Building capacity to help Africa trade better

Will SACU have a permanent summit?


Will SACU have a permanent summit?

Gerhard Erasmus, tralac Associate, discusses whether SACU will have a permanent summit.

It has been announced that a meeting of Heads of State and Government of the SACU member states will be convened in South Africa in July this year, when South Africa will be the chair of the SACU Council. It will apparently have some serious matters on its agenda; such as deeper regional integration, development policies for the region and trade negotiations with third parties. This announcement comes soon after the first such meeting, which took place on 22 April 2010 in Windhoek as part of the SACU centenary celebrations. It was at this occasion that the July Summit was first mentioned.

This latest development raises a number of interesting political and legal questions. Why is this high level gathering convened? What will it discuss and why? Will these meetings become a permanent feature of SACU? What effect will summit decisions have? Will they be legally binding? Does the SACU agreement need to be amended in order to accommodate this development? SACU has not had summits of this kind before; its highest institution, as provided for in its agreement, is the Council of Ministers. Why has it become necessary to convene a SACU Summit? The organization faces some serious challenges and seems to be in danger of losing momentum.

The 2002 agreement, which entered into force in 2004, has brought additional challenges with regard to the establishment of new institutions and the adoption of joint policies. The SACU Tariff Board, Common Negotiating Mechanism and Ad Hoc Tribunal are listed in article 7 as "established" SACU institutions but are not operational. No common SACU policies are in place.Some of SACU's problems have in fact become more acute as the member states had to deal with the challenges of the EPA negotiations (where they failed to develop joint negotiating strategies on how to enter into a trade pact with the EU which will also be WTO compatible), deeper integration plans in the rest of the Southern African region and the lack of a proper regional development strategy. There is growing unease in Pretoria about the present revenue sharing formula.In the mean time South Africa has started to adopt new national policies on industrial development, trade and investment which will have far reaching consequences for the whole region. A customs union is after all only possible as long as it implements a common external tariff and has a single customs territory.

Lack of common policies with regard to these matters results in less cohesion and poses the danger of fragmentation and the undermining of the essential features of a customs union. One of the advantages of a Summit could be to arrest such tendencies.The present predicaments faced by SACU have been in the offing since the adoption of the new Agreement. The new SACU promised to be a "democratic" organization but that proved to be a very hard to pin down; especially in the light of the wide disparities between South Africa, the region's economic engine, one the one hand, and the BLNS states on the other. Lesotho and Swaziland in particular have become very dependent on the customs revenue received from the SACU Common Revenue Pool. South Africa wants to change the revenue sharing formula in order to retain some of the income generated by the tariffs on goods imported into its economy and "conditionalities" are mentioned.

It is not clear exactly what south Africa has in mind to replace the present revenue sharing arrangement.Strong institutions, inspirational leadership and an effective decision making mechanism are required to deal with these challenges. SACU lacks strong institutions. It's most important institutions are the Council of Ministers and the Customs Union Commission; which have been inherited from the previous regime. They are essentially platforms for articulating and defending national interests; not joint SACU policies. In fact, there is no institution to speak on behalf of SACU. The Secretariat is the only full time body but deals primarily with the administration of the organization. It does not have a mandate to pronounce on policy issues for the SACU region as a whole.

A regular meeting of heads of State and Government may fill this institutional void and could provide much needed leadership with new policy outcomes for SACU. For the sake of its own forward momentum and consolidation SACU needs positive institutional impetus; which such meetings could provide. However, that will only happen if a very deliberate effort is made and summits are prepared with this outcome in mind. There is nothing unique about summits to guarantee unity in approach or a fundamentally different interpretation of national or regional interests. It may in fact be that a SACU summit becomes the launching pad for new South African initiatives as to how the region should deal with trade negotiations, industrial development and other issues. These are viewed as urgent concerns.A new orientation may indeed be the outcome, but not necessarily one which would strengthen the "values" underpinning the present SACU Agreement.

For the latter to happen, the BLNS leaders will also have to come to the party and develop realistic strategies and joint proposals. The question is whether this is being done. If the EPA negotiations are anything to go by the prospects for this type of outcome are rather slight.SACU has another institutional deficit; decisions are taken on the basis of "consensus". How will a summit take decisions on the matters on its agenda? Exactly what items will be on the agenda and who will prepare it? Experience in other international organizations has shown that "consensus" decision-making can be very difficult without additional arrangements to ensure proper preparation of proposals, canvassing of support and opportunities for reaching compromises. Consensus does not come about easily; in particular if the needs of the members are diverging or deal with essential national interests.

This July Heads of State and Government meeting will take place as an ad hoc occasion but it is possible to formalize these summits and make them a permanent item on the SACU schedule of regular meetings. After all, other regional organizations such as SADC, COMESA and the EAC have regular summit meetings and their agreements provide for them as part of the institutional makeup of those organizations. The issue then to determine is whether the SACU agreement needs to be amended to "institutionalize" the SACU Summit and to establish a new SACU body. This requires proper preparation and clarity regarding the gains to be had. Institutional arrangements are not an end in themselves. Their value depend on the requirements of the organization as well as their powers and functions; which are to be determined in the light of an organization's and members' evolving needs and the capacity of institutions to bring about more effective outcomes and better operations. There must, in particular, be the political will to achieve a more effective inter-state body with the necessary new powers.

The need for legal certainty is another concern. If it is decided to have ad hoc meetings of the Heads of State and Government on an informal basis these will be "political" events. Decisions taken at such meetings will have to be implemented by the SACU Council; although it will not really be possible to ignore them since they will be taken by the highest authorities in the member states. Should it be decided to institutionalize the "SACU summit" some careful preparation will be needed. One of the implications then to be considered is the fact that the Council of Ministers is the highest authority in SACU in terms of the present agreement. The relationship between the Council and an institutionalized Summit will have to be clarified. Such a step will require a clear legal foundation; with provisions on the Summit's status, powers and functions. This will require an amendment of the 2002 Agreement or the formal establishment of a new institution. Article 8 (8) of the SACU agreement says that the Council has the authority to create additional institutions.So what does this calling of a SACU summit signal? Is it the beginning of a new life for the organization and a new dynamic in SACU? Will we see new institutional arrangements? Or will it be the beginning of a fundamental shift after a hundred years of doing business in a particular manner?



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