South Africa’s Trade Minister has defended his country’s big brother attitude in the region, blaming it on the size of the economy.
Dr Rob Davies admitted trade imbalances between the giant neighbour and other trading partners in the SADC region, including Botswana, but said the real issue will be to find ways of striking a balance.
“Because we are large and because we are most industrialised, we see high percentage of interregional trade,” Davies told Sunday Standard.
“There has been a bit of imbalances and that is not what we think is desirable,” he said.
South Africa is Botswana’s largest trading partner, but trade has been skewed in favour of Africa’s largest economy.
Botswana imports its needs from its neighbour, which makes the diamond dependent economy a net importer with plans to narrow the gap by exporting electricity through Mmamabula Energy Project hitting a snag.
Critics have pointed out that South Africa wants to remain dominant as it is dragging feet on regional integration matters. One example is the reluctance to sign the Economic Partnership Agreement, a trade agreement between the region and Europe.
Davies, however, promised there will be solutions to the EPA issue, which he said was largely stalled by trade related demands from the European Union (EU).
“There are signals there will be solutions to these issues,” he said. “We made a substantial offer….we want to see an outcome with harmonious relationships with our trading partners,” Davies said.
EPAs came as a result of the expiry of the Cotonou Agreement, which granted Botswana a tariff quota of 18,916 tonnes per year with a 92 percent reduction in customs duties.
But with the EPA offer, Botswana is significantly enhancing market access for its beef because it is exporting unlimited quantities duty free.
Under the EPAs, the EU will provide duty-free access to its markets for ACP exports, while at the same time the ACP countries will also provide duty-free access to their own markets for EU exports.
Botswana initialised the EPAs in a bid to assure unlimited exports of Botswana beef to the EU. But critics blamed the slow pace of its neighbor is reliant on its Trade, Development and Co-operation Agreement (TDCA) if EPAs are not signed.
Under TDCA, which was singed in 1999, there is a provision for a free trade area between South Africa and the EU over a transitional period of 12 years, which means that the EU and South Africa will open their markets to each other at a different pace.
Davie also put doubts on the common Monetary Union, which was to be implemented in 2016.
South Africa has so far opened up to 80 percent of the products to the EU, but Europe has only opened up to 65 percent of SA products.
Dorcas Makgato-Malesu, the Botswana Trade minister, agreed with Davies that there are challenges relating to trade, including the EPA, which Botswana is negotiating under the auspices of SADC.
Malesu said she was ‘still optimistic’ of a breakthrough because Botswana has pertinent issues that may not bother South Africa.
Davies also cast doubts in the implementation of Monetary Union by 2016 as SADC members have challenges that are worse than the Eurozone.
“Ready by 2016?” asked the minister. “I doubt it will be achieved”. The Eurozone, which was formed through the Maastricht Treaty of levels of inflation and debt, is facing problems that are influenced by other factors.
“Look at Europe, it is struggling to support the Monetary Union.”
The level of criterion is also a big disparity that will work against the SADC union. There are doubts on whether members will meet targets set on the 2002 Memorandum of Understanding.
These include core inflation of 9 percent in 2008, 5 percent in 2012 and falling to 3 percent in 2018. Most of the members are still above the target range.
The MoU also set government debt at 60 percent against the GDP.