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  • 1. Talitha Bertelsmann-ScottResearch Associate – South African Institute of International Affairs (SAIIA) 20 February 2013
  • 2. •  Combined population of 273 million consumers•  9.8 million km2 surface area – roughly the same as China or US•  Dynamic growth area in time were West is stagnating•  From 2000-2010 GDP in the region grew by 45%•  Mineral resource deposit significant with new finds in Mozambique, Tanzania, Malawi•  Water rich countries like Lesotho, Zambia•  South Africa dominates
  • 3. ž  In comparison to N and W-Africa, quite smallž  DRC and Madgascar has French connection (Seychelles and Mauritius)ž  Physical Embassies throughout Southern Africa with dedicated economic relations departments in South Africa, Mozambique and Angolaž  Mozambique – •  investment of around €1 million per annum with a total stock of €9 million •  21 Companies with 10,000 employees in primary sectors, services (Bureau Veritas, Sofreco), energy (Total), construction (Razel, Soletanche Bachy) and engineering (Alstom)
  • 4. ž Angola – •  Trade balance in favour of Angola: France imports large amounts of oil and little else •  Exports from France also largely for oil industry and some household products •  France third largest investor in Angola in agriculture, services, pharmaceuticals and oil •  French companies employ around 20,000 workers
  • 5. ž South Africa •  Largest and most diversified presence •  France is ranked as the 9th largest investor in South Africa, with •  203 French companies with 29 000 employees •  investment value of €1,3bn
  • 6. ž  Low levels of trade •  Africa accounts for <2.5% of world trade •  Intra-Africa trade is low: only around 10-12% - compared to EU of around 60%ž  Africa relies heavily on exports of commodities •  This reliance has led to debt crisis and poor income distribution •  Need diversified opportunities to trade, profit from larger marketsž  7 African countries in bottom ten most restrictive trade regimes
  • 7. ž Economic scene dominated by •  Large companies – sustained and inclusive growth, employment should come from SMME’s –  Trading environment difficult for small operators •  South Africa – –  Retail, another important growth and employment sector is dominated by SA companies: Shoprite, Game, Woolworths change in operations –  Services: Banking – Standard Bank, Communicationsž Construction contracts predominantly won by Chinese firms in recent years
  • 8. ž Other success areas include SAB Miller, British American Tobacco, Distell, SAAž South African dominance is such that even successful regional companies relocate to make use of value-chains, markets, distribution networks •  Windhoek Lagerž Yet increasingly facing competition from Brazil, Russia, India, China (BRIC) nations
  • 9. ž  Sinceend of apartheid countries unified in Southern African Development Community (SADC)ž  15 Member States, but Madagascar suspendedž  Why Regional Integration? •  Overcome problem of small markets, political fragmentation, huge cost of infrastructure development, policy lock-in effectž  Model integration on European Union example of linear integration •  From free trade area to political union (?)
  • 10. ž  Free Trade Area – remove tariffs on significant amount of products between parties, maintain external tariffs (2012)ž  Customs Union – remove internal border controls and only have one set of tariff codes for all countries (2015)ž  Common Market – unified standards and practices, labour mobility(2016)ž  Monetary Union – Common currency (2018)ž  Sovereignty ceded to regional authority at each step
  • 11. ž Currently excludes DRC, Angola, Seychelles and Madagascarž 85% of tariffs were liberalised in 2008, moving closer to 95% coverage by end last yearž Number of exclusions remainž Advantages in import to South Africa – markets where overlap like Tanzania and Kenya
  • 12. ž Advantages in export where market share competes with East African producež In theory this should apply to Asian competitors but in general terms Asian countries hold price advantage despite tariff advantagež SADC FTA progress in increasing trade but not enough to ensure movement of goods
  • 13. ž Five countries in SADC belong to a customs union •  South Africa, Botswana, Lesotho, Namibia and Swaziland •  Overhang from colonial times •  South Africa collects customs revenue and shares all between BLNS –  Effectively development assistance –  If expanded the BLNS are sure to lose out –  Lesotho, Swaziland resource 50% of fiscal incomež Real agenda of SADC?
  • 14. ž Realisiticwithin Southern and Eastern African contextž South Africa increasingly leaning towards postponing further integration in favour of another bigger FTA with East Africa •  Tripartite FTA – as it will include all states in COMESA and East African Community •  26 States = free trade from Cape Town to Cairož BUT it is not enough to bring tariffs down •  Enforcement not effective without regional court
  • 15. ž Poor infrastructurež Lengthy waiting times at bordersž Corruptionž Non Tariff Barriers – very difficult to monitor and controlž Insurancež Financingž Poor consumersž Dominance of South African retail stores
  • 16. ž Many focus on trade facilitation in order to increase SADC tradež Focus on reducing complexity and cost of trade transaction in order to increase efficiency, transparency and predictability of trade but to maintain government control where necessaryž It costs $5000-$8000 to ship a 20ft container from Durban to Lusaka but only $1,500 to ship from Japan to Durban
  • 17. ž Only so much that can be achieved on policy levelž Trade facilitation next step towards increasing intra-regional tradež Donors and governments have adopted a corridor approach towards trade facilitationž North-South corridor – connecting Eastern states to Durban and Dar es Salaam Ports and develop Maputo
  • 18. Corridor Management Committees: TransportCorridors have their own management structures that areusually established through a MoU between the countries Ethiopia  -­‐  Djibou?  the corridor transits through. Efforts are being made to“cluster corridors and to manage the corridors in clusters. Northern   EAC Cluster Western Cluster Central   Dar  es  Salaam   Malanje   Lobito-­‐Benguela   Namibe   Nacala   Trans-­‐Caprivi   Trans-­‐Cunene   Beira   North-­‐South   Trans-­‐Kalahari   Maputo   Eastern Cluster N-S Cluster
  • 19. Focus Areas and Corridors along the topCorridor Layers Click on a road section
  • 20. Click on adocument
  •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
  • 22. OSBP – On-going work at Chirundu Border PostChirundu can be said to be now trulyoperating as a OSBP. Have been challenges(such as how to address transit fraud) butprocedures now signed off so out-standingissues (signage, additional training, fibreacross bridge, preparation of a performancecharter and final modifications to buildings) Journey times on NSC typically 1/3 driving and 2/3 waiting. Most effectivecan now be completed. way to reduce costs is to reduce waiting times at borders. This can be done by converting to OSBP but need to address: physical facilities (common control zone with a fenced perimeter, common facilities – scanning, weighbridges and inspection bays); operations and training; and legal framework (extraterritorial jurisdiction).
  • 23. Border Crossing Monitoring: Have relatively sophisticated border monitoring processes based on a GPS truck tracking system. The system tracks “queuing” times as well as border clearing times.35   32   32   32   30  30   28   28   25  25   24   23   23   21   21  20  15  10   5   0   juil.-­‐07   août-­‐07   sept.-­‐07   oct.-­‐07   nov.-­‐07   déc.-­‐07   Avg  hours  to  cross  from  Zimbabwe  to  Zambia   Avg  hours  to  cross  from  Zambia  to  Zimbabwe  
  • 24. Border Crossing Time reduced by Nr of Vehicles increased by 2/3>1/3 65% 36%Note: Before December 2009, average border crossing time was between 72 and 120 hours
  • 25. Note: Chirundu average border crossing time down to 25 hours in June 2012
  • 26. ž Exisiting surveys from many organisations, including World Bank, but no accessible case studiesž Developed a list of barriers from exisiting work and validated against firm level interviewsž 50 Case studies in 10 countries (+Moz)ž Initial findings show correlation but with striking differences
  • 27. All  Access  to  Finance   9%   Customs   RegulaGons   29%   Infrastructure   27%   CorrupGon   11%   Skilled   Labour   Inefficient   13%   Bureaucracy   11%   SAIIA
  • 28. 50%  45%  40%  35%  30%   Customs  RegulaGons  25%   CorrupGon  20%   Skilled  Labour  15%   Inefficient  Bureaucracy  10%   Infrastructure   5%   Access  to  Finance   0%   SAIIA
  • 29. 45%40%35% South Africa30% Botswana25% Lesotho20% Namibia15% Swaziland10%5%0% Customs Corruption Skilled Labour Inefficient Infrastructure Regulations Bureaucracy
  • 30. 30252015 SACU Non-SACU1050 Customs Corruption Skilled Labour Inefficient Infrastructure Access to Finance Regulations Bureaucracy
  • 31. Exchange rates/FOREX/Banking Tax rates Infrastructure Malawi Inefficient Bureaucracy DRC South Africa Skilled Labour Corruption Customs Regulations 0% 10% 20% 30% 40% 50% 60%
  • 32. 20181614121086420
  • 33. ž  Of the opinion that if corruption could be done away with, the other barriers would automatically resolve themselvesž  Customs clearance – three advantages in DFZ •  Special lane at border •  Customs officials visit on site •  Limited paper work due to duty exemptionž  Infrastructure •  Government has invested in ports in order to satisfy demands/needs of oil and aluminum companies
  • 34. ž Infrastructure •  Don’t make much use of the roads •  Ample electricity, water •  Additional oil, gas and coal finds might overburden existing portsž Banking •  Despite or perhaps due to large figures involved they’ve not had any difficulty in moving funds in or out of Mozambiquež Message – it pays to be big •  Also evident from other case studies
  • 35. ž  Weighbridges most often mentioned as significant NTB •  Readings differ, payment options limited, no security for trucks •  Roadblocks – unpredictable, have to plan ahead to be corruptž  Labour market – permit system •  Mozambique very clear and efficient system •  Other end of the scale – large sums but no pos result •  Large companies rotate staff globally for skills training, but very difficult in Southern Africa
  • 36. ž E-platform – recent introduction in SA •  Welcomed by Road Freight Association •  E-platforms frequently mentioned as solution to delays and corruption •  BUT e-platform seems to have added to delays –  Border officials still want to the paperwork –  Infrastructure at borders problematicž Paperworkfor mixed consignment of fresh produce easily a foot deep
  • 37. ž Size matter as larger companies can outsource logistics, customs clearance or appoint in-house expertisež Hierarchy of stumbling blocs associated with development •  Banking, access to forex important barriers in DRC, Malawi not so in South Africa rest of SACU •  Corruption headache for South Africans wanting to do business in DRC, for DRC locals accepted as normal costs associated with doing business
  • 38. ž For SACU companies, greater focus on efficiencies and predictabilityž Infrastructure in Southern-SADC has improved dramatically, •  only mentioned in context of physical border infrastructurež North still lagging far behind and weather dependent •  Time to get goods across borders and to point of sale varies from shipment to shipment
  • 39. ž  PS interesting position: beneficiary, implementor, driver, stumbling blockž  Very limited engagement at the regional levelž  National engagement as well as bilateral •  Mixed resultsž  Exception is telecommunications that has effective tool in CRASA •  Again, it pays to be big, telecom huge tax revenue and profits, mutual benefit in engagement
  • 40. ž SADC-wide business visaž More effective SADC e-platform that gives regular updates on tariffs, excise and other developmentsž SADC Rules of Origin certificates to become more easily obtainablež Uniform regional weighbridge system and clearance
  • 41. ž Where does it leave companies in SA wanting to trade with neighbouring states? •  Western Cape well placed ito access to Mozambique •  Retail sourcing practices in local agriculture beneficial •  Growing middle-class in SADC means increased wine sales •  Cape Town Port industry missing out vis Maputo, Dar es Salaam, Walvis Bay, Luanda
  • 42. ž Small companies •  Know the risks – waiting times, corruption, NTB’s •  High risk, high reward? •  Feed into value-chain of larger operators •  Participate in regional forums for private sector •  Read www.thetradebeat.com - research findings •  Report NTB’s – www.tradebarriers.org •  Subscribe to TMSA newsletter
  • 43. News Feed Bridges across borders - unleashing Ugandas regionaltrade potential Lobito Corridors strategic role in Southern AfricastressedAfrica needs to spend $52bn on railways to exploit ironore projects> Mauritius: private sector competitiveness project>  Mozambique: agriculture development project> IMF report on options for Swaziland> AfDB: Malawi country strategy paper 2013-2017>India-SACU trade pact may be restricted to a fewproducts> Trevor Manuel:  Africa and the European financial crisis> Namibia: Big year ahead for Trade> Botswanas "diamond" trade deficitØ  UK backs fair business practice for Africa