Introduction
Regional economic integration – characterised by the elimination of prohibitive trade barriers and the coordination of monetary and fiscal policies – is the development strategy adopted by the SADC to enhance economic growth. Integrating small economies contributes towards efficiencies in production and intraregional trade, encourages investment in infrastructure, and overcomes barriers to equitable, sustainable growth and development.
However, by 2012 – despite an overarching socio-economic policy roadmap with clearly defined norms, values, practices and objectives, and a harmonized and complementary, legally binding Protocol on trade liberalisation – intra-regional trade remained comparatively low and progress toward regional economic integration had all but stalled.
SADC Protocol on Trade (Protocol)
Signed in 1996, before the 2001 restructuring process, the Protocol was an early economic integration initiative aimed solely at liberalising intra-regional trade in goods and services. It requires member states endeavour to reduce tariff charges and remove customs procedures that hinder efficiency, and harmonise trade policies in accordance with international standards.
The Protocol was amended firstly in 2000 to align its objectives with the RISDP that was then in the late drafting stage, and further amended in 2007 and 2009 to overcome obstacles that had been encountered.
However, despite this being a legally binding document with a multilateral emphasis, several member states had actually renewed dormant or established new bilateral trade agreements[1]. Although publically committed to regional integration ideal, it appeared that many members lacked any real commitment to deepen and ensconce the process. This was the first of many problems.
The Regional Indicative Strategic Development Plan (RISDP)
Approved in 2001 and adopted in 2003, the RISDP represented the conceptual framework within which the SADC would pursue its socio-economic objectives. Designed to act as a roadmap for deepening economic integration, it provided member states with comprehensive economic development policies. It also affirmed commitment to good political, economic and corporate governance – seen as required by the Mission Statement of the SADC – as well as to democracy, participation in civil society, transparency and respect for rule of law.
It assigned priority to the following areas of intervention and cooperation, agreed upon as essential to regional integration:
A. Trade/Economic liberalisation and development
B. Infrastructure in support of regional integration
C. Peace and security in the region
D. Special programmes at a regional dimension: health; HIV/Aids and other communicable diseases; food, security and trans-boundary natural resources; gender equality, science; technology and innovation; and research and development.
Most notably, it charted a 15 year linear model of progression toward full regional economic integration demarcated by consecutive developmental milestones to be realised along the way: a free trade area (FTA) by 2008; customs union (CU) in 2010; common market in 2015; monetary union in 2016; and economic union with regional currency in 2018.
Issues with the Linear Progression Model of Integration
Free Trade Area
The regional FTA was officially launched in 2008 to meet its deadline. In reality, it only came into effect at the start of 2013, following a workable majority of the member states meeting the tariff phase-down commitments requires of them at the end of 2012[2]. Even after the FTA came into effect though, substantial issues remained:
i) Malawi, Mozambique and Zimbabwe had all failed to reduce import quotas and tariffs on goods from South Africa. Tariff reduction on South African goods represented a significant loss of potential revenue these governments were reluctant to surrender.
ii) Trade in sugar, commonly viewed a ‘political good'[3] , was a source of disagreement. Disputes between sugar producing and sugar consuming SADC member states could not be resolved.
iii) Complicated rules of origin remained problematic, stemming largely from overlapping trade agreements and domestic concerns over particular industries – particularly textiles.
iv) Most significantly, certain products and goods fundamental to intra-regional trade – such as minerals and mineral products, vehicles, base metals, textiles, processed foodstuffs, and all animal products – were excluded from the tariff phase-down agreement, which severely restricted the FTA’s scope.
Customs Union
A CU is an FTA with a Common External Tariff (CET). On top of the issues that remained with the FTA discussed above, three major issues stood in the way of realising an SADC CU:
i) Loss of Revenue. Any proposed CET lower than a member state’s current tariff rate would represent an immediate, and in many cases substantial, loss of revenue. Madagascar and Lesotho, for example, depend on customs charges for upwards of 40% of their annual revenue[4].
ii) Loss of Sovereignty. Agreeing on and implementing a CET amounts to forfeiting autonomy over external trade policy. Given the region’s struggle for independence from colonial and white-minority rule, any threat to national sovereignty is, unsurprisingly, usually greeted with suspicion and hostility.
iii) Multiple Memberships. Many SADC members also belong to other regional trade blocs with similar integration ambitions. Tanzania, for example is also a member of the East Africa Community (EAC) and the Common Market of Eastern and Southern Africa (COMESA), whilst every member of the Southern Africa Customs Union (SACU) – an established CU with an implemented CET – is also a member of the SADC. This leads to a conflict of interest, compounds by several orders of magnitude the difficulty in agreeing on a CET, and directly undermines attempts at deeper regional integration.
Common Market, and beyond
A Common Market is a CU with harmonised regulation and free movement of factors of production – most notably, labour. Notwithstanding the numerous and insurmountable issues with earlier stages of integration, there was one key consideration that undercut the already implausible plausibility of the progression to a common market.
Given the enormous disparity in GDP, financial opportunity, and quality of living between member states, the establishment of a common market would inevitably lead to significant ‘brain drain’ to the most developed and prosperous nations, particularly South Africa[5].
In 2010, the Forced Migration Studies Program at the University of Witwatersrand in Johannesburg estimated that there are between 1 and 1.5 million Zimbabweans living, both legally and illegally, in South Africa[6]. Considering Zimbabwe is a country of 14 million, one need only glance at that figure to realise just how the free movement of labour – especially skilled and educated labour – could have a devastating effect on the majority of SADC members, who are more than aware of this.
The prospect of Monetary Union, let alone Regional Currency, in a region where the GDP (in 2010) differs from just over $400 billion (South Africa) to $1.9 billion (Malawi), and inflation figures range from 4 million (Zimbabwe) to less than 10 (South Africa and Botswana)[7] is so farfetched as to invite ridicule. Moreover, crises in the European Union cast a long shadow over the merit and sustainability of advanced economic integration blocs.
Conclusion
The progression model of the RISDP was spectacularly overambitious and overlooked many fundamental characteristics of the region. This rendered it largely inoperable, although it enjoyed limited success in establishing an FTA in the region, this FTA was limited in scope and still riddled with issues. Moreover, and despite the FTA, intra-regional trade had not increased to nearly the level envisaged.
Further, prospects of progression to a CU were next to none, in part due to the unwillingness of countries to surrender autonomy and revenue, but largely due to the fact that many countries retained multiple memberships of regional blocs with similar, and thus conflicting, integration ambitions. The inclusion of a proposed full economic union with regional currency by 2018 cast grave doubt on the coherence of the RISDP itself.
It became increasingly evident that the RISDP was in need of a major rethink. The next brief looks at developments in 2014 and 2015 which supplied the need.
