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Prospects of Amalgamating the SADC and SACU
February 19, 2015
At its inception, the principal mandate of the Southern African Development Community (SADC) Treaty was to enhance regional integration within the SADC region. The initial goal of the SADC Treaty was the development of a common market, common monetary union and a common currency that would facilitate trade within the region. Equally important was the desire to form a bulwark against stronger economies from other regional groupings. On the other hand, the Southern African Customs Union (SACU) also harboured the desire to facilitate the establishment and operationalisation of a customs union, a common currency, common market and a monetary union at different times of its existence. Because of their success, the SADC and SACU are modelled after existing regional groupings such as the East African Community, taking cognisance of the meteoric economic rise of Kenya and economic reforms in Rwanda. This paper examines the possibility of collapsing SACU into the SADC bloc and the attendant duplication and overlapping of tasks by the two institutions. The paper also explores the motivating factors that have contributed to Africa’s regional integration as well as the nature of the integration process. The emphatic part of the paper is on the current challenges of SADC and SACU, notably duplication of functions and overlap within the two groupings. The paper recommends an amalgamation of the two groupings and the harmonisation of their operations and the attendant regulatory framework governing the two RECs.
In its conventional sense, amalgamation is common in the natural sciences as well as in the corporate world. It rarely makes an appearance in the social sciences. However, generally the concept of amalgamation implies the merging or combination of entities or institutions. In regional integration, amalgamation is synonymous with merging of blocs or institutions. African governments perceive regional integration as a rational response to the difficulties faced by a continent with many small markets and landlocked countries. As a result, African governments concluded a very large number of regional integration arrangements, several of which have significant membership overlap. While characterized by ambitious targets, they have a dismally poor implementation record. Part of the problem may lie in the paradigm of linear market integration, marked by stepwise integration of goods, labour and capital markets, and eventually monetary and fiscal integration. This tends to focus on border measures such as import tariffs. However, supply-side constraints may be more important. A deeper integration agenda that includes services, investment, competition policy and other behind-the-border issues can address the national-level supply-side constraints far more effectively than an agenda which focuses almost exclusively on border measures.
The geo-political environment in which the Southern African Development Community (SADC) and the Southern African Customs Union (SACU) operate raised debates about the need to collapse the two institutions, especially given the amount of duplicity and overlap of membership. Such a merger would see the creation of a more comprehensive regional grouping that would serve both as a regional customs union as well as a socio-political regional bloc. Such a merger would be able to focus on socio-economic and political dynamics of the Southern African region. However, this discussion cannot be pursued without establishing the objectives and structure of each of the two institutions as well as their involvement in the Economic Partnership Agreements (EPA).
There are several advantages and disadvantages of combining the SADC and SACU. The advantage of having only one institution would be the elimination of the overlap in functions, which are currently performed unnecessarily by two separate entities. In addition, their combination would allow for swifter implementation of tasks by eradicating cumbersome bureaucratic tendencies. Ideally, one-stop check-points at border crossing locations would also assist in increasing the efficiency of task completion. However, challenges presented by the amalgamation would most likely include sacrificing the superior position of some member states, notably South Africa, Amalgamation requires a more egalitarian environment so that states can work together in harmony. Additionally, some smaller economies such as the economies of Lesotho and Botswana, which have historically depended on South Africa, are most likely to find the new set-up unpalatable because it will not allow stronger countries to assist them as much as before.
Theory of Regional Integration
Early theorising related to the European integration process emphasised the procedural nature of the phenomenon of regional integration. The most renowned scholar of regional integration, Ernst Haas, defined integration as follows:
‘the process whereby political actors in several distinct national settings are persuaded to shift their loyalties, expectations and political activities toward a new centre, whose institutions possess or demand jurisdiction over pre-existing national states. The end result of a process of political integration is a new political community, superimposed over the pre-existing ones.’
Consequently, it can therefore be argued that theorising related to regional integration started as an attempt to determine the optimal way of implementing the process of integration. In other words, for example, theories of economic integration were mainly interested in what would produce the most beneficial outcome in economic terms. However, these theories were developed alongside other social sciences. Regional integration gained more scientific rigour and new models were developed as the social sciences advanced. Among these models are such classical theories of political integration as federalism, transactionalism, and most importantly, functionalism or neofunctionalism. These were all dominant models in the discussion related to the European integration process, whereas in the African context theories of economic integration had more importance. However, this paper does not intend to delve into the intricacies of the theoretical framework for regional integration, but instead seeks to explore the practicalities of the phenomenon thereof. There no more exist clear-cut models and schools of regional integration, as most of these have since gone into oblivion due mostly to globalisation. It therefore follows that in the case of theoretical models or regional integration, the division into two distinct waves is not possible as is the case with the empirical phenomenon. The theoretical discussion related to integration has naturally continued throughout the 1970s and 1980s and mostly related to European integration. In the case of European integration, there no longer exist such clear-cut schools or models of regional integration as during the first wave of the 1970s. And instead, the discussion has proliferated in various directions.
In the case of the developing countries, theoretical discussion faded away with the demise of the first generation of regional organisations. Regional integration in developing countries experienced a resurgence both as an empirical phenomenon as well as an object of academic interest in the beginning of the 1990s. However, theorising related to regional integration among developing countries has recently been quite limited and academic discussion currently concentrates on the relationship between globalisation and regionalisation, leaving discussions on regional integration on the back burner.
Current debates present economic cooperation between countries as occurring on three levels: coordination, harmonisation and integration. Coordination is the lowest level of economic cooperation. It usually involves the voluntary alignment of national policies and investments in certain sectors of the economy. Harmonisation is a higher level of cooperation, and it usually involves harmonisation of national legislation or the adoption of common legislation. On this level, all legislation is still national, and all policies and instruments are nationally controlled and implemented, although they might be regionally agreed upon. Integration is the highest level of economic cooperation. In a regionally integrated market, some of the traditional decision-making powers of nation states are handed over to the regional level, and regional rules and decisions supersede national legislation. Furthermore, at least some economic policies are formulated on the regional level. Integration can thus refer both to the process as a whole, but also to a certain advanced level of cooperation between and among countries usually in the same geographical region or location.
Major Objectives of the SADC and SACU
One commonality between the SADC and SACU is the fact that they both seek to enhance economic performance of member states through different institutional mechanisms. The SADC was a reconfiguration of the former SADCC whose mandate to liberate the region came to fruition, leading to the realisation that the bloc needed to shift its focus from political to economic emancipation. Consequently this new paradigm was informed by a set of objectives, which are:
to achieve development, peace and security, and economic growth, to alleviate poverty, enhance the standard and quality of life of the peoples of Southern Africa, and support the socially disadvantaged through regional integration, built on democratic principles and equitable and sustainable development.
Generally, the major emphasis of these institutional mechanisms is the socio-political and economic welfare of people in member states. Similarly, the objectives of SACU are guided by its mandate to promote economic development among its members, notably South Africa, Botswana, Lesotho and Swaziland. Given the geo-politics of the day and the superior economic status of South Africa, it became evident that SACU’s member states were heavily dependent on South Africa, despite the country’s much despised political orientation of apartheid. The member states that were heavily dependent on South Africa proceeded to form a bulwark against any possible threat to their economic activities. This bulwark took the form of SACU and had the goal of creating a common market. The monetary union existed at that time as well as a customs union which facilitated collaboration and assisted in the harmonisation of economic activities within the foursome constellation of states. The major objectives of SACU were therefore crafted with a view to realise this mandate. These objectives of SACU as contained in Article 2 of the 2002 SACU Agreement were (and still are):
Closer analysis of these objectives indicates that SACU’s major thrust was to come up with a policy framework to facilitate and promote economic activity within the small constellation of states. SACU also sought to improve the socio-economic and political welfare of the member states’ peoples. The SACU’s goals were similar to the objectives of SADC constellation of 15 states. As such, given the opportunity, amalgamation of SADC and SACU would pave way for a stronger and more harmonised institution. Merging the major objectives of the two blocs would also pave the way for a smooth transition and harmonisation as well as the subsequent amalgamation of the two blocs.
Economic Partnership Agreements (EPAs)
The influence of the European Union (EU) within SADC and SACU is evident in EU’s economic partnership agreements (EPA) negotiations with SADC beginning in 2002. The SACU member states negotiated the EPAs as an appendage of SADC. The fact that EU undertook EPA negotiations with SACU under the SADC umbrella shows the existing ties between SADC and SACU. Equally important is the fact that major players in SACU wield the same (or more) power in SADC, which would imply that SADC decisions and agreements with other regional groupings can affect and impact on the operations of SACU. However, it remains to be seen whether SADC could make decisions on behalf of SACU. In the EPA negotiations between SADC and SACU, South Africa played a pivotal role because it is a dominate member in each of the bodies.  Given that South Africa plays an important part in both institutions, collapsing the two institutions would strengthen the position of South Africa within the new consolidated body.
The fact that SADC and SACU negotiated for EPAs as two distinct but symbiotic and interdependent institutions has shown that the process of negotiating for the EPAs would have been less cumbersome if the two regional bodies had set up a joint team to negotiate for both SADC and SACU. Therefore, there was overlapping and duplication of tasks for the two regional bodies to engage the EU separately.
Overlapping and Duplication
Overlapping memberships have created trade inconsistencies among regional blocs. Some countries are unnecessarily members of both COMESA and SADC. Of the 15 SADC member states, 9 members also belong to COMESA whose membership totals 20. Zambia as a member of COMESA customs union, agreed to a common external tariff for countries that are not members of COMESA. Because South Africa is not a member of COMESA, this tariff did not apply to South Africa. This means that Zambia agreed to reduce, but still maintain tariffs with South Africa (under SADC conditions) (under the COMESA provisions). Similarly other regional groups such as SACU, which already have agreements with EU, were forced to seek ways of negotiating with non-SACU countries that are members of both SADC and COMESA
Given the desire to overcome different economic challenges by different RECs within the African, Caribbean and Pacific Group of States (ACP), some countries have opted to become member of multiple RECs. Multiple membership no only creates confusion, competition and duplication, but also constitutes a burden on the taxpayer. South Africa, Botswana, Lesotho, Namibia and Swaziland are members of both SACU and SADC, while Namibia and Swaziland both hold memberships of three regional integration agreements and are part of the Common Monetary Area (which include South Africa and Lesotho) and also participate in the Regional Integration Facilitation Forum (RIFF). Additionally, a majority of SADC member states are also members of the Common Market for Eastern and Southern African States (COMESA). This causes problems in the event that each region decides to form a customs union, because no one country can simultaneously belong to two unions at any one time. It has also been noted that differences in approaches to integration cause confusion, and lead to inconsistent and incoherent policymaking.
Given that South Africa has already negotiated a Free Trade Agreement with the EU and SACU, any agreement that South Africa concludes will include other SACU members. Overlapping membership has also diluted regional integration among REC member states. When integration is shallow, a state can sign numerous bilateral or even multilateral agreements. However, when integration deepens to the level of a monetary union or customs union, states must choose one integration agreement.
The SACU/SADC Dichotomy
The co-existence of SADC and the SACU creates challenges to SADC regional integration as states within the southern African catchment geographical area find themselves divided between the two institutions. SACU members are prohibited from entering into new preferential trade agreements with third parties. Nevertheless, states do not always respect this regulation.38 In addition, powerful economic blocs such as the EU seek to divide SADC and SACU by negotiating with them separately despite the fact that SACU membership is encapsulated in SADC. The Southern African Customs Union (SACU) is acknowledged as the oldest functioning customs union in the world. It was not established as a concerted decision by sovereign states, but was a culmination of a decision by a colonial power (Britain) to establish a customs union of the Union of South Africa (now the Republic of South Africa), Basutoland (now Lesotho), Swaziland and Bechuanaland (now Botswana). Namibia only joined SACU when it became independent in 1990. SACU now consists of these five member states. Despite its history spanning more than a century, SACU is still a customs union in progress. South African agencies still manage the affairs of the customs union related to implementation of the common external tariff. The SACU Tariff Board, and national bodies which would manage this function for SACU are provided for in the 2002 SACU Agreement, but have not yet been established.
SACU members’ negotiation of EPAs with the EU without the involvement of SADC as a larger economic bloc serves to divide the SADC region by showing fissures within the SADC membership. Despite negotiations with the EU evolving as a result of SACU efforts, Hancock accuses the EU of seeking to divide SACU and SADC by means of EPA negotiations.39 Vickers also argues that the vast power asymmetries between the EU and ACP countries grants smaller states very little bargaining power to shape the negotiating process and the outcome of the negotiations. Vickers claims that SADC’s split ‘into four sets of separate trade regimes with the EU, 40 came as a result of this decreased bargaining power. The split, he claims, led to the undermining of the SADC regional integration agenda. Given the division among SACU members, members currently have different external tariffs, an imbalance which makes deeper regional integration a challenge. The creation of a common market, a monitory union or a stronger customs union are nearly impossible without such regional integration. Additionally, states continue to discuss the potential for mandates that would require SADC and SACU to handle regional economic integration issues. Van de Merwe asserts that SACU leaders presented suggestions to SADC leaders, suggesting that SACU become the nucleus for the wider SADC body.41 Unfortunately the result of this tug-of-war for supremacy between SACU and SADC presents the current derailment of efforts for further regional integration.
SACU member states, along with Mozambique, Angola and Tanzania, have converging opinions as a result of the SADC’s current configuration. A point of contention between these states regards the question of whether Tanzania should concentrate its efforts on the East Africa Community. It is most likely that the resultant SADC configuration will include SACU member states along with Mozambique. With Mozambique already reportedly willing to join SACU, the SADC configuration may indeed end up being a SACU configuration. Additionally, a number of studies have analysed and attempted to forecast the possible path that regional integration will take in Southern Africa in the wake of EPAs. It must be noted that these analyses are necessarily speculative in nature. Almost all of the forecasted regional integration paths, current day literature regarding regional integration, and expert analyses consulted in this study, predict implicitly or otherwise, that “EPAs will result in the re-enforcement of the integration of SACU economies.” This underscores the naivety of assuming that SACU has no active role in the regional integration process. Additionally, and with regards to SADC, a myriad of studies on SADC differ but essentially emphasise the blurry and inherently “either” or nature of attempting to predict SADC’s future. The different studies put SADC at the crossroads of political and economic challenges that would most likely impede regional development.
Justification for Collapsing SADC and SACU
Collapsing SADC and SACU into one entity would bring a number of advantages. Firstly, the transition for member states of both institutions would be natural because there would be minimal in the composition of the new consolidated regional group and trade commodities. The new entity would operate within the same geo-political environment, making the transition even more natural for member states. In addition, collapsing the two regional groups would help to reduce the overlapping of important regional functions thus improving efficiency. The new body would also be more focused on specialized sub-groups within the collapsed body being established. Additionally, the amalgamation would enable the hamonisation of numerous regulations that govern the operation of the two RECs. This tightening of the existing regulatory framework would enhance competitiveness with other RECs that have similar objectives.
The new consolidated body would not present much threat to the sovereignty of member states given that the new look regional group will seek to correct the weaknesses of SADC and SACU. The consolidated body would be much stronger to meet the challenges and competition brought about by globalisation. As a result, the new body would need to consolidate and develop broader institutions. The collapsing of SADC and SACU would enable the region to have a broad-based body premised on handling both political and economic issues in the region. Different legal and institutional frameworks for SADC and SACU have been among challenges to regional integration. Collapsing the two can also be accompanied by the enactment of a consolidated legal framework. With the collapsing of the two regional bodies, an appropriate set of regulatory and legal framework would accompany the establishment of the consolidated body. Such institutional, legal and regulatory frameworks to administer the new consolidated body would enable the region to compete with bigger economic blocs such as the EU and to position the region as a strong economic bloc.
However there are disadvantages to collapsing SADC and SACU. The existing economic and political differences between and among SADC and SACU member states cannot be curtailed by collapsing the two institutions. In addition the different objectives of the two regional bodies cannot be fully integrated into the objectives of the new consolidated regional body. It would also present a challenge to afford rich and poor countries the same status under the new consolidated body. Such a development would also threaten the hegemony (political and economic) of those countries which currently dominate in SADC or SACU or both. As a result, different economic development would result in some member states benefiting at the expense of others. In addition, bigger economies such as South Africa cannot allow the collapsing because currently they override the smaller states and draw economic benefit for the economic hegemony that they enjoy.
Possible Challenges to the SADC/SACU Amalgamation
While it is acknowledged that merging SADC and SACU would strengthen the resultant bloc, the endeavour to do so is riddled with challenges. Firstly SACU, probably the oldest customs union in the world, would not want to play second fiddle to SADC, a more recent invention. On the other hand, SADC cannot be merged into SACU as this would mean that it would have to limit its current political and economic objectives, such as those pertaining to governance, electoral processes and mediation efforts in the region. In addition, in both SADC and SACU, South Africa plays a big brother role. Merging the two blocs would threaten the benefits currently enjoyed by South Africa. Additionally, the members of SACU used to following South Africa’s lead as the only superior economic and political giant will find the adjustment challenging. Allowing other SADC member states to become a member of the new bloc would mean that smaller SACU member states such as Lesotho, and Botswana would have to contend with economically and politically superior countries. Such an arrangement would threaten the current status of smaller SACU member states. The diverse historical background of SACU and SADC member states would also present challenges. While it has been possible to use a common currency in SACU, it would be difficult to use one currency where different countries have no or very few historical commonalities. Different levels of stability in different SADC countries would not provide a conducive environment for a merger between those countries in SACU and those in SADC. Civil unrest in the Democratic Republic of the Congo (DRC) would not be good for economic development. Similarly, high levels of poverty in some SADC countries such as Malawi would tend to drag the economic performance of the merger backwards and this would not auger well with those countries that currently enjoy peace and stability. Consequently, it would be very difficult to merge countries with different levels of economic development and histories.
Despite the challenges of integration, SADC and SACU member states stand to gain more from replacing SADC and SACU with one regional body. The above discussion have cited a number of similarities which would warrant and justify collapsing SADC and SACU. In additional the practicalities involved would tend to enhance competitiveness. However, the different agendas of each of the two institutions cannot be fully aligned or reconciled in the new consolidated body, though through harmonisation, most of the agendas of each would be captured in the new dispensation.
The current separate arrangement has benefited some countries, notably South Africa and as such South Africa does not support the idea of collapsing because that would threaten her economic and political hegemony in the region. The onus is on the African Union, which, as the umbrella continental body, has an obligation to play an oversight role in sanitising economic development and regional integration in Africa.
It can also be noted that SACU, largely due to the effects of the ongoing EPA negotiations, stands poised to lead the regional integration process in Southern Africa. Subsequently, this paper recommends a re-thinking by the African Union and the SADC of the RECs that comprise the AEC building blocks in Southern Africa. In doing this, the recommendation is not to do away with SADC. Rather, the African Union (AU) should take the lead in facilitating an agreement between the two RECs (SADC and SACU) as to the way forward and what their different roles can and/or will be. However, in doing this the AU must be cognizant of the ten guiding principles of rationalisation as articulated by the UNECA, economic rationale and existing reality. In this regard and with the guiding principles in mind, it is only reality that SACU is a well-functioning customs union way ahead of SADC in terms of integration. This is a fact that can be hardly disputed. It would hence, be against rational economic sense to expect SADC to lead SACU in the integration process nor vice versa. Rather, as the more advanced of the two, it only makes sense that SACU leads, especially given its longevity within the economic development domain.
Lastly, the amalgamation would only be in the interest of meeting the targets of the Abuja Treaty. Given the uncertainty, doubts and suspicions, and most importantly, the seemingly overlapping role of these two Southern African RECs in the regional integration, the two will most likely be curtailed in the process. As a result, this would pave the way for focus on the actual integration agenda, which the two RECs are well positioned to address. It would also open space to discuss the creation of one regional body to replace SADC and SACU in an effort to facilitate regional integration.
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Jephias Mapuva is a Senior Lecturer in the Department of Geography at Bindura University of Science Education (Zimbabwe).