by Catherine Grant Makokera | Oct 30, 2019 | Blog
Some of you may have noticed that the recently signed trade agreement between the United Kingdom and the region includes the acronym ‘SACU + M’. This is a pertinent time to remind ourselves about the most important and often overlooked economic partnership that South Africa has – SACU.
Who is SACU? The Southern African Customs Union is the world’s oldest customs union made up of 5 members – Botswana, Eswatini, Lesotho, Namibia and South Africa. Historically it was set up to allow for better control of the economies managed by the British colonialists. It has evolved however and is now more focused on ensuring the smooth movement of goods between the countries as well as allowing for the efficient processing of imports to the landlocked members.
What is SACU? It is a customs union, which means that the members share a common external tariff. Goods imported into Eswatini should be treated the same as those imported into Namibia. The same tariff rates are applied and the revenue raised in this way is shared via a formula agreed by the members. A customs union should also result in non-existent or very thin borders between members. There is also a common trade policy and this explains why the trade agreement with the UK is with SACU as a group.
Why do countries belong to SACU? There are similar benefits to be found in a customs union as those from other forms of regional integration, such as access to an expanded market as well as fewer barriers and costs impacting on trade between the members. Belonging to a customs union can also result in greater leverage in trade negotiations with other partners and the sharing of capacity. In the case of SACU, there is also an added benefit for Botswana, Eswatini, Lesotho and Namibia as they receive a supplementary contribution from South Africa to offset any consolidation of economic activity in the region in the largest country.
Where does Mozambique fit in? Mozambique is not a member of SACU. There has been some informal debate about expanding the membership of the customs union but this would be complex and has not found favour with the existing members. It is therefore quite unusual to see the grouping of SACU + M entering into trade agreements together. In the case of the UK however, there was little choice in the matter. This grouping is a legacy of the process undertaking by the European Union that resulted in SADC Economic Partnership Agreement (EPA). The EPA negotiations were long and messy, with one of the reasons being the configuration of the groups that were negotiating with the EU. SADC Member States ended up spread across four different groups. Mozambique and Angola were together with SACU.
While it is still in the process of leaving the EU, the UK was constrained in its engagements with other countries. The agreement signed recently was largely a roll-over of the EPA so that there would be little disruption to trade in the face of a hard Brexit. These engagements can complicate regional integration in Southern Africa – in an environment where this process is already complex enough.
The UK-SACU+M agreement is a useful reminder that it is critical for us to ensure that the building blocks of our regional interactions, including SACU and SADC, are given the attention that they deserve. It is easy to get caught up in the hype of trade agreements with partners such as the UK or ambitious plans such as the African Continental Free Trade Agreement but our economic linkages with our neighbours underpin all of these. SACU deserves more air time and energy to ensure that it continues to function effectively for all the member states and their people.
Photo credit: GovernmentZA on Visual Hunt / CC BY-ND
by Catherine Grant Makokera | Sep 2, 2019 | Blogs
Earlier this month I attended the SADC Industrialisation Week in Dar es Salaam, Tanzania and had the opportunity to learn new things. One of them was the term ‘manel’. I am a veteran of many conferences, summits and workshops dealing with international relations, trade, investment, regional development and economic governance. I have witnessed ‘manels’ before but had not picked up on this useful word to describe the phenomenon of a group of all male speakers discussing a topic, often in a way that brings to the table the interests and views of only one half of the population.
Unfortunately, the ‘manel’ does not appear to be facing extinction any time soon. There is an increasing awareness of the inappropriateness of a platform that does have a female voice but, in some instances, there is little done to remedy the situation. The organisers of SADC Industrialisation Week presumably had months to plan for the many sessions that took place over four days. It was disappointing to see that the programme reflected little effort to source capable and expert female participants for some sessions.
I simply don’t accept any suggestion that the lack of representation is because there are no females working in the areas that were covered at the event, including pharmaceuticals, mining, infrastructure development, trade, manufacturing and agro-processing. While it is true that some of these sectors remain male-dominated, it is certainly not a reflection of the real world to have a panel with no women on it. The policies being discussed impact on women and there is a need to ensure they can make input at the highest levels. In the opening session of SADC Industrialisation Week, the outgoing Chair of the SADC Business Council, Ms. Charity Mwiya of Namibia, presented a strong case for the participation of women. This unfortunately did not flow through into the rest of the event.
There are good reasons to include more women as speakers at events like SADC Industrialisation Week. They not only bring a different perspective and experiences of trade and doing business in the region, but they can have an approach that is more inclusive. Women (and some men!) can feel intimidated to raise questions and contribute to discussion if the setting appears to be exclusionary of their point of view. It can help to have at least one person that they can relate to sitting on the stage. Everyone will benefit from better quality engagement when diverse inputs are included at the event. The Harvard Business Review once reported that the collective intelligence of a group rises with the participation of more women. This is compelling evidence for gender representation, especially when trying to deal with complex regional issues.
The SADC Secretariat website itself recognizes that –
- Women offer different perspectives and interests in the decision-making process, from their unique experiences which are often overlooked due to under-representation in political and decision-making positions.
There is a commitment in the SADC Protocol on Gender and Development to proactively work towards equal representation of men and women at all levels of decision making. It is a long-term goal to see more women at the level of Heads of State, Ministers and even as Members of Parliament. In the short-term, SADC could at least look at its own events and do away with ‘manels’.
It needs to be a conscious decision by all of us organizing and participating in conferences to fight against the ‘manel’. Women speakers can help us embrace different experiences and opinions so that there is a level of inclusivity in policy making that is still elusive at national, regional and international levels. Contributions from those who have been previously excluded are necessary if we are to achieve the objectives of inclusive, sustainable economic development. Join me in calling out those events dominated by ‘manels’ and recognizing those who make the effort to identify and invite a diverse range of speakers. You can even take the pledge at https://genderchampions.com/panel-parity.
by Catherine Grant Makokera | Apr 29, 2019 | Blog
Catherine Grant Makokera & Faith Tigere Pittet et al
The British exit of the European Union (EU) is still ongoing, or rather still undecided. It is nearly three years since the referendum was held that resulted in the decision of the UK to leave the EU but the House of Commons is yet to agree to a Brexit deal. Luckily, the UK narrowly avoided a no-deal Brexit in March when the European Council (EC) granted an extension to the Article 50 period to 31 October 2019. The extension offers some relief, as a no-deal Brexit would have meant that the UK “crashed out” of the EU single market without any systems in place to regulate the movement of goods or people crossing the UK border.
While some might hope that a second referendum will prevent the UK from having to exit the EU at all or that a smooth Brexit will be negotiated, pragmatists are preparing for the worst. This means putting in place systems to manage for a hard or no-deal Brexit. This is something that even companies on the other side of the world from the UK need to consider and understand the possible implications for their business.
A hard Brexit would entail the UK leaving the EU without a deal that would enable them to remain part of either the customs union or common market. This arrangement would effectively prioritise the UK having full control over its borders and it would allow the country to negotiate new trade deals independently. Without a bilateral free trade arrangement in place, the UK would trade with the remaining EU members under terms applied to all non-preferential trading partners. The UK would also need to negotiate its membership of the World Trade Organisation (WTO) as it is currently a member under the terms applied to the EU.
A no-deal Brexit will also have a significant impact on value chains and trade between the UK and ‘third party countries’ like South Africa. The UK has been actively seeking to minimise this impact by discussing trade agreements that could enter into force as soon as the UK leaves the EU. One such agreement will be with the members of the Southern Africa Customs Union (Botswana, Eswatini, Lesotho, Namibia and South Africa) plus Mozambique. This agreement is still under discussion but the extension of the Article 50 period provides space to resolve the few outstanding issues related to rules of origin and recognition of certificates for agricultural products.
It is highly unlikely that the UK will leave the EU without having concluded some kind of arrangement to ensure that trade with South Africa continues uninterrupted. There is however a small chance that a vacuum will exist for a short period, during which South African exports to the UK would be subject to tariff rates applied to all non-preferential trading partners (or Most Favoured Nation (MFN) tariffs). Based on initial assessments of the tariff schedule provided by the UK, up to 469 products across 26 product categories will face tariffs, which have not been in place under the EU-SADC Economic Partnership Agreement; see UK MFN ad valorem tariffs, post no deal Brexit graph here. Ad valorem tariffs (expressed as a percentage of the value of the imports) range from as high as 24{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} on certain fish products to as low as 1.4{fdf3cafe0d26d25ff546352608293cec7d1360ce65c0adf923ba6cf47b1798e1} on pork products as shown in Figure 1. Non-ad valorem tariffs outnumber their percentage-based counterparts 254 lines to 215 lines and cover a larger number of product categories. These include compound tariffs, specific tariffs and tariff rate quotas, which are widely considered to be more trade distorting.
Based on current exports from South Africa to the UK, the sectors most likely to be impacted by a no-deal Brexit are automotives and agriculture. A recent study by UNCTAD has confirmed that South Africa is likely to be one of the developing countries most affected by a hard Brexit. Such assessments have no doubt focused the minds of the trade officials from SACU and Mozambique who continue to engage with the UK in order to reach agreement on a new trade arrangement. This will be possible in most areas but there is still a need to take into account the likely terms of the agreement to be reached between the UK and the EU, including in relation to rules of origin and the treatment of goods in transit between the two markets.
The Brexit extension was granted to ensure that all options are explored by the UK, including the time required to conduct a second referendum. The UK government is currently holding talks with the opposition Labour Party in the hopes of brokering a deal that could be acceptable to Parliament. For most countries outside of the skirmish, it is very much a wait and see game. The UK can only implement new trade agreements once it is outside of the EU and some provisions will hinge on the nature of the deal struck between the UK and EU. From the South African perspective, there are good signs that much has already been done by the government to secure a smooth transition for our traders. It would only be the absolute worst case that we will see added costs from tariffs for some products and the potential disruption in supply chains. Uncertainty certainly still exists, and it will be important for South African companies to continue to monitor the developments around Brexit, ensure they understand the impact of different scenarios on their business and feed this information into stakeholder engagement processes with the negotiators.
Photo credit: ChiralJon on Visual Hunt / CC BY
by Catherine Grant Makokera | Feb 13, 2019 | Blog
Catherine Grant Makokera and Sanusha Naidu
With the election date set for 8 May, the focus for many South Africans preparing to vote is understandably on domestic priorities. South African citizens are grappling with the challenges of economic development, malfeasance, unemployment, food security, gender-based violence and failures in service delivery, to name but a few. Many would see the pomp and ceremony of foreign affairs as a distraction for many, with the economy, repair of institutions, and the state of the public utility, Eskom at the center of their concerns.
The reality, however, is that in an interconnected world, South Africa cannot afford to ignore international relations. In any case, foreign policy is a continuation of domestic policy; the state of the economy and institutions have a bearing on how the country is perceived externally, and in how it manages its external engagements. While the results of strategic engagements with our partners may not be apparent on an everyday basis, they suddenly become more obvious when things go wrong.
This was recently demonstrated in a media report when an exchange between a group of diplomatic missions based in Pretoria and the advisors of the President was made public. This was over the demarche wrongly issued by the Department of International Relations and Cooperation directed at 5 foreign Ambassadors who it was mistakenly said they penned a letter that criticised government’s handling of corruption and economy when in actual fact, their letter was in support of government’s investment promotion drive. This incident serves to highlight that South Africa does not exist in isolation and those countries we do business with closely watch domestic issues.
Alongside his efforts to reform institutions and the economy, President Ramaphosa has already shown a strong commitment to both regional and international engagements. It can be expected that he will continue as a high-profile statesman if he is elected later this year.
One of the key features of the State of the Nation Address delivered by President Ramaphosa on the 7 February 2019 is the announced R1 trillion investment vehicle, which is aimed at mobilising investment. Further, Ramaphosa underlined the importance of the African Continental Free Trade Agreement as creating a path for the country to undertake investment-led trade in the continent. He stressed the need to improve ease of doing business in order to strengthen the country’s regional and global competitiveness. The goal that he set in this respect is for South Africa to be among the top 50 global performers for attracting investment and trade. A sound institutional and economic policy framework at the domestic level should underpin all of this.
During his engagements at Davos, India, and recently at the BUSA conference and the Mining Indaba, Ramaphosa made it clear that economic diplomacy is the core focus of the country’s foreign policy engagements. This is a familiar policy arena for the President considering his background as a business leader.
Ideally, though, the foreign policy of South Africa will need to go beyond the personal reputation of an individual. It should be strategic and reflect shared priorities for national development, crafted in consultation with key stakeholders from the private sector, academia, and civil society. Institutional capacities should be developed to enhance South Africa’s foreign policy machinery. This includes retooling the processes and systems in relevant agencies tasked with foreign policy and trade and investment strategies, developing human capital, and improve inter-agency cooperation.
The year 2019 could be a major turning point in the domestic political landscape as well as South Africa’s external engagement. There are a few immediate steps that should be undertaken to get the country moving forward on the foreign policy front. The first is to update the White Paper on South Africa’s Foreign Policy: The Diplomacy of Ubuntu. The policy document would do well to better frame the country’s strategic interests both in Africa and abroad. The second is to adopt the Foreign Service Bill. The third is for the Review Panel to expedite its findings so that there is better coordination and implementation of policy recommendations into a revised White Paper.
All eyes are already on South Africa’s performance as it occupies a non-permanent seat in the United Nations Security Council for the third time and gears itself up to lead the African Union in 2020. The opportunity is there for South Africa to get its foreign policy groove back and President Ramaphosa does seem like the statesman that can do so.
Grant-Makokera is a Director of the Tutwa Consulting Group. Naidu is a Senior Research Associate based with the Institute for Global Dialogue.
by Catherine Grant Makokera | Feb 6, 2019 | Blog
This week has seen South African political parties heading north to engage with various actors in Zimbabwe.
It would be easy to simply discount this as extended campaigning in the run-up to the South African elections, but there is a more important message.
Zimbabwe and South Africa remain intimately connected on many different levels. Linkages between political parties are just one of them.
The movement of people is another one that is often mentioned, especially in relation to the estimated 2 million Zimbabweans currently living in South Africa.
The two economies are tied together through trade, investment, physical infrastructure, and capital systems.
South Africa is Zimbabwe’s number one trading partner, with nearly R30 billion worth of exports moving north each year.
These are not just commodities being traded, but largely value-added products that support jobs across a wide range of sectors in the South African economy.
Firms owned by South Africans, including some state-owned enterprises, have deployed significant capital into the economy of Zimbabwe over decades and remain some of the largest players in that market, especially in services such as finance and retail.
South Africa – and the rest of the region, for that matter – ignore developments in Zimbabwe at their peril.
There is no doubt that an unsettled population, along with a failure to uphold the rule of law and a slow-burning economic crisis, undermine the efforts underway to strengthen the integration of African countries and facilitate more intra-Africa trade.
Zimbabwe’s neighbouring countries remained largely quiet about the disruptions and unrest witnessed over these past two weeks.
South Africa missed an opportunity to reiterate respect for core regional principles, and instead, simply called for the removal of sanctions against Zimbabwe.
Quite frankly, this is a red herring.
The sanctions have always been targeted, and have been of a personal nature. They are not the same as the sanctions imposed by the international community against the apartheid regime in South Africa.
Only about 70 individuals in Zimbabwe are affected by the limits imposed by the US on travel and assets.
The EU is now providing development assistance via government channels after many years of avoiding this level of engagement.
There are only two individuals remaining under sanction from the EU – former president Robert Mugabe and his wife, Grace.
Sanctions are one tool in the economic diplomacy arsenal, but in most cases, their impact has been shown to be limited.
In the case of Zimbabwe, the value is further eroded by the distraction factor.
Sanctions have provided a convenient excuse used by the leadership there – and echoed by partners like South Africa who are seeking to avoid engagement on the harsh realities of an economy on its knees.
They simply reinforce the familiar narrative from Zanu-PF which speaks of the threat from a political opposition that is backed by forces seeking “regime change” in the country.
Politics and economics are intimately connected, making for a complex situation that requires strong leadership and the prioritisation of reforms that will undoubtedly result in at least some short-term pain.
President Emmerson Mnangagwa has been trying his best to maintain the idea that Zimbabwe is “open for business”. He is pushing ahead with initiatives aimed at confirming a reform agenda, such as the appointment this week of a Presidential Advisory Council, which includes high-profile business leaders (some associated with South African companies).
Even the petrol price increase is being rolled back for some sectors, including farming, through the promise of excise tax refunds and the allocation of coupons.
These measures are simply tinkering at the margins. They do little to address the structural challenges that have resulted in a shortage of cash in the economy, increasing inflation and diminishing the few formal employment opportunities outside of the public sector.
Zimbabwe needs to find ways to earn money again. This will require imported inputs for manufacturing and agriculture as well as investment from countries like South Africa.
It also needs trust to be restored in the policy environment and the financial system.
The engagement with Zimbabwe must continue and move beyond the consideration of short-term fixes. Any advance of cash to the government of Zimbabwe now would simply disappear into a consumption-based system and there would be no long-term improvements.
South African leaders must rather engage with the business community and creatively access all points of leverage to encourage long-lasting changes that will benefit the people of Zimbabwe and the region.
This article was first published on City Press, 03 February 2019
