SADC-EU Partnership Agreement hailed

SHARE   |   Monday, 13 June 2016   |   By Ditiro Motlhabane
Local businesses to export to the EU under more relaxed conditions Local businesses to export to the EU under more relaxed conditions

Economists and the business community have hailed the signing of the SADC-European Union (EU) Economic Partnership Agreement on Friday in Kasane, Botswana by six member states of Botswana, Lesotho, Mozambique, Namibia, South Africa and Swaziland. The six SADC member states and the EU signed the Economic Partnership Agreement (EPA) after negotiations which dragged on for 10 years. All the SADC EPA member States were represented by their respective Ministers of Trade, while the EU was represented by the European Union Trade Commissioner, Cecilia Malmstrom and Marisa Gerards, Ambassador of the Kingdom of the Netherlands to the Republic of South Africa. The EU-SADC EPA is a development-oriented agreement with the objective of supporting sustainable economic growth, diversification and expansion of the industrial base of the region through regional and global value chains, investment and opportunities. This will complement the Tri-partite Free Trade Area and the proposed Continental Free Trade Areas. The Agreement embraces the objectives of the SADC Regional Indicative Strategic Development Plan of poverty eradication and deeper regional integration. Former Deputy Governor of Bank of Botswana (1999-2005) Dr Keith Jefferis – now an independent consultant at E-Consult Botswana, said the EPA paves the way for local businesses to export to the EU under more relaxed conditions. He said the new EPA is "absolutely essential particularly to secure Botswana's beef market".

He said Botswana would have lost its favourable market access for her beef is she missed the opportunity. "It would have been a very major negative consequent if we hadn't been part of this thing. Taken holistically the EU is the second largest market in the world. Therefore, it is important to maintain preferential access to the EU market," said Dr Jefferis, adding that notwithstanding that other local exports are not as big as beef, the duty free quota free provision means everything produced locally can be exported to EU. Botswana Meat Commission (BMC) Communications Manager Brian Dioka concurs, saying they are "very excited" about the signing of the EPA and are already swinging into action. He said the protection of the beef industry against market forces is important especially that beef revenue is marginal. By securing market access for intermediate goods the EPA presents an opportunity for BMC to increase products that can add value downstream e.g. canned products. "The new EPA has slotted us at par with producers in EU countries, thus eliminating cartels.  It guarantees that we will stay in business, since the EU remains the most lucrative market for us because of free passage of goods and high exchange between the two currencies," he said.

In anticipation of the new EPA, BMC recently increased prices in Q1 2016 up to P33/kg to entice farmers, especially from the Green Zone, to sell more cattle. Such increase makes BMC the highest paying facility in region for producer prices. "We would not have made the decision if there was uncertainty about the EU market," he said. By 2014/15 BMC was supplying 9000 tonnes/ year of beef to the EU, and 1600 tonnes/ year to Norway. In previous years the abattoir only exported 6-7 000 tonnes/year to EU. "We intend to increase this," said Dioka. The three BMC abattoirs have the capacity to slaughter 260 000 cattle per annum but currently only manage between 130-140 000, leaving a deficit of 120 000 cattle. The major contributing factors for such shortfall are very low throughput from farmers, exacerbated by farmers' non-compliance with EU livestock movement protocols and repeated outbreaks of FMD and other cattle diseases. President of Business Botswana – a body which represents the interests of the private sector – Lekwalo Mosienyane also agrees that the new EPA presents opportunities for the development and growth of industries in the local economy targeting exports.

Dr Jeferris cautions that the euphoria over the EPA should not be overstated as challenges that have arrested economic development over the years will continue even under the new agreement. While the potential benefits are immense, it is not yet hurray! He said issues that the private sector is continually complaining about persist, among them lack of skilled manpower, burden of disruptive utilities like water and electricity, and generally lack of capacity to produce for export by budding industries. On the other hand Dr Jefferis said SADC countries should be alive to the fact that lots of other countries like the ACP are getting the same deal, which will in turn present intense competition. But even such competition has not extinguished the excitement in the textile sector. CEO of Premier Clothing Fazul Zahir is elated about the flexibility in the EPA. He waxes lyrical about opportunities presented by the EPA. "It is a great day. Yes, it is definitely going to be beneficial to local manufacturers, particularly those in the textile and garment industry. The current conditions are not conducive for manufacturing for export because the requirements are rather restrictive," he said.

Fazul said the EPA takes out the "two stage transformation" requirement currently in place, thus allowing local manufacturers to import fabric from anywhere in the world, use it to produce garments and export to the EU without restrictions. In the past the requirement was that the fabric used in the manufacturing should be made in Botswana. The biggest hurdle was that there is currently no manufacturer of fabrics in the country.  Fazul's sentiments are shared by Sam Lin, Managing Director at Carapparel Botswana- the only local beneficiary under AGOA. AGOA is a recently renewed trade partnership, which allows free access to the US market for products from Africa. Local businesses planning to produce for export to the EU will have it easier because the new EPA removes the requirement for a certificate of origin, which presented a major hindrance for local manufacturers. The establishment of the Textile and Clothing Institute of Botswana (TCIB) to overcome chronic shortage of skilled workers - which has crippled the textile sector - by Shahid Ghafoor, Managing Director of Western Apparels, will come in handy.  Ghafoor also doubles as the President of the Botswana Textile and Clothing Association.

The EU-SADC Economic Partnership Agreement provides amongst others, for implementation of guaranteed duty-free, quota-free market access to the EU for goods from Botswana, Lesotho, Mozambique, Namibia and Swaziland. South Africa will also have improved preferential treatment for their products over and above what is already covered by the EU-South Africa Trade and Development Cooperation Agreement into the EU market. The EU Delegation to the Botswana and SADC said it is committed to supporting the implementation of the EPA, through the EU programs managed by the Delegation, both towards Botswana and also to the SADC EPA States.