109 years old, since 1910.
19 August 2019

13th SACU Council Of Ministers Meeting - Remarks By The Executive Secretary, Ms Tswelopele Moremi

7 December 2007

Windhoek, Namibia

Chairperson
Commission Members

It is an honour to present to the 13th Meeting of the Commission the Executive Secretary Report. The 13th meeting of the Commission and Council is taking place at a time when the cohesiveness of the region and, the preservation of the aims and objectives of the SACU Agreement face pressing challenges. The challenges is centred around SACU`s trade relations with third parties as well as the progress of implementing planned regional programmes and activities, especially the agenda of consolidating SACU and institution building.

The purpose of this Report is therefore to highlight key challenges around the key issues surrounding the regional integration agenda of SACU. The report also provides an update on the key programmes and activities being implemented as part of SACU`s integration agenda and institution building. This is in line with the proposal of the 12th Commission Meeting held on 28th September 2007 in Maseru, Lesotho.

Chairperson, the Report is for information only for the Commission but the expectation of the Secretariat is that Commission can take advantage of this Report to further debate these issues and provide input for decision making to the Council.

EXTERNAL TRADE RELATIONS

Chairperson,

Under Article 31 of the SACU Agreement (i.e. Trade Relations with Third Parties), the basic principles that are to guide the engagement of the Member States in both multilateral and bilateral trade relations are set out. It is in that provision that

Negotiation of the EPA with the EU

It is in that provision that the participation of the SACU Member States in the EPA negotiations with the EU, which were recently concluded, was through the SADC Group. The resulting Agreement with the EU is therefore with the SADC region rather than SACU. On the other hand, two of the SACU Member States opted to defer their signing of the EPA. This suggests that despite efforts to adopt common positions before the negotiations, the SACU Member States did not address their participation as a cohesive regional trading bloc.

The EPA between the EU and the SADC Group will become effective from January 2008. What is yet to be determined is how and whether the current obligations of SACU Member States will be harmonised in trade relations with the EU under both, the trade chapter of the RSA/EU TDCA and the EPA, given that the latter has not been signed by all SACU Member States.

The SADC Free Trade Area (FTA) and Customs Union

The recent joint meeting of the SADC Ministers of Trade and Finance, held in November 2008, confirmed the road map for the launch of the Free Trade Area (FTA) in August 2008 and Customs Union in 2010. All SACU Member States are also in SADC and subscribe to its integration agenda including the recently approved roadmap. The commitment of the SACU Member States to the SADC-FTA may not however lead to major difficulties in the administration of the CCA until 2010, as little in the current structure of intra-SADC relations will change until then.

The impending establishment of the SADC Customs Union in 2010 will however impact on SACU in many respects, such as the following:

The participation of SACU Member States in the decisions and preparatory work for the eventual establishment of the Customs Union will therefore require a harmonized regional approach. Such an approach would firstly determine the future of SACU where SADC establishes a Customs Union and, set uniform principles to guide the involvement of member states, i.e. in accordance with the provisions of the SACU Agreement. Where this is not done, this may threaten the gains made so far by SACU as a trading bloc.

Trade Relations with other Trading Blocs

Chairperson

Under the 2002 Agreement, SACU has also been actively negotiating trade arrangements with other trading blocs, such as: the EU, US, EFTA and MERCOSUR. The challenge that however remains is that of SACU continuing the efforts to harmonise existing trade relations with third parties which were entered before the 2002 Agreement. This will require that Member States re-affirm their commitment to uphold the principles and obligations of the SACU Agreement governing trade relations with third parties.

The Changing Agenda of Issues Covered in Trade Negotiations

The SACU Agreement is limited to issues associated with trade in goods. SACU Member States however, face increasing demand to broaden the scope of third party trade negotiations to also include such areas as: Trade in Services, Finance and Investment, Government Procurement, Environment, Market and Monetary Integration.

The fundamental difficulty lies in the fact that, the SACU Agreement does not incorporate issues outside trade in goods in the negotiation of trade relations with third parties and the Member States have however not yet decided whether the issues outside trade in goods should be subject to the SACU Agreement provisions or not.

Given the importance of trade in services in international trade relations, SACU will have to proactively make a decision on how to deal with these issues. It is worth noting that the study on the consolidation of SACU is looking into this issue which can provide a direction as to the future handling of this issue.

IMPLEMENTATION STATUS OF SACU PROGRAMMES

Chairperson

As you are aware, implementation of the 2002 SACU Agreement started in earnest from July 2004. This however also coincided with a number of important developments at the regional level, including the debate on the SADC Customs Union, the SADC/EPA negotiations, etc. This has meant that SACU Member States have had to deal with the challenges of building and nurturing new institutions of SACU provided for in the Agreement while at the same time making their contributions to the broader regional integration initiatives under SADC and other regional bodies.

This situation has posed enormous challenges to SACU Member States in a number of areas. Firstly, it is stretching the technical and human capacities of the Member States in managing multiple regional trade arrangements. Secondly, it places a major responsibility on the SACU Member States to strengthen internal consultation mechanisms and be able to develop strategic positions on emerging regional integration developments on a constant basis. Thirdly, regional developments are weakening the cohesiveness of the Member States in matters involving the implementing of the SACU Agreement.

This means that, both policy and technical issues have to be addressed in the implementation of the SACU Agreement. At the policy level, there continues to be need for political direction to determine the future of SACU in the light of regional developments, such as the envisaged SADC Customs Union. At the technical level, there remains an urgent need to consolidate SACU as a Customs Union. These issues are addressed in more detail below, under the following headings:

The above are supported by a brief discussion of the progress achieved in the implementation of specific SACU programmes and activities and, proposed steps required to overcome some of the challenges being faced. Detailed information has been provided in the thematic reports.

Institutional Development

Well-functioning institutions are a prerequisite for the effective and efficient operations of a Customs Union. These institutions facilitate implementation of the key objectives of the Agreement. The main challenge faced in the development of SACU institutions has however been that of establishing the Tariff Board and the Tribunal. Once these remaining SACU institutions are established, they should bring about a balance in the exercise of responsibility and promote democratic decision-making. These institutions will also play an important role in the consolidation of SACU.

The review of the roadmaps agreed for the establishment of both, the Tariff Board and Tribunal however indicates that slippages have been experienced. Some SACU Member States are still facing challenges in the implementation of some critical milestones, such as: the ratification of the adopted Annexes on the National Bodies and the Tariff Board; and, the adoption of the necessary legislative reforms at national level.

The delay in the establishment and operationalisation of the Tariff Board also means that, SACU is unable to harness regional expertise required to advise the Council on issues of determining customs duties, other trade tariffs and, application of trade remedies, such as: anti-dumping, countervailing and safeguard measures.

The development of the Annex to the SACU Agreement setting out the specific roles and functions of the Tribunal has taken longer to finalise than earlier anticipated. This is largely due to the detailed nature of the work anticipated to be referred to the Tribunal and likely overlap with matters that are within the purview of Council.

During the process of developing Annexes to the SACU Agreement, it has also become apparent that there is need to clarify procedures to be applied for their operationalisation. In particular, there is need to determine whether Member States are required to ratify Annexes to the SACU Agreement before they can be made operational. It will also be important to clarify whether this would also apply to those Annexes that do not go beyond the scope and provisions of the SACU Agreement.

Policy Harmonisation

The SACU Agreement as set out in set out in Part Eight places an obligation on Member States to develop Common Policies and regulations to support the proper functioning of the Customs Union. Concerted efforts have been made to develop new regional policies and, where some already exist, to secure their harmonisation with national policies of the Member States. These efforts have however achieved limited success so far. The main challenge appears to be that of reconciling the socio-economic interests and priorities of the Member States who are also at different levels of development.

Due to the above factors, Member States have different perceptions and objectives that they expect the common policies to achieve. On the other hand, common policies in a Customs Union are supposed to also take account of the differences in levels of development of the Member States and, therefore, their vulnerability to competing third party imports and, revenue implications in setting of CET rates.

The difficulty to clarify objectives and parameters that the common policies should incorporate has also hampered the pace of progress.

Drawing on the above, it is clear that the development of common policies should be supported by strategies that address the specific needs of individual Member States. The policies should therefore aim to respond to the common goals and objectives of SACU. Possible options may include adapting policies representative of best practices from either, individual Member States of SACU or, external trading partners, supported by a process that enables the following:

By applying a more systematic approach, the SACU region may secure faster and smoother development and harmonisation of policies. Any such approach will however also require the commitment and political will of the Member States in order to succeed. This will only come when there is a clear appreciation of the importance and value of deepening integration.

Trade Facilitation

In recognition of the need for a comprehensive approach for improving trade facilitation within SACU, Council adopted a programme for five customs initiatives, covering the following priority areas:

i. Introduction of a Single Administrative Document (SAD) as a common Customs Declaration form;

ii. Establishment of One Stop Border arrangements;

iii. Introduction of joint Border controls;

iv. Use of electronic data interchange by Customs authorities; and,

v. Implementation of a capacity enhancement programme.

It is anticipated that implementation of these initiatives would reduce transaction costs and, create a more transparent and predictable environment for the conduct of trade within SACU. The pace of implementing these initiatives has however been generally slower than earlier envisaged. The major source of delays appears to have been associated with the linking of implementation to donor financing, which presents its own challenges.

In order to enhance trade facilitation within the SACU region, there will be need to prioritise the implementation of the five customs initiatives by all Member States. Amongst other measures, this will entail that all Member States commit the required financial and human resources. This should be supported by the assignment of key officers from Customs Authorities who will be held accountable for the Implementation of each Initiative on behalf of the Member State.

Revenue Management

When the SACU Agreement became effective, Council took a deliberate decision to immediately secure the implementation of a new Revenue Sharing Formula (RSF). The effective and efficient implementation of the RSF is however also dependent on accurate intra-SACU trade data that can then, in turn be used as a basis for the allocation of the revenue shares to Member States.

Member States have faced two major challenges associated with the attainment of the objectives set for the implementation of the new RSF. Firstly, the process of resolving data problems associated with intra-SACU trade statistics. Secondly, the process of determining and adopting permanent arrangements for the management of the Common Revenue Pool (CRP) has been protracted.

In an attempt to resolve these issues, an audit of intra-SACU trade data was conducted in 2006. Recommendations of the Audit are presently being implemented and have assisted in facilitating the annual reconciliation of trade data.

On the other hand, a number of studies have been undertaken on different options for the management of the CRP. It has however taken much longer to arrive at a decision on a permanent arrangement for the management of the CRP. This has been further compounded by linking the management of the CRP to the "broader issues" affecting the implementation of the SACU Agreement.

The delay in agreeing a permanent revenue management option also means that, some provisions of the SACU Agreement cannot be immediately implemented as operational procedures may have to change. For example, a key provision that has not been implemented relates to the audit of the CRP. This would require that structures for the management and governance of the CRP are determined as they will, in turn, affect the chart of accounts for the Pool and therefore, guide the planning and conduct of audits.

In order to move the SACU Agenda forward, there may be merit in separating the decision on a permanent arrangement for the management of the CRP from a decision on some of the "broader issues" that are still to be addressed. Once a decision has been taken on the management of the CRP, its implementation can then be made subject to the resolution of the "broader issues".

SACU Administration

An important component of the new SACU dispensation has been the provision for the establishment of an independent full-time Secretariat. Substantial progress has been in the filling of all key vacancies at the Secretariat with the recruitment of a competent team of professional staff. The major challenge presently faced by the Secretariat is that of balancing the needs for consolidating institutional stability and that of effectively and efficiently responding to increasing external imperatives created by the emerging regional agenda.

The external agenda which requires SACU`s collective response has been growing rapidly. This has also tended to overshadow the internal consolidation needs of the Secretariat, a situation that has further been compounded by the current organizational structure. The current structure was designed without taking into account the emerging regional challenges. There will be need to consolidate the Secretariat and address the structure to ensure that it responds to emerging regional challenges.

CONCLUSION

Chairperson

In conclusion this Report has highlighted the major challenges faced in the implementation of the SACU Agreement and the planned programmes for SACU. As the oldest Customs Union, SACU has gained valuable practical experiences associated with regional integration. These can be applied to shape the future economic well being of the sub-region.

In order to play its role in the region, SACU must however draw on the collective strengths and commitment of the Member States to achieve regional objectives. This will require that Member States uphold key tenets of the Agreement, and ensure that they regularly consult each other and take common decisions that protect and/or promote the interests of SACU.

This is particularly important in that, Member States presently face multiple regional integration arrangements that will increasingly challenge the undertakings that they already subscribed to in the context of the SACU Agreement. In addition, the Member States need to prioritise programmes aimed at consolidating the operations of SACU and secure that impediments to the timely implementation of programmes are addressed and milestones are upheld.

On its part, the Secretariat will continue to strengthen its service delivery capabilities and assist Member States in the coordination and implementation of regional programmes. The Secretariat will continue to monitor regional and international developments and provide appropriate recommendations to uphold the fundamental principles of the SACU Agreement.

I thank you