ATC120917: Report of the Portfolio Committee on International Relations and Cooperation on the workshop on progress with processes towards regional integration, dated 29 August 2012

International Relations


Report of the Portfolio Committee on International Relations and Cooperation on the workshop on progress with processes towards regional integration, dated 29 August 2012

1. Introduction

The Portfolio Committee on International Relations and Cooperation held a workshop on 29 February 2012 at the Townhouse Hotel, Cape Town . The workshop was meant to appraise the Committee on South Africa ’s role in supporting regional integration both in Southern Africa and the African continent as a whole.

Members in attendance were:

African National Congress

Mr HT Magama - Chairperson

Ms R Magau

Ms W Newhoudt-Druchen

Mr E Sulliman

Ms L Jacobus

Democratic Alliance

Mr I Davidson

Mr B Eloff

Congress of the People

Mr S Ngonyama

Inkatha Freedom Party

Mr MB Skosana

Mr MA Mcwango

United Democratic Movement

Mr B Holomisa

Members of staff in attendance were Ms L Mosala, Content Adviser, Mr L Sigwela, Committee Secretary and Mr D Madlala, Committee Researcher.

The experts invited to facilitate the workshop were the Director-General of the Department of International Relations and Cooperation (the Department) Ambassador JM Matjila, Mr Paul Kalenga, Trade Policy Adviser, from the Southern African Development Community (SADC), Trudi Hartzenberg, Executive Director from the Trade Law Centre for Southern Africa (TRALAC), as well as Professor Gerhard Erasmus also from TRALAC.

2. Opening address

Ms L Jacobus MP welcomed all those in attendance. The Chairperson of the Portfolio Committee on International Relations and Cooperation (the Committee), Mr HT Magama MP, gave a political input and statement of objectives with a background on the issue of regional integration as well as South Africa’s history in engaging with Southern Africa.

3. Statement of objectives by Mr HT Magama MP

The interest of the Committee was to establish the role Parliament could play in the national effort to drive the regional integration agenda. It was of interest to explore how deeper and wider integration could be achieved as an essential ingredient for a future economic community. Taking on board the citizenry of the region and preparing them for a greater global competition and bargaining power, was regarded important. It was important to identify bottlenecks hindering deeper integration agenda, and to explore whether there was a common agenda in the Southern African Customs Union (SACU) and the Southern African Development Community (SADC). The other pertinent issue was to establish whether the member states thereto understood and expected the same political outcome with regional integration.

T he phenomenon of regional integration in Southern Africa, just like the rest of Africa , has a long history. The reasons or objectives for integrating have been evolving over time. It was initially rekindled as a decolonisation agenda and the desire to overcome the colonially imposed ‘artificial’ boundaries, and has evolved over three decades.

In the 1970s, an informal grouping of Frontline States (FLS) was created. The paramount objectives were to combat apartheid South Africa and to support national liberation movements in Southern Africa . These objectives have since changed to the current emphasis on socio-economic integration in the post-independence era. This was meant for stronger bargaining base in global forums and for mutual benefit in the form of accelerated growth and development.

Consequently, from the FLS initiative, the Southern African Development Coordination Conference (SADCC) was established in 1980 by nine states. In part, it was a political response to South Africa ’s Constellation of South African States (CONSAS) created in 1979 to attempt to entrench South African hegemony over the sub-region. SADCC was a more formal organisation than the FLS. Its key objective was to harmonise development among the countries of Southern Africa while supporting liberation struggles.

The mounting pressure on the apartheid regime, however, led to it abandoning its policy of regional destabilisation at the end of the 1980s. From 1994, when Nelson Mandela became president of a post-apartheid South Africa , this country played an active role in promoting sub-regional stability and development.

The transformation of SADCC from a Coordinating Conference to a Development Community took place in August 1992 in Windhoek , Namibia . SADC was formed with an expanded mandate seeking greater economic and political integration of the sub-region. The organisation was committed to the creation of a framework for common interest in the areas of public governance, defence and security, socio-economic development and to strengthen regional political solidarity and provide for mutual peace and security. It placed more emphasis on increasing markets within the sub-region and strengthening economic ties between SADC member states and external actors.

Southern African regionalism removed some trade barriers, allowing greater movement of goods and capital across its borders. However, statistical data reflect that there is very little trade amongst African states. A question was posed as to what the impediments could be to inter-state trade.

In reality, the earliest structure depicting regional integration is SACU, which celebrated a hundred years of existence in 2010, marking its place as the oldest customs union in the world. The structure of SACU had a facelift in 2002 to accommodate the refocusing of its mandate to fit into the modern-day requirements of a union of its kind to serve its members as required.

SACU has had its fair share of successes in distributing collected revenue amongst its membership. However, this continues to be a challenge to ordinary South Africans. Voices have criticised this arrangement of transfers of funding to neighbouring countries, irrespective of their development orientation ( Swaziland was given as an example). As domestic development challenges in South Africa are persistent and funds at home are deemed scarcer, a way had to be found to balance the two compelling scenarios for deeper integration within SACU.

The lessons learnt from the events around the handling of Economic Partnership Agreements (EPAs) are huge. From that experience, it is difficult to say the region was ready to competitively participate in multilateralism from a regionalised standpoint. This would assist states to negotiate more effectively for international market access and ward off marginalisation and unfair competition in the global arena.

South Africa is cognisant of the need to work towards processes in the continent to facilitate continental integration. The African Union programme is to rationalise and harmonise the Regional Economic Communities (RECs), to contribute towards the realisation of the aspirations of the Abuja Treaty on the African Economic Community (AEC). It was seen as critical to streamline the disparate integration processes of SADC, the Common Market for Eastern and Southern Africa (COMESA) and the East Africa Community (EAC), the so-called ‘spaghetti bowl’.

4. Presentation by Ambassador JM Matjila

4.1 South Africa ’s Approach to Regional Economic Integration

South Africa has been advancing a developmental integration agenda that combines trade, infrastructure development and sector policy coordination towards productive capacity across the region. This includes strengthening a “real economy” cooperation agenda, of which industrial development is a critical component. South Africa supports the need to accelerate regional economic integration, and endorses SADC’s roadmap for the achievement of this objective in the region.

4.2 Developments of the Economic Regional Agenda: SACU

SACU remains the oldest customs union; however this has not been without challenges. The SACU Agreement (2002) is not fully adhered to, which manifested when negotiating with third parties (e.g. EPAs). Revenue declines from the SACU revenue pool exposed an over-reliance on SACU receipts for national budget revenue by member states and a lack of diversification. Low intra-regional trade was prevalent. In addressing the challenges, SACU member states agreed on five priorities, namely: (1) development of regional industrial policy, (2) review of the revenue sharing formula, (3) development of SACU institutions, (4) unified engagement of member states in international trade negotiations and (5) trade facilitation.

4.3 Developments of the Economic Regional Agenda: SADC Free Trade Area

The launch of the SADC Free Trade Area (FTA) in 2008 provided an enabling platform to advance higher levels of regional economic integration and infrastructure development. The SADC Summit of August 2010 adopted a comprehensive work programme with concrete actions and timelines aimed at consolidating the SADC FTA as a priority. Within SADC a significant trade integration progress has been recorded. In 2008, 85 per cent of goods were traded duty free. By 2012, 99 per cent of goods traded would be duty free.


The SADC Customs Union was not realised in 2010 as planned. The SADC Summit, during its August 2010 meeting, reaffirmed its commitment to establish a SADC Customs Union and recognised the need to establish synergies between the processes to consolidate the SADC FTA, the establishment of the Customs Union and the COMESA-EAC-SADC Tripartite FTA.

The 2010 Summit also endorsed the decision of the Ministerial Task Force to appoint a High Level Expert Group (HLEG) on the SADC Customs Union. The group’s mandate was to consolidate and refine previous technical work undertaken in order to reach agreement and common understanding on key elements.

The HLEG met four times in 2011, and a report was submitted to the SADC Senior Officials Task Force in November 2011. That report would form part of deliberations at the Ministerial Task Force on Regional Integration and the SADC Council of Ministers’ meeting which was then underway (in February 2012) in Luanda, Angola.

4.5 Regional Indicative Strategic Development Plan (RISDP) review

The RISDP identified the establishment of specific milestones in support of the regional economic integration agenda, namely a SADC Free Trade Area by 2008; a Customs Union by 2010 and a Monetary Union by 2016. The Free Trade Area was launched in 2008. A Monetary Union is not yet on the agenda. The current focus is on consolidating the Free Trade Area. In its meeting of March 2011, the Council of Ministers took a decision that member states undertake reviews of national development policies to ensure alignment to the RISDP.

4.6 COMESA-EAC-SADC Tripartite Free Trade Area

The establishment of the COMESA-EAC-SADC Tripartite Free Trade Area (FTA) arises from a decision by the Heads of State and Government at the Inaugural Tripartite Summit in Kampala , Uganda in October 2008. The COMESA-EAC-SADC Tripartite FTA represents 26 countries with a combined population of nearly 600 million people and a total gross domestic product (GDP) of approximately US$1.0 trillion.

The rationale for the creation of a Tripartite Free Trade Area is based on the following issues:

o It addresses issue of overlapping membership;

o It forms a building block towards eventual African economic integration as envisaged by the Abuja Treaty of the African Union;

o It creates a better opportunity to expand market access for South African products on the continent, while preserving South Africa’s market space; and

o However, it will also enable greater competition with other strong economies in the regions such as Kenya and Egypt .

The Second Tripartite Summit officially launched the COMESA-EAC-SADC Tripartite Free Trade Area (FTA). During the negotiations on 12 June 2011 in Johannesburg , the Summit endorsed the pillars of tripartite integration, namely (i) market integration; (ii) infrastructure development; and (iii) industrial development. It endorsed the Tripartite FTA Negotiating Principles, Processes and Institutional Framework, and agreed that the negotiations on the movement of business persons, as well as the work programmes on infrastructure and industrial development would be undertaken concurrently on separate tracks during Phase I. It further noted that the time-frames may run concurrently rather than sequentially on the basis that some programmes would be ongoing and could therefore be pursued simultaneously.

Recent developments were that the Inaugural Meeting of the Tripartite Trade Negotiation Forum (TTNF) was held in Nairobi , 7-9 December 2011. The meeting put in place the administrative arrangements necessary to facilitate the conduct of the TFTA negotiations and to agree on a negotiating schedule and approach. The next meeting of the TTNF will begin substantive negotiations.

Regional and continental infrastructure development is of intrinsic importance to the realisation of Africa ’s economic growth and development imperatives and ambitions for greater trade integration and global market space. In the realisation of regional and continental integration, the AU/NEPAD Presidential Infrastructure Championing Initiative (PICI) was established by the 16 th Summit of the African Union in January 2011.

The championing by President Jacob Zuma of the North-South Corridor project has provided important impetus to continental infrastructure development projects. It will be mirrored in other corridor projects across various countries and sub-regions throughout the continent.

4.7 The Director-General recommended that South Africa should advocate for the following:

· Finalisation by SADC of the review of RISDP priorities and time-frames.

· Contribution by South Africa to regional economic integration through infrastructure development.

· Consolidation of SADC FTA for trade liberalisation in East and Southern Africa .

· Promotion and strengthening institutional cooperation between SADC and SACU (the notion of SACU as nucleus for regional economic integration).

· Prioritisation regional economic integration with focus on market integration; infrastructure development; and industrial development.

· The realisation of the grand FTA (Tripartite process).

· There is a need to develop clear strategies of engagement within various groupings and to ensure that they are in line with South Arica ’s interests as a country; and in the region. South Africa was regarded as on course for achieving regional integration.

5. Observations by members of the Committee

In order to reach the goal towards regional integration within SADC, the following observations need to be taken into account:

· The role of Parliament with regard to regional integration should be strengthened.

· The Committee should organise a consultative meeting or workshop with other SADC members of Parliament to discuss a unified approach to regional integration.

· Fears by member states around losing economic and political sovereignty in regional integration must be addressed.

· Lessons must be drawn from the current EU experience of the economic meltdown and its impact on the Union as a cautionary measure for a future integration. The full extent of its impact on Africa should be examined.

· Climate change should be at the centre of regional integration processes.

· South African companies with branches in other parts of Africa should conform to climate change regulations embodied in the outcome document which emanated from the 17 th Conference of the Parties on climate change (COP17).

· Perhaps at some stage in the future, a federal state of Southern Africa which adequately deals with infrastructure and security is something people will actively desire.

· High-quality products and the processing of goods are matters that are often neglected but should be discussed.

· Government bureaucrats should be committed to the regional integration initiative.

· Discussions should be initiated around domestic policies and unequal development in the region.

· There are signs of a decline of living standards in the region. This should be adequately addressed.

· South Africa is said to be quite behind the rest of the world in ICT.

6. Response by the Department

· The role of parliaments in SADC on the regional integration process is important.

· Boosting intra-Africa trade is vitally important.

· National interest issues require national debate and the general public must be involved in the process, so is the case with the regional integration issue.

· Bigger countries are often the ones that have to foot the bill for integration.

· Angola is growing quite steadily and is a strategic partner to South Africa .

· Parliament should guide both the Department and the Department of Trade and Industry politically as the integration process unfolds.

· In the past this country had factories producing certain materials, but now it imports these materials.

· South Africa should consider import-substitution policies.

· SACU member states need to do more with ICT and education.

· The tax base has reduced in SADC countries like Lesotho , Botswana , and Swaziland because of the crisis in Europe . It means there are fewer buyers of SADC exports.

· The Official Development Assistance has also declined due to the economic crisis in the northern hemisphere.

7. Challenges to achieving regional integration in Southern Africa : Mr Paul Kalenga

Some of the identified main challenges to regional integration included the following:

· A lack, within SADC, of a parliamentary structure with enforcement capacity.

· SADC is still a cooperative rather than a rules-based entity. The latter was regarded as the best mechanism for success.

· Legal and political institutions must be in place.

· The Secretariat of SADC is not a supra-national body, and member states have to own the decisions of the institution and implement them.

· Angola and the Democratic Republic of Congo are key strategic countries, the fact that they are not part of the Free Trade Area (FTA) means that the FTA is sub-optimal.

· SACU has opened its markets, which is a good development.

· Some countries do not fulfil their trade facilitation and liberalisation obligations as set out by the SADC collective:

o Malawi : Only 46 per cent of tariff offer liberalised;

o Zimbabwe : has been granted derogation, annual reductions to resume;

o Tanzania : unilaterally introduced a 25 per cent tariff on sugar and paper products; and

o Mozambique ’s offer on tariff reductions with South Africa will be completed in 2015.

· Intra-SADC trade flows are still quite low.

· Non-diversified range of goods and services persists.

· Vertical integration in production is still lacking.

· Tariff barriers, non-tariff barriers, supply-side constraints, inadequate trade and insufficient production-related infrastructure need to be addressed.

In order to achieve a Customs Union, Common Market, Monetary Union and eventually a Common Currency, the following must be taken into consideration:

· A Common External Tariff must be adopted therefore countries must surrender the tariff policies.

· Other problems include: overlapping membership (spaghetti bowl), economic imbalances, divergent trade policies and strategies, customs revenue dependence, and varied tariff structures.

· A customs union requires a Free Trade Area and a common external tariff.

· Achieving a common market by 2015 is a politically difficult step considering that member states have to surrender sovereignty on financial and immigration policies.

· A monetary union and a single currency require a common interest rate and fiscal policies.

7.1 Recommendations by the presenter as to how South Africa could rejuvenate regional integration processes

· A rethought policy focusing perhaps on specific issues such as infrastructure should be considered. South Africa can be a champion of the rethought process.

· South Africa and SADC should comprehensively implement the Free Trade Area.

· Member states should strive to reduce costs of doing business.

· SADC should change its competitiveness agenda (infrastructure and supply-side measures).

· Member states should reinvent the SADCC spirit, a rules-based approach to processes of the organisation.

· COMESA-EAC-SADC Tripartite mechanism offers opportunities through market integration, infrastructure, and industrial development.

8. Observations by the members of the Committee

· The Committee should encourage participation of broader members of society, including civil society, in regional integration processes.

· Road shows should be undertaken in various provinces to educate the public about what regional integration entails.

· SADC Parliamentary Forum and Pan-African Parliament should have discussions on integration matters.

· The priorities of each country will have an impact of the success of regional integration.

· South Africa should consider strengthening integration rather than adopting a rules-based approach.

· The Departments of International Relations and Cooperation and of Trade and Industry should engage and allow the public to debate integration issues.

· The Committee should embark on a countrywide public diplomacy campaign on the issues around regional integration. The road show should clearly articulate how integration would benefit the people.

· A debate is needed in the House and a supporting resolution on regional integration processes should be passed.

· Integration must move in a phased manner to allow for the economic imbalances within the region to be addressed.

9. Presentation by Trudie Hartzenberg: Trade Law Centre (TRALAC)

South Africa is a member of SACU, the oldest customs union of its kind. The shared revenue emanating from the customs collections has contributed positively to the members’ fiscal well being; Lesotho and Swaziland are good examples.

9.1 South Africa , SACU and trade policy space

A customs union means a “common customs territory with a Common External Tariff (CET)”. This means there is a SACU tariff (not a South African tariff; although as the region’s powerful economy, South Africa ’s policy imperatives (industrial policy) inform the CET.

9.2 Recommendations by the presenter

However, SACU has not been without its fair share of challenges. Implementation of the provisions of the reviewed agreement (SACU 2002 Agreement which entered into force in July 2000) is still a problem. SACU is in the process of establishing a future strategy for engaging into a deeper integration agenda, namely that of becoming an economic community. There is a need to address the broader regional agenda of possible involvement in the Tripartite FTA process. SACU is faced with an intra-regional crisis, especially in Swaziland .

9.3 Policy statements: South Africa ’s trade agenda

South Africa has developed supporting policy initiatives to facilitate regional trade. The National Development Plan was launched in November 2011. It followed the Diagnostic Report (June 2011), which presented a review of achievements and shortcomings since 1994. It has drawn the strategies that need to be put in place to grow a sustainable economy which will create jobs.

The Trade Policy and Strategy was introduced by the Department of Trade and Industry in May 2010. It is meant to support multilateralism and commitment to the African integration agenda. South-South cooperation is to be enhanced and supported to create jobs in the country. Industrial development is seen as key to economic development and regional intra-trade activities.

The White Paper on South Africa ’s Foreign Policy (May 2011) has been crafted to champion Pan Africanism and South-South partnerships. There is a deliberate policy shift and strategic focus on partnering with the emerging markets (trade and investment), and advocate the African Agenda within the South-South forum. The rise of China , India , Turkey , Indonesia , Brazil , Russia and others, has created space for addressing domestic imperatives, which are actually common amongst these emerging economies.

10. Comments by members of the Committee

South-South Cooperation is important and it should be the new focus for economic diplomacy. South Africa should ensure that mutual benefit takes centre stage in Brazil-Russia-China-South Africa formation (BRICS) and India-Brazil-South Africa forum (IBSA). There must be concrete agreements that create jobs for local people.

11. Presentation by Professor Gerhard Erasmus

The role of Parliament in regional integration processes is of paramount importance. Decisions relating to water, energy, climate change and trade are negotiated regionally or multilaterally. It is no longer easy for states to unilaterally develop policies without reference to the rules-based principles and agendas applying to all.

Parliament should have full grasp of regional integration issues to be able to disseminate and educate the citizenry. Technical capacity and coordination amongst the portfolio committees on the process is very important. Parliament has to speak in one voice and ask the right questions (such as whether this is the right model for economies of the region). The private sector should be involved in all stages of negotiations as they are the constituency which will drive the regional integration agenda.

12. Conclusion

The importance of the role of Parliament in the regional integration agenda has been made very clear. The experts were applauded for their facilitative role in the workshop.


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