SADC Customs Union, a mirage

SHARE   |   Monday, 17 August 2015   |   By Phillimon Mmeso
Dr Mhlongo Dr Mhlongo

Efforts by SADC member states to have a customs unions is faced by many challenges and will take time before it is established, admitted SADC deputy Executive Secretary for Regional Integration, Dr Thembinkosi Mhlongo. Addressing the media at the ongoing Summit on Monday, Dr Mlongo said that currently most of SADC member states belong to different customs unions and can’t be dual members notably Southern African Customs Union (SACU) and Common Market for Eastern and Southern Africa (COMESA).
“It is not allowed for member states to be members of more than one customs unions and this is a great challenge for the regional block,” he said.
SADC wanted to establish a customs union by 2013 as part of Regional Indicative Strategic Development Plan implementation framework for the Integration Milestones but has failed leading to the regional block reviewing it and setting 2020 as the year for the setup of the customs union, said Dr Mhlongo.
Another major challenge that is hindering the establishment of the customs union for the regional block is the establishment of a single Common External Tariff (sometimes referred to as a CET), which he said that it is being complicated by the fact that within SADC there are currently 11 individual tariff policies that will need to converge into a single and uniform tariff regime. He said that the issue is too political as it involves sovereign states as such it will be very difficult to negotiate it.
The SADC deputy Executive Secretary for Regional Integration was quick to add that SADC has achieved a lot in terms of regional integration like free trade within the region.  He also cited the construction of the Kazungula Bridge which he said it is a regional project which boosts trade within SADC.
He raised a concern that lack of regional trade arrangements (RTAs) within the African is hampering trade as currently it is too expensive for African states to do intra trade.
Dr Mhlongo said that if RTAs are well designed they can contribute to Africa playing a critical role in the global economy.
In an interview with the Patriot on Sunday SADC chairman for council of ministers, Kenneth Matambo said that the regional block is far from achieving its own customs union looking at the challenges they are facing.
He concurred with Dr Mhlongo that member states are currently members of various customs unions which might make it difficult for them to abandon them.
Asked if Botswana is ready to abandon SACU for SADC CU, Matambo said he cannot comment of something that is not yet there.
Matambo who is also the Minister of Finance and Development said that Botswana can only join SADC Customs Union if it exists. “We cannot join another customs union while we are a member of SACU and cannot say whether we will abandon SACU if the SADC Customs Union comes up,” he said.
 SADC Director of Trade, Industry, Finance and Investment (TIFI) Boitumelo Gofhamodimo has also admitted that RISDP 2003-18 has failed to advance beyond Free Trade Area (FTA) with other stages being Customs Union by 2010, a Common Market by 2015, Monetary Union by 2016 and Economic Union with a single currency by 2018 having failed to materialize leading to the regional block reviewing it.
She said that the set milestones are still relevant in the medium to long term period and that a thorough assessment is going to be undertaken within the framework of the revised RISDP.
On what they have achieved, Gofhamodimo said that they have managed to attain an FTA in 2008 with 85% on goods and tariffs on goods zero rated by almost all FTA participating countries.
 She said that Intra-SADC trade substantially increased by quad rippling from US$D 89.3 million 2001 to US$D 394 million and this is attributed to implementation of the protocol on Trade.
Gofhamodimo raised a concern that most of the exports are in primary commodities which calls for urgent need to diversify and improve the productive capacity of the economies of the region.
Trade with the rest of the world is also expected to increase particularly with new initiatives including the operationalization of the Tripartite FA and the Economic Partnership Agreements that involve SADC member states, revealed SADC Director of Trade, Industry, Finance and Investment.
In 2012 heads of state at the African Union Summit, which took place in Addis Ababa, Ethiopia   under the theme ‘boosting intra-African trade', endorsed a plan to set up a Continental Free Trade Area (CFTA) by 2017.
The proposed CFTA would be a key component of the AU's strategy to boost trade within the region by at least 25-30 percent in the next decade.
 African Development Bank Group has estimated that if implemented CFTA is expected to address Africa’s low internal and external trade performance which is currently at 13% and 2%, respectively.
A computable general equilibrium (CGE) analysis by Cheong, Jansen and Peters estimates that the CFTA could stimulate intra-African trade by up to USD 35 billion per year, or 52% (above the baseline) by 2022.
 According to the African Development Bank Group this in effect means that tariffs and quotas on the trade of most goods and services among African countries will be eliminated, bringing together 54 African countries with a combined population of more than one billion people and a combined gross domestic product of more than USD 1.2 trillion.
Commenting on CFTA Gofhamodimo confirmed that it is on the charts and negotiations were launched in June 2015.
Efforts to liberalize trade in services is high on the agenda said Gofhamodimo adding that negotiations are ongoing in six priority sectors namely construction, financial services, tourism and energy.
Past studies by International Monetary Fund (IMF) have shown that African trade has been hindered by distorted trade regimes and high transaction costs owing to inadequate transport, information, and communications infrastructure.
Another challenge that is making SADC and other African regional block to regress is that most of member states have restrictive trade regimes among all groups of countries, with high tariffs, a large number of often specific and seemingly arbitrary exemptions, and significant degrees of tariff escalation.