From Africa Recovery, Vol.13#1 (June 1999), page 23 (box within article on EU-South Africa trade)

Trade pact's wider Southern African impact

At the launch of the Southern African Development Coordination Conference (SADCC) in 1980, member states set as a key goal a reduction in their economic dependence on regional giant South Africa. But following the inauguration of a democratic government in 1994, South Africa was actually invited to join the grouping, renamed in 1992 as the Southern African Development Community (SADC). Some of the country's SADC partners now are increasingly concerned about the way in which South African suppliers are gaining increasing market share in the region.

Compounding these concerns are fears in some quarters that the South Africa-European Union trade pact will enable EU companies to use South Africa as an export base from which to make inroads into other Southern African markets, damaging local industries. SADC states also fear that EU exporters will gain access to the South African market on better terms than those available to neighbouring SADC firms.

Speaking at a 1997 conference of the European Network for Information and Action on Southern Africa, Mr. João de Deus Pinheiro, European Commissioner for Development, dismissed speculation that the EU-South Africa trade pact would hurt Southern African businesses, emphasizing that there are "good reasons to be optimistic." Mr. Pinheiro pointed out that the EU made clear in its trade negotiations that South Africa, as a minimum, should give the same trade concessions to its neighbours as it will give to the EU. "This very principle has also been laid down in the SADC trade protocol," he said. "Through this double-locked mechanism, the EU-South Africa trade talks serve as a crowbar for opening up South Africa to the region." Moreover, Mr. Pinheiro predicted that the entire region would benefit because growth in South Africa-EU trade would fuel growth in South Africa, in turn leading it to buy more from its neighbours.

Similarly convinced that the trade deal will have benefits for SADC as a whole, SADC Deputy Executive Secretary Prega Ramsamy explained that the asymmetry principle agreed between South Africa and its partners in the SADC trade protocol negotiations means that the South African "cuts in tariffs will be deeper for the SADC countries than for the EU." (The 14 SADC member states aim to gradually remove tariff and non-tariff barriers to create a free trade area; see box, page 21.)

Mr. Ramsamy also discounted fears that EU companies would be able to encroach on SADC markets by transiting goods through South Africa: SADC rules of origin specify that if more than 35 per cent of a product's inputs originate in SADC countries, the product gets preferential access to the SADC market. And certain bilateral agreements between South Africa and other SADC countries specify a threshold lower than 35 per cent. "It may be that those companies with a very high component of foreign imports won't meet the 35 per cent value-added [threshold] and might have problems penetrating the market," he surmised.

Describing SADC countries' concerns over the EU-South Africa trade deal as "legitimate," an April 1999 study by the South Africa Foundation nevertheless predicts that signature of the SADC trade protocol "will go a long way to providing equal access for products from SADC countries to the South African market." Moreover, the study says the EU-South Africa trade agreement may give an impetus to signing of the SADC trade protocol.

Mr. Hidipo Hamutenya, Namibia's Minister of Trade, shares this view: "There was really no sense of urgency [to trade liberalization in South Africa]. But now that South Africa is focused on the free trade agreement with the EU, they will have the opportunity to speed up the SADC protocol."

If South Africa responds to pressure induced by trade liberalization by acquiring technology to improve competitiveness, then this technology acquisition also will likely penetrate the rest of the SADC market, adds Mr. Ramsamy. "I think it's important in the context of globalization that we should use the region as a stepping stone to the global market, and this is where the South Africa-EU free trade pact comes in."

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