EU Treaty Sparks Southern African Trade War: South Africa and Its Neighbours Face off over New Trade Arrangements with the EU. Europe Accuses South Africa of Bullying and Bad Faith as the World's Oldest Customs Union, SACU, Comes under Threat. Is This the Beginning of a New Southern African Economic Order, Asks Tom Nevin

By Nevin, Tom | African Business, October 2009 | Go to article overview

EU Treaty Sparks Southern African Trade War: South Africa and Its Neighbours Face off over New Trade Arrangements with the EU. Europe Accuses South Africa of Bullying and Bad Faith as the World's Oldest Customs Union, SACU, Comes under Threat. Is This the Beginning of a New Southern African Economic Order, Asks Tom Nevin


Nevin, Tom, African Business


The signing by South Africa's neighbours of an interim European Partnership Agreement (EPA) has so angered South Africa that it has threatened to erect trade barriers and put an end to its century-old South African Customs Union (SACU) with Botswana, Lesotho, Swaziland and Namibia. South Africa's reaction is the strongest sign yet that the SACU could quickly become history.

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South Africa's Trade and Industry Minister, Rob Davies, immediately reacted with the warning that his ministry will interrupt the flow of customs-free goods between the SACU countries to stop the anticipated flood of cheap imports entering the country.

South Africa regards the action of the SACU partners as a betrayal and points out that the union's rules forbid signatories from entering into separate trade agreements with other countries.

Botswana reacted angrily and the European Union accused South Africa of "bullying" and "acting in bad faith". Botswana trade and industry minister Daniel Moroka has refuted claims that South Africa will virtually have to wall itself off from its SACU partners to prevent tariff-free goods from Europe leaking over border.

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Under the prevailing SACU arrangement, goods flow duty and tariff free between the five member states. About 99% of EU imports arrive in Botswana from South Africa, he says, and over 80% of Botswana's total trade enters via South Africa.

"Only 0.1% of goods destined for Botswana come from the EU directly," maintains Moroka. "Let me put it bluntly - the majority of companies that operate in Botswana are headquartered in South Africa. The purchasing arms of these firms are based in South Africa. Because we are landlocked the bulk of imports come from South Africa. There is no danger of cheap goods coming through Botswana into South Africa. At the same time we are genuinely committed to our objectives in the SACU," says Moroka.

Ivan Costello, the EU's trade negotiator for the SADC, didn't pull his punches. He maintained that South Africa wants to disband the SACU because it is not in the country's interests to continue to share customs revenue with the region.

SACU fragmentation

The sparks began to fly with the signing on 7th May of the Interim SADC European Partnership Agreement (EPA) by the EU and Botswana, Lesotho, Swaziland and Mozambique, with Angola signifying it is keen to join the grouping and saying it will do so at the first opportunity. With the opening of a new chapter in the region's trade relations with the EU, it seems nothing will ever be the same again. The century-old SACU is likely to be the first real casualty.

The EPA was meant as a new beginning for southern Africa's trade relations with the EU but after nearly two years of wrangling, with South Africa holding out for a better deal, the EU decided to exclude South Africa and tie up an arrangement with the other partners instead. SACU member Namibia has declined to sign because it still awaits clarity and confirmation on issues of trade with the EU it raised when the EPA came up for signature in 2007 (See box: Namibia waits for answers).

Moroka reports that Botswana appended its signature because it was commercially the right thing to do - not signing meant the risk of forfeiting valuable preferential access into the European market. Preferential loss could have cost Botswana 80% of the value of its exports to Europe and directly threatened the livelihood of 600,000 of its inhabitants.

The jury is still out, and will probably remain so for some time, as it chews over the ramifications of a mooted EPA between seven southern African countries and the European Union. The going so far has been anything but easy.

The EPAs are designed to replace the Cotonou Agreement that previously governed African, Caribbean and Pacific (ACP) countries' trade with the EU. …

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EU Treaty Sparks Southern African Trade War: South Africa and Its Neighbours Face off over New Trade Arrangements with the EU. Europe Accuses South Africa of Bullying and Bad Faith as the World's Oldest Customs Union, SACU, Comes under Threat. Is This the Beginning of a New Southern African Economic Order, Asks Tom Nevin
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