Chapter 5 International trade in southern Africa and Africa

Lecture overview
• The Southern African Development community (SADC)
– – – – What is SADC? The SADC ‘Protocol on Trade’ The mission of SADC The SADC economy Exports and imports in southern Africa.

International trade in SADC countries

Lecture overview (continued)
• • • • • • Export processing zones in southern Africa The SADC free trade area and regional integration Southern Africa and COMESA Southern Africa and the African Union The Southern African Customs Union Other regional trade/economic communities in Africa

Learning objectives • Describe the role of SADC in facilitating development and economic growth in the southern African region. Appreciate the importance of the adoption of the SADC Protocol on Trade in enhancing bilateral and regional initiatives to advance regional economic integration. Identify initiatives that improve the African countries’ market access to the EU and the US. Outline the export and import trends in southern Africa • • • .

social and cultural integration of the African continent. Describe some of the other regional economic communities that exist in Africa • • • . COMESA. and the Southern African Customs Union in fostering economic. Explain how firms could tackle African markets.Learning objectives (continued) • Explain the importance of export processing zones in creating an environment for regional firms to participate in global markets. Describe the role of the African Union.

on 1 April 1980. The Treaty establishing the Community. SADC consists of fourteen member countries. Its predecessor – the Southern African Development Co-ordination Conference (SADCC) – was formed in Lusaka.What is SADC? • • • • It is the Southern African Development Community. . was signed at the Summit of Heads of State on 17 August 1992. which replaced the SADCC.

The SADC region SADC consists of fourteen member countries: .

co-operation to liberalise trade and fair competition in commodity trade .The SADC protocol on trade The aim of the protocol is to increase trade without any impediments by: – Eliminating import duties – Eliminating export duties – Eliminating non-tariff barriers Essentially it aims to enhance bilateral as well as regional initiatives to advance regional economic integration.

Reduction on services and non-tariff barriers have been neglected.Criticisms of ‘Protocol on Trade’ • Little is done to ensure that other complementary policies are put in place to industrialise the region. • • . Rules of origin are complex and they hinder regional economic integration.

The objectives of the SADC • • • • • • To achieve development and economic growth To alleviate poverty Enhance the standard and quality of life of the peoples of southern Africa To support the socially disadvantaged through regional integration To evolve common political values. systems and institutions To promote and defend peace and security .

social and cultural affinities and links among the peoples of the region. .Objectives of SADC (continued) • • • • • To promote self-sustaining development To achieve complementarities between national and regional programmes To promote and maximise productive employment and utilisation of resources in the region To achieve effective protection of the environment To consolidate the long-standing historical.

Goal of SADC The ultimate goal of SADC is to extend the current preferential trade arrangement so as to establish a regional trading block and a common market for SADC. .

The SADC economy .

International trade in SADC countries .

Lesotho’s largest trade market is the US – and relies heavily on SA for all its consumables. . The major destination for Botswana’s exports (mainly diamonds and beef) is the EU. The main export destination for the DRC is Belgium (mainly diamonds). The largest export market for Malawi is also the US.Exports and imports in southern Africa • • • • • The US has been the destination for most of Angola’s exports – mainly oil.

.Exports and imports in southern Africa (continued) • • • • • The EU is the leading export market for Mauritius. Namibia’s trade is highly oriented towards the EU – on the import side SA is the dominant partner. The EU is South Africa’s most influential trade partner. Seychelles’s main trading partners are France. the UK. Mozambique’s most important trade partner is South Africa. Germany and Japan.

food and animals. sugar. Malawi Tobacco. machinery and transport. vehicles and transport Consumer and capital goods. beef exports. food and live animals. Clothing and textiles. electricity 7. refined petroleum products. chemicals. manufactured goods 2. fuels Machines. transport equipment. chemical and rubber products. food 6. transport equipment. wood. Angola Crude oil. tea. Lesotho Diamonds. pearls and precious stones Aluminium. electrical equipment. crude materials. gold cobalt. nickel. sugar Machinery and transport. diamonds 5. tobacco. food Food. vehicles and parts Consumer goods. coffee Diamonds.Principal exports and imports per SADC country Country Principal exports Principal imports 1. machinery. capital and intermediate goods. soda ash. energy products Textiles and fabric. food and live animals. DRC 4. machinery and transport material. fish. Mauritius Clothing. petroleum. beverages. diamonds. copper. Mozambique . chemicals. chemicals. tobacco. coffee. raw materials. Botswana 3. manufactured goods. oil. machinery. materials based manufactures Manufactured goods. copper.

fuel and energy. transport equipment. diamonds. beverages. South Africa 11. Seychelles 10. oil. transport equipment. frozen fish. cinnamon bark Gold. Zambia 14. waste paper Gold. sugar. zinc. machinery. Petroleum. Namibia Principal exports Diamond. minerals. cobalt Tobacco. fertiliser Machinery and transport equip. machinery Food. tobacco. platinum. industrial raw material. petroleum products. gold. Tanzania 13. capital goods. apparel and clothing. petroleum products. fish products.Principal exports and imports per SADC country (continued) Country 8. manufactured goods Raw sugar. chemicals. chemicals Cons. Swaziland Canned tuna. wood pulp. food 9. food. machinery and transport equipment food. metals. chemicals. beef Principal imports Fuels. machinery. cotton 12. agricultural products. consumer goods Manufactures. Zimbabwe . manufacturing parts Fuels. food. goods. copper. processed fish. transport & equipm. non-metals. horticulture. manufactured goods Copper. machinery.

special economic zones. and Maquiladoras In South Africa they are referred to as Industrial Development Zones (IDZ) • • . bonded warehouses. customs zones. free ports.Exports processing zones in southern Africa • Are industrial zones with special incentives set up to attract foreign investors. in which imported materials undergo some degree of processing before being re-exported They include free trade zones.

• . unutilised potential.Export processing zones in southern Africa EPZs are established for a number of strategic reasons: • • • As a source of foreign investment To find a niche in the global economy To serve as industrial estates that have dutyfree production of exports. facilities and services tailored for export oriented industries As part of a broader development initiative that encourages private sector participation in providing infrastructure in areas with abundant.

Exports processing zones in southern Africa In South Africa four IDZs can be identified: • • • • Coega East London Johannesburg Saldanha and Richards Bay All part of a broader initiative to encourage private sector participation in areas with underutilised potential .

In Mauritius. • • . government focuses on forging competitive edge of export oriented activities.Export processing zones in southern Africa (continued) • In Mozambique EPZs are either separate geographical areas or single factor units geared towards exports. the EPZs were introduced in 1995 to attract foreign investment. particularly in the textile industry. Special incentives are given to investors involved in manufacturing for exports. In Malawi.

accounting for 22% of all exports in the country.Export processing zones in southern Africa (continued) • Namibia had 22 EPZ companies in 2003 which had invested N$ 3. In 2001 Seychelles had 24 EPZ companies which generated US$150 million.3 billion and created nearly 10 000 direct employment opportunities. • .

Ethiopia. Djibouti. Burundi. Eritrea. Comoros. Uganda. Madagascar. Mauritius. Malawi. Namibia. COMESA is a regional grouping that started with 20 countries in eastern and southern Africa. The original 20 member countries of COMESA were Angola.Southern Africa and COMESA • • The Common Market for Eastern and Southern Africa (COMESA) was established in 1994. Swaziland. Seychelles. DRC. Egypt. Zambia and Zimbabwe. Sudan. Rwanda. Kenya. • .

Several countries that did not participate cited insufficient economic development to compete openly with the stronger and more developed countries.) • • • The combined GDP of COMESA countries totalled over $175 billion in 2003. COMESA launched a Free Trade Area (FTA) with nine out of the 20 countries participating.Southern Africa and COMESA (cont. In 2000. intra-COMESA trading has been reported to have increased by 30% • . Since the launch of the FTA.

merger or acquisition. – Intra-industry trade reduces transaction costs associated with intra-regional trade. – Engage in inter-firm and intra-firm research and development for transfer and development of technology – Intra-regional industrialisation and socio-economic progress lie in the accelerated development of industries where FTAs have a comparative advantage. Intra-industry trade is a more effective channel for technology transfer: – Integrating foreign technologies if actively involved in trade and cross-country product sharing.Some suggestions for firms involved in cross-border trade • • New entrants may establish commercial presence through joint ventures. . licensing agreements.

and cultural integration of the African continent The development of NEPAD is considered as one of the most important development in the history of OAU – The primary objectives of NEPAD are to eradicate poverty and to place African countries on a path of sustainable growth and development .Southern Africa and the African Union • • • The Organisation of African Unity (OAU) was established in 1963 Its objective is to foster economic. social.

and cultural integration of the African continent African Common Position on Africa’s External Debt Crisis (1997) – a strategy for addressing the continent’s external debt crisis The Algiers decision on unconstitutional changes of government (1999) and the Lome Declaration on the framework for an OAU response to unconstitutional changes (2000) The New Partnership for Africa’s Development (NEPAD) – adopted as a Programme of the AU at Lusaka Summit in 2001 . to determine its destiny and to address the challenges to peace democracy and security The Abuja Treaty (1991) proposed the establishment of an African Economic Community (AEC) whose objective is to foster the economic. social.The OAU history and initiatives Lagos Plan of Action and the Final Act of Lagos (1980) that incorporate programmes and strategies for self reliant development and cooperation among African countries The African Charter on Human and People’s Rights (Nairobi 1981) and the Grand Bay Declaration and Plan of Action on human rights – the two instruments to promote human rights in the continent The OAU Declaration on the political and socio-economic situation in Africa and the fundamental changes taking place in the world (1990) – which underscores Africa’s resolve to seize the imitative.

Customs revenue collected is shared among members. • • • SACU provides for common external tariff and common excise tariff.The Southern African Customs Union (SACU) • Came about as a result of negotiation involving Britain and SA as early as 1910. Namibia and Swaziland. . Botswana. The new renegotiated agreement was adopted in 1969 by five member countries: South Africa. The aim of SACU is to maintain the free interchange of goods between member countries. Lesotho. and persisted until 1960.

(2) economic policy and regulatory issues. The new agreement focuses on (1) governance & administration. and a share of the development component.The Southern African Customs Union (SACU) • SACU agreement was further reviewed after the first democratic election in 1994. • • . Consensus was reached on institutional reform principles. including a share of customs pool. a share of the excise pool. (3) revenue sharing.

Other regional trade/economic communities in Africa • • • The East African Community (EAC) Economic community of Central African States (ECCAS) Central African Economic and Monetary Community (CEPGL) • • Intergovernmental Authority of Development (IGAD) Economic Community of West African States (ECOWAS) .

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