An academic write-up on international trade, Free Trade Areas (FTAs), the case of the Southern African Development Community (SADC).

1. CAEE 5124: INTERNATIONAL TRADE
TERM PAPER
SADC FTA:
ORIGIN, ACHIEVEMENTS, CHALLENGES AND
WAYFOWARD
BIKARA INNOCENT 14157293
DEPARTMENT OF AGRICULTURAL ECONOMICS,
EXTENSION AND RURAL DEVELOPMENT
BY

2. ii
TABLE OF CONTENTS
1.0 INTRODUCTION.............................................................................................................................1
2.0 ECONOMIC STRUCTURE OF SADC COUNTRIES.......................................................................1
3.0 OVERVIEW OF THE SADC TRADE PROTOCOL (TP) .................................................................2
4.0 REGIONAL TRADE LIBERALIZATION BENEFICIAL OR NOT?................................................3
5.0 ACHIEVEMENTS............................................................................................................................5
6.0 CHALLENGES……………………………………………………………………………….6
6.1 Non-tariff Measures (NTMs) .........................................................................................................6
6.2 FOOD SECURITY........................................................................................................................9
6.3 OVERLAPPING MEMBERSHIP................................................................................................10
6.4 TRADE POLARISATION...........................................................................................................11
6.5 REVENUE LOSS........................................................................................................................11
6.6 CONCENTRATED EXPORTS ...................................................................................................12
6.7 RULES OF ORIGIN....................................................................................................................13
6.8 TRADE DIVERSION..................................................................................................................13
6.9 INFRASTRUCTURAL BOTTLENECKS ...................................................................................13
6.10 OTHER CHALLENGES ...........................................................................................................15
7.0 CONCLUSION AND RECOMMENDATIONS ..............................................................................15
REFERENCES......................................................................................................................................17
Appendix 1: Fugure Showing NTM coverage of agricultural products by country..................................21
Appendix 2: Figure Showing Share of NTMs Per Product......................................................................22

3. iii
LIST OF TABLES
Table 1: Heterogeneity of SADC countries ..............................................................................................2
Table 2: Product Categorization for SADC Tariff Phase-down.................................................................3
Table 3: Applied Most Favored Nation (MFN) Tariff (percent)…………………………………… 7
Table 4: Key Export and Import Commodities of SADC Member States................................................12
Table 5: Time Delays and Trade Costs...................................................................................................14
LIST OF FIGURES
Figure 1: Intra-SADC trade in agricultural products and average tariffs applied on agricultural products..8
Figure 2: Application of NTMs by Type..................................................................................................9
Figure 3: Illustration of overlapping trade blocs.....................................................................................10

4. 1
1.0 INTRODUCTION
Southern African Development Community (SADC) is one of the more than 500 Regional Trade
Areas (RTAs) and Preferential Trade Agreements (PTAs) that have emerged around the world
(Kalaba and Kirsten, ND). It emerged from Southern African Development Coordination
Conference (SADCC)1
and the milestone Trade Protocol (TP) was signed in Maseru in 1996 by
twelve member states and came into effect at the beginning of 2000. To date, it comprises of
fifteen countries2
, namely:- Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho,
Malawi, Madagascar, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland,
Tanzania, Zambia and Zimbabwe. Together, the member countries cover 9.7 million square
kilometers3
, have a population of approximately 249 million and had a combined GDP of $378
billion in 2006 (UNCTD, 2009).
The stated objectives of SADC are to promote economic development and growth in the region;
initially through the elimination of customs tariffs and non-tariffs barriers to trade within the
region (that is, establishing a Free Trade Area (FTA)), gradually establish a Customs Union,
Common Market, create a Monetary Union and ultimately establish a regional central bank and
adopt a common currency by the year 2018.
Botswana, Lesotho, Namibia and Swaziland, collectively known as the BLNS countries, together
with South Africa, had been cooperating under the Southern African Custom Union (SACU)4
, so
SACU lies within the larger SADC region and throughout this paper, reference will be made to
SACU and non-SACU countries. The economic structure of SADC countries and an overview of
the SADC TP are presented in section 2 and 3 respectively; arguments on whether regional trade
is beneficial are presented in section 4; achievements and challenges are presented in sections 5
and 6 respectively and section 7 on conclusion and recommendations lace the paper.
2.0 ECONOMIC STRUCTURE OF SADC COUNTRIES
SADC countries are heterogeneous in terms of the contribution of different sectors of the
economy to GDP and per capita incomes (Table 1). These two are generally regarded as
indicators of a country’s level of development. Conventionally, countries where agriculture
contributes significantly to total GDP are regarded to be less developed than those countries
1
That was in existence since 1980.
2
DRC, Madagascar and Seychelles came on board later and membership of Madagascar currently suspended after
the coup d'état in 2009
3
the equivalent of the United States or China (UNCTD, 2009) though with a much smaller total GDP
4
Which had been in existence since 1910

5. 2
where agriculture contributes less to GDP. In the same vein, countries with low per capita
income have high poverty rates and less developed than those with high per capita income.
Table 1: Heterogeneity of SADC countries
Source: World Bank development indicators
Agriculture dominates the GDP of Malawi, Mozambique and Tanzania which means that their
economies have not yet undergone structural transformation and are characteristically Least
Developed Countries (LDCs). The economy of Mauritius is dominated by the services sector due
to a booming tourism sector. The South African, Namibian and Zimbabwean economies are
dominated by services sectors and then followed by industry (mining) sectors, while the
economies of Botswana and Angola are largely dependent on industry (mining).
By 2006 almost all the SACU member states except Lesotho had 4-digit per capita income;
Botswana with the highest, followed by South Africa, Namibia and then Swaziland. Angola had
the highest GDP among the non-SACU states and at the tail end was DRC with a meager $130
per capita (which is just 2.3% of the Botswana per capita GDP). This shows the heterogeneity of
SADC member countries and it is strikingly evident that countries with a dominant agricultural
sector have the lowest GDP per capita.
3.0 OVERVIEW OF THE SADC TRADE PROTOCOL (TP)
The cornerstone of trade liberalization in SADC has been the elimination of both tariff and non-
tariff barriers to trade among member nations. The tariffs were supposed to be gradually phased
down and the principle of variable geometry was adopted. The principle of variable geometry
Country Agriculture Services Manufacturing Industry GDP per
capita
(2006)
2000 2006 2000 2006 2000 2006 2000 2006
Angola 5.66 …. 22.21 … 2.89 … 72.12 … 1,970
Botswana 2.41 1.97 38.64 44.52 4.38 3.75 58.95 53.51 5,570
DRC 49.97 45.67 29.73 26.60 4.82 6.49 20.30 27.73 130
Lesotho 17.92 17.17 40.69 41.85 16.96 18.07 41.38 40.98 980
Madagascar 29.21 27.54 56.56 57.21 12.24 13.40 14.23 15.25 280
Malawi 39.54 35.52 42.54 44.71 12.88 12.84 17.92 19.77 230
Mauritius 5.95 5.56 62.85 67.57 23.71 19.13 31.20 26.87 5,430
Mozambique 26.06 21.74 47.33 49.28 13.29 13.37 26.61 28.98 310
Namibia 10.96 11.26 60.69 57.73 11.09 12.88 28.35 31.01 3,210
South Africa 3.27 2.52 64.94 67.03 18.98 18.19 31.78 30.45 5,390
Swaziland 15.51 10.94 39.73 43.47 35.84 36.77 44.76 45.59 2,400
Tanzania 45.04 45.30 39.22 37.33 7.45 6.91 15.74 17.37 350
Zambia 22.31 16.05 52.40 59.20 11.42 11.54 25.29 24.75 630
Zimbabwe 18.49 21.91 56.52 50.69 15.80 15.49 24.98 27.40 340

6. 3
allowed for asymmetrical trade liberalization and was borne out of the realization that member
countries were not at the same level of development. This principle allowed SACU countries5
to
liberalize faster than the other less developed members. The tariff phase down was rolled out in
categories A, B, C, D and E as shown in table 2. Member countries were also categorized into (i)
Developed Countries (SACU countries); (ii) Developing Countries (Mauritius and Zimbabwe);
and (iii) Least Developed Countries (Angola, DRC, Madagascar, Malawi, Mozambique,
Tanzania and Zambia). Developed/SACU countries were required to front-load their tariff
reductions to achieve the “substantially all trade” threshold (of 85% off all merchandise) within 5
years; developing countries were required to mid-load their tariff reductions to achieve the same
threshold utmost 8 years from the coming into force of the protocol and the LDCs were required
to backload their tariff reductions to between 8 and 12 years from the coming into force of the
trade protocol (SADC, 2008).
Table 2: Product Categorization for SADC Tariff Phase-down
Product
Category
Schedule Description/Remark
A Products whose tariffs would be
completely removed or were
non-existent at the start of the
phase-down process in 2000.
In line with the World Trade
Organization (WTO)
requirement which stipulates
that substantially all trade
should be free in an FTA.
A & B
Constitute 85% of all
intra-SADC tradeB Products subject to tariff phase-
down to 0% over an 8-year
period
Goods that constitute
significant sources of
customs revenue
C Tariff phase-down over a period
of 12-years
Sensitive products such as
textiles, clothing and motor
vehicles
Limited to a maximum
of 15% of each
Member’s intra-SADC
merchandise trade.
E Products excluded from
preferential trade
Include firearms, munitions,
precious and strategic metals
(gold, silver and platinum)
and second hand goods
Constitute a small
fraction of intra-
SADC trade.
Source: Modified using information from SADC (2008) and Negasi (2009)
4.0 REGIONAL TRADE LIBERALIZATION BENEFICIAL OR NOT?
In theory trade liberalization is expected to enhance efficiency in production, international
competitiveness and the volume of trade (Ebrill et. al., 1999). Even when complete liberalization
5
South Africa, Botswana, Lesotho, Namibia and Swaziland

7. 4
is not achieved, the emergence of regional trade schemes is an attempt to harness these benefits
by minimizing distortions to trade flows (termed “second best” theory). The benefits can be
dichotomized into: (i) static or (ii) dynamic effects; though most of the literature places emphasis
on the static effects (Negasi, 2009).
Static effects are based on the changes in equilibrium market prices and quantities before and
after the creation of the economic bloc and entails the traditional (i) trade creation and (ii) trade
diversion; and the non-traditional (iii) labor opportunity effect; (iv) economies of scale effect;
and (v) foreign exchange saving effect (Cline, 1978). Trade creation occurs when high cost
production is substituted by low cost production as a result of regional integration while trade
diversion occurs when low cost production from non-member nation(s) is substituted by high
cost production from member nation(s)6
. Labor opportunity effect occurs when an increase of
output made possible by regional trade integration allows for the employment of extra labor at a
wage below the minimum wage rate. Economies of scale effect occur when firms become able to
produce at their capacity as a result of the increase of the market size. Foreign exchange saving
effect occurs when there is an increase in imports from within the regional bloc resulting in
reduced imports from the rest of the world (ROW) thus savings in foreign exchange (Negasi,
2009).
Dynamic effects of regional integration include: (i) the competition effect through larger
volumes of exports and imports that increase the pressure on the exporting industries and
competing import sectors to keep costs low; (ii) the investment effect as a result of new foreign
and domestic investments that are more efficient; (iii) creation of a larger market that provides
greater possibilities for the exploitation of economies of scale; (iv) better terms of trade as a
result of collective negotiations; (v) structural transformation effect, which is a shift from
traditional primary-products export to new industrial-products export; and (vi) capital formation
effect such as enhanced labor and capital productivity, possibly through (a) reduction on barriers
to technological diffusion and transfer; (b) spillover effects due to externalities generated by
export and import growth; (c) rising marginal product of capital among others. Unlike static
effects, dynamic effects are presumed to continue generating annual benefits even after the
withdrawal of a nation from the regional bloc7
(Negasi, 2009).
6
If trade creation outweighs trade diversion, then regional trade liberalization is welfare enhancing (Chauvin and
Gaullier, 2002)
7
For example, increased growth rate made possible by integration will have continued effects provided that it is
sustained.

8. 5
Whether these RTAs and PTAs, based on the second-best theory, actually result in welfare gains
cannot be determined a priori (Mutambatsere, 2006; Hoekman and Schiff, 2002) and has been a
subject of various empirical work (Simwaka, 2011; Chauvin and Gaullier, 2002; Cassim, 2001;
Evans, 1997; Clausing, 2001; Frankel and Romer, 1999; Elbadawi, 1997; and ADB, 1993).
Simwaka (2011), Evans (1997) and ADB (1993) reported the existence of a high potential of
beneficial trade within SADC countries, Chauvin and Gaullier (2002) and Cassim (2001) found
the trade potential to be small while Elbadawi (1997) found no significant trade potential among
SADC members. Chauvin and Gaullier (2002) and Laubscher (1997) pointed to the
heterogeneity of SADC economies as an indicator of the existence of potential complementarity
in trade if the economies exploit production of goods and services in which they have a
comparative advantage. They highlight the possibility of South Africa, Zimbabwe and Mauritius
specializing in the industry sector in order to meet SADC’s import demands since they have a
comparative advantage in a greater number of industrial-based sectors. Chauvin and Gaullier
(2002) also emphasize the importance of SADC member countries keeping their external tariffs
low in order to forestall potential trade diversion.
Lewis et. al. (2002) used a computable general equilibrium (CGE) model to simulate the SADC
FTA and found trade creation to dominate trade diversion. Mutambatsere (2006) identified
potential positive welfare gains for net-exporters to the SADC region and the opposite for net-
importers since he expected producer surplus responses from a given price change to exceed the
consumer surplus response from an equivalent price change. Van Rooyen & Esterhuizen (2001)
found potential for integration and cooperation of Zimbabwean and South African agri-food
supply chains and consequently larger production.
5.0 ACHIEVEMENTS
SADC is one of the largest free trade zones on the African continent with a population of 250
million people (Maringwa, 2009; SADC, 2008). Institutional mechanisms such as tariff reduction
schedules, rules on the origin of goods and services, harmonized customs and trade documents
and dispute settlement mechanisms were put in place and are operational.
To address the infrastructural constraint to trade, Zambia and Zimbabwe developed Chirundu
into a one-stop border post (OSBP)8
. The initiative increased trade by 20% and reduced delays in
8
The only one in Africa to date. At Chirundu, those travelling fom Zambia to Zimbabwe complete all their
formalities on the Zimbabwean side; and those travelling from Zimbabwe to Zambia complete all their formalities
on the Zambian side.

9. 6
movement of goods (Negasi, 2009). In addition, infrastructural corridors such as Dar-es-Salaam
Corridor, Mtwara Development Corridor, Nacala Development Corridor, Shire- Zambezi
Waterway, Beira Corridor, Limpopo Corridor, Maputo Corridor, Libombo Development
Corridor, Lesotho Railway, Trans-Kalahari Corridor, Walvis Bay Corridor, Trans-Caprivi
Corridor, North-South Corridor, Trans-Kunene Corridor, Lobito Corridor, and the Malanje
Corridor and Kazungula Bridge are either complete of are being developed as a result of
concerted efforts between SADC and member countries (SADC, 2008).
SADC countries trade more products with each other than they do with the ROW (Behar and
Edwards, 2011). Negasi (2009) reported that intra-SADC had grown (from 14% to 37%)
especially in the minerals, fuel and manufacturing sectors but cautions of possible trade diversion
due to the increasing extra-SADC trade bias. Maringwa (2009) found that trade was created for
sugar and wheat products, though he attributed it to bilateral trade agreements between member
countries and not necessarily to the SADC framework.
6.0 CHALLENGES
The challenges to SADC integration include the high levels of Non-tariff measures,
infrastructural bottlenecks, trade diversion, stringent rules of origin, lack of diversity in exports,
loss of customs revenue, trade polarization, overlapping membership, food security concerns
among others. These are discussed in the sequel.
6.1 Non-tariff Measures (NTMs)9
NTMs are institutional, infrastructural and regulatory burdens that impede the movement of
goods across borders. These include certification procedures, quantity control measures,
technical regulations, market regulations, government procurement and investment restrictions,
insufficient intellectual property rights protection and policies affecting cost of entry (Njinkeu et.
al., 2008; Johnson et. al., 2007; Wilson et. al., 2005; Teravanithorn and Raballand; 2008; Limão
and Venables, 2001). The persistence of NTMs even among Free Trade Areas (FTAs) is self-
defeating in that it impedes the trade that the member nations ‘intend’ to promote. For example,
Behar and Edwards (2011) found that intra-SADC trade has not changed significantly while
Kalaba and Kirsten (ND) found that the trade has actually declined during the phase down of
9
NTMs include all interventions that distort trade. Non-tariff Barriers (NTBs) are a subset of NTMs had have
protectionist intent. Examples of NTBs include tariff-rate quotas, quotas, licensing regimes and price bands.

10. 7
tariffs. But most importantly, they both attribute this to an increase in non-tariff measure with in
the region during the tariff phase-down period (as shown by the trends in table 3 and figure 1).
Table 3: Applied Most Favored Nation (MFN) Tariff (percent)
1997 2001 2007 Percentage change
(1997 to 2007)
Angola … 8.81 7.2 -1.48
Malawi 25.3 13.1 13.3 -9.58
Mauritius 28.7 18.4 3.15 -19.85
Mozambique 15.7 13.8 10.3 -4.67
Seychelles … 28.3 7.12 -16.51
SACU 11.3 8 7.74 -3.20
Tanzania 24.3 16.3 12.6 -9.41
Zambia 14.1 12.6 13.7 -0.35
Zimbabwe 23.8 19.6 14.1 -7.84
Pooled simple average 18.8 14.4 10.2 -7.24
Pooled import-weighted 8.42 6.95 6.45 -2.0
Tariffs by user
Consumption goods 31.3 26.3 19.7 -8.9
Intermediate inputs 15.2 11.0 8.7 -5.7
Capital goods 12.4 8.1 6.2 -5.5
Source: Behar and Edwards (2011)
Table 3 shows that tariffs reduced significantly in SADC countries between 1997 and 2007; and
figure 1 shows that while the average agricultural tariffs declined from about 16% in 2000 to
below 5% in 2008, the share of agricultural trade declined from 21% to about 13%.

11. 8
Figure 1: Intra-SADC trade in agricultural products and average tariffs applied on
agricultural products
Source: Kalaba and Kirsten (ND)
Natural resource based industries, such as agriculture and food, textiles and mining are most
strongly affected by NTMs (Deardoff, 2012). According to the findings of Kalaba and Kirsten
(ND), each agricultural product traded in SADC was affected by about 10 NTMs on average and
Sanitary and Phytosanitary Measures (SPS) were the most widely used, followed by licensing
and quantitative controls as well as export measures (figure 2). Mozambique had the highest
incidence of NTMs, and the lowest was Malawi (see appendix 1). On a product level, fruits were
the most affected products with more than 40% of all NTMs applied (see appendix 2). After
quantifying the NTMs into their ad-valorem tariff equivalents, Kalaba and Kirsten (ND) found
that the NTMs applied to meat and milk were as high as 400% and 200% respectively. This is
evidence of high levels of protection by SADC countries and could explain the decline in
(agricultural) trade over the tariff phase down period. The infant industry argument is has
perpetuated the use of NTMs in many countries since the rules of WTO do give room for their
use but others such as quantitative restricts are used by governments in complete disregard of
WTO rules (Flatters, 2001; Kalaba and Kirsten, ND).

12. 9
Figure 2: Application of NTMs by Type
Source: Kalaba and Kirsten (ND)
According to Negasi (2009), SADC member states continue to introduce periodic bans on
imports, impose additional import levies and other forms of import controls; often as
protectionist devices. NTBs are real obstacle to intra-regional trade expansion and undermine the
credibility of the Trade Protocol in the eyes of traders, investors and consumers. Behar and
Edwards (2011) try to allay the fears about the high NTMs used in SADC by arguing that they
are comparable to those used by countries at similar levels of development. However, these
NTMs need to be reduced if the fruits of regional integration to be realized.
6.2 FOOD SECURITY
It is envisaged that reduction in tariffs reduce the price of food therefore increase both physical
and economic assess to food. However, the continued use of NTBs such as SPS and the lack of a
regional policy on the production important food staples such as maize (for example, on the
production of GMO maize) jeopardizes food security in SADC and may lead to reoccurrence of
famine in vulnerable countries such as Malawi and Namibia (Mutambatsere, 2006).

13. 10
6.3 OVERLAPPING MEMBERSHIP
Competing interests and uncoordinated policies have resulted in overlapping regional trade blocs
(Tavaresa and Tang, 2011). As shown in figure 3, overlaps exist in SADC, Common Markets for
Eastern and Southern Africa (COMESA) and East African Community (EAC). All members of
SACU belong to SADC. Seven SADC countries (Angola, DRC, Malawi, Mauritius, Swaziland,
Zambia and Zimbabwe) are also members of COMESA. Tanzania is a member of both SADC
and EAC.
Overlapping membership presents challenges, particularly when trading blocs move towards
deeper levels of economic integration (SADC, 2008). For example, Zambia belongs to both
SADC and COMESA. Under the SADC TP, Zambia is to extend duty-free treatment to South
African products. However, because of its COMESA membership, Zambia is to implement a
common external tariff in line with the COMESA Customs Union, which excludes South Africa.
Which means that Zambia has agreed to simultaneously promote free trade with South Africa
and maintain COMESA tariffs against that same country (SADC, 2008). In recognition of such
dilemmas, Piazolo (2002) cautions South Africa against joining COMESA.
Figure 3: Illustration of overlapping trade blocs
Source: SADC (2008)

14. 11
Within SADC alone there has been competition for FDI and divisions during negotiations for
Economic Partnership Agreements (EPAs) with other trade blocs and nations as some members
opt to negotiate unilaterally. As Mlambo (2005) notes, competition for FDI between SADC
countries is both wasteful and costly and may weaken regional co-operation and integration. In a
related study, Sandery (2006) found unilateral trade liberalization policies of South Africa
(involving EU, Mercosur, China, US and India) to have cost the BLNS countries about 15% of
their total government revenue.
6.4 TRADE POLARISATION
As much as it is widely accepted that increased trade among nations promotes economic growth,
Krugman (2007) notes that for this to happen, it requires that the economic activities be well
distributed among and within the nations. In the SADC context, polarization of trade towards
South Africa is a major concern of other member states (Behar and Edwards, 2011; Kilolo-
Malambwe, 2011; Pallotti, 2004; Chauvin and Gaullier, 2002; Cassim, 2001). Negasi (2009),
Kalaba and Tsedu (2008) and Mlambo (2005) found that most of the total trade in SADC is with
South Africa and the flow of FDI is concentrated in few countries and sectors. According to
Kilolo-Malambwe (2011), Swaziland and Namibia export 45% and 29% respectively of their
products to South Africa. Botswana imports 83.5% and Swaziland imports 92.9% of their
commodities from South Africa. This shows the high dependence of SADC countries on trade
with South Africa (the dependence being higher for imports than exports). The trade orientation
in SADC seems to conform to the prediction of “New Economic Geography (NEG)” that posits
that FTAs are detrimental to poor economies as industrial activity relocates to middle income
economies (Deichmann and Gill, 2008; Coulibaly and Fontagné, 2006). Even within South
Africa, investment is highly concentrated in sectors that are capital intensive such as mineral and
energy exploitation, telecommunications and manufacturing that have very few backward and
forward linkages with the rest of the economy hence minimal job creation. Hess (2004) however
dispels the concerns of continued trade polarization. He argues that if trade costs reduce, wage
disparities and trade concessions extended to smaller economies by developed economies
continue, these small economies will become attractive locations for export orientated firms and
polarization will no longer be a concern.
6.5 REVENUE LOSS
The effect of trade liberalization on revenue depends to a large extent on the share of tariff
revenue in total revenue (Matlanyane and Harmse, 2002). Matlanyane and Harmse (2002) found

15. 12
trade liberalization did not significantly reduce South Africa’s trade tax revenue. On the other
hand, Sandrey et. al., (2006) predicted an 11% decline in revenue accruing to Lesotho from the
SACU revenue pool as a result of trade liberalization. This raises concern among government as
it may result in fiscal deficits and macroeconomic instability. Flatters (2001) however addresses
this concern by noting that revenue losses are not an economic costs and that such losses can
easily be made up through normal economic growth.
6.6 CONCENTRATED EXPORTS
The lack of diversity in regional commodities implies that the potential for trade is low among
SADC countries and increases the possibility of the bloc’s reliance on imports from ROW. As
shown in table 4, SADC member countries mainly export primary and unfinished goods while
imports are mainly capital and intermediate goods (with a few exceptions).
Table 4: Key Export and Import Commodities of SADC Member States
Member
State
Major Exports Major Imports
Angola Crude oil, diamonds, refined petroleum
products, gas, coffee, sisal, fish and fish
products, timber, cotton.
Machinery and electrical equipment, vehicles
and spare parts; medicines, food, textiles,
military goods.
Botswana Diamonds, copper, nickel, soda ash, meat. Foodstuffs, machinery, electrical
goods, transport equipment, textiles, fuel and
petroleum products, wood and paper products,
metal and metal products.
DRC Diamonds, copper, crude oil, coffee, cobalt. Foodstuffs, mining and other machinery,
transport equipment, fuels.
Lesotho Manufactures 75% (clothing,
footwear), wool and mohair, food
and live animals
Food; building materials, vehicles, machinery,
medicines, petroleum products.
Madagascar Coffee, vanilla, cloves, shellfish, sugar, cotton
cloth, chromite, petroleum products.
Capital goods, petroleum, consumer goods, food.
Malawi Tobacco 60%, tea, sugar, cotton, coffee,
peanuts, wood products, apparel.
Food, petroleum products, semi-manufactured
consumer goods, transportation equipment.
Mauritius Clothing and textiles, sugar, cut flowers,
molasses.
Manufactured goods, capital equipment,
foodstuffs, petroleum products, chemicals.
Mozambique Aluminium, prawns, cashews, cotton, sugar,
citrus, timber, bulk electricity.
Machinery and equipment, vehicles, fuel,
chemicals, metal products, foodstuffs, textiles.
Namibia Diamonds, copper, gold, zinc, lead, uranium;
cattle, processed fish, karakul skins.
Foodstuffs, petroleum products and fuel,
machinery and equipment, chemicals.
South Africa Gold, diamonds, platinum, other metals and
minerals, machinery and equipment.
Machinery and equipment, chemicals, petroleum
products, scientific instruments, foodstuffs.
Swaziland Soft drink concentrates, sugar, wood pulp,
cotton yarn, refrigerators, citrus and canned
fruit.
Motor vehicles, machinery, transport equipment,
foodstuffs, petroleum products, chemicals.
Tanzania Gold, coffee, cashew nuts, manufactured
cotton.
Consumer goods, machinery and transportation
equipment, industrial raw materials, crude oil.
Zambia; Copper/cobalt 64%, electricity, tobacco,
flowers, cotton.
Machinery, transportation equipment, petroleum
products, electricity, fertilizer; foodstuffs,
clothing.

16. 13
Member
State
Major Exports Major Imports
Zimbabwe Cotton, tobacco, gold, ferroalloys,
textiles/clothing.
Machinery and transport equipment, other
manufactures, chemicals, fuels.
Source: SADC (2008)
6.7 RULES OF ORIGIN
Conventionally, rules of origin are used in a regional bloc to authenticate that the goods claiming
preferential treatment are the product of significant economic activity in a member state. This
was the case in the originally agreed rules in the SADC TP but they were later revised so as to
serve another purpose; to encourage the development of linkages between upstream and
downstream industries (Flatters and Kirk, 2004). Rules of origin designed for the later have been
tested before but have failed due to their conflict with realities of international trade. Today a
large part of internationally traded commodities are intermediate products due to production
fragmentation that is aimed at taking advantage of different economic circumstances in different
locations such as availability of cheap labor or capital. Such regulations therefore increase the
cost of production and ultimately deem SADC an unsuitable place for such a production model
(Brenton et. al., 2005).
6.8 TRADE DIVERSION
Besides trade polarization, peripheral economies in a regional bloc also bear the cost of trade
diversion, by importing relatively expensive goods from the growing industrial centers rather
than more efficient global producers, making them even poorer (Kilolo-Malambwe, 2011).
Sandery (2006) found that poor consumers in BLNS countries were making transfers to richer
producers as a result of the SACU trade liberalization and the benefits that are accrue to
consumers are all concentrated in South Africa which has a high consumer population.
6.9 INFRASTRUCTURAL BOTTLENECKS
Intra-SADC trade is also constrained by lack of infrastructure and multiplicity of and
bureaucracy at customs crossings that require a lot of documentation, are time wasting and
costly. This is because the traditional infrastructure was built to bring in goods from sea ports
rather than facilitating intra-trade. As shown in table 5, the number of documents required to
export in Angola, Namibia, Malawi and Swaziland are way too many compared to those required
in East Asia and Pacific, Eastern Europe, Central Asia, Latin America and the Caribbean, Middle
East and North Africa, Organisation for Economic Co-operation and Development (OECD)
countries, South Asia and the average for Sub-Saharan Africa. The number of documents
required to import are also more in SADC than all the regions except South Asia. It takes about

17. 14
35.1 days to export good in the SADC region, the highest number 65 days in Angola and lowest
in Mauritius (14 days). However the number of days required to export in Mauritius (which is
the lowest in SADC) is still higher than in OECD but lower than for the rest of the regions. The
cost of exporting is $1,903.7 in SADC which is way higher than all the regions except sub-
Saharan Africa. The number of days it takes to import are actually highest in SADC and the cost
to import a container are more than for the rest of the regions except sub-Saharan Africa of
which SADC is part.
Another infrastructural bottleneck is inadequate power generation which makes power expensive
and increases the costs of production in the region.
Table 5: Time Delays and Trade Costs
Region or
Economy
Documents
to export
(number)
Time to
export
(days)
Cost to
export
(US$ per
container)
Documents
to import
(number)
Time to
import
(days)
Cost to
import (US$
per container)
East Asia &
Pacific
6.7 23.1 909.3 7.1 24.3 952.8
Eastern
Europe &
Central Asia
6.5 26.8 1581.8 7.8 28.4 1773.5
Latin
America &
Caribbean
6.8 18.6 1243.6 7.3 20.9 1481
Middle East
& North
Africa
6.4 22.5 1034.8 7.4 25.9 1221.7
OECD 4.3 10.5 1089.7 4.9 11 1145.9
South Asia 8.5 32.4 1364.1 9 32.2 1509.1
Sub-Saharan
Africa
7.8 33.6 1941.8 8.8 39.4 2365.4
SADC 7.4 35.1 1903.7 8.8 42.4 2348.3
Angola 11 65 2250 8 59 3240
Botswana 6 30 2810 9 41 3264
DRC 8 44 2607 9 63 2483
Lesotho 6 44 1549 8 49 1715
Madagascar 4 21 1279 9 26 1660
Malawi 11 41 1713 10 51 2570
Mauritius 5 14 737 6 14 689
Mozambique 7 23 1100 10 30 1475
Namibia 11 29 1686 9 24 1813
South Africa 8 30 1531 9 35 1807
Swaziland 9 21 2184 11 33 2249
Tanzania 5 24 1262 7 31 1475
Zambia 6 53 2664 9 64 3335
Zimbabwe 7 53 3280 9 73 5101
Source: World Bank Doing Business survey (2010) quoted by Behar and Edwards (2011)

18. 15
6.10 OTHER CHALLENGES
· Civil strife in SADC countries are a setback to socio-economic development. It is no
coincidence that DRC had the lowest GDP per capita in SADC in 2006 (table 1). The
civil war in the resource-rich eastern part of DRC does not only deny the country the
chance to exploit the natural resources but also skews fiscal allocations towards wars and
peace initiatives instead of sectors directly contribute to macroeconomic development.
· The SADC secretariat lacks binding authority and member countries are not willing to
cede power to a centralized authority. This results in uncoordinated interventions and
may undermine the long-term success of the SADC FTA and other deeper forms of
integration agreed upon.
7.0 CONCLUSION AND RECOMMENDATIONS
After the eminent success of the EU, regional FTAs will continue to emerge and offer hope for
the much hyped global free trade. SADC is a step in the right direction. But from the literature
reviewed, it is eminent that challenges that SADC faces far outweigh the achievements this far.
Some recommendations are warranted thence:
· To address the issue of trade polarization, SADC members should agree on a method of
compensating disadvantaged economies as is done in SACU and West African Economic
and Monetary Union (WAEMU).
· Member countries should place emphasis on reforms that reduce their dependence on
import duties for revenue; such as growing domestic revenue sources (for example value
added tax (VAT), exercise tax, income tax among others).
· Policy harmonization is key to the success of SADC. Member countries should cede
some power to the SADC secretariat to enable it make binding decisions on the policies
of member countries to avoid lacunas of regional economic integration as was seen in the
recent EU financial crisis that culminated into painful austerity measures and the
intervention of European power houses.
· The regional secretariat should also be given powers to make interventions aimed at
deepening democratic governance and bringing peace and security to member countries
to ensure that all member countries develop in tandem.

19. 16
· Strategic investment in infrastructural development such as roads, far-reaching rail
network, renewable energy, information technology among others will reduce transaction
costs and make SADC a competitive investment destination.
· The private sector should not only be consulted but should fully participate in SADC
trade initiatives to make sure that the priorities of regional government are in congruence
with the ideals and needs of the private sector.
· SADC should embrace outward looking approach to regional integration described by
Flatters (2001) as “open regionalism.” This will enable the integration of SADC with the
global economy, improve competitiveness and reduce the forestall trade diversion.
· On the food security front, SADC should make deliberate efforts to reduce NTMs on
agricultural products, enhance availability of rural finance, harmonize food security
policies (including and GMOs) before-hand to avoid interventionist measures in times of
crises.
· SADC should adopt less stringent rules of origin in order to stimulate regional integration
and facilitate the growth of companies that are able to compete effectively on global
markets.
· SADC member countries should be steadfast in implementing existing and future
commitments or else all the well thought plans of regional economic integration will
remain on paper.
It is important to note that liberalized free trade is no panacea for maximizing the welfare of the
citizens, selective and coordinated state intervention10
is will always be necessary for the
achievement calculated national and regional development objectives, especially in the
developing world (Tsie, 1996).
10
Whether national or regional

20. 17
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24. 21
Appendix 1: Fugure Showing NTM coverage of agricultural products by country
Source: Kalaba and Kirsten (ND)

25. 22
Appendix 2: Figure Showing Share of NTMs Per Product
Source: Kalaba and Kirsten (ND)