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SOUTH AFRICA’S STRATEGIC MULTILATERAL

ENGAGEMENTS IN THE REGION: IS SOUTH AFRICA ON

COURSE FOR REGIONAL INTEGRATION?

29FEBRUARY 2012

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Outline of the presentation

1. Background

1. South Africa’s Approach to Regional Economic Integration

3. Developments of the Economic Regional Agenda SADC Priorities SACU SADC FTA RISDP Review COMESA- EAC-SADC Tripartite FTA

4. Way forward

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The North South Corridor Route

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South Africa’s Approach to Regional Economic

Integration

South Africa is advancing a developmental integration agenda that combines trade integration, infrastructure development and sector policy coordination towards productive capacity across the region. This includes strengthening a “real economy” cooperation agenda, of which industrial development is a critical component.

South Africa supports the need to accelerate regional economic integration, and endorses SADC’s roadmap for the achievement of this objective in the region.

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Developments of the Economic Regional Agenda SADC Treaty of 1992 in Article 5 states as a SADC objective, sustainable socio-economic development and improvement of the quality of life of the people of Southern Africa through regional integration.

In actualising this objective SADC currently prioritises the following:

Development of comprehensive work programme in an effort to consolidate the regional economic integration agenda.

RISDP review Consolidating the SADC FTA Status of the SADC Customs Union COMESA-EAC-SADC Tripartite FTA process

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Developments of the Economic Regional Agenda SACU

SACU remains the oldest customs union, however this has not been without challenges.

SACU Agreement (2002) – not fully implemented which manifested when negotiating with third parties (e.g. EPAs)

Revenue declines from the SACU revenue pool which exposed over reliance on SACU receipts for national budget revenue by member states and lack of diversification

Low intra-regional trade In addressing the challenges SACU member states agreed on

five priorities namely; 1) development of regional industrial policy, 2) review of the revenue sharing formula, 3) development of SACU institutions, 4) unified engagement of Member States in international trade negotiations and 5) trade facilitation.

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Developments of the Economic Regional Agenda SADC FTA

Launch of SADC Free Trade Area (FTA) in 2008 - provides enabling platform to advance higher levels of regional economic integration and infrastructure development.

SADC Summit (August 2010) adopted comprehensive work programme with concrete actions and timelines aimed at consolidating SADC FTA as a priority.

Within SADC significant trade integration progress recorded. In 2008, 85% of goods were traded duty free; by 2012, 99% of goods traded will be duty free.

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A SADC CUSTOMS UNION

The SADC preparatory process towards its Customs Union effectively started in 2006 with specific focus on the following areas: the Common External Tariff (CET); revenue collection, management and distribution; harmonisation of Customs Union related policies; and the legal, administrative and institutional arrangements for the Customs Union. Although significant analytical work was undertaken, an agreement could not be reached on these key elements of the Customs Union, due to the complexity of legal, technical and institutional issues at stake as well as the absence of a negotiation process.

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CONT

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A SADC CUSTOMS UNION

The SADC Customs Union was not realised in 2010 as planned. The SADC Summit, during its August 2010 Meeting reaffirmed its commitment to establish a SADC Customs Union and recognised the need to establish synergies between the processes to consolidate the SADC FTA, the establishment of the Customs Union and the COMESA-EAC-SADC Tripartite FTA.

The 2010 Summit also endorsed the decision of the Ministerial Task Force to appoint a High Level Expert Group (HLEG) on the SADC Customs Union whose mandate was to consolidate and refine previous technical work undertaken in order to reach agreement and common understanding on key elements.

The HLEG have met 4 times in 2011 and a report was submitted to the SADC Senior Officials Task Force in November 2011. This report will form part of deliberations at the Ministerial Task Force on Regional Integration and SADC Council of Ministers Meeting currently underway in Luanda, Angola.

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The Dakar-Djamena-Djibouti trans-African highway criss-cross 10 African countries.

The project will link Dakar (Senegal) to Djibouti (Djibouti)

The highway will pass through Mali, Burkina Faso, Niger, Nigeria, Cameroon, Chad, Sudan and Ethiopia

Dakar-Djamena-Djibouti Road and Rail-Senegal

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Developments of the Economic Regional Agenda Regional Indicative Strategic Development Plan review

RISDP- identified establishment of specific milestones in support of the regional economic integration agenda i.e. SADC Free Trade Area by 2008; Customs Union by 2010; and Monetary Union by 2016. The Free Trade Area was launched in 2008. A Monetary Union is not yet on the agenda. The current focus is on consolidating the Free Trade Area

Recent developments:

March 2011 Council of Ministers Meeting (March 2011)- decision that Member States undertake review of national development aligned to RISDP.

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COMESA-EAC-SADC Tripartite Free Trade Agreement

Establishment of SADC-COMESA-EAC Tripartite Free Trade Area (FTA) arises from decision by the Heads of State and Government at Inaugural Tripartite Summit in Kampala, Uganda in October 2008

The COMESA-EAC-SADC Tripartite FTA represents 26 Countries with a combined population of nearly 600 million people and a total Gross Domestic Product (GDP) approximately US$1.0 trillion;

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COMESA-EAC-SADC Tripartite Free Trade Agreement

The Rationale for the creation of a Tripartite Free Trade Area are based on the following issues:

Addresses issue of overlapping membership Forms a building block towards eventual African economic

integration as envisaged by the Abuja Treaty of the African Union.

Better opportunity to expand market access for SA products on the continent, while preserving SA’s market space

However, it will also enable greater competition with other strong economies in the regions such as Kenya and Egypt

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Rwanda named East Africa’s number one ICT nation by UNCTAD. Benefited from ICT-based investments by lucrative international players such as Microsoft, Nokia, and Terracom

Rwanda undertook to drive ICT and Optic Fibre linkages into continent

ICT Broadband and Optic Fibre linkages-Rwanda

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COMESA-EAC-SADC Tripartite Free Trade Agreement (Continued)

Second Tripartite Summit decisions: Officially launched the COMESA-EAC-SADC

Tripartite Free Trade Area (FTA) Negotiations on 12 June 2011, Johannesburg, Summit endorsed the pillars of Tripartite integration, namely (i) market integration; (ii) infrastructure development; and (iii) industrial development.

Summit endorsed the Tripartite FTA Negotiating Principles, Processes and Institutional Framework.

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The most important principles agreed to were that the negotiations shall

be REC and/or Member State driven; the principle of variable geometry shall apply ( Member States shall enter negotiations at level of development); and decisions shall be taken by consensus.

A roadmap for establishing the COMESA-EAC-SADC Tripartite FTA, which will be implemented in two phases was agreed to:

The 1st Phase, which is split into two periods, will last up to 36 months starting from 12 June 2011 till June 2014. It consists of a preparatory period of 6 to 12 months followed by substantive negotiations for the trade in goods component of the FTA, which will take up the remaining period up to June 2014.

The 2nd Phase covering negotiations on trade related issues, as a built-in agenda, will commence after the completion of Phase I.

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Summit agreed that the negotiations on the movement of business persons, as well as the work programmes on infrastructure and industrial development would be undertaken concurrently on separate tracks during Phase I.

Summit noted that the time-frames may run concurrently rather than sequentially on the basis that some programmes would be ongoing and could therefore be pursued simultaneously.

Recent Developments: The Inaugural Meeting of the Tripartite Trade Negotiation Forum (TTNF) was held in Nairobi, 7-9 December 2011.

The Meeting put in place the administrative arrangements necessary to facilitate the conduct of the TFTA negotiations and to agree on a negotiating schedule and approach

The next meeting of the TTNF will begin substantive negotiations

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Regional and continental infrastructure development is of intrinsic importance to the realisation of Africa’s economic growth and development imperatives and ambitions for greater trade integration and global market space.

In the realisation of regional and continental integration, the AU/NEPAD Presidential Championing Initiative (PICI) was established by the 16th Summit of the African Union in January 2011. (See Annexure)

The championing by President Jacob Zuma of the North-South Corridor Project has provided important impetus to continental infrastructure development projects that will be mirrored in other corridor projects across various countries and sub-regions throughout the continent.

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Way forward

South Africa should advocate for the following:

Finalise review of RISDP priorities and time-frames.

Contribute to regional economic Integration through: Consolidation of SADC FTA. Promoting and strengthening institutional cooperation

between SADC and SACU (i.e. notion of SACU as nucleus for regional economic integration).

Prioritise regional economic integration with focus on market integration; infrastructure development; and industrial development.

Ensure the realisation of the grand FTA (Tripartite process)

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Way forward

There is a need to develop clear strategies of engagement within various groupings and to ensure that they are inline with our interests as a country and in the region. Therefore South Africa is on course for achieving regional integration.

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The AU/NEPAD Presidential Infrastructure Championing Initiative (PICI) aimed at advancing Regional Integration

through Infrastructure development in Africa

President Zuma initiative at the AU Summit in Kampala (July 2010) 2011 January AU Summit endorsed and established PICI; Ministerial Working

Group and Technical Task Team to assist PICI Heads of State and Government; PICI Sub-Committee comprises 8 HoS&G: South Africa (Chair), Algeria,

Senegal, Nigeria, Egypt, Benin, Republic of Congo and Rwanda; The idea is to use Political Championing to accelerate regional and continental

infrastructure projects to ensure the advancement of regional integration; PICI is mandated to:

Prioritise and consolidate infrastructure projects for high impact and results in accordance with the AU/NEPAD Africa Action Plan (2010-2015) and the Programme for Infrastructure Development in Africa (PIDA);

provide political leadership and remove existing bottlenecks; mobilise resources to fast track implementation of prioritised projects;

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AU/NEPAD PICI Champions and Projects

Congo-DRC RRBRep. du Congo

Nigeria-Algeria Gas

pipeline:Nigeria

Dakar-Ndjamena-Djibouti Road and Rail: Senegal

North-South Corridor RR

South Africa

Missing links of Trans-Saharan Highway and Optic Fiber project

Algeria

ICT Broadband and link to fiber optic project into neighboring states: Rwanda

Egypt: no project as

yet.Benin: no project as

yet.

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What Africa would look like if PICI and PIDA are effectively implemented:

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Increased inter and intra-African regional trade (which is currently less than 10%)

Greater regional and continental integration; Accelerated economic growth; Improving living standards; Enhanced collaboration amongst all stakeholders; including:

• AUC • NEPAD Agency• Regional Economic Communities • African Development Bank etc