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Sacu undecided on textile deal

The Nation, Malawi

Sacu undecided on textile deal

by Frank Phiri

18 June 2006

What a blow. The Southern African Customs Union (SACU) has not yet made up its mind on extension of the duty-free market access for four textiles and garment exporting countries, including Malawi, Economic Report has learnt.

The duty-free export status is due to expire at the end of this month. If not extended, the trade agreement could potentially threaten more than 6,000 jobs in Malawi.

SACU comprises Botswana, Namibia, Lesotho, South Africa and Swaziland (BNLS countries). Four other Southern African countries-Malawi, Mozambique, Tanzania and Zambia (MMTZ countries)-have since 2000 been exporting textiles and garments to the SACU duty-free.

In March this year, senior trade officials at Southern Africa Development Community (SADC) secretariat in Botswana told Nation Business Review that SACU had not yet made up a final decision to extend the trade deal, citing delays by MMTZ countries to send certain information and statistics demanded by SACU.

At the time, however, SACU had agreed to grant two of the MMTZ countries-Malawi and Zambia-a request for an increase in the volumes of textile exports after the two fulfilled outstanding requirements. Malawi’s quota was increased by four million to 12.5 million.

Principal Secretary in the Ministry of Trade and Private Sector Development Newby Kumwembe told Economic Report last week that a final decision on the extension was still pending.

But Kumwembe said he was optimistic the extension was going to be granted soon.
“We’re still negotiating, but the prospects are very good. Being a negotiating issue, some members of SACU are agreeable but some are still making up their minds,” he said.

Kumwembe said a meeting was due to be held at SADC level in Botswana in the next 10 days to discuss the way forward on the matter.

He said one of the conditions for the extension is that SADC exporters must attain capacity for the double-transformation regime in line with the SADC Trade Protocol.

Double transformation means that a country should have the capacity to produce fabrics and garments, for such garments to enjoy preferential market access under regional trade terms.

Namibia, Botswana, South Africa, Swaziland, Mauritius and Zimbabwe fall in the category of SADC member states that are required to meet the double transformation criteria.

Until this year, Least Developed Countries (LDCs) such as Angola, DRC, Lesotho, Malawi, Mozambique, Tanzania and Zambia were expected to meet a less stringent rule of origin of single transformation, to enjoy preferential access to regional markets.

These countries are now required to upgrade to the double transformation regime-something that will not come on the cheap considering that many countries have already performed badly in building capacity for the Africa Growth and Opportunities Act (Agoa) market.

As most of the SACU members are pre-occupied with refining their own efficiencies so as to ably compete in lucrative markets in the United States of America (USA) and Europe, it seems that extension of the duty-free status is not a unilateral priority.

The current uncertainties over the extension, would, however, be to the detriment of some exporters heavily reliant on the SACU market.

“We’re talking about more than 6,000 jobs that would be jeorpadised if the SACU deal does not materialise,” Kantilal Desai, chairman of the Garments and Textile Manufacturers Association of Malawi (GTMA), said in an interview.

Desai said the Ministry of Trade and Private Sector Development had assured the association that SACU would grant the extension.

At least six companies are exporting to the SACU market. These are Knitwear Industries, Giant Clothing Limited, Chirimba Garments, Win-Win Garments, Crossbow Clothing and Exclusive Fashions.

The MMTZ/SACU Agreement is adhoc as SADC member states wait for the trading bloc to become a free-trade area (FTA) in 2008.