30 March 2023

Executive Secretary’s report at the 15th SACU Council of Ministers meeting held on 27 June 2008 in Midrand South Africa

27 June 2008

Johannesburg, South Africa

Commission Members
Ladies and Gentlemen

It is an honour for me to present to the 15th Meeting of the Commission the Executive Secretary's Report. In doing so, I also wish to take this opportunity to thank South Africa for hosting this meeting. Finally we would like to welcome all the Member States to the meeting.

The purpose of this report is to respond to matters raised at the 14th Council meeting held in Gaborone, Botswana on 4th April 2008, which require follow-up action. Specifically the report presents detailed proposals regarding the planned Special Council meeting which will offer an opportunity to discuss and decide upon a number of urgent challenges facing the Organization. Finally, the report presents a proposal to facilitate the smooth rotation of the Chairmanship of SACU and handover procedures.

In recognition of the challenges faced by SACU, at the 10th SACU Council meeting held on 10th April 2007, Council directed the Task Team on Regional Integration to develop a coherent SACU Strategy. Council however took note that the development of a comprehensive SACU Strategy would be informed by the outcome of the commissioned studies on integration. The final report of these studies was presented to the Task Team on Regional Integration which met recently on 2nd - 3rd June 2008, in Johannesburg, South Africa. The Chairperson of the Task Team will submit a detailed report to Council on this matter.

Council has also recognised the need for political direction on matters relating to regional integration, especially as they pertain to the interrelationship of SACU with SADC. Finally, at the 14th Council meeting, Council acknowledged the complications created by the outcome of the EPA negotiations and their impact on integration initiatives in the region. Council decided to convene a special meeting dedicated to address these challenges.

In pursuit of these directives, in order to facilitate achievement of the intended objectives, the Secretariat initiated the process to identify some of the key issues facing SACU. These include the uncertainty on the direction that SACU Member States want to pursue on regional integration. From the various agreements that the Member States have entered into either individually or collectively, it demonstrate that SACU Member States are desirous of deepening their integration into the continental and global economy. However, there is no clear thought-out strategy for pursuing this.

In order to come up with a strategy, there is need to ascertain Member States commitment to deeper integration with a common vision. There are also external challenges that SACU faces which have introduced policy, institutional, legal and technical challenges that need to be addressed.

There is need for a clear direction on the development of common or harmonized policies in the areas of industry, agriculture and competition. So far progress has been limited. In doing so, Member States must indicate whether national policies should be developed first or regional, SACU-wide policies should take precedence? Deeper integration also requires clarity on the roles and mandates of the respective institutions as well as an assessment of the current policy processes.

On Trade negotiations, Council has recognised the urgency of developing a Common Negotiating Mechanism (CNM) as provided for under Article 31 of the Agreement. This in turn requires SACU to develop common trade policies and strategies which will facilitate the adoption of common negotiating positions. This is exacerbated by the limited scope of the SACU Agreement especially engaging in trade negotiations with third parties.

Questions have also been raised on the adequacy of the SACU Revenue Sharing Formula in addressing the development needs of the region. In addition, the question also arises whether current customs border controls are in support of trade facilitation and the free movement of goods which is a fundamental principle of a Customs Union.

Available evidence shows that the envisaged establishment of a SADC Customs Union in 2010 will have implications for SACU Member States in terms of how they will have to address the sustainability of revenue from trade taxes. The establishment of a SADC Customs Union will be underpinned by a CET, which may differ from the SACU CET. This on its own will have revenue implications for SACU Member States and may require Member States to consider alternative revenue measures within their domestic economies. If the current proposals for the SADC CET are adopted, this will have negative implications for the SACU Revenue Sharing Arrangement. Given the high dependence by some Member States on the SACU revenues, this should be a major issue of debate for SACU. A critical question therefore, is how SACU Member States cushion themselves from this eventuality.

Finally in the past, Council made a decision to be used as a nucleus for a SADC Customs Union. This assumes a gradual expansion of SACU to include new members. Available research shows that the envisaged formation of the SADC Customs Union will have implications for the current SACU revenue sharing arrangement and the overall shares that Member States receive from the Common Revenue Pool. SACU Member States therefore need to debate whether the current arrangement is sustainable with an expanded SACU.

On Institution building and capacity development, Article 2 of the SACU Agreement provides for the development of effective, transparent and democratic institutions which will ensure equitable trade benefits to Member States. In order to achieve this, the questions that need to be addressed are whether SACU is ready for the establishment of both the Tribunal and the Tariff Board. If yes, what needs to be done to fast track the establishment of these institutions?


This list of issues is not exhaustive. The Secretariat is fully aware of the need for Member States to identify their areas of concern which they need to address. Therefore, if this proposal is approved we will expect Member States to provide additional input.

It is the considered view of the Secretariat that in order to give Member States opportunities to deliberate on these important issues, it will be necessary to provide an environment for open and frank discussions. It is in this context that the Secretariat proposes that the special Council meeting decided upon be in the form of a Retreat whose objective would be debate these issues and to arrive at a common understanding on the way forward.

On logistical considerations, the timing of the retreat is of utmost importance.
It is therefore important that once Council has approved the principle, the Secretariat would endeavour to liaise with all Member States on the appropriate date. In thinking about this matter, the Secretariat has been informally consulting with the current Chair of Council who has offered to host the Retreat.

It is expected that the Retreat will result in an "Outcomes" paper, which Council could use to make appropriate policy decisions. It is proposed that given the complexity of the issues and in order to facilitate discussions, an external facilitator be appointed to provide moderation during deliberations and assist the Secretariat in isolating the key conclusions and decisions coming out of the retreat.

At this juncture, allow me to focus on another matter which is the Rotation procedure of the Chair of the SACU Council and the process involved in the hand over. Article 8.10 provides for the rotation of the Chair of Council as follows:

"The Chair of Council shall be held in turn by each Member States for a period of twelve months in the order to be decided by the Council"

According to Rule 4 (a) of the Rules of Procedure for the SACU Council of Ministers, the Chair of Council shall be held for a term of 12 calendar months in alphabetical order of the Member States. Botswana has been the Chair of Council since 15 July 2006 following Swaziland. The term of office of Botswana will expire on 14 July 2008.

In line with the decision to rotate the Chair of Council in an alphabetical order, the next Member State to assume the Chair of Council is Lesotho. This change will become effective on 15 July 2008.

Chairperson,While Article 8.10 of the SACU Agreement provides for the rotation of the Chair of the SACU Council, it does not indicate what procedures should be followed to ensure continuity and a smooth transition from one Chair to the next. It is silent on related aspects regarding the manner and the procedures on how the transition will be handled.

I believe that this is the matter which was raised at the last Council Meeting. We consider it necessary to propose formal procedures with regard to this matter and in doing so, the Secretariat has considered and has considered practices in other regional organizations.

The practice in SADC has been a formalized procedure whereby the Chair rotates every year on the occasion of the SADC Summit of Heads of States and Governments. In order to facilitate the smooth transmission a troika system has been adopted where the outgoing Chairperson, the incoming Chairperson and the next Chairperson form a troika to facilitate decision making in between SADC meetings. The advantage of this arrangement is that it also provides for continuity not only between the outgoing and the incoming Chairperson but also with respect to the next Chairperson.

In the case of COMESA like in SADC the hosting Country automatically assumes the Chair. The Vice Chairperson is appointed from the Country which will be the next to host the Summit. The previous Chairperson becomes the rappouteur. As part of the handing over to the incoming Chair, the outgoing Chair provides a report which highlights the main activities which were carried out during that Countries tenure.

This arrangement is suitable for Organizations which have a relatively large Membership, as is the case with SADC and COMESA. If SACU had to follow a similar arrangement, it would mean that a transitional arrangement will involve three of the five Member States in a troika; leaving only two outside. This model is therefore not considered appropriate for SACU.

In order to facilitate smooth transition during rotation and ensure continuity in decision-making, it is necessary to have a formalized system of handing over from the outgoing Chairperson to the incoming Chairperson and to establish a mechanism for decision making in between meetings. Given the size of the Organization, a much simpler arrangement is proposed. It is proposed that an ad hoc Committee comprising the outgoing Chairperson and the incoming Chairperson be established for this purpose. The Secretariat will prepare a Handing over Notes which will be used as a basis for a Handing Over meeting between the outgoing Chairperson and incoming Chairperson and the Secretariat.

Finally the specific recommendations of Council are contained on page 11 to 12 of the Executive Secretary Report. I will welcome the Commission support for the Report of the Executive Secretary and accompanying recommendations.

I thank you