single economy pact. The mutual defence pact was the most advanced of all the agreements. In the area of education, there was a protocol, and it was critical for this protocol to be implemented because there was not equality of skills in the region. Zimbabwe has the highest-educated professional adults in the region, followed by Mauritius. Very few countries have sufficient facilities. South Africa had numerous facilities in the health sector and thus had been the source of transfer for skilled staff, and there was a protocol in place also for this sector. South Africa became the recipient also for transfers from other countries. In the areas of Border control and border management there was a great deal of macroeconomic convergence.

It was noted that the Development Bank of South Africa (DBSA) could be the corner stone for further economic convergence but this was a South African institution that could operate anywhere on the continent although it was not a regional entity. Hence there had been a need identified for a SADC development fund and this might take a while to set up, as it still had to be negotiated.

The SADC institution had problems in recruiting people who were qualified to manage the complex work involved, and they had recently recruited but did not find South Africans with suitable experience. The other limitation could be that South African directors were generally offered more pay than SADC was able to offer and there was no incentive to join SADC. To overcome that South Africa had asked Cabinet to consider the promulgation of a secondment policy which could be used for short-term secondments from government or private sector companies, on favourable terms that would also have to guarantee no loss of ranking or benefits in South Africa.

Discussion
The Chairperson commented that she was happy with what SADC was doing and had realised the importance of the Africa trade and the potential for trade power by the Continent.

The Chairperson raised the issue of the SADC Parliamentary Forum and its transformation to a full parliament. She asked what were the views of the DFA, and whether South Africa was ready for that.

Ms Duarte responded that the Heads of State addressed the SADC Parliamentary Forum issue in Tanzania and mentioned that it was not necessary to form a Parliament in the region as this would form duplication, as there was a PAN-African Parliament already in place. Parliamentarians would have to stretch themselves and so it was decided it was best for SADC to maintain itself at a forum level. Other regions were also following the same trend and were beginning to review the advocacy and costs of Parliament.

The Chairperson asked for information on members of SACU and COMESA, and further clarity.

Ms Duarte explained that the Southern African Customs Union (SACU) members were Botswana, Lesotho, Namibia, Swaziland and South Africa, but Mozambique and Angola were considering whether to join SACU and were therefore currently doing a study to see if it would be in their best interests to do so. COMESA was the Commercial and Economic Union of Eastern and Southern Africa. It consisted of 23 states from Swaziland up to Egypt. It was not a customs union but the countries had trade relations with one another. There would be a need to have a discussion whether there should be a single customs union, and whether SACU or COMESA would be the basis of such union

The Chairperson acknowledged that South Africa seemed to be advanced and had rapid growth in terms of the economy but asked if that would not cause a threat to the other countries who would view SA as the “big brother” who wanted to take control.

Ms Duarte said that South Africa had been working hard not to be the “big brother” but the reality was hard, as South Africa had 23% of the GDP on the continent and so was in fact quite powerful. South Africa was a large country, and could not act like a small country with a small economy. Although South Africa was trying to act with humility, the reality was also that whenever there was a need or crisis on the continent South Africa was asked to help. It always considered what its national interest would before it engaged and would need to be cautious of not generating the "big brother " perception but rather being seen as a constructive partner on the continent. The fact that the South African President was invited to G7 whilst others were not, and the leading role South Africa was taking in the New Economic Partnership for African Development (NEPAD) might also be causes of the perception.

The Chairperson was concerned about the situation in Lesotho after elections and wanted to know what was happening on the ground.

Ms Duarte said that after the election Lesotho was not in a crisis but not in a politically calm environment either. The analysis made was that although the ruling party achieved victory it did not include proper voting access in the rural areas of the country. An unstable Lesotho was not in South Africa’s interest because it was inside South African borders and so the South African government would have to monitor so that they could assist when asked to do so.

Ms S Chen (DA, Gauteng) asked whether the issue of illegal immigrants, and their effect on security, had been discussed or considered during the Summit.

Ms Duarte noted that migration had been a consequence of economic development everywhere in the world, as shown by the examples of Mexicans migrating to the US, and some European country nationals migrating to more stable economies, and the more prosperous countries invited high level immigrants into the country. SADC had a protocol of freedom of movement, and there had been constant questions around undocumented migrants and the poor border control. SADC citizens should be able to come into the country on a 90-day visitor visa, but this did not apply to undocumented migrants. It was noted that these migrants were not only from Africa but included a number from China and European countries, and the Department of Home Affairs (DHA) was trying to work with and resolve those issues. Indian and Pakistani unskilled migrants were also coming to South Africa. This had been an economic issue, as most human beings would not usually leave their country of origin unless forced to. Young people trained in South Africa would leave for Europe as they saw better opportunities in other countries. Ms Duarte promised the Committee that she would email the Chairperson the detailed profile of the other countries.

Mr Z Kolweni (ANC,North West) declared that the first part of the presentation, which profiled the member states, was useful to him. The goals set by SADC were very ambitious and good, but he was surprised to hear how poor the profile was on the education protocol and skills. There was then clearly a long way for SADC to go before achieving its goals. He wondered, under the health protocol, if there was any project that was integrating the youth, such as the youth brigade, to take over SADC leadership. Xenophobia he argued, was not Africa's own making but was a product of the system of colonisation, when children were not informed of the real issues. He was concerned that children were not being properly educated on political issues and current affairs. He suggested that there would be a need for an elite programme that would take the youth on board, and there should also be bursaries to help.

Ms Duarte agreed that the goals were ambitious but it was important that they were set. It might be that the 2008 Customs Union goal might not be reached. On the issues of education she noted that South Africa produced engineers every year who would promptly leave the country. South Africa was being a training ground for other countries, although it had more facilities by way of comparison with other African countries. In terms of health there had not been a specific integrative programme for youth, except for the SADC brigade. She believed that the intention of the programme was not so much to address issues of xenophobia than to bring professional soldiers from all the countries to deal with emergencies. SADC believed the key to addressing xenophobia lay in the sports protocol, which needed urgent implementation, and which would promote people-to-people contact through sports and culture. South Africa was not displaying as extreme xenophobia as countries such as Germany. Ms Duarte liked the idea of a campaign and thought there should be a national debate about this issue. The main issue of migration had been the fear of South Africans that they would be displaced from jobs and houses by the migrants, and therefore this must be addressed by reducing unemployment and putting the needs of South Africans first.

Mr A Hendricks (UIF, Western Cape) requested an explanation of the border control matters in which there had been progress.

Ms Duarte noted that there had been strides in terms of documentation on the borders, and in co operation between countries on the passage of goods, which would use one set of customs controls for both countries on the border, which would cut down on costs.

Mr Hendricks asked where the SADC offices were based.

Ms Duarte noted that SADC had its office in Botswana but each of the states had an SADC desk.

Mr J Sibiya (ANC, Limpopo), asked what criteria were used to assess whether a country fell into the category of a Least Developed Country (LCD).

Ms Duarte responded that the criteria that were used to assess whether a country fell into the category of least developed country were derived initially by the International Monetary Fund and the World Bank. These looked at the country’s prospects of raising Gross domestic product, the number and skills of active adults in the population, and goods and services with potential to bring a new economic situation, market diversification, trading partners and other issues. The size of the population of Lesotho militated against it having a good GDP and in addition the majority of Lesotho’s citizen’s worked in another state and the transfers of funding were not direct. Because of the same monitory system between Lesotho and South Africa, wages would be used for household maintenance, and GDP looked at properties owned in the country also.

Mr Sibiya referred to the joint forces, and asked if the forces would be ready should there be an attack or a need to mobilise the army. Furthermore he questioned what was a military force in terms of the norms and values taken highly by different countries.

Ms Duarte said that the SADC brigade was an army but was guided by the mutual defence pact. SADC forces would protect any SADC country that was threatened by an external force. Armies were trained in Zimbabwe at a training centre for SADC, funded by all the countries. Essentially it was a peace keeping service, and the soldiers were trained how to stimulate dialogue instead of violence.

Mr Sibiya asked for more clarity on integration, and whether this would include finance, goods, free movement, labour or skills.

Ms Duarte explained that macroeconomic convergence included finances and the region would need some financial convergence, although there had not been a final decision on what monetary system to use. SADC was also looking at how to manage an interrelated financial system instead of a completely integrated one, and the finance protocol was under consideration. There was a need to ensure that other countries would not be threatened by the rand and the pula, which was also quite strong.

Mr Sibiya noted his concern about the serious amount of illegal traffic through the border between South Africa and Zimbabwe, such as trucks full of tobacco from Zimbabwe, which was confiscated. Apparently there were supposed to be scanners that indicated everything that was being carried on the truck yet manual methods had shown cartons of tobacco. This raised concerns and questions of whether the scanners were effective, or whether there was a case of officials turning a blind eye. Mr Sibiya asked if there were set requirements for each country to ensure that their conditions were stabilising, which he felt should be done before the agreements entered into full force. Mr Sibiya also noted that groups of people were organisations and chains of people from Malawi, who would burrow tunnels under the border fences, enter goods and people illegally and pass the documents through to police officials who were in possession of border stamps. He was concerned how this would be dealt with as a region.

Ms Duarte acknowledged that the Zimbabwe border had been a problem and this would not end until the crisis inside the country had been resolved. The best thing South Africa could do was to assist the Presidents in the facilitation process, as Zimbabwe did not have a market any more. The border and security cluster was also discussing the corrupt police, and the electric fences, which were a problem. So far it had been difficult to pinpoint where the illegal entries were occurring. .

Mr. Kolweni said that he had not heard any mention of Science and Technology and what the profile was of these disciplines. He also suggested that not sufficient use was being made of local media to popularise what had been done in the SADC to the public.

Ms Duarte replied that DFA would try to promote this, but unfortunately the media was more interested in bad than in good news. There were two science clubs in South Africa and Mauritius. These were used for astronomy and new innovation, and she would prepare details of these in the next presentation. She added that there would be a further draft protocol produced during August.

The Chairperson noted that the Committee would be considering Africa region-by-region to get a better understanding.

The meeting was adjourned.