On September 1, 11 members of the Southern African Development Community will enter a free-trade arrangement leading to the total abolition of tariffs and the creation of a common market. Will everybody be a winner or will some nations lose out? Tom Nevin discusses.

The last of the barriers to a free trade zone in the Southern African Development Community (SA DC) have been swept away with the dismantling of tariffs from September 1. The decades-long search for a tariff free community was finally resolved in April this year, and the date of September 1 set for the launch of free trade in the region. Importers and exporters alike breathed a sigh of relief when the end of nearly 25 years of cross-border wrangling was announced and a date set for the implementation of the 11-nation free trade area (FTA).

Said a clearly elated Iddi Simba, FTA chairman and Tanzania’s Minister of Commerce and Industry at the April 1 meeting: “We will see a definite programme of action which will lead to the establishment of a common market in the SADC.” His announcement followed a series of meetings in Johannesburg by SADC trade officials seeking to thrash out the final problems standing in the way of a freely-flowing, tariff-free commerce in the region. Some of these included rules of origin in the clothing and textile sector and were responsible for putting the implementation date back nine months, from its previously scheduled New Year’s Day launch. From the inauguration date, regional Trade Ministers will hold monthly meetings to assess the integration progress. Three SADC member states, Angola, The Democratic Republic of Congo and Seychelles will not take part in the early stages of the project. Mfundo Nkhulu, chief director responsible for African trade relations in the South African Ministry of Trade and Industry, sees the importance of the free zone as critical to SDAC’s access to the benefits of the United States Africa Growth and Opportunity Act, and the European Union - South Africa trade deal. In terms of the rules of origin, (the main cause for the earlier impasse), two new options have been accepted for acquiring origin for clothing and textiles. All remaining issues will be addressed by the end of August, including the sticky, sugar co-operation agreement. Also resolved was the mechanism for settling disputes. During the transition phase, there will be a quota arrangement in the clothing and textile industries. During this five-year period, the least-developed countries will be expected to invest in capacity to meet the stricter rules of origin. The free trade project is by far the most ambitious by the SADC, and underlines the community’s commitment to inter-regional trade and its drive to integrate meaningfully into the global economy. The SADC economies, as a trading bloc they a persuasive argument for investment. SADC countries are performing strongly in comparison with some of their African counterparts Millennium milestones Perhaps the turn of the millennium was the catalyst for change in the continent. Whatever it was, four major milestones were reached in the first four months of the year, and each has an impact on the fortunes or misfortunes of the other.

Firstly, the announcement of SADC free trade implementation by September 1, 2000. Second was the threatened disintegration of sister organisation Comesa, third the proposed West Africa currency union (see Moin Siddiq’s analysis page 16) and lastly, the imminent signing of Suva 1 to replace Lome IV. The Common Market for Eastern and Southern Africa (Comesa) has hit a few pot-holes along its road to a free trade zone. Its plans to create tariff-free inter-regional trade from Egypt to Angola came under fire from the trade bloc’s poorer nations because they weren’t offered compensation for losses expected by the dismantling of tariff barriers.

Tanzania says it would rather pull out of Comesa than submit its strengthening, but still fragile, economy to the stresses of tariff removals. Comesa is trying to beef up trade between its member nations which currently stands at just $4.2bn out of total foreign trade worth $62bn. The issue of compensation to gain the support of SADC’s poorer countries is as much of a thorn in the side of the southern African bloc as it is in Comesa’s. Other methods of compensation, such as non-synchronisation of countries and trade categories have been mooted for SADC members.

Suva 1 - how big a deal for SADC?

The Lome Convention, now nearing the end of its life as its fourth five-year term draws close to its 2002 expiry, is about to be replaced by a new, improved model Suva 1 - to run in tandem with the Cotonou Accord. Lome was named after the city of its birth, the capital of Togo in west Africa - its offspring gets its name from the capital of Fiji where the convention will be headquartered and dispense its trade largess from now on. The Suva protocol has been designed to run for 20 years, during which its mission is to groom ACP countries for integration into the global economy. A financial package of about 17bn Euros is included in the agreement, 85% earmarked for sub-Saharan Africa with a sizeable portion of that pencilled in for SADC, South Africa excluded. The Suva convention will continue much in the same way Lomé leaves off. Its structure - 71 former African, Caribbean and Pacific colonies - will be virtually unchanged, (with the exception of the inclusion of Cuba), although many operational changes have been written in. Caribbean sugar producer are keen on membership of the club because of the generous trade concessions that will accrue from the European Union. Just for starters, Cuba will receive three times more for its sugar than it gets today on the open market. Cuba’s right to join stems from its Spanish colonial heritage. With the notable exception of South Africa, all SADC countries are signatories to the Lomé Convention. South Africa is in the process of finalising its own concessionary trade agreement with the European Union. SADC countries, in particular those whose primary agricultural output includes beef, sugar and bananas, have been nervous about the change-over from Lomé to Suva because of the non-reciprocal trade privileges that were at stake. In many aspects, Lomé was at odds with World Trade Organisation (WTO) regulations, and this had to be taken into account when tailoring Suva. In many ways, Suva is a means to an end, designed to create a blueprint for alternative trade arrangements between 2002 and 2007and put them in place, as seamlessly as possible, between 2008 and 2020. By this time, a barrier - free commercial regimen will hopefully be in place. To all intents and purposes, the plan gives SADC a 20-year breathing space. For South Africa it is a mixed blessing. On the one hand it will continue to grow the region economically, giving SA’s regional trade partners more money to spend on South African imports; on the other, it could be a magnet that attracts industry out of South Africa to set up in neighbouring SADC countries taking advantage of concessionary trade arrangements with the EU. Regional first, global later When the economy-priming Spatial Development Initiative (SDI) programme was launched some three years ago, it undertook to approach the issue on two fronts - to make South Africa and the SADC globalisation-compliant and to stimulate commercial regional integration.

South Africa’s coastal regions were to tackle the global aspect, being that much closer to world markets, and Gauteng was seen as the regional industrial lynchpin. At the outset, the SDI management - urged on by the SA Department of Trade & Industry (DTI) - paid equal heed to both scenarios. On the coast, Richards Bay, Durban, Port Elizabeth, Cape Town and Saldanha were given special attention. Gauteng was a harder nut to crack but, ironically, has emerged as front-runner in the SDI basket of projects. “We have noticed that the initial splurges of future manufacturing growth was into the southern African region and not into the globe”, says DTI’s assistant director for special projects, Dr Paul Jourdan. “Because that is where the apartheid distortion was most apparent. Regional trade has been growing at 10%-plus a year in supermarket content products, resource goods and capital equipment.” Such manufacturing industries were concentrated in Gauteng and they were able to compete even against the Asians with their crisis and collapse of currency. Proximity to regional markets gave SA the export edge. Because of the proven viability of the regional market, the SDI leadership is studying the creation of a series of special economic zones in Gauteng. The belief is that regional economic growth will benefit South Africa as long as the region continues to develop. “We believe that the region will have a resource-base phase”, says Jourdan, “and we’ve seen the orders coming through for mining, sugar-farming and forestry equipment and as that activity expands in the region, they will earn the dollars to buy consumer goods from South Africa. For this country to supply supermarket goods is simply us taking our rightful place. For those goods to be supplied from Europe is ridiculous. We will always be able to undercut.” The second, coastal, strategy continues because “if we’re really to become a winning nation, we’ve got to be able to bat it out with the world. The coast also links into the region because we have increasing coaster trade that networks the routes between Mombasa and Luanda.” The coastal SDIs are now moving into a double-edged follow-on strategy. One is a spatial more coherent industrial focus and the other a sectoral or industrial target. Southern Africa’s striving for regional economic integration is being regularly put to the test by both natural and human calamities. Civil wars in Angola and The Democratic Republic of the Congo devour human and financial resources and send unnerving shock-waves through the region. Zimbabwe, the second-largest economy in the region, is sinking into economic and political fragmentation and catastrophic floods halted Mozambique’s miraculous economic revival. Hoping for an end to growing pains If these are growing pains, then the SADC must hasten its coming of age because it is only through strong regional cooperation that the sub-continent can hope to compete successfully in the global village. This is South African President, Thabo Mbeki’s repeated message. There is cause for optimism. SADC countries are for the most part accelerating their economic output and outpacing most other countries in Africa (see diagram). They’re also attracting the lion’s share of foreign direct investment (FDI) into southern Africa. The United Nations Conference on Trade & Investment (Unctad) reports that FDI into the SADC increased from US$2.3bn in 1994 to nearly $8bn four years later. Road, rail and sea transport communications are receiving attention as never before - anticipating the day when inter-regional customs formalities are cut to the bone or done away with completely for SADC traders.

On the other hand, frontier security measures will have to be strengthened considerably to combat the inevitable flood of illegal imports trying to sneak in under the guise of the FTA. Of concern also is the contagion of corruption and graft that plagues interregional borders. There is undoubted resentment among some SADC member countries that through its regional dominance, South Africa will score in heavily biased balance of trade revenue at the expense of poorer, less developed nations in the area.

As it is, South Africa’s exports of its goods and services into the region are worth about R10bn more than its SADC imports. It worries them that they will be over-run in what they see as South Africa’s inexorable march to economic imperialism, and that the free trade agreement is a means of releasing the floodgates. The agreement attempts to dampen this apprehension by having South Africa open its markets ahead of its regional counterparts. Fears, both real and perceived, abound. Some have been put to rest, others persist. Each country wants clear answers to two basic questions: how much will I benefit, how much will I be hurt? Neither is easily answered because of the wide economic and other disparity that exists through the region.

All agree that economic cooperation holds the key to regional development and prosperity. All are encouraged at the progress. The pudding has been prepared and is now laid on the table. It looks a tempting dish, but the proof of its digestibility remains to be seen.

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