Chapter 5

International trade in southern Africa

and Africa

Lecture overview

• The Southern African Development community (SADC)

– What is SADC?– The SADC ‘Protocol on Trade’– The mission of SADC– The SADC economy

• International trade in SADC countries– Exports and imports in southern Africa.

Lecture overview (continued)

• Export processing zones in southern Africa• The SADC free trade area and regional

integration• Southern Africa and COMESA• Southern Africa and the African Union• The Southern African Customs Union• Other regional trade/economic

communities in Africa

Learning objectives

• Describe the role of SADC in facilitating development and economic growth in the southern African region.

• Appreciate the importance of the adoption of the SADC Protocol on Trade in enhancing bilateral and regional initiatives to advance regional economic integration.

• Identify initiatives that improve the African countries’ market access to the EU and the US.

• Outline the export and import trends in southern Africa

Learning objectives (continued)

• Explain the importance of export processing zones in creating an environment for regional firms to participate in global markets.

• Explain how firms could tackle African markets.• Describe the role of the African Union, COMESA,

and the Southern African Customs Union in fostering economic, social and cultural integration of the African continent.

• Describe some of the other regional economic communities that exist in Africa

What is SADC?

• It is the Southern African Development Community.

• Its predecessor – the Southern African Development Co-ordination Conference (SADCC) – was formed in Lusaka, on 1 April 1980.

• The Treaty establishing the Community, which replaced the SADCC, was signed at the Summit of Heads of State on 17 August 1992.

• SADC consists of fourteen member countries.

The SADC region SADC consists of fourteen member countries:

The SADC protocol on trade

The aim of the protocol is to increase trade without any impediments by:

– Eliminating import duties– Eliminating export duties– Eliminating non-tariff barriers

Essentially it aims to enhance bilateral as well as regional initiatives to advance regional economic

integration, co-operation to liberalise trade and fair competition in commodity trade

Criticisms of ‘Protocol on Trade’

• Little is done to ensure that other complementary policies are put in place to industrialise the region.

• Reduction on services and non-tariff barriers have been neglected.

• Rules of origin are complex and they hinder regional economic integration.

The objectives of the SADC

• To achieve development and economic growth• To alleviate poverty• Enhance the standard and quality of life of the

peoples of southern Africa• To support the socially disadvantaged through

regional integration• To evolve common political values, systems and

institutions• To promote and defend peace and security

Objectives of SADC (continued)• To promote self-sustaining development• To achieve complementarities between national

and regional programmes• To promote and maximise productive

employment and utilisation of resources in the region

• To achieve effective protection of the environment

• To consolidate the long-standing historical, social and cultural affinities and links among the peoples of the region.

Goal of SADC

The ultimate goal of SADC is to extend the current

preferential trade arrangement so as to establish a regional trading block and a common market for

SADC.

The SADC economy

International trade in SADC countries

Exports and imports in southern Africa

• The US has been the destination for most of Angola’s exports – mainly oil.

• The major destination for Botswana’s exports (mainly diamonds and beef) is the EU.

• The main export destination for the DRC is Belgium (mainly diamonds).

• Lesotho’s largest trade market is the US – and relies heavily on SA for all its consumables.

• The largest export market for Malawi is also the US.

Exports and imports in southern Africa (continued)

• The EU is the leading export market for Mauritius.• Mozambique’s most important trade partner is

South Africa.• Namibia’s trade is highly oriented towards the EU

– on the import side SA is the dominant partner.• Seychelles’s main trading partners are France, the

UK, Germany and Japan.• The EU is South Africa’s most influential trade

partner.

Principal exports and imports per SADC country

Country Principal exports Principal imports

1. Angola Crude oil, refined petroleum products, diamonds, coffee

Consumer goods, capital and intermediate goods, transport equipment, food

2. Botswana Diamonds, copper, nickel, soda ash, beef exports, vehicles and parts

Food, beverages, tobacco, machinery, electrical equipment, chemical and rubber products, vehicles and transport

3. DRC Diamonds, copper, cobalt, coffee, petroleum, gold

Consumer and capital goods, raw materials, energy products

4. Lesotho Clothing and textiles, food and live animals, tobacco, chemicals, machinery, manufactured goods, diamonds

Textiles and fabric, crude materials, machinery and transport material, chemicals, manufactured goods

5. Malawi Tobacco, tea, sugar Machinery and transport, chemicals, materials based manufactures

6. Mauritius Clothing, sugar, fish, pearls and precious stones

Manufactured goods, machinery and transport, food and animals, fuels

7. Mozambique Aluminium, wood, food and live animals, electricity

Machines, transport equipment, oil, food

Principal exports and imports per SADC country (continued)

Country Principal exports Principal imports

8. Namibia Diamond, copper, zinc, processed fish, beef Fuels, machinery, transport equipment, chemicals, food, consumer goods

9. Seychelles Canned tuna, frozen fish, cinnamon bark Manufactures, petroleum products, food, machinery

10. South Africa

Gold, platinum, diamonds, machinery and transport equipment food, beverages, tobacco, manufactured goods

Food, fuel and energy, capital goods, manufacturing parts

11. Swaziland

Raw sugar, apparel and clothing, wood pulp, waste paper

Fuels, machinery, transport equipment, chemicals

12. Tanzania Gold, agricultural products, fish products, manufactured goods

Cons. goods, machinery, oil, transport & equipm, industrial raw material,

13. Zambia Copper, non-metals, cobalt Petroleum, metals, fertiliser

14. Zimbabwe

Tobacco, gold, horticulture, minerals, sugar, cotton

Machinery and transport equip, chemicals, petroleum products, food

Exports processing zones in southern Africa

• Are industrial zones with special incentives set up to attract foreign investors, in which imported materials undergo some degree of processing before being re-exported

• They include free trade zones, special economic zones, bonded warehouses, free ports, customs zones, and Maquiladoras

• In South Africa they are referred to as Industrial Development Zones (IDZ)

Export processing zones in southern Africa

EPZs are established for a number of strategic reasons:

• As a source of foreign investment• To find a niche in the global economy• To serve as industrial estates that have duty-

free production of exports, facilities and services tailored for export oriented industries

• As part of a broader development initiative that encourages private sector participation in providing infrastructure in areas with abundant, unutilised potential.

Exports processing zones in southern Africa

In South Africa four IDZs can be identified:

• Coega• East London• Johannesburg• Saldanha and Richards Bay

All part of a broader initiative to encourage private sector participation in areas with under-utilised

potential

Export processing zones in southern Africa (continued)

• In Mozambique EPZs are either separate geographical areas or single factor units geared towards exports.

• In Malawi, the EPZs were introduced in 1995 to attract foreign investment. Special incentives are given to investors involved in manufacturing for exports.

• In Mauritius, government focuses on forging competitive edge of export oriented activities, particularly in the textile industry.

Export processing zones in southern Africa (continued)

• Namibia had 22 EPZ companies in 2003 which had invested N$ 3.3 billion and created nearly 10 000 direct employment opportunities.

• In 2001 Seychelles had 24 EPZ companies which generated US$150 million, accounting for 22% of all exports in the country.

Southern Africa and COMESA

• The Common Market for Eastern and Southern Africa (COMESA) was established in 1994.

• COMESA is a regional grouping that started with 20 countries in eastern and southern Africa.

• The original 20 member countries of COMESA were Angola, Burundi, Comoros, DRC, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe.

Southern Africa and COMESA (cont.)

• The combined GDP of COMESA countries totalled over $175 billion in 2003.

• In 2000, COMESA launched a Free Trade Area (FTA) with nine out of the 20 countries participating.

• Several countries that did not participate cited insufficient economic development to compete openly with the stronger and more developed countries.

• Since the launch of the FTA, intra-COMESA trading has been reported to have increased by 30%

Some suggestions for firms involved in cross-border trade

• New entrants may establish commercial presence through joint ventures, licensing agreements, merger or acquisition.

• Intra-industry trade is a more effective channel for technology transfer:

– Integrating foreign technologies if actively involved in trade and cross-country product sharing.

– Intra-industry trade reduces transaction costs associated with intra-regional trade.

– Engage in inter-firm and intra-firm research and development for transfer and development of technology

– Intra-regional industrialisation and socio-economic progress lie in the accelerated development of industries where FTAs have a comparative advantage.

Southern Africa and the African Union

• The Organisation of African Unity (OAU) was established in 1963

• Its objective is to foster economic, social, and cultural integration of the African continent

• The development of NEPAD is considered as one of the most important development in the history of OAU

– The primary objectives of NEPAD are to eradicate poverty and to place African countries on a path of sustainable growth and development

The OAU history and initiativesLagos Plan of Action and the Final Act of Lagos (1980) that incorporate programmes and strategies for self reliant development and cooperation among African countries

The African Charter on Human and People’s Rights (Nairobi 1981) and the Grand Bay Declaration and Plan of Action on human rights – the two instruments to promote human rights in the continent

The OAU Declaration on the political and socio-economic situation in Africa and the fundamental changes taking place in the world (1990) – which underscores Africa’s resolve to seize the imitative, to determine its destiny and to address the challenges to peace democracy and security

The Abuja Treaty (1991) proposed the establishment of an African Economic Community (AEC) whose objective is to foster the economic, social, and cultural integration of the African continent

African Common Position on Africa’s External Debt Crisis (1997) – a strategy for addressing the continent’s external debt crisis

The Algiers decision on unconstitutional changes of government (1999) and the Lome Declaration on the framework for an OAU response to unconstitutional changes (2000)

The New Partnership for Africa’s Development (NEPAD) – adopted as a Programme of the AU at Lusaka Summit in 2001

The Southern African Customs Union (SACU)

• Came about as a result of negotiation involving Britain and SA as early as 1910, and persisted until 1960.

• The new renegotiated agreement was adopted in 1969 by five member countries: South Africa, Botswana, Lesotho, Namibia and Swaziland.

• The aim of SACU is to maintain the free interchange of goods between member countries.

• SACU provides for common external tariff and common excise tariff. Customs revenue collected is shared among members.

The Southern African Customs Union (SACU)

• SACU agreement was further reviewed after the first democratic election in 1994.

• Consensus was reached on institutional reform principles, including a share of customs pool, a share of the excise pool, and a share of the development component.

• The new agreement focuses on (1) governance & administration, (2) economic policy and regulatory issues, (3) revenue sharing.

Other regional trade/economic communities in Africa

• The East African Community (EAC)

• Economic community of Central African States (ECCAS)

• Central African Economic and Monetary Community (CEPGL)

• Intergovernmental Authority of Development (IGAD)

• Economic Community of West African States (ECOWAS)