109 years old, since 1910.
18 September 2019

SADC Heads Of Mission Conference, 17 January 2008, Pretoria, South Africa, Address By The Executive Secretary, Ms Tswelopele Moremi

17 January 2008

Pretoria, South Africa

First of all, I would like to express my deep appreciation to the Department of Foreign Affairs for inviting me to address the esteemed gathering of South African Heads of Missions to SADC countries here in Tshwane.

For us at the SACU Secretariat, this invitation is most welcome as it does allow us an opportunity to inform you on the latest developments concerning the Southern African Customs Union (SACU), since its renewal through the 2002 SACU Agreement. In particular, I will share the programmes SACU is implementing and the challenges it is facing.

History

As you are aware, the Southern African Customs Union (SACU) was established in 1910. The Agreement was renegotiated in 1969 and again in 1994, taking account of the changing political and economic situation in the region. It comprises of 5 countries namely Botswana, Lesotho, Namibia, South Africa and Swaziland. This arrangement made SACU a customs free zone with a Common External Tariff.

In addition, the conclusion of the Uruguay Multilateral Round of Trade Negotiations in 1994 and the establishment of the WTO in 1995 introduced a new era of trade liberalisation. It was therefore important that SACU Member States took account of these developments and strengthen SACU taking into account the regional integration process.

2002 SACU Agreement

Consequently, in 2002, a new legal framework was implemented that provides a modern rules-based dispensation in line with the idea of a Customs Union as a single, integrated market and a single negotiating entity.

The 2002 Agreement sets out a broad framework for enhanced integration with a legal personality and includes a clear mandate, objectives, institutions and decision making procedures. The key features include the creation of effective and democratic institutions that provide for a joint decision making process. The Agreement further provides for dispute settlement procedures, the adoption of common policies, as well as a Revenue Sharing Mechanism that calculates on a transparent and predictable basis revenue shares for all Member States.

SACU Governance Structures

Well-functioning institutions are a prerequisite for the effective and efficient operations of a Customs Union. These institutions facilitate implementation of the key objectives of the Agreement.

In line with the objective to create effective and transparent institutions, the governance structures of SACU are composed of the following institutions:

1. A Council of Ministers comprised of Ministers responsible for Finance and Trade and Industry
2. The Customs Union Commission comprising of Senior Officials at the level of Directors-General of Finance and Trade and Industry
3. Five Technical Liaison Committees at the level of experts covering agriculture, trade and industry, transport, customs and finance
4. The SACU Secretariat, based in Windhoek, Namibia, responsible for the day-to-day administration of the Agreement and assisting Member States in the implementation and interpretation of the Agreement, while also facilitating and coordinating the different programs launched under the SACU umbrella.

Additional institutions to be established are the SACU Tariff Board, which shall make recommendations to Council on the level and changes of customs duties, rebates, refunds, etc., as well as the SACU Tribunal, which will be responsible for disputes regarding interpretation or application of the SACU Agreement or any other issue referred to it by Council.

Once these remaining SACU institutions are established, they should bring about a balance in the exercise of responsibility and promote consensus decision-making. These institutions will also play an important role in the consolidation of SACU.

Current SACU Work Programme

SACU`s work programme is structured around three functions: Trade Facilitation and Revenue Management, Policy Development and Research, as well as Regional Integration.

Trade Facilitation

Regarding Trade Facilitation, SACU has placed high priority on the implementation of a trade facilitation programme to reduce transaction costs and, create a more transparent and predictable environment for the conduct of trade within SACU. It should also improve free movement of goods, one of the pillars of a Customs Union. 5 customs initiatives have been developed as follows:

In addition, SACU is working with the World Customs Organisation to develop a Customs Reform and Modernisation programme.

The main challenge has been that the pace of implementing these initiatives has been generally slower than envisaged. This is related to the varying levels of capacity in Member States to implement and finance projects, which has meant an increasing reliance on donor financing, which presents its own challenges.

Revenue Management

A unique feature of SACU as a Customs Union is that the 2002 Agreement provides for a Common Revenue Pool (CRP) and outlines a revenue sharing formula (RSF), which consists of a customs, an excise and a developmental component.

The revenue sharing arrangements of SACU has historically played a critical role in supporting the economic development of especially the smaller SACU Member States. However, with trade liberalisation, customs revenue has the potential to decrease revenues of developing nations which are reliant on these sources of income. Therefore the challenge will be for the Member States to identify alternative revenue sources.

In addition, with the ongoing debate to deepen regional integration in SADC through the envisaged formation of a SADC Customs Union, it would appear that the SACU Member States cannot avoid a debate on the future revenue sharing arrangements.

Regional Integration

The 2002 SACU Agreement provides a framework for deeper integration beyond trade and marks a watershed in the development of common policies which is a necessary imperative for the future development of Southern Africa and Africa as a whole.

To address the challenge for deeper regional integration, SACU is proactively taking action to consolidate itself by building the remaining institutional structures and undertaking technical studies to support these processes.

The level of macro economic convergence already achieved in SACU provides an important platform from which to further integrate with the rest of Africa. This is an important contribution to the development of a regionally integrated economic space in the spirit of Article 6 of the Abuja Treaty.

In this regard, SACU is willing to share its experiences as a Customs Union in order to constructively contribute to the debate on deepening regional integration within Southern Africa

Common Policy Development

The 2002 SACU Agreement requires Member States to develop Common Industrial Development Policies, while also harmonising agricultural policies, cooperating on competition policies, laws and regulations, and develop policies and instruments to address unfair trade practices.

Concerted efforts have been made to develop new regional policies and, where some already exist, to secure their harmonisation with national policies of the Member States. Common policies in a Customs Union are supposed to take account of the differences in levels of development of the Member States, their vulnerability to competing third party imports, and revenue implications in the setting of tariff rates.

However, the main challenge appears to be that of reconciling the differing socio-economic interests and priorities of the Member States. As a result, Member States have different perceptions and objectives that they expect the common policies to achieve.

Drawing on the above, it is clear that the development of common policies should be supported by strategies that address the specific needs of individual Member States while responding to the common goals and objectives of SACU.

Notwithstanding the above and while the Agreement makes provision for common policies, the main challenge is the speed with which the Member States are proceeding to develop common policies. The development of common policies is critical for the consolidation of SACU and forms a fundamental pillar of SACU as an effective regional economic organisation.

Trade Negotiations with third parties

One of the objectives of the SACU Agreement is to integrate SACU into the global economy through trade negotiations with third parties. The SACU Agreement in effect requires the five SACU Member States to negotiate as a unit, with the resulting agreements applying universally in all five Member States. This is done to ensure the integrity of the Customs Union, specifically the Common External Tariff.

The Agreement therefore provides for the development of a Common Negotiating Mechanism (CNM). It provides a formalised structure through which all trade negotiations SACU is involved in will be undertaken. Negotiations where this principle was upheld include the SADC Protocol on Trade, the SACU-EFTA Free Trade Agreement and the SACU-MERCOSUR Preferential Trade Agreement. However, recent developments in the SADC-EU EPA negotiations have posed significant challenges to this principle. Efforts are underway to resolve this issue and develop a way forward that would ensure the continued integrity of the CET, while simultaneously addressing the specific interests of Member States in their trade vis-à-vis the European Union.

A major challenge for the region is the fact that the region had to negotiate under different configurations with the EU, which has implications for the regional integration efforts currently underway. As the debate on regional integration moves forward, it will be important to ensure that existing and future economic arrangements contribute towards achieving the objective of deepening regional integration.

Final Perspectives on Regional Integration

At the continental level, Africa has taken the initiative to revive itself driving the regional integration process as enshrined in Article 6 of the Abuja Treaty. The question that arises is how we as regional economic players in Africa can play a viable role in moving this process forward, taking into account their comparative strengths and advantages.

The decision by the AU Heads of State and Government to accelerate regional economic integration coincided with the decision to revitalize SACU through the implementation of the 2002 Agreement.

SACU is consolidating itself through the establishment of appropriate institutions, development of common policies, and the implementation of the trade facilitation programme. This is leading to greater macroeconomic convergence and therefore there is a need for a clear recognition of the achievements made by SACU in the area of regional integration and that it has an important role to play at a continental level.

Regional integration brings both opportunities and challenges. As Southern Africa pursues greater integration within the context of a very dynamic World Economy, SACU aims to play a catalytic role in ensuring that its Member States improve their trade competitiveness and enhance economic development.

In conclusion, despite the challenges SACU has faced in revitalising itself, it remains an important player in the economic integration process in Southern Africa. SACU is open and willing to enter into dialogue with other regional entities aimed at sharing experiences and enriching the debate on regional integration with a view to fast track the process.

I thank you