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South African Institute of International Affairs (SAIIA) Trade and Industrial Policy Strategy (TIPS) Friedrich Ebert Stiftung

South Africa’s International Trade Diplomacy: Implications for regional integration

A study conducted for the Friederich Ebert Foundation

Peter Draper, Philip Alves, Mmatlou Kalaba

South African Institute of International Affairs (SAIIA), Trade and Industrial Policy Strategy (TIPS), Friedrich Ebert Stiftung

July 2006

SARPN acknowledges SAIIA as a source of this document:
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Executive summary

Deepening processes of economic integration requires a willingness on the part of member states involved in such processes to pool sovereignty. Yet in the SADC context it is not clear whether member states are willing to cede real sovereignty, or at least a sufficient quantum to construct a real customs union by 2008 as proposed under the RISDP. Furthermore, it is well-known that the region is divided on this question with a number of member states “hedging their bets” through membership of other regional bodies.

In the South African case much political and institutional capacity has been expended in re-establishing the Southern African Customs Union (SACU) as the core platform from which to integrate into the global economy. So the extent of the South African government’s political commitment to the SADC Customs Union project (a key RISDP goal) is not clear.

If South Africa were an “ordinary” SADC member state this need not necessarily constitute a problem. But it is not. It dominates the region economically (accounting for about 60% of SADC total trade and about 70% of SADC GDP)1, rendering it indispensable for any economic integration process. In the Southern African region only South Africa has the requisite economic capability and levels of diversification to drive economic integration in a mutually beneficial manner.

Yet at the same time as South Africa is integrating with the region, it is also conducting an active trade diplomacy agenda across the world. Agreements currently under negotiation at various levels and in different forums have the potential to substantially alter the playing field: in South Africa, regionally, and internationally. These potential agreements, discussed in Section 4, will have major implications for the conduct of business in the region.

This agenda holds the following strategic implications for SADC’s plans:
  1. First, SACU, and not just South Africa, is negotiating these arrangements. This process should strengthen SACU’s institutions and separate it further from the region in terms of its global connectedness.
  2. Flowing from this, as SACU’s negotiated concessions start to bite they will have implications for regional businesses concerned with accessing the South African market.
  3. This will intensify regional competition, hopefully generating positive spillovers in terms of competitiveness, consumer benefits, and regional industrial relocation.
  4. However, depending on how regional producers respond it may undermine the process of regional economic integration by foreclosing economic opportunities opened up through the SADC FTA.
Therefore, in order to better understand the trajectory of regional economic integration it is necessary to get to grips with South Africa’s trade diplomacy, and for the purposes of the broader FES project relate this to its implications for the goals put forward in terms of the RISDP. This assessment begins with an analysis of African development priorities, particularly with respect to foreign direct investment (FDI) needs and trade. That sets the scene for a focused analysis of South Africa’s African expansion via FDI and trade, and the implications this holds for African development.

  1. African Development Indicators. World Bank Database, Global Indicators (2005)

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