Thursday, November 5, 2009

SA's neighbours must prioritise diversification - WTO review

By Ann Crotty

Economic diversity is the most important policy imperative facing the four smaller members of the Southern African Customs Union (Sacu), the World Trade Organisation's (WTO's) latest trade policy review of the region notes.

Since the previous review in 2003, Sacu members (Botswana, Lesotho, Namibia, South Africa and Swaziland) collectively grew gross domestic product (GDP) at an average rate of about 4 percent in real terms.

However, the report notes that infrastructure and other constraints mean that the GDP growth has been erratic.

It notes that Botswana and Namibia need to diversify away from their heavy reliance on diamonds and other minerals; Lesotho needs to reduce its dependence on textiles and Swaziland needs to reduce its dependence on sugar.

The report also notes that inflows of direct investment into Sacu remain low on a global scale "notwithstanding their sustained growth trend".

A more cohesive regional market would enhance the outlook. The only trade policy instruments that are harmonised are the applied customs tariff, excise duties, rebates, customs valuation, contingency trade remedies, and non-preferential rules of origin.

The review argues that the complete implementation of the 2002 Sacu Agreement, which entered into force in July 2004, "would result in further harmonisation of policies, deeper economic integration and more balanced development that now seem elusive".

While some progress was made in consolidating some Sacu institutions and mechanisms set up under the 2002 agreement, a number of key areas still need to be addressed.

"Work on coherent policy formulation in the areas of agriculture, industrial development, competition, and unfair trade practices is still at an early stage." The WTO suggests the development of a common position on trade relations with third parties could help accelerate the creation of the Southern African Development Community Free Trade Area.

Intra-Sacu trade has increased since 2003 but the review notes that the traditional importance of South Africa was broadly unaltered. "More than 95 percent of commercial flows within the customs union involved South Africa as a destination or supplier."

The review highlights the adverse swing from the positive trade balance registered by Sacu in 2003 to a $13.7 billion (R105bn) deficit in 2007.