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Regional Integration Case Study
(SACU)
Southern African
Customs Union
Ebenezer Amoah
Helena Indongo
Hlobsile Bhembe
Professor. Dr. Sebastian Dullien
1
❖Brief Background & History
❖Main Driver of Integration
❖Current Integration Dynamics
Outline
❖Main Areas of Integration: De jure vs De facto
❖Trade Integration
❖Monetary & Financial Integration
❖Factor Movements
❖Political & Defense Pact
❖Main challenges & problems for the future
❖Conclusion
2
The Evolution of SACU since 2004
1910
2004
2002
COUNTRY
YEAR
POPULATION
South Africa
1910
60.6 Million
Botswana
1910
2.4 Million
Eswatini
1910
1.2 Million
Lesotho
1910
2.2 Million
Namibia
1910
2.7 Million
Source: SACU Insights 2004-2019
3
Member Countries Main Sectors
South Africa
❖ Automotive
❖ Textile
❖ Service
❖ Mining
❖ Energy
Namibia
❖ Mining
❖ Beef
❖ Fishery
❖ Grapes
Botswana
❖ Mining Diamonds
❖ Livestock - Beef
Eswatini
❖ Sugar Cane
❖ Sugar based
products
Lesotho
❖ Agriculture
❖ Apparel
industry
4
Source: SACU Annual Report, 2021
Features & Driving Objectives of SACU
Features: Linked by a single tariff − the Common External Tariff (CET) − and a common
customs territory - no customs duties & quotas on all intra-SACU trade.
Objectives:
➔ To prioritise regional integration is the overarching objective for SACU
➔ To develop common policies and strategies with respect to industrial development
➔ Facilitate SACU members trade negotiations with third parties
➔ To have a common pool of customs and excise duties funds
Source: SACU Insights, 2004-2019
5
SACU Institutions
Source: SACU Annual Report, 2021
6
Main driver behind integration (political vs.
market)
Political History
Source: SACU Insights 2004-2019; 2019
Market
7
Trade Integration: De jure vs De facto
intra-SACU merchandise export shares, in %,
comparable with other RECs
45
40
Period
Annual
Average Share
(%)
2004-2008
3
2009- 2013
13
2014- 2019
15
35
30
25
20
15
10
5
0
2004
2005
2006
2007
2008
2009
SACU
2010
2011
ECOWAS
2012
2013
COMESA
2014
2015
2016
2017
2018
2019
EAC
Source: Author‘s illustration based on ITC Trade Map data, 2022
8
Trade Integration : De jure vs De facto
Intra-SACU import shares (%), comparable w/ other
RECs
Period
Annual
Average
Share (%)
2004-2008
10
2009-2013
14
2014-2019
14
30
25
20
15
10
5
0
2004
2005
2006
2007
Intra-SACU import share
2008
2009
2010
2011
intra-ECOWAS import share
2012
2013
2014
2015
intra-COMESA import share
Source: Author‘s illustration based on ITC Trade Map data, 2022
2016
2017
2018
2019
intra-EAC import share
9
Trade Integration: De jure vs De facto
Trade Integration
Indicator
De jure
De facto
Elimination of goods Article 18 (1) : Duty-free quota-free
tariffs
(unless elsewhere specified) .
Rather low & stagnating level of integration, however
more integrated than other RECs.
Trade Facilitation
Article 28 (2) provides for
harmonization of Technical Barriers to
Trade (TBTs): product standards and
technical regulations.
No harmonization of TBT; No unified standard/
accreditation system in SACU (e.g., Namibia pharma).
SACU Trade Facilitation Programme
2011
Real time customs system interconnectivity between
South Africa & BLNS countries.
Trade in Services
liberalization (TIS)
No provisions for TIS
Several sectors are integrated among SACU.
SADC Protocol on Trade in Services 2022, ratified by all
SACU members.
Rules of Origin
No rules of origin
No rules of origin
Numerous NTBs among SACU members that pose a
trade cost ; less standardization of procedures in crossborder trade.
Source: Elago, n.d.; SACU, 2023; SACU Agreement, 2002 ; WTO, 2016
10
Walvis Bay Corridor Group (de facto trade
facilitation)
Source: Namibian High Commission to South Africa, 2022
11
Monetary Integration
Monetary Integration
DE JURE
DE FACTO
No provisions in SACU
Agreement
Common Monetary Area (CMA) Multilateral
Monetary Agreement between NLS & S.A. (fixed
exchange rate & free capital flows). Hence S.A.
sets monetary policy.
Botswana: trade-weighted basket of Rand & SDR,
S.A. has large weight. Hence, Botswana Pula
moves in tandem with Rand.
Therefore, de facto monetary integration
determined by S.A.
CMA : free access to S.A. foreign exchange
market
IMF (2007) found monetary convergence in CMA
countries : estimation results of an interest rate
adjustment model.
UNCTAD ,2008.
Monetary integration
BLNS countries interest rates compared to S.A. repo rate
Source: Trading Economics, 2022
Monetary integration
BLNS countries interest rates compared to S.A. repo rates
Source: Trading Economics, 2022
Financial Integration
Financial Integration
DEJURE
DEFACTO
No provisions in the
SACU Agreement
1. CMA: free movement of capital flows, hence NLS have access to
developed S.A money and capital markets.
2. Financial relations in hub and spoke system with S.A at the center:
a). S.A major banks First National Bank (FNB), Nedbank, Standard
Bank, Absa Bank: 90% combined market share in S.A. also dominate
financial system in the BLNS:
- Eswatini & Namibia 5 banks in total: FNB, Standard Bank, Nedbank
dominate.
- Lesotho : FNB, Standard Bank, Nedbank, & 1 state bank
- Botswana: 8 major banks, 5 from South Africa
b). Financial institutions: Botswana’s Letsegho financial services
available in Eswatini, Namibia & Lesotho
S.A. investment banks also available in BLNS:Alexander Forbes, African
Alliance, Stanlib, Old Mutual.
Source: WTO, 2016
Financial Integration
S.A vs BLNS commercial banks lending rates to
customers
Source: Trading Economics, 2022
Financial Integration
S.A vs BLNS commercial banks lending rates to
customers
Source: Trading Economics, 2022
Political & Defense Integration
Political & Defense Pact
DEJURE
DEFACTO
No provisions for political &
defence pact in SACU
integration.
Article 5 of SADC (1992) makes
provisions for a Defence and
Political pact.
AU provides for a
non/aggression ^ common
defence pact.
All SACU members have signed
both pacts.
Source: African Union , n. d
Movement Of Capital
S. A. (as the regional hub in SACU) is the largest source of FDI in
the other SACU countries.
FDI Stocks from selected countries, 2010, % of GDP
European
Of which
France
Portugal
UK
Other
United
States
China
South
Africa
Total
SACU
South
Africa
35.5
1.0
0.1
12.9
21.5
23.2
1.1
Swaziland
3.5
0.0
0.0
0.1
3.4
0.1
-
11.1
14.7
Botswana
3.0
0.0
0.0
2.4
0.6
0.5
1.2
3.3
8.0
Namibia
2.6
0.0
0.0
0.0
2.6
0.0
0.4
4.3
7.4
Lesotho
0.7
0.0
0.0
0.5
0.3
0.1
0.4
2.7
4.0
Source: IMF, 2013, p.12
59.9
19
Movement Of Capital
Cross boarder banking operations with South Africa
Source: IMF, 2013, p. 14
20
Movement Of Capital
Key Nonfinancial South African Firms Operating in the SACU Region
Agro
Mining
South Africa
x
x
x
x
x
Botswana
x
x
x
x
x
x
x
x
x
Lesotho
Namibia
Eswatini
x
x
x
x
x
x
x
x
x
Nonfinancial Services
Trade
Manufacturing
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Source: IMF 2013, p.12
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
x
Movement Of People
Migration
DEJURE
DEFACTO
No provisions for movement of people
See data
LABOUR FORCE OF
ORIGIN COUNTRY
33 695
805850
4.18%
43 461
905835
4.79%
50 475
1033295
4.88%
41 770
327322
12.8%
65 384
347185
18.8%
42 038
363609
11.56%
45 435
373068
12.1%
149 432
863588
17.3%
234 089
865440
27.0%
181 832 894106
20.3%
192 008
937123
20.4%
58 250
657389
8.86%
91 250
753051
12.12%
40 708
4.61%
36 671
920919
3.98%
SHARE LABOUR
FORCE OF ORIGIN
COUNTRY
2020 MIGRATION
STOCK
3.2%
SHARE LABOUR
FORCE OF ORIGIN
COUNTRY
LABOUR FORCE OF
ORIGIN COUNTRY
705,453
LABOUR FORCE OF
ORIGIN COUNTRY
2010 MIGRATION
STOCK
23 147
SHARE OF LABOUR
FORCE OF ORIGIN
COUNTRY
2015 MIGRATION
STOCK
LABOUR FORCE OF
ORIGIN COUNTRY
SHARE OF LABOUR
FORCE OF ORIGIN
COUNTRY
2005
MIGRATION STOCK
South
Africa
ORIGIN
DESTINATION
Migration stock in South Africa from BLNS
countries, as a share of BLNS total labor force
Botswana
Eswatini
Lesotho
Namibia
881284
Source: UNDESA , 2020; World Bank, World Development Indicators, 2022
Revenue Pool Mechanism
De jure the revenue-sharing arrangement
This has important fiscal policy implications for BLNS countries
Source: SACU Annual Report, 2021; WTO, 2016 ; Bank of Namibia, 2005
23
Current Integration Dynamics
❖
De jure Regional industrialization development
❖
De jure Review of the revenue sharing arrangement
❖
Address factors limiting – seamless movement of goods, trade
facilitation and logistics e.g dumping, infrastructure, policy
❖
De jure SACU Customs Modernisation Programme (CMP)
➔
reduce turnaround time at the board for the traders
➔
secure the supply chain (amid situations like COVID)
➔
minimize physical interaction at the border
Source: SACU Annual Report, 2021 ; WTO, 2016 ; Lombaerde et. Al., 2017 ; South Africa Reserve Bank & IMF, 2013
24
Current Integration Dynamics
❖
Development of Democratic SACU institution
➔
Tariff board
➔
Regional competition commision for SACU countries
❖
De jure Unified engagement in trade & investment negotiations
❖
Harmonisation of customs procedure and policies
❖
How to position itself in order to fully benefit from AfCFTAs
Source: SACU Annual Report, 2021 ; WTO 2016; Lombaerde et. al., 2017 ; Draper et al., 2007
25
Challenges & Future Problems
❖
❖
❖
❖
❖
❖
❖
❖
The dominance of South Africa in decision making
Reliance on the revenue pool funds
Revenue pool dispute
High economic differences - S.A economies of scale - Dependency
Competition is tough to NO competition at all
BLNS lack the resources and well as the management skills to
successfully implement integration projects.
Lack of harmonized standards.
Unharmonized VAT within SACU (refund terms pose extra
administration cost)
Source: SACU annual report ,2020 ; WTO 2015-2016 ; Braude & Sekolokwane, 2008 ; Kalenga, 2012 ; Edwards & Lawrence, 2008
26
SACU Outlook
Tighten implementation rules of integration
projects
● Need for member states to continue
working even more closely with similar
customs process and Policies
● Elimination of total border control for
goods, services
● For sustainability & For SACU to work the
BLNS need to develop other industries to
diversify their economies
●
Source: SACU Agreement, 2002 ; WTO, 2016 ; SACU Annual Report, 2015-2021 ;
Kalenga, 2005
27
Conclusion
❖ SACU is far from a single market
❖ Compared to COMESA, ECOWAS and EAC the SACU region is
integrated but with room for improvement esp. in terms of
❖ Trade integration - level are still low, they could trade more with
each other.
❖ De jure Financial Integration is still lacking; de facto well integrated.
❖ De jure Monetary integration lacking; de facto well integrated.
❖ Movement of Labour is limited
28
References
African Union (n. d). The African Union Non-Aggression and Common Defence Pact. Retrieved on 20.12.2022 from
https://au.int/en/treaties/african-union-non-aggression-and-common-defence-pact.
Bank of Namibia. (2005). Annual Symposium: The benefits of Regional Integration for Smaller Economies. ISBN: 99916-61-
28-X.
Braude, W., & Sekolokwane, K. (2008). Sustainable Development: The missing Piece in the Southern African Customs
Union’s regional trading arrangements? International Institute for sustainable Development.
Draper, P., Halleson, D., & Alves, P. (2007). SACU, Regional integration and the Overlap Issue in Southern Africa: From
spaghetti to cannelloni?. South African Institution of International Affairs.
Edwards, L., & Lawrence, R. (2008). SACU Tariff Policies: Where Should They Go From Here? Centre for International
Development at Harvad University.
Elago, P. (n.d.). SACU’s Trade Facilitation Programme: Talking Regional Customs Modernisation. Trade Law for Southern
Africa
Newsletter. Retrieved from https://www.tralac.org/documents/newsletters/2556-sacu-tradefacilitation-programme- talking-regional-customs-modernisation-paulina-elago-tralac-newsletter-november2018
/file.html#:~:text=In%20accordance%20with%20the%20SACU,of%20prohibited%20and%20restricted%20goods
29
References
High Commission of the Republic of Namibia to the Republic of South Africa. (n.d). Trade and Investment: Walvis Bay
Corridor. Retrieved on16.12.2022 from https://pretoria.mirco.gov.na/index.php/trade-and-investment/walvis-bay
corridor.
IMF (2013). Inward and Outward Spillovers in the SACU Area. IMF working paper. Retrieved on 12.12.2023 from
https://www.imf.org/external/pubs/ft/wp/2013/wp1331.pdf.
International Trade Centre’s Trade Map. (2022). List of Supplying Markets in Southern African Customs Union (SACU) for
the Product Imported by Southern African Customs Union (SACU). [Data file]. Retrieved December 3, 2022
from
https://www.trademap.org/Country_SelProductCountry_TS.aspx?nvpm=1%7c%7c11%7c%7c11%7c
OTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c3%7c1%7c1%7c1
International Trade Centre’s Trade Map. (2022). List of importing markets in Southern African Customs Union (SACU) for
the product exported by Southern African Customs Union (SACU). [Data file]Retrieved December 3, 2022 from
https://www.trademap.org/Country_SelProductCountry_TS.aspx?nvpm=1%7c%7c11%7c%7c11%7cTOTAL%7c%7c
%7c2%7c1%7c1%7c1%7c2%7c1%7c3%7c1%7c1%7c1
International Trade Centre, Trade Map. (2022).SACU exports to the world. https://www.trademap.org/CountrySelProduct
_TS.aspx?nvpm=1%7c%7c11%7c%7c%7cTOTAL%7c%7c%7c2%7c1%7c1%7c2%7c2%7c1%7c3%7c1%7c1%7c1
International Trade Centre, Trade Map. (2022). ECOWAS, EAC, COMESA intra- exports and intra-imports. [Datafiles].
Available from https://www.trademap.org/Index.aspx
International Trade Centre, Trade Map. (2022). ECOWAS, EAC, COMESA imports and exports to the world. [Datafiles].
Available from https://www.trademap.org/Index.aspx
30
References
Kalenga, P. (2005). Trade policy options for Eastern and Southern Africa. Trade Law Centre for Southern Africa.
Kalenga, P. (2012). Regional integration in SADC: Retreating or forging ahead. Trade Law Centre for Southern Africa.
Lombaerde, D. P., Saucedo Acosta, E. J. (2017). (1st ed.). Indicator-Based Monitoring of Regional Economic Integration:
Fourth World Report on Regional Integration. United Nations University Series.
Southern African Customs (2002). Southern African Customs Union Agreement between the governments of the Republic
of Botswana, the Kingdom
of Lesotho, the Republic of Namibia, the Republic of South Africa and the
Kingdom of Swaziland.
Southern African Customs Union. (2023). Trade Facilitation. Retrieved 02/01/2021 from https://www.sacu.int/category.
php?cat=Trade%20facilitation
The World Bank. (2023). World Development Indicators. Retrieved January 10,2023 from World Development Indicators
data https://data.worldbank.org/indicator/SL.TLF.TOTL.IN?end=2021&locations=BW-LS-NA-SZ&start=2004
Trading Economics (2022). Economics database. Retrieved on 12.12.2023 from https://trading economics.com/
UNCTAD (2008). Regional cooperation and integration in Sub-Saharan Africa. United Nations. Retrieved on 12.12.2023
from https://unctad.org/system/files/official-document/osgdp20084_en.pdf.
UNDESA (2020). International Migrant Stock: Destination and Origin. Retrieved on 18.12.2023 from https://www.un.org/
development/desa/pd/content/international-migrant-stock
W.T.O. (2016). Trade Policy Review: Report by the Secretariat Southern African Customs Union. Retrieved 10.12.2023
from
https://www.wto.org/english/tratop_e/tpr_e/s324_e.pdf.
31
Appendix
intra-SACU merchandise trade share, in %, comparable with other RECs.
35
30
25
20
15
10
5
0
2004
2005
2006
2007
intra-SACU trade share
2008
2009
2010
2011
intra-ECOWAS trade share
2012
2013
2014
intra-COMESA trade share
2015
2016
2017
2018
2019
intra-EAC trade share
32