The deadlock in trade negotiations between the EU and South Africa that threatened to break the world's oldest customs union, the Southern African Customs Union (SACU), is set to ease off, thanks to progress being made in ironing out differences between the two parties.
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Speaking to Mmegi Business Week in Gaborone this week, the Head of Delegation of the EU in Botswana, Paul Malin said he was confident SACU would stay intact after the EU softened its stance and agreed to apply a common tariff to its exports to the region.
This was the contentious issue that led to a breakdown in negotiations when South Africa insisted on a Common External Tariff (CET) for the southern African region inspite of its separate trade agreement with the EU - the Trade, Development Cooperation Agreement (TDCA).
"In principle, we have agreed to harmonise the TDCA and the interim Economic Partnership Agreement (EPA) so that a common tariff can apply to the whole region," Malin said.
"What is left now is to just formalise this and I believe the process should be completed by early next year. However, there are still other issues, such as the Rules of Origin, which might need a bit more time to solve as they might have political connotations as well."
Botswana, along with Swaziland, Lesetho and Mozambique, has initialled the interim EPA, while South Africa, Angola and Namibia have remained on the sidelines. However, South African sources indicate that under the current alignment proposal by the EU, new border controls will be required within SACU due to the misalignment of Rules of Origin.
In the negotiations towards a full EPA, other outstanding issues remain on trade in services and investment provisions. The negotiating parties are scheduled to meet again in February next year.
Botswana's chief trade negotiator James Masisi has echoed Malin's confidence in the progress being made, though not with as much enthusiasm. "I wouldn't say if the Common External Tariff issue is solved, all our problems are solved because there are still other issues on the South African side such as Rules of Origin and Most Favoured Nation (MFN) status.
"But if we manage to align the tariffs so that the region's trade is not segmented, we should be very close to a full EPA. Our next meeting will be in February and we are hopeful it will be fruitful." Masisi has come out of retirement to resume his duties as Government Trade Negotiator for a further five years. He is on secondment from the Botswana Institute of Development Policy Analysis (BIDPA) where he went after retiring from the Ministry of Trade and Industry at the end of last year.
Progress in EPA negotiations will be good news for Botswana and other countries in the region that were set to lose considerable revenues if SACU broke up. According to a recent study by BIDPA, Botswana stands to lose the equivalent of up to 29 percent of the total revenue required for the 2009/2010 budget if SACU breaks up.
Statistics show that Botswana received R5 634 million from the SACU revenue pool in 2006. "Botswana's dependence on the SACU revenue has grown steadily over time," the BIDPA study says."By 2008, Botswana's dependence on SACU revenue had grown to 27 percent of (the) total revenue (for the) 2007/8 budget. As a result of the global downturn and its impact on diamond exports, the transfers from Pretoria of SACU revenue will be Botswana's single largest source of revenue in 2010."
However, Masisi played down the chances of SACU breaking up and the impact it would have on Botswana revenues if it did. "I believe the BIDPA report was a bit unbalanced as it is not a cutthroat consequence that Botswana will lose such an amount of money if SACU breaks up," he said.
Ironically, Masisi is employed by BIDPA which produced the report. "SACU, which has been around since 1910, has faced many challenges before and it is expected that the organisation will face challenges again in the future.
"What is important is that member states are committed to the future of their customs union and we are convinced that this commitment will carry the organisation through this (particular) challenge. When we can find each other as African brothers, we should be allowed to negotiate among ourselves."
Source:mmegi.bw/
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