News Archive October 2016

tralac’s Daily News Selection

The selection: Friday, 28 October 2016

Featured tweets from CFTA/TFTA-focussed discussions held yesterday in Geneva and Lusaka:

@SabineBohlke: Boosting intra African trade should become Africa’s mantra! AU workshop in Geneva on the Continental Free Trade Area; @EKangamungazi: CaritasZambia and @CUTS_Lusaka engaged stakeholders on their position on the TFTA agreement and what it means for Zambia. Sequencing is important.

tralac Newsletter: Trade rules assisting SMEs to compete better

Financing infrastructure in Africa: First STC on transport, intercontinental and inter-regional infrastructures, energy and tourism (AU)

The overall objective of the STC meeting (28 Nov – 2 Dec) is to assess progress and to achieve concrete advances in the financing of major infrastructure, notably those in the Priority Action Plan of the Programme for Infrastructure Development in Africa (PIDA/PAP), through decisions and consensus on investing in the preparation, structuring, implementation and risks mitigation of climate resilient infrastructure projects. The specific objectives include: (i) evaluation of the progress made by regional and international institutions in financing the energy, transport and tourism sectors projects, notably PIDA/PAP and regional projects and other AU flagship projects under the AU Agenda 2063; (ii) analyse constraints and how to strengthen national and regional capacities and to increase the participation of national and regional financial institutions in financing the development of the three sectors (domestic and regional financial resource mobilization); (iii) adoption of strategies on making Africa the preferred destination for tourism under the AU Agenda 2063. [Programme, pdf]

South Africa: Logistics Barometer Report 2016 (University of Stellenbsoch)

The Logistics Barometer provides a numerical analysis of logistics costs trends in South Africa supported by insights from logistics industry specialists and academia. The usefulness of calculating annual data lies in the fact that trends can be identified and applied by both operational and strategic analysts in the public and private sector for future planning, policy development and investment objectives on a macroeconomic level. The calculations in this edition are up to 2014, with an estimate for the 2015 year (2015e), and a forecast for the 2016 year (2016f).

Botswana: Draft National Development Plan (NDP 11) presentation speech

External sector development: The overall balance of payments has been in surplus for the entire NDP 10 period, except in 2010. However, the merchandise trade part of the current account was in deficit for all the years of the Plan, except 2013 and 2014. On the other hand, the Services Account was in surplus for the entire Plan period. A worrisome trend during NDP 10 was a steady decrease in the share of non-traditional exports, as part of total exports. For instance, while in 2009 the share of non-traditional merchandise exports was about 10%, it decreased to 8% in 2010 and reached 3% by 2013. This suggests that limited export diversification has taken place. In order to bolster economic diversification during NDP 11, particular attention should be on creating new and growing non-traditional exports. On the other hand, a modest increase in the share of exports of services was registered during the Plan period.

Kenya-Ethiopia: One-stop post to better trade in Marsabit (The Star)

Kenya is waiting for Ethiopia to complete construction of the one-stop border point between the two countries so they can be linked and start operations, a governor has said. Marsabit Governor Ukur Yatani said the centre will propel grow the county’s economy and promote development. Kenya and Ethiopia signed a bilateral agreement in 2011 to develop the joint border point and road that will enhance bilateral trade. The border post is funded by the African Development Bank at Sh843 million. The project will also link Marsabit to the Trans-Africa Highway that links Nairobi to Addis Ababa. The Sh843 million border project was set to be complete by May, but contractors sought an extension in the contract due to poor terrain that saw construction halting a number of times.

Chinese, French oil firms in talks over Uganda’s pipeline (IPPMedia)

China National Offshore Oil Corporation (CNOOC) and France’s Total are in final talks over the construction of Uganda’s oil pipeline that will run up to Tanga port. Li Yong, Executive Vice-President of CNOOC limited, in a meeting with Uganda’s President Yoweri Museveni said the oil firm was ready to undertake the US$4 billion pipeline project. Li, according to a State House statement issued on Wednesday, said they are in talks with Total regarding the necessary modalities to ensure the take-off of the project. [Bagamoyo port: Uncertainty hits Kikwete’s $11 billion ‘legacy’ project]

South Africa: Exporters encouraged to utilise more of AGOA tariff lines (dti)

According to the Director of Americas Bilateral Trade Relations in the International Trade and Economic Development Division of the Department of Trade and Industry , Mr Malose Letsoalo, South Africa is only utilising 141 tariff lines out of the 1835 that are there under AGOA. He added that with regards to the 3 400 non-reciprocal arrangements, South Africa was only utilising 459. “We have experienced a lot of change and diversification in terms of our exports to the United States of America market from just exporting mainly commodities between 1994 and 2000, to more value-added products since 2001 to date,” said Letsoalo. Export councils as well as provincial departments participating in the workshop expressed the need for collaboration, communication and increasing the partnership between the dti and the exporters. The workshop also resolved that Trade Invest South Africa within the dti leads the process of developing an action plan derived out of the Integrated National Export Strategy to ensure that the objectives are realised.

South Africa completes administrative process for SACU-MERCOSUR PTA (dti)

South Africa has completed all the administrative processes to facilitate the implementation of the SACU and MERCOSUR Preferential Trade Agreement as from 21 October 2016. In accordance with Article 36, the SACU - MERCUSOR PTA entered into force on 1 April 2016, 30 days following SACU’s acknowledgement of the notification from MERCOSUR that it had concluded the necessary legal requirements and South Africa will implement the Agreement retrospectively from the date of entry into force of the Agreement, 1 April 2016. SACU offered concessions on 1 062 tariff lines and MERCOSUR offered concessions on 1 052 tariff lines. In either case, the preference margins range between 100 - 10%. SACU offered a Tariff Rate Quota for four agricultural products, which will be accessible on a first come first serve principle with no permit requirements. The tariffs will be reduced immediately on entry into force of the Agreement. The PTA is the first trade agreement concluded by SACU as a single entity, following the SACU Agreement of 2002.

Zimbabwe: SI64 causes decline in net revenue collections - Zimra (Zimbabwe Independent)

The Zimbabwe Revenue Authority has blamed the introduction of Statutory Instrument 64 of 2016 (SI64) and rampant smuggling for the 6,9% slump in net revenue collections. Zimra’s third quarter revenue performance net collections were pegged at $854,1m, a 6,9% decline compared to the same period last year. The government had targeted to collect $917,3m.his figure was also a 2,7% decrease from the 2015 third quarter revenue collections. “The unsatisfactory performance was mainly due to revenue forgone through concessions, trade agreements and rebates amounting to US$150,7 million, and government policies, which were introduced to curb the influx of imports of designated manufactured products,” Zimra board chairperson Willia Bonyongwe said in a statement.

African Customer Due Diligence Repository Platform: update (Afreximbank)

Dr George Elombi, Afreximbank Executive Vice-President in charge of Corporate Governance and Legal Services, told participants that the high cost of conducting customer due diligence adversely affected the stability of the African financial sector and the productivity of corporate entities. “Financial crimes, compounded by weak corporate governance capacity, have the potential to derail legitimate economic activity and slow down the development of financial markets essential for optimal allocation of capital to support the structural transformation of resource-constrained African economies,” he said. He announced that Afreximbank was preparing to launch an online African Customer Due Diligence Repository Platform to provide a centralized source of primary data required to conduct customer due diligence checks on African counterparties. That platform would allow subscribers to conduct due diligences at a low cost, thereby decreasing the cost of trade finance in Africa.

‘Beef imported from Africa unlikely to meet Northern Irish farm standards’ (CTA)

There is a worrying level of beef being imported from Botswana in Africa, which is unlikely to meet Northern Irish farm standards, according to Ulster Farmers’ Union Beef and Lamb Chairman, Crosby Cleland. The level of Botswana beef imports coming through Belfast port has already reached 333t this year, he said. “Since this trade was first highlighted last year it has continued to grow, while domestic producers remain under pressure. For beef producers hit by poor market prices for much of this year, this is a worrying level of beef coming from a source unlikely to have farm standards equivalent to those in Northern Ireland. “Since food labelling and quality assurance have become big issues for consumers it is surprising so little is known about where this imported meat is sold.”

Abdul Majeed: ‘Africa promises plenty as global car hub’ (PWC/The Hindu)

PwC Autofacts expects light vehicle production to increase from about one million units produced in 2015 to 1.45 million vehicles in 2022 at an annual growth rate of 5.5 per cent. South Africa will continue to lead the surge from 5.84 lakh vehicles to 6.9 lakh in 2022. In the process, its share is expected to contract from over half the production as other regions enter the fray. Nigeria, for instance, is projected to nearly treble its light vehicle production from 27,000 units in 2015 to 75,000 units over the next seven years. Morocco, likewise, is expected to see numbers grow from 2.88 lakh units to 4.23 lakh in 2022 while Algeria will grow from 19,000 to 1.12 lakh units. Egypt is projected to nearly double output from 89,000 to 153,000 vehicles in 2022 while Ethiopia will be the only laggard with no big assembly expected in the coming years.

Trade ministers in Oslo weigh WTO options for Buenos Aires meeting and beyond (ICTSD Bridges News)

The Oslo mini-ministerial also provided the opportunity for some ministers from the WTO group currently negotiating a Trade in Services Agreement to gather in the margins to take stock of the talks, given the current target of concluding those negotiations by early December. Sources familiar with the meeting noted that this event was not a full or formal TISA ministerial, in light of the fact that only some ministers were present – namely those that were already participating in the main Oslo gathering. The TISA talks currently include 23 participants, counting the EU as one, with approximately half of that number present in Norway.

South Africa: trade and industry discussion with China’s National Development and Reform Commission (GCIS)

The Minister in the Presidency for Planning, Monitoring and Evaluation and Chairperson of the National Planning Commission, Jeff Radebe will (today) lead a delegation of Ministers who will host a high level Chinese delegation from the National Development and Reform Commission (NDRC) of China. The main objective of the meeting is to exchange views on issues of mutual concern relating to trade and industry agreements signed between South Africa and China during the FOCAC 2015, hosted in Johannesburg, and the 2015 Chinese State visit to South Africa.

Africa’s youngest billionaire banks on regional integration to boost expansion (The Africa Report)

Tanzanian billionaire Mohammed Dewji, who is head of Mohammed Enterprises Tanzania Limited (MeTL) Group, is spreading his trading, commodities and manufacturing businesses around East and Southern Africa, positioning them to benefit from regional integration. Dewji has his sights set on more than tripling his company’s revenue. “[Seven years from now] our revenue target is $5bn per year. We project that we will be employing 100,000 people,” Dewji tells The Africa Report. To do that, MeTL’s targets are in East and Southern Africa. MeTL executives have identified Burundi, the Democratic Republic of Congo (DRC), Malawi, Mozambique, Rwanda, Uganda and Zambia as countries ripe for investment. The company says investment in these countries will strategically position it to capture opportunities in three regional blocs.

Africa to host, for first time, the Academy on Labour Migration (ILO)

The 2016 ILO Academy on Labour Migration will be held in Johannesburg (5-9 December) to discuss, review and make recommendations on latest trends and development aiming at labour migration governance, strategies, policies and tools. The Regional Office for Africa and the International Training Centre of the ILO are convening this training opportunity to effectively address challenges and opportunities related to protection of migrant workers and their families, migration and development linkages, and strategic partnership for good governance around migration issues. [Regional Conference of International Association of Refugee Law Judges: address by Minister Malusi Gigaba]

Today’s Quick Links:

Meeting of the PIDA Steering Committee (24-25 October, Nairobi, in French)

AfDB’s regional road safety workshop concludes today

SADC: 2nd newsletter detailing German cooperation (pdf)

Joint communique by League of Arab States, AU, UN on Libya (UNSMIL)

DRC: Government supports Freeport sale of Tenke copper mine

Malawi govt bans soft drink produced in Mozambique over health concerns

Q&A with Adriana Riccardi, head of Uruguay’s competition authority (UNCTAD)


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tralac’s Daily News Selection

28 Oct 2016
The selection: Friday, 28 October 2016 Featured tweets from CFTA/TFTA-focussed discussions held yesterday in Geneva and Lusaka: @SabineBohlke: Boosting intra African trade should become Africa’s mantra! AU workshop in Geneva on...
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Logistics Barometer South Africa 2016

​​​For a decade South Africa has been measuring its national logistics costs in a standardised, internationally benchmarked way. The Logistics Barometer presents the latest results of this national cost measurement and drills down to investigate the trends that influence these costs – from the oil price to outsourcing to the impact of modal strategies and infrastructure development.​

Why?

The second edition of the South African Logistics Barometer continues the macrologistics research work published in the CSIR State of Logistics Survey for South Africa (discontinued in 2014) and the first Logistics Barometer published in 2015. It fits into a growing global body of work to measure national level logistics costs and links to the World Bank Trade Facilitation and Logistics Global Knowledge Network.

The Logistics Barometer provides a numerical analysis of logistics costs trends in South Africa supported by insights from logistics industry specialists and academia. The usefulness of calculating annual data lies in the fact that trends can be identified and applied by both operational and strategic analysts in the public and private sector for future planning, policy development and investment objectives on a macroeconomic level. The calculations in this edition are up to 2014, with an estimate for the 2015 year, and a forecast for the 2016 year.

At 11.2% in 2014, South Africa’s logistics costs as percentage of GDP deteriorated slightly compared to 2013, and this trend is expected to continue. The ratio generally improved up to 2011, but has been on an upward trend since then.

South Africa is still one of only three countries who consistently measures and publishes logistics costs on a national level, the other two being the U.S.A. and Finland.

The Logistics Barometer has, as its backbone, more than 20 years of research into freight volumes and freight flows in South Africa. The logistics cost calculations have been refined over the past 13 years to make it one of the most robust and reliable quantitative reports on logistics costs globally.

The source data for the logistics cost measurements originate from the Transnet Freight Demand Model (FDM), GAIN Group’s National Freight Flow Model (NFFM), StatsSA’s Annual Financial Statistics Survey (AFS) and StatsSA’s Quarterly employment statistics (QES).

Where?

South Africa’s gross domestic product (GDP) totalled R4 014 billion in 20151 and although it has claimed back the title of Africa’s biggest economy from Nigeria due to exchange rate fluctuations, both economies look to be on the brink of recession mostly due to the decline in export commodity prices.

Average GDP growth for South Africa equalled 2.1% between 2011 and 2015, but the International Monetary Fund (IMF) adjusted the growth forecast for 2016 to only 0.1%, recovering to 1.0% in 2017. Nigeria’s economy is forecasted to retract by -1.8% in 2016, recovering to 1.1% in 2017. Both countries are well below the forecasted world output growth of 3.1% in 2016 and 3.4% in 2017.

The Logistics Performance Index (LPI) provides a comprehensive measure of the efficiency of international supply chains. South Africa was ranked 20th out of 160 countries in 2016 and is classified as a logistics over-performer when compared to its peers. When looking at the performance over the aggregated LPI (2010-2016), South Africa is only one of two countries in the top 30 that are not classified as high-income countries, the other being Malaysia.

South Africa’s logistics costs totalled R429 billion in 2014 and equated to 11.2% of GDP or 51.5% of transportable GDP. Logistics costs increased by 9.2% between 2013 and 2014, after showing modest growth of only 3.5% in the previous period. It is estimated to have grown by 9.5% during 2015 and is forecasted to grow by 6.3% in 2016, in line with current inflation estimates.

The phenomenon from 2012 to 2013 of logistics costs rising faster than the underlying transport activity (measured in tonne-km) was reversed in 2014 with a relatively larger growth in tonne-km than real costs. The growth of low-value transport relative to other categories could have contributed to this phenomenon.

How does South Africa compare to other countries?

Over the past number of years more countries have attempted to measure logistics costs, some only as a once-off exercise. It is worthwhile therefore to provide a comparison between these countries although various ways of measuring exist and different economic and structural factors influence logistics costs.

Developed countries would have lower logistics costs when expressed as a percentage of GDP, the outlier being Finland, which has a low-outsourcing environment and a long cash-to-cash cycle. The developing countries also each face their own challenges. India is densely populated with high congestion and inadequate infrastructure, infrastructure also being the biggest challenge for efficient logistics in all the BRICS countries. Russia has long transport distances to contend with, Brazil has port operational challenges and China has one of the highest regulated logistics industries in the world.

South Africa’s infrastructure challenges in a BRICS context are therefore not unique and performance on LPI measurements not poor. But the country is far away from trading partners, has long inland transport distances, relies heavily on unbeneficiated exports, and has a much smaller economy than the other BRICS countries, which is also growing slower than most. The country is therefore vulnerable to external shocks and logistics cost reduction needs to be a priority.

Trade supply chains

The 13 years of measuring South Africa’s logistics costs included measurements of international trade logistics costs within South Africa, i.e. up to the quay wall landside for exports and from the quay wall landside for imports. Port costs and ocean carrier costs to foreign ports were excluded and it was therefore always a domestic cost measurement. The work was recently expanded to include these aspects.

The impact of international trade logistics costs (ITLC) on national logistics costs is depicted in Figure 8. The country’s total ITLC (up to and from foreign port gates) is R242 billion or 11.7% of trade GDP (i.e. the value of all traded commodities, amounting to R2 061 billion). Only 9.5% (R23.1bn) of these ITLC are paid directly to ports (port authority and port terminal charges).

This means that direct port costs are only 1.1% of the value of trade. As a direct result of South Africa’s spatial challenges, the highest portion of these costs is the inland logistics, being 41.8% (R101.1bn). That is because our centres of production and consumption are far from ports. Given South Africa’s distance from global markets, the contribution of ocean carrier costs is also significant, at 39.2% (R94.9bn).

The costs, up to the point when ships leave port gates or arrive in front of port gates, amount to close to R46bn (port charges, documentation charges and ship standing costs) (‘Other’ is composed of truck standing costs and inventory carrying costs, which is negligible). About half (50.3%, R23.1bn) of these costs are paid to the port authority and terminal operators. The rest is additional costs caused by documentation and additional transport costs due to the delay of ships in front of and in the port. Of the R22.8 billion (R16.8bn + R0.77bn + R5.2bn) remaining additional costs, around three quarters (73.7%) are documentation charges.

Only 3% is because trucks are delayed before and in the port and just under a quarter (22.8%) because ships are delayed in front of and in the port. A very small cost is also incurred for the financing of delayed inventory (ICC). Significantly though, these other port-related charges are more or less equal to the direct port charges. More significant is the fact that most of these charges are documentation charges or relates to what the World Bank perceives as the ease of doing business. (Please note that in this research, delay also includes “normal” turnaround time (i.e. it is impossible to turn trucks and ships around in no time), but it can always be improved. The data indicates the baseline number from which it can be improved.)

Transport costs are the dominant contributor towards logistics costs, amounting to 57% of the total in 2014, followed by inventory carrying costs (15.2%), warehousing (14.6%) and management & administration costs (13.5%).

The contribution of transport costs to total logistics costs is expected to decline to 55% in 2016 mainly due to lower fuel prices (fuel costs made up 40% of road transport costs in 2014). This is the lowest contribution level it has reached since 2010.

Transport costs showed a moderate increase of 3.7% between 2013 and 2014, still driven by efficiency gains from logistics service providers.

The trade-off was that inventory carrying costs increased by 21.8% between 2013 and 2014. The increase in the prime interest rate from 9.0% at the start of 2014 to 9.25% at year-end, compared to 8.5% in 2013, contributed to the higher inventory carrying costs, but external factors such as economic uncertainty and a volatile currency have led to increased inventory levels and are forecasted to have the same effect in 2016.

On the back of these higher inventory levels, warehousing costs (which include storage and handling costs) increased by 12.1% between 2013 and 2014, following on nominal growth the previous two years, and is estimated to have grown above inflation in 2015.

Road transport contributed 83% to transport costs in 2014, rail tariffs contributed 15% and pipeline tariffs contributed 2%.

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Logistics Barometer South Africa 2016

28 Oct 2016
​​​For a decade South Africa has been measuring its national logistics costs in a standardised, internationally benchmarked way. The Logistics Barometer presents the latest results of this national cost measurement and drills...
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Afreximbank Forum ends with call for strengthened financial control mechanisms and capacity building on corporate governance

Africa must institute stronger financial control mechanisms and capacity-building for customer due diligence and corporate governance in order to attract capital competitively and ensure greater financial stability and sustainable development, participants in the Third Annual Forum on Customer Due Diligence and Corporate Governance organised by the African Export-Import Bank’s (Afreximbank) have said.

In conclusions at the end of the two-day Forum held in Kigali on 26 and 27 October, the close to 200 participants said that strong corporate governance was critical to ensuring the integrity and credibility of financial systems and to reducing the vulnerability of African economies to financial instability and shocks

They called on African financial institutions to engage frequently with their boards and senior management and to assess the adequacy and accuracy of information being submitted them.

Other conclusions include the need for government bodies and institutions to foster initiatives to promote good corporate governance practices and for effective capacity building and collaboration to be established between the public and private sectors in order to enhance corporate governance and customer due diligence.

Given the fast-changing business dynamics and the growth of online banking, mobile payments and other electronic platforms, the participants expressed the need for a strong technology-driven approach to corporate governance and customer due diligence so as to increase effectiveness and responsiveness to change.

The participants, in addition, welcomed the Afreximbank initiative to establish an online African Customer Due Diligence Repository Platform to serve as a centralized source of primary data required to conduct customer due diligence checks on African counterparties.

In an address to the Forum, John Rangombwa, Governor of the National Bank of Rwanda, had said that previous global financial crises had shown that weaknesses in governance contributed to systemic vulnerability and failures. He argued that financial institutions and regulators had a critical role to play in putting in place regulations and monitoring mechanisms to ensure sustained stability of the financial sector.

Participating in the Forum were representatives of regulatory bodies, financial institutions, and legal firms from more than 20 African countries, who were joined by international experts and Rwandan government officials.


Forum hears call to tackle Africa’s $50 billion annual loss to illicit financial flows

The estimated $50 billion being lost annually by Africa due to illicit financial flows should be a source of concern to the continent, especially as access to finance and capital was a key constraint to growth and economic development, Claver Gatete, Minister of Finance and Economic Planning of Rwanda, said on Wednesday in Kigali.

Declaring open the third Annual Customer Due Diligence and Corporate Governance Forum organised by the African Export-Import Bank (Afreximbank), Mr. Gatete noted that over the last 50 years, Africa had lost in excess of $1.7 trillion to illicit financial flows. That amount roughly equalled all the official development assistance it received during the same period.

The illicit activities had significant implications for growth and economic development and for the financial soundness of banks and corporates, he said, pointing out that they undercut legitimate economic activities, discouraged investment, bred suspicion and undermined government legitimacy.

The minister urged African financial institutions, regulatory bodies and governments to work together to establish mechanisms that would ensure a healthier financial landscape and help prevent financial crimes as well as strengthen investors’ confidence in the continent.

Also speaking, Dr. George Elombi, Afreximbank Executive Vice-President in charge of Corporate Governance and Legal Services, told participants that the high cost of conducting customer due diligence adversely affected the stability of the African financial sector and the productivity of corporate entities.

“Financial crimes, compounded by weak corporate governance capacity, have the potential to derail legitimate economic activity and slow down the development of financial markets essential for optimal allocation of capital to support the structural transformation of resource-constrained African economies,” he said.

He announced that Afreximbank was preparing to launch an online African Customer Due Diligence Repository Platform to provide a centralized source of primary data required to conduct customer due diligence checks on African counterparties. That platform would allow subscribers to conduct due diligences at a low cost, thereby decreasing the cost of trade finance in Africa.

Afreximbank was also increasing awareness on the need to look inward for financial resources through its Africa Direct Investment Initiative, continued Dr. Elombi. It was, in addition, promoting the use of African credit rating agencies by African entities as a way to commoditize corporate and banking-related information in order to ensure greater access to credit at reduced compliance costs.

The Forum, which is being organised in collaboration with the Rwanda Development Board, follows two editions held in Dakar in 2014 and in Seychelles in 2015.

The more than 200 participants include bankers, regulators, and representatives of financial institutions and corporate entities from Africa and beyond. It is featuring open discussions and presentations by experts, including from the International Anti-Corruption Academy in Vienna, the International Finance Corporation, the Rwanda Governance Board and several international and African banks.

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Entry into force of the Preferential Trade Agreement between MERCOSUR and SACU

Preferential Trade Agreement (PTA) between the Common Market of the South (MERCOSUR) and the Southern African Customs Union (SACU)

South Africa has completed all the administrative processes to facilitate the implementation of the SACU (Botswana, Lesotho, Namibia, South Africa, and Swaziland) and the MERCOSUR (Argentina, Brazil, Paraguay, and Uruguay) Preferential Trade Agreement as from 21 October 2016.

In accordance with Article 36, the SACU-MERCUSOR PTA entered into force on 01 April 2016, thirty (30) days following SACU’s acknowledgement of the notification from MERCOSUR that it had concluded the necessary legal requirements and South Africa will implement the Agreement retrospectively from the date of entry into force of the Agreement, 1 April 2016.

The SACU-MERCUSOR PTA was signed in the City of Salvador, Federative Republic of Brazil, on 15 December 2008 on the side of MERCOSUR, and in the City of Maseru, Lesotho, on 3 April 2009 on the side of SACU. MERCOSUR was the last party to notify completion of its internal processes on 19 December 2015.

The Agreement contains the main text, and seven annexes. The main text sets out the principles, legal provisions and procedures for the relations under the Agreement. It also establishes the Joint Administration Committee, to manage the administration of this Agreement. Annex 1 and 2 set out MERCOSUR and SACU respective tariff concessions. Annexes 3, 4, 5, 6, and 7 cover general rules of origin, trade remedies, dispute settlement, Sanitary and Phytosanitary Measures, and cooperation on Customs Administration.

SACU offered concessions on 1 062 tariff lines and MERCOSUR offered concessions on 1 052 tariff lines. In either case, the preference margins range between 100 - 10%. SACU offered a Tariff Rate Quota for four agricultural products, which will be accessible on a first come first serve principle with no permit requirements. The tariffs will be reduced immediately on entry into force of the Agreement.

The PTA is the first trade agreement concluded by SACU as a single entity, following the SACU Agreement of 2002. This agreement is also the first with another developing region, giving meaning to the objectives of South-South cooperation. Thus, the PTA creates a basis for further integration and cooperation including possible further exchanges of tariff preferences, and cooperation on any other area.

The Agreement is being administered by SARS following the approval of the legislation and its publication in the Government Gazette.

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