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Intra-SADC trade edges up

Southern Times, Namibia

Intra-SADC trade edges up

By Felix Njini, Windhoek

1 July 2011

Non-tariff barriers (NTBs) are still the biggest stumbling block to countries raising current low levels of intra-regional trade.

Low income levels within individual SADC member states and adverse geography have also emerged as the biggest drawback to intra-regional trade.

But contrary to popular belief, intra-regional trade has actually been slowly going up since 2000, though the figure still pales into insignificance compared to what the rest of the region trades with the outside world, specifically China and United States of America (USA).

SADC Secretariat trade policy advisor Paul Kalenga told The Southern Times that intra-SADC trade grew in absolute terms to US$34 billion in 2009 from US$13.2 billion in 2000, a 155 percent increase.

While proponents of closer economic co-operation within the region are likely to laud the growth in intra-regional trade, the figure, as a proportion of total SADC trade, has only grown to 18.5 percent in 2009 from 15.7 percent in the nine years since 2000.

This could be explained by the fact that SADC trade with the rest of the world, especially China and the US has also grown tremendously during the same period.

SADC launched its Free Trade Area (FTA) in 2008 and the regional bloc anticipates that trade within the region would be completely liberalised by January 2012.

The FTA is 85 percent operational and Malawi, Tanzania and Zimbabwe should remove tariffs on sensitive products such as textiles and clothing, leather and leather products, motor vehicles if the FTA is to attain full compliance by January next year.

In addition, Angola, Democratic Republic of Congo (DRC) and Seychelles are still expected to submit join the FTA.

The FTA has been dogged by a variety of problems.

Malawi had been struggling with implementation of its tariff phase down schedule since 2004 and the SADC Secretariat is assessing the country’s compliance levels.

Zimbabwe has also experienced problems implementing its tariff commitments on sensitive product lists.

The country applied for a partial revocation of the FTA agreement (derogation) to suspend tariff phase downs from 2010 until 2012 and annual reductions are expected to start being implemented as from next year up to 2014.

Tanzania is also in the same category as Malawi and Zimbabwe.

The Southern Times understands that Tanzania earlier this year applied for a partial revocation of the FTA agreement to levy a 25 percent import duty on sugar and paper products until 2015 to allow its industries to take measures to adjust.

’Maximum tariff liberation would be attained in January 2012 when the tariff phase down process for sensitive products will be completed. For SACU countries, this process was completed in January 2007, whilst for Mozambique, the process will only be completed in 2015 in respect of imports from South Africa,’ Kalenga told The Southern Times.

Poignant though is the gradual increase in the levels of intra-regional trade.

Kalenga’s statistics on regional trade is also corroborated by a study carried out by the World Bank in April this year which found out that once individual GDP and geographical issues are factored, trade within the region is actually high.

The World Bank also found out that contrary to stylised fears, SADC countries are actually more integrated and that while there are impediments which make it difficult to move goods across the region, these are at levels comparable to countries with similar levels of development.

Benchmarking against GD, SADC has experienced an increase in openness over the past decade that is comparable to other developing countries.

The World Bank study found out that Malawi, Mozambique, Zambia and Zimbabwe are dependant to a large extent on SADC for imported goods, sourcing up to 50 percent of their imports from SADC countries and exporting 20 percent of their goods within the region.

Intra-regional trade makes up 10 percent of Mauritian exports and imports.

SACU countries source only 5.6 percent of imports from the region and the rest of SADC market accounts for 10.5 percent of SACU exports.

In addition, between 60 to 70 percent of SADC exports to the region are sold to SACU while between 80 to 90 percent of SADC imports from the region are from South Africa.

The region is heavily dependent on regional economic powerhouse, South Africa as a source of imports than as an export destination.

’Many SADC countries export a more diverse range of products to the SADC region than to the rest of the world, which is indicative of the regionalisation of SADC trade,’ the World Bank noted.

But there is no need for approbation, intra-regional trade levels are still way too low, the World Bank says.

’Intra-SADC is low, but this is partly a consequence of low levels of economic development. Once income levels are conditioned, SADC countries have experienced an increase in openness comparable to other developing countries. Intra-SADC trade is also found to be relatively high and diversified,’ the World Bank study reveals.

As intra-regional trade has crept up, tariffs are still choking the full potential of countries within the southern African bloc doing business together.

The World Bank study found out that it costs more than twice to clear a standard 20-foot container for imports into southern Africa compared to East Asian markets for example.

Costs to clear containers are very high in Botswana, DRC, Zambia and Zimbabwe and the time taken to export and import is also high within the region.

For example, while it costs US$925.80 to clear a 20-foot container in East Asia & the Pacific and US$1 509.10 in South Asia, the same cannot be said for Angola where the same container will be cleared at a cost of US$3 240 and in Botswana at US$3 264.

Costs are relatively high in Zambia and Zimbabwe where the same container will be cleared for US$3 335 and US$5 101 respectively.

It’s slightly cheaper for exporters to have the same container cleared though the lowest cost is US$737 per container (Mauritius) topping US$3 280 per container (Zimbabwe).

It will take an exporter 65 days before goods are cleared for exports in Angola and in Zambia and Zimbabwe, 53 days respectively.

Mauritius has the lowest export clearance period of just 14 days, followed by Swaziland and Madagascar with 21 days. The rest of SADC countries’ export clearance period ranges between 21 days to 44 days.

The highest number of days it takes for an import clearance is 73 (days) in Zimbabwe, followed by Zambia with 64 days, DRC 63 days and the country with the shortest number of days is Mauritius (14 days).

The highest number of days other markets take to clear exports in South Asia for example is 33 days, the World Bank study reveals.

Unlike in the developed markets where exporters required on average six documents as paper work when exporting a product, in SADC the number of documents range from 4 (four) to 11.

Angola, Malawi and Namibia require the most documentation from exporters (11), followed by Swaziland (9), DRC (8), South Africa (8) and Zimbabwe (7).

Border delays have therefore emerged as the major impediment to intra-regional trade.

’Building multi-lane highways will not raise trade if trucks must wait at the border. Port improvements would have limited impact if the problem is getting goods to the coast. Regional policy co-ordination on reducing obstacles to trade is particularly important for SADC countries, many of which are landlocked,’ the World Bank noted.

While the region takes credit for increases in trade, it should swiftly move to scrap barriers to trade.
’Many regions continue to implement further reforms so SADC must keep pace.

’Furthermore, SADC needs to trade more than normal, which requires a trade environment that exceeds benchmarks and doesn’t just keep pace with them. Given its unfortunate geography, it is especially important,’ the World Bank advised.