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What new South African Policies for Regional Integration and how to develop them?

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What new South African Policies for Regional Integration and how to develop them?

by Gerhard Erasmus, tralac Associate

The South African Minister of Trade and Industry has on several occasions mentioned plans for “radical economic transformation” in South Africa. A recent statement contains the following indications as to what this will entail for regional integration:

“As Africa takes centre stage as the next growth frontier, the dti will continue to play a prominent role in advancing developmental integration in Africa through SACU, the SADC and the envisaged Tripartite Free Trade Area (T-FTA) that spans Eastern and Southern Africa. In the aftermath of the recent 6th BRICS Summit in Fortaleza, Brazil, South Africa will also ensure that it continues to deepen economic development, trade, and investment partnerships with the BRICS through the work of the BRICS Contact Group for Economic and Trade issues.” (Business Report, 15 August 2014).

It is always good news to learn about governments’ intentions to engage new opportunities and to tackle existing problems. This is what governments should do. The fact that, in the present instance, regional integration is targeted and that specific African trade arrangements are mentioned, provides a concrete context for commenting on the Minister’s statement.

  • The first point to note is that African markets are important for South African exporters of goods and services. The South African economy faces a number of serious problems. Part of the answer lies in ensuring African market access arrangements are based on predictable and certain undertakings. They need binding agreements which have to be negotiated.

  • In order to translate South African plans into reality the buy in from the other member states in SADC, SACU and the T-FTA will have to be ensured. These states too stand to benefit from inclusive deals but regional policies are about joint efforts; they cannot come about through unilateral diktat. It means that regional interests, as opposed to South African interests, will have to be pursued. This aspect should be clarified.

  • Minister Davies should perhaps, as a necessary first step, enlist regional support by getting a new joint strategy adopted. There are regional plans such as SADC’s Regional Indicative Strategic Development Plan (RISDP) and Part Eight in the SACU Agreement (which provides for common industrial, agricultural and competition policies and for a policy against unfair trade practices) but they have not generated any success stories. The RISDP is under review and SACU could not adopt any joint policies yet. One lesson to learn is that existing regional structures are not particularly effective in generating the required regional policies. Why not? Should they be improved as part of the desire to adopt new regional policies?

  • The SADC, SACU and T-FTA legal instruments state that all decisions are taken by consensus. This reflects sensitivities about sovereign equality but makes it extremely difficult to agree on joint policies and implementation measures. Dispute settlement becomes impossible. We must bring about technical improvements for the sake of effectiveness and learn lessons from how it is done elsewhere. In the WTO, for example, qualified majorities are provided for in some cases, while ‘reverse consensus’ applies in respect of dispute settlement. It is to be noted that the T-FTA is based on a “single undertaking” but lacks effective dispute settlement procedures.

  • Another stumbling block concerns the implementation of obligations. In the RECs implementation is left to the members states; there are no collective monitoring devices. The duty to implement founding instruments and to bring national law in line with regional agreements is couched in vague language; which leaves essential decisions to national authorities. And then of course our governments never litigate against each other.

  • Does it matter whether regional trade arrangements are effective? Should they be improved as part of a new strategy for doing business with each other? Given the lack of progress, the extent to which ‘derogations’ are invoked, and how domestic measures trump regional obligations, the answer should be an emphatic yes. The proverbial new wine will simply be wasted when poured into old bags. The Minister’s plans are doomed if they will be implemented through exiting regional structures and procedures.

  • How will these new regional policies come about? South Africa is the regional economic power house but it cannot ignore the equally valid needs of neighbouring countries. Pretoria might have to take on a new, inclusive leadership function in particular areas but will have to invest in prior efforts to sell itself in that role. Trade policies, in particular if they have to contribute to regional stability, will have to be based on actions to promote mutual advantage. Market access for South African goods and service providers will bring local benefits but will have to account for reciprocal needs and regional progress.

  • What is ‘developmental integration in Africa’? Is this term part of the regional vocabulary? If developmental integration is about industrialization and beneficiation then it is only a new name for a well-established notion. And well-known problems will have to be addressed. Investors take decisions in terms of many considerations; including the incentives offered by individual governments. A regional industrialization plan is a complicated matter and will require the blending of several National Development Plans. These Plans are national designs, not regional ones. Perhaps Minister Davies should start his recently announced endeavour by aiming first for the adoption of a Regional Development Plan.

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