Cautionary note on EPAs

Botswana Gazette, Botswana

Cautionary note on EPAs

Written by JFG

22 September 2009

Government deserves commendation on the various programmes it has embarked on to diversify the economy away from mining especially diamonds. Such strategies include inter alia 1) the setting up of BEDIA to attract foreign direct investments (FDIs) thus facilitating the growth of the manufacturing sector. 2) The IFSC model which I am highly convinced was a well thought out model considering the geographical situation of this country and of course its population.

The IFSC was set up to facilitate the growth of the financial services industry in Botswana. Setting up LEA to lead the development of the entrepreneurial framework of the nation was also a welcome move. The Government through Ministry of Trade and Industry is also a signatory to a number of trade agreements which if taken advantage of can propel local entrepreneurs to greater heights.

Our leadership deserves a pat on the back for the above policies, but the latest agreement again through the Ministry of Trade should be welcome with caution. This latest agreement, which the Government believes can take Botswana a step forward in economic diversification, is the Economic Partnership Agreement (EPA).

EPAs are negotiations aimed at redefining the trade regime between EU and ACP countries by replacing the system that has been in application since the signing of the Lome Convention. (EPAs: hopes, fear and challenges; 2007). One aspect that should be noted about this arrangement is that, it provides for reciprocal trade agreements.

This means that both the EU and ACP will provide duty-free market access to each other’s exports. The difference with the previous agreement is that the ACP exports got duty-free access to EU markets while the reverse did not apply.

Proponents of EPAs believe that the arrangement will lead to poverty reduction while contributing to sustainable developments. They also believe that the arrangement will facilitate the growth of agricultural sector because our farm produce and other products will have lucrative markets of the EU.

It’ is of great importance to understand what EPAs would mean to our diversification efforts and realisation of Vision 2016 objectives. The following impacts should be expected from the signing of such arrangement.

• Botswana’s prospects of development can be frustrated by the EPAs. Our carefully crafted diversification policies may not be compatible with EPAs. Small industries and small companies are likely to suffer from hyper competition as highly subsidized cheap products from the EU are likely to flood Botswana market. The influx of cheaply produced milk products from this region is likely to threaten the dairy industry before it grows and thus negatively affecting our well crafted NAMPAAD policy.

• EPAs undermine regional Integration efforts. The cotonuo agreement intended that the EPAs contribute to regional integration and the current format of the agreement does not. Regional integration is a tool for SADC region to create favourable trading environment within the region. The current arrangement is characterised by several splits and formation of new alliances. In the 14 member SADC only seven countries negotiated under SADC-EPA where as other member states like Zimbabwe, Zambia, Democratic Republic of Congo (DRC), Madagascar, and Malawi decided to negotiate under Eastern and Southern Africa (ESA) configuration. (Impact of EPAs on MGD; 2008)

The EU pledges development aid to Botswana through European Development Fund (EDF). EDF is the financial arm of the EU which is meant to assist former colonies to develop. It is released in period of five years. Analysis by the South Centre Factsheet No 6 (2007) shows a decline in the percentage of total allocation disbursed in the period (1975-2000). This shows that we cannot bank on the EDF support. How can our Government expect AID from the EU during this economic crisis when the same EU failed to meet its promised target at the time when the world economy was booming?

The current credit crunch offers us an opportunity to change our mindset and appreciate initiatives crafted by Africans for Africans such as NEPAD. We should be very careful not to abdicate our roles of policy formulation to Western organisations such as World Bank, International Monetary Fund (IMF) and EU.