SADC Confirms its Free Trade Area

The August 2008 SADC Summit held in Sandton South Africa officially launching the SADC Free Trade Area which saw the bulk of tariff liberalisation completed on the first of January this year. Twelve of the SADC Member States: Botswana, Lesotho, Madagascar, Malawi, Mauritius, Mozambique, Namibia, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe have ratified the SADC Protocol on Trade. The outstanding Members are Angola and the Democratic Republic of the Congo (DRC) who are LDC’s and will join the FTA as their capabilities allow. In addition Malawi, also an LDC, has only partially implemented its commitments. There are notable exceptions to the 2008 ‘free’ status and the FTA will only be fully operational by 2012.

The liberalisation of trade has wider practical implications within the region, notably with regard to the global food crisis, which the region has felt acutely. Estimates show that the SADC region is expected to increase its cereal harvest by around 20% compared to last season. This will result in a significant increase in the regional food security situation, if trade flows are unencumbered. Member States with surpluses can export to those with deficits thereby improving the overall food security situation. However, the removal of temporary export bans on major food crops will have to be addressed to enable those with shortfalls adequate access to food.

To establish the FTA, products have been grouped under three main categories (A, B and C). Category A products (mostly capital goods and equipment) were liberalised in the first year, 2000. Category B products (e.g. goods that constitute important sources of customs revenue) were liberalised gradually to 2008. Category C consists of products deemed sensitive by member states (e.g. imports sensitive to domestic industries such as sugar). These goods, limited to a maximum of 15% of each member’s total merchandise trade, are to be liberalised between 2005 and 2012. In addition, a fourth category of products, Category E, covers products ineligible for preferential treatment under general and security exceptions permissible under Articles 9 and 10 of the Protocol. These are expected to make up a small list of products, so that by 2012 about 98% of SADC merchandise trade will be subject to zero tariffs. The phase-down offers are country-specific and are currently being implemented. Implementation of the Protocol is based on the principle of reciprocity, i.e. tariff preferences will be extended only to member states that have submitted their instruments of implementation.

SADC members made ‘differentiated’ offers to non-SACU SADC countries plus Botswana, Lesotho, Swaziland and Namibia, and ‘general’ offers” to South Africa. Moreover, SACU members made offers to the other SADC members for immediate reductions to achieve zero tariffs after five years, except for sensitive products. SADC offers to SACU countries are differentiated. Offers for tariff reduction to BLNS countries are heavily front-loaded, while offers to South Africa are mid to back- loaded. Offers by the other SADC members to South Africa thereby delayed tariff reductions on category A and B products. Moreover, tariff reductions on the sensitive products (category C) are further delayed from the eighth to the twelfth year. This asymmetrical implementation is seen as a means of enhancing equity in the region since South Africa, the principal SACU member, is far more developed than other SADC members. Zimbabwe and Mauritius also agreed to start their tariff reductions earlier than other non-SACU members.

The FTA is not the end of the road and the Regional Indicative Strategic Development Plan (RISDP) approved by the SADC Summit in 2003 and confirmed in 2007, sets further ambitious targets for SADC’S regional integration. These are:

The completion of negotiations of the SADC Customs Union by 2010;
The completion of negotiations of the SADC Common Market by 2015;
Achieving a SADC Monetary Union and SADC Central Bank by 2016; and
The launch of a regional currency for SADC by 2018.

While there has been political commitment to this timetable, practitioners have been less enthusiastic in seeing beyond the practical difficulties in actually meeting these targets.