Southern African Development Community (SADC) members signed the Trade Protocol in 1996, however progress in the region to reap the benefits purported to accompany regional economic integration appears limited. Although SADC has adopted a growth and development through trade strategy, indications are that more needs to be done to implement this in a way that yields more positive results.
Evidence based policy making is critical for developing sound and relevant government policies. The process of evidence based policy making by definition allows one to monitor specific variables to determine the efficacy of a government intervention. Accurate data and sound data analysis are needed to achieve particular objectives.
This note highlights the pattern of South Africa, European Union and Asia trade over the period 1990-2009. The note pays particular attention to trade flow changes between South Africa and the EU and compares these to the changes in the trade flows between South Africa and Asia. The note also looks at the changes that have occurred within the Asian region, taking a closer look at sub-regions in Asia, namely, Eastern Asia, South Central Asia, South Eastern Asia, and Western Asia.
The trade trends reveal that South Africa's imports have been slowly increasing dominated by Asia. Similarly Asia, in particular East Asia, has emerged as South Africa's major trade partner, dethroning the European Union as an export destination.
With regards to imports, China has, over the years, rose to become a significant exporter to South Africa. The same can be said for Saudi Arabia and the United Arab Emirates. On the other hand, Japan, India, Pakistan and Singapore have lost ground in terms of preference as import sources. Germany and the United Kingdom remained South Africa most important export markets, although the two countries' share of South Africa exports declined.
On closer inspection, there is evidence to suggest that a number of traditional European Union imports commodities that were ranked as in the top ten exports to South Africa that have been replaced by Asian imports and these include; HS27: Mineral fuels, Oil, distillation products, etc.; HS29: Organic chemicals; HS39: Plastics and articles thereof; HS71: Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal & articles thereof; imitation jewellery; coin; HS73: Articles of iron or steel and HS85: Electrical, electronic equipment.
This research note shows that the EU is a significant trading partner to South Africa. Over the years the EU has been South Africa's largest trading block. Post 2005, Asia became a crucial trading partner to South Africa, and based on the previous trends, expectations are for Asia to surpass the EU in terms of value of trade within the next decade.
For many African states, negotiations to liberalise trade in services is a relatively new experience. Southern African Development Community (SADC), Common Market for Eastern and Southern Africa (COMESA) and East African Community (EAC) member states are set to negotiate services at several levels – regional, bilateral, multilateral and even at the supra-regional level in the context of the Tripartite agreements.
Trade in services is not a feature of the 2002 Southern African Customs Union (SACU) agreement, and although the Heads of State and Government hinted at the possibility when they undertook to develop “SACU positions on new generation issues”, it is unlikely that services will be negotiated in the context of SACU any time soon. SACU member states already have to contend with bilateral services negotiations with the European Union (EU) (Botswana, Lesotho, Swaziland), regional negotiations as part of SADC (all five SACU member states), regional negotiations as part of COMESA (Swaziland) and even at the supra-regional level as part of the Tripartite negotiations. This is already ambitious, particularly for a country with limited capacity such as Swaziland. These negotiations are mostly focused on services liberalisation, which addresses regulatory barriers relating to the access and treatment of foreign services suppliers. If SACU member states feel the need to directly address the issue of services within the configuration, the basis of the discussion should be deeper integration. With deeper integration, the focus should be shifted from liberalising the barriers that exist at the borders, towards addressing the behind-the-border issues, which exist within the jurisdiction of the member states.
The purpose of this paper is two-fold. First it is to review Botswana's competitiveness policy in the 10th National Development Plan, (NDP10 -2009-2016), National Export Strategy (2010-2016) and what are its conceptual foundations in the works of Michael Porter (1990). This will help explain the direction of trade and development policy in a small landlocked country like Botswana. The second purpose of the study is to review the actual experience of several non-traditional manufacturing exporters (i.e. outside the textile and motor vehicle industry) and to see what their experience has been and whether the current export strategy will facilitate their competitiveness and survival in Botswana's challenging commercial context. The five firms reviewed in this paper, represent numerically approximately one third of the firms in the non-traditional export sector. The sector is very small and is likely only to become smaller as the existence of this sector is in many ways the product of an earlier period when there was more government intervention in the development of exports. The analysis of the firms is qualitative in nature as firms were understandably unwilling to provide cost and revenue data and there were an insufficient number of firms for any serious quantitative analysis. The research focuses on the main concerns of the firms in sustaining their position in the export sector. In some cases this stems from the costs of transport, smallness and in others from decisions of government in terms of development policy and its application.
The paper will consider whether there is anything in the current competitiveness strategy that will assist firms in meeting the challenges of production in a small landlocked country like Botswana. It will be argued that the strategy and the actual commercial needs of most of the firms surveyed are disconnected as the export strategy is focused on a view of export development which is in appropriate given the actual level of private sector development in Botswana. Moreover, the policy is internally contradictory. Like most resource rich countries Botswana's principle policy direction for diversification is beneficiation which lies at the very heart of national and regional trade policy. It fails to focus on the question of how beneficiation of raw materials is to proceed in light of the current electricity and energy policy which lies at the core as to why firms in Botswana beneficiate minerals abroad. Thus the approach taken in this paper is essentially commercial, considering the actual cost and availability constraints that firms face.
Climate and trade issues lie at the intersection of two of the world's most contested, delayed and important multilateral negotiations. Climate change under the auspices of the United Nations Framework Convention on Climate Change (UNFCCC) and international trade as regulated by the World Trade Organization (WTO). This paper is a scoping assessment of the inter-relationship between international trade and climate change negotiations as it affects policy development in South Africa. The paper highlights two key variants of measures which pose a challenge to both these negotiations, specifically border carbon adjustments and the liberalization of trade in environmental goods and services.
The paper finds that while free trade in green industry products may be encouraged under a global climate agreement, it should not be reasonably required. In addition, for Border Carbon Adjustments (BCAs) under the UNFCCC, the authors recommend that BCAs be considered an issue best left to the WTO to judge as fair or not. At the same time, the authors propose a multilateral climate agreement under the UNFCCC which considers one (or all) of the following three agreements/provisions to mitigate the negative impact of response measures on non-Annex 1 countries:
In 1997 the EU introduced a requirement that beef imports be traceable through a computerised system. To ensure continued access to the EU market, Botswana introduced the livestock identification and traceback system (LITS). The objectives of this study are to estimate the costs associated with implementing the system and determine the effects on Botswana's beef exports to the EU market, government's export revenue from the beef sub-sector, and cattle producers' incomes and rural employment in the cattle industry.
There is increasing evidence that export diversification is linked to growth. However, possibly less than 10 African countries show signs of export diversification, with manufacturing making up at least 25% of total exports. Botswana and Zambia are both heavily reliant on primary commodity exports. In Zambia, the dominance of copper was such that only 6% of Gross Domestic Product (GDP) was manufacturing at independence in 1964 – 90% of export revenues were with copper. Zambia has had two main eras of economic policy since independence, with a central planning approach in the first period. In 1991 Zambia evolved to a market economy model. Policies and the role of government differed – from that of investor to facilitator – but the outcome was similar: mineral exports have remained high and dominate the portfolio of goods exported.
In their quest to achieve higher economic growth and development African governments have experimented with different growth and industrialisation models. Prominent among these is the import substitution industrialisation (ISI) model adopted after gaining independence in the 1960s and 1770s. It is widely believed that the ISI model failed, and after this came the idea of supporting growth through regional economic integration, specifically through the institutions of regional economic communities.
Sugar cane remains a major contributor to the Mauritian economy. In 2003 it was cultivated on 85% of the arable land by 28 000 planters, with most planters being smallholders. One in three rural families is directly or indirectly involved in the sugar industry. Annual sugar production averages 575 000 tonnes of which 507 000 tonnes are exported to the EU under the African Caribbean and Pacific (ACP) - European Union (EU) Sugar Protocol, the Special Preferential Sugar Agreement, which provides a guaranteed price well above the world market price. The share of the sugar industry in the Mauritian economy has dwindled from 25% of Gross Domestic Product (GDP) in the 1970s to about 3.5% in 2003, but still represents about 19% of foreign exchange earnings.
South Africa's trade policy has undergone much change as the country approaches its second decade of democracy. In particular, of more recent interest on the global sphere, and hence on the domestic front, have been the trade issues du jour, including trade in services and behind-the-border issues such as non-tariff measures and competition.
Trade remains an important facet of the country's economy, and although growth has improved since the 1990s when economic growth of 1% was being experienced, it is generally agreed that South Africa needs to grow its economy by more than the 5% it is averaging currently per annum. Increasing growth in the country's exports is seen as one key objective in the country's path to achieving more robust growth, but of course a crucial question is how this can be done.
Numerous challenges have arisen which have affected South Africa's ability to realise this objective. Amongst these are issues such as volatility of the exchange rate and a widening trade deficit, together with political crises plaguing African trading partners such as Kenya and Zimbabwe. Expanding infrastructure bottlenecks, for example related to maritime transport, and increasing uncertainty regarding energy supply are further limiting factors that are not part of the trade policy arena per se, but do impact on the country's ability to expand its exports. This is also linked to an important area of policy concern, which relates to how trade policy complements, and is complemented by, other economic policies, such as the industrial policy, in a pragmatic way. On the bilateral and multilateral front further difficulties have arisen, for example, within the context of the Doha negotiations related to liberalisation in agriculture, as well as the Economic Partnership Agreement (EPA) negotiations with the European Union (EU).
This paper examines the pattern of trade between IBSA countries for the period 2001-2008. We find that trade between the countries has been on the increase. After the IBSA initiative was established in 2003, each country recorded a significant growth in its trade with other IBSA countries in 2004, leading to a large intra-IBSA trade increase of 43.45%. Intra-IBSA trade continued to rise thereafter peaking at US$26 497.7million in 2008, a 40.97% growth from the previous year.
With regards to South Africa's exports with Brazil, we find that the mining sector dominates. In the manufacturing sector, high-technology followed by medium-technology manufactures dominates. South Africa's chief imports from Brazil are largely with manufactures, particularly of high-technology goods followed by medium-technology imports. The agricultural sector is the second most significant sector after manufacturing.
This paper involved the determination and analysis of trade potential for the South African pulp and paper industry using a gravity model approach. The pulp and paper sector was identified by the Department of Trade and Industry amongst four other lead sectors to enhance economic growth through the Accelerated and Shared Growth Initiative for South Africa (AsgiSA). This paper identifies South Africa's export destinations for its pulp and paper products that will enable the country to fully utilize its trade potential. The paper concludes by listing all the countries that should be of high priority for South Africa's trade analysts and policy makers in determining how resources should be reallocated in order to utilize export growth.
About the authors:
Adele Breytenbach is an Economics Masters student at the University of Pretoria. She completed her Bachelor’s degree in Statistics as well as her Honours degree in Econometrics at the University of Pretoria, both attained with Cum Laude. She started working for Economic Trend SA (ETSA) in 2010, after working as a researcher at the Investment and Trade Policy Centre (ITPC) in 2008/9 and as an Economic Tutor and Assistant lecturer in 2009 at the University of Pretoria’s Department of Economics. Adele is also a member of the international Golden Key Honorary Society.
André C Jordaan is an associate professor in the Department of Economics at the University of Pretoria. He is an expert in Development Economics, Macroeconomics and International Economics. Professor Jordaan is a member of the Virtual Institute at the United Nations Conference on Trade and Development (UNCTAD) and the Economic Society of South Africa (ESSA). His areas of research include International Trade, Sectoral Trade Analysis and Gravity models.
This study involved the determination and analysis of trade potential for the South African pulp and paper industry using a gravity model approach. The pulp and paper sector was identified by the Department of Trade and Industry amongst four other lead sectors to enhance economic growth through the Accelerated and Shared Growth Initiative for South Africa (AsgiSA). The econometric gravity model was designed to forecast the potential international bi-lateral trade flows by looking at specific conditions. It is also used to establish which priority markets in the economy are underperforming when taking their trade potential into consideration. These results then help determine how resources could efficiently be allocated to utilize export growth and promote job creation.
Trade patterns change as a result of the international specialisation of production and the increased integration of world markets. This is especially evident in small open economies such as the countries that make up the SADC region. In 2000, the share of SADC industrial production that was exported stood at 12%; by 2005, this share stood at 17%. A similar yet more pronounced trend applies to the share of domestic final demand for industrial goods imported. For 2000, the share of domestic final demand imported was 13%; this increased to 20% in 2005. The change in trade patterns reflected in these numbers has important implications for the use of resources in the economies of the region. This study focuses on the implications of changes in SADC industry trade patterns on the energy use patterns of the countries within the region.
Member countries of the Southern Africa Development Community (SADC) engaged in a number of bilateral trade liberalisation agreements and initiatives from as way back as the 1950s, the main objective being to increase bilateral trade flows through deeper opening and access of regional markets. Southern African countries saw these ‘country to country' trade agreements coupled with the adoption, by the SADC region, of a ‘Protocol on Trade' (TP) in 1996, and its implementation from 2000, was viewed as a coherent trade policy strategy to promote regional economic growth and help reduce poverty. Bilateral trade flows have been analysed on sensitive products textiles and apparel, cereals and vehicles between SADC countries that have signed bilateral trade agreements between themselves and implemented the SADC TP which led to the adoption of a SADC Free Trade Area in 2008. Analysis focused on sensitive products because preferential bilateral trade agreements seem to be more generous (offer better concessions) on these products as compared to commitments member states undertook at the wider regional level under the SADC TP. Trade creation on wheat and sugar products dominates trade diversion even though the percentage increase in trade in these products is small. Moreover, there is no conclusive evidence that bilateral trade agreements increased bilateral trade flows beyond the market access opportunities provided by the SADC TP except only for textile products from Malawi into South Africa. SADC countries need to do more to implement commitments in their bilateral trade agreements to realise the real market access benefits of trade liberalisation.
This paper proposes that non-temporary circular migration creates and sustains 'circular migration flows', which are the outcome of the continuous interaction between sending and receiving countries that is created and sustained by migration and by transnational networks. Circular migration generates both pecuniary and non-pecuniary flows which are conducive to enterprise creation and development. A positive migratory experience will see an individual increasing his or her financial, human and social capital, and this facilitates entrepreneurial activities in both home and host countries, including fostering trade linkages between sending and receiving countries. Hence this paradigm helps us consider how migration can stimulate employment. This paper considers this premise with reference to the Southern African sub-region.
Maize is the most important staple cereal product consumed in the Southern African region. The purpose of this paper is to examine the origins of the global 2007/8 food price crisis and the impact this had on the trade in maize within the SACU customs union as well as to consider the impact on consumer prices of maize. The reason why maize is central to this issue is not simply because of its roles as the principle staple food product of the SACU region but because much of the global crisis that occurred in 2008 had its origins in changes in US ethanol policy which were related specifically to the maize sector. The paper also considers whether in fact changes in VAT policy with appropriate and targeted poverty alleviation programs will achieve the objective of decreasing poverty in the SACU region. Lastly the paper considers duty on maize meal and processed maize products which serves to raise the import parity price for meal in an already oligopolistic market.
The paper has attempted to contribute to a key issue in the current debate on economic development: the link between trade and poverty. The paper focused on the impact of imported chickens on Zimbabwe's poultry industry. The general aim of the study was to find the impact of imported chicken on producers, consumers, retailers and government. The study relied on primary data collected through a survey. Questionnaires and interviews were used to gather information on the impact of imported chickens on producers, consumers and government. The method of ordinary least squares to estimate the model suggested to explain the linkages between trade and poverty. Quantity of domestically produced chickens, quantity of imported chickens and a dummy variable have been used as explanatory variables top rice of chickens, the depended variable. The quantity of domestically produced chickens and the dummy have been found to be significant in influencing the price of chickens on the local market. The quantity of locally produced chickens has been found to have an insignificant effect on the rice of the chickens
The results emanating from the study indicated that the imported chickens have had varied impact on the relevant players in the poultry industry. The consumers and retailers benefited, while producers lost. From the study the consumers benefited from a price reduction of chickens as a result of the influx of imported chicken in Zimbabwe. This translated to an improvement in welfare and hence has poverty reduction effect. The consumer surplus gain was estimated to be $24 334. Producers generally faced stiff competition from imported chicken and hence their production was reduced. Retailers benefited most from price differential margin. They imported chicken at lower price and tried to match though generally at lower price the local producer's prices. Other significant results found were that the imported chickens have an impact on employment. There was an increase in unemployment as a result of closure of companies which are directly linked to poultry production.
The paper concludes with proposing strategies that can be adopted to deal with the supply side constraints of the poultry industry so as to improve its competitiveness and production.
Empirical studies on regional economic integration process in Africa exhibit sluggish progress and there by limited level of intra trade. The existing literatures in Africa, particularly in Southern African regional integration bloc, SADC have neglected effects of regional economic integration dealing with disaggregated data. This study analyzes trade creation and diversion effects of the Southern African Development Community (SADC) using disaggregated data from 2000 to 2007.
The investigation estimates an augmented gravity model using panel data and random effect estimator methods. The results show that the intra -SADC trade is growing in fuel and minerals, and heavy manufacturing sectors while it displays a declining trend in agricultural and light manufacturing sectors. This implies that SADC has displaced trade with the rest of the world in both fuel and minerals, and heavy manufacturing sectors. SADC has served to boost trade significantly among its members rather than with the rest of the world. Countries participating in SADC have moved toward a lower degree of relative openness in these sectors trade with the rest of the world. However, the increasing trend of extra-SADC trade bias over the sample period in both agricultural commodities and light manufacturing sectors means that there has been a negative trade diversion effect. In other words, the value of trade between members and non-members has been increasing for the two sectors. These results seem to suggest that SADC countries retained their openness and outward orientation despite they signed the trade protocol for enhancing intra-SADC trade in agricultural and light manufacturing sectors.