Will SADC trade agreements attract investors this time?
Kasane did not seem, at first glance, the obvious place to sign a regional free trade agreement. It sits on the banks of the Chobe River in the far north-western corner of Botswana and is the tourist gateway to the Chobe National Park.
Botswana presumably chose it as the venue for Friday’s signing of the European Union-SADC Economic Partnership Agreement (EU-SADC EPA) not only to promote tourism, but also because of Kasane’s symbolic location: at the junction of four states of the SADC – Botswana, Namibia, Zimbabwe and Zambia – with Angola very close.
So that made it an appropriate venue for the signing of an agreement intended to integrate the six participating SADC countries that signed the EPA more closely with the EU but also with each other. The six are South Africa, Botswana, Namibia, Lesotho, Swaziland and Mozambique.
The EPA will give the latter five states quota-free and duty-free access to the very rich EU market. To South Africa, which has already had a free trade agreement with the EU since 2000, it will provide increased access. In particular, it will give South Africa an annual duty-free export quota of 110 000 million litres of wine and 150 000 tons of sugar.
It will also recognise 105 South African “geographic indications” – the exclusive right to use commercial labels like rooibos and honeybush tea, Karoo lamb and many wines in the EU market.
In exchange, the EU mainly won the exclusive right to use about 200 of its own geographic indications, characteristically European products such as Champagne, Camembert and feta cheese, in the markets of the six SADC countries.
This was the first EPA which the EU signed with African states. Another, with the East African Community, is to be signed soon.
It essentially took 12 years to negotiate the SADC EPA, from 2004, mainly because the SADC countries were at first wary about the whole idea of the EPAs. For about 30 years, under the Lomé Convention, the ACP (African, Caribbean and Pacific Group of States) countries had duty-free quotas in the EU market, without having to reciprocate by opening their markets to Europe.
But the World Trade Organisation demanded reciprocal and non-discriminatory market access for all countries.
So in 2000, the Lomé Convention was replaced by the Cotonou Convention which paved the way for the more conventional, reciprocal free trade agreements called EPAs.
Though reciprocal, the EPAs are also “asymmetrical”, meaning they still give more access for the ACP states to the EU market than vice versa. And the EU will continue to support the development of the SADC states.
The SADC EPA, in particular, also has generous “rules of origin”, meaning producers of goods in any of the six participating SADC states may source inputs into their products from any other ACP states and still enjoy duty-free, quota-free access to the EU market for those products.
Botswana’s Minister of Investment, Trade and Industry Vincent Seretse said at the signing ceremony, the latter concession would “strengthen productive capacities of industries in the region”.
So the signing of the EPA marks a significant shift from the old paternalistic relationship with the EU to a more normal one.
Cecilia Malmström, the EU trade commissioner who signed the EPA for the EU, said the EPA had created a predictable environment which should attract investment.
But she stressed it would only do so if the SADC used it as a tool by creating a good business climate, including by fighting corruption, facilitating entrepreneurs to open businesses and increasing the skills of their workers.
The trouble is, you could have said much the same when the first duty-free quotas were given to the ACP countries in the 1970s. That favourable access to the EU market was also supposed to attract investors. But it didn’t really happen.
At a meet and greet with journalists a few months ago, the EU delegation to Botswana Trade Counsellor, John Taylor, said he was astounded by the lack of ignorance expressed by the Botswana government and the SADC bloc. “What we hear when we come down is about wonderful opportunities with China and USA. And I think that is a bit mispalced,” said Taylor.
He said the European Union contributes a quarter of the world’s GDP and is the world’s lucrative market that Botswana should utilise. He expressed confidence that the EU is the best trading partner for Botswana and other SADC countries. Taylor further stated that in terms of market and custom unions the EU is a well-established market that Botswana and the SADC bloc should take advantage of.
Taylor also urged Botswana to diversify from the diamond industry and develop other industries which could enable Botswana to trade more with the EU. “After the diamonds have all been dugout of the ground the country will have to have developed other industries. This will help to develop the country’s wealth and the EU is Botswana best trading partner. This is the area that Botswana will be able to do business,” said Taylor.