Category / Customs Union

by Mike Poverello

SADC Free Trade Area requires Integrated Border Management

At least two articles have surfaced within the last week calling for greater urgency towards the development of free trade areas in Africa. How much time, money and effort seem to be expended in futile trade discussions that – to the man in the street – are meaningless. One such article, appearing in the Freight & Trade Weekly (FTW) relates to a speech delivered by the South African Transport Minister imploring SADC members to fast-track an integrated border management framework to enable ‘free flow’ of trade in the region. Before pressurizing foreign countries to embrace such change it should at least be properly considered at home. For more than 15 years, South Africa has failed to implement any meaningful integrated border management of its own. Forget about the so-called economic protectionism amongst individual African countries. We have – on our own soil –an inter-departmental ‘protectionism’ which cares little for free flow of legitimate goods. Admittedly there are moves to ‘integrate’ certain frontline functions such as customs border control and immigration. This, however, still does not mitigate interference from other government agencies in tampering with ‘legitimate trade’. Each department seems hell-bent on enforcing its respective mandate regardless of consequential overlaps in activity, oblivious to the detrimental effect this has for legitimate trade. So what is ‘integrated border management’? In the context of a sovereign state it could imply one of two things:

  • A cooperative inter-departmental approach where ‘individual’ government departments perform combined interventions (according to their respective legal mandate) on people, cargo and conveyances according to a structured operational procedure and workflow; or
  • A Border Management Agency (being a single government entity) comprising the capacity to effect all immigration, customs and border control/security functions at ports of entry and exit.

Secondly, integrated border management at external borders can be further extended to include a streamlined import/export or entry/exit process to facilitate the movement of legitimate travellers, goods, and conveyances in a single transaction. This is described as a ‘one stop border’. A critical success factor here is the ability of two country’s border authorities to be able to co-locate with one another and affect a common clearance/passenger movement process. Theoretically these things are all easy to understand, but a whole lot more difficult to implement – more about this another time.

Therefore, before a successful SADC FTA can ever hope to materialise, the concept of proper risk-based inter-departmental control must be embedded and administered within a home country before attempting a bi- or multilateral initiative. The article “SADC must implement integrated border management” can be found on page 17, of the 28 October 2011 issue of the FTW.

by Mike Poverello

Southern Africa: Eyeing the Money, Not Development

A new revenue sharing formula in the Southern African Customs Union (SACU) is intended to boost development but has met with resistance from the governments of poorer states in the sub-region that are interested in “just getting the money”. Differences over the economic partnership agreements (EPAs) with the EU nearly tore the customs union apart in 2010; now the issue of the revenue sharing formula has become equally contentious.

The South African Treasury Department wants a revision of the formula.

Smaller member states Botswana, Lesotho, Namibia and Swaziland (BLNS) argue that SACU’s common external tariff (CET) gives South Africa an instrument to protect its own industry, while the level playing field in the union makes it hard for the peripheral countries to build their own industrial bases and compete with their much larger neighbour’s products and services. For this they deserve to be compensated, they argue.

A lot of time was spent on working out the formulation of a new mechanism, but nothing definite was decided on.

Certain trade commentators warned against an “unrealistic” perception of the balance of power in SACU. South Africa feels that it cannot be expected to receive less than what it’s due. At the same time within the BLNS countries there is a shocking lack of understanding of the realities. The South African Treasury is frustrated over having to hand over so much money, without having control over it. It is proposed that South Africa should top up the revenues for reasons of political stability and economic policy but the formula shouldn’t just focus on trade, rather stimulate development.

The current revision of the SACU agreement is mainly inspired by the recession and a couple of years of experience with the current revenue formula, which South Africa now wants to renegotiate. Such changes are not significant enough to drive the process. A leaked draft report on the proposed changes to the formula has caused an outcry in the BLNS, being pitted heavily in favour of South Africa. Countries are still studying the report with a final decision expected in April 2011.

One of the options on the table is to increase the development component of the pool with funds, for instance, going to regional infrastructure projects instead of state coffers. It is however doubtful that countries like Swaziland and Lesotho will be keen on that. For them, it is more important than anything else to get the money.

It is therefore obvious that the current one sided focus, where South Africa compensates the SACU states for their inability to improve their economic plight or maintain domestic fiscal discipline will remain a burden on ‘big brother of the south’ unless some lessons of ‘tough love’ are brought bear on the region. It makes one wonder how on earth SADC let alone an African Union can ever materialize under such mentality.

Original article dated 28 March 2011 featured on allAfrica.com