Can SA handle burden of regional leadership ?
CAN South Africa really handle the burden of regional leadership and can the Southern African Customs Union (SACU) be the fulcrum of wider regional integration?
In the past two publications of this newspaper, regionalisation in the age of globalisation and the dynamics of regional integration in southern Africa, particularly focusing on SACU and Southern African Development Community (SADC), have been discussed.
The last section, part III, deals with the contentious free trade agreement (FTA) and economic partnership agreement negotiations currently ongoing between Africa, Caribbean and Pacific (ACP) and the European Union (EU).
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FTA and EPA negotiations
In so far as the SACU countries have decided to undertake multilateral and free trade agreement (FTA) negotiations as a single entity, they will be required to develop collective policies and negotiating positions on issues such as services, intellectual property matters, investment and competition law.
In particular, SACU’s negotiations with the United States (US) have highlighted the importance of internal policy coordination among the SACU states prior to engaging in external negotiations.
In keeping with its FTA strategy of ‘competitive liberalisation’, the US wants a comprehensive FTA with SACU, encompassing liberalisation of trade in goods, services and investment, inclusion of labour and environment provisions, and tightening of intellectual property rights.
On the contrary, the SACU Agreement covers a limited set of disciplines: trade in goods, agriculture, transport and the management of the common revenue pool. The main challenge is to reconcile these narrow disciplines with the comprehensive negotiating posture of the US.
Intra-SACU expansion, combined with the unfolding global trade agenda, will increasingly necessitate an alignment of SACU policies and programmes with the demands of the contemporary global trade regime.
The ongoing sets of negotiations on EPAs between the EU and some countries in eastern and southern Africa present another challenge to SACU. Initially, South Africa was involved as an observer in the negotiations by virtue of its membership of SACU and SADC.
However, the EU Council of Ministers decided in December 2006 to include South Africa in the SADC EPA grouping. Undoubtedly, South Africa’s involvement will have an important bearing on the negotiations.
It is unclear, though, what the nature of that influence will be and how this will affect the internal dynamics of the SADC EPA grouping. The parallel process of reviewing the TDCA, negotiated by South Africa and the EU, will also have implications for SACU.
The BLNS countries have been part of the TDCA review process aimed at harmonising their EPA negotiations with the EU with the TDCA. Likewise, the EU has been engaged in a process of recasting its rules of origin in order to create a single system for ACP countries to which South Africa could accede.
A vital issue in this regard will be cumulation, particularly South Africa’s cumulation with the ACP bloc and SADC. In addition, a review of trade defence measures germane to the TDCA has been proposed with the goal of rationalising them.
The evolving SACU trade architecture will also be shaped by the manner in which issues are tackled within the Co-operation Council set up by the TDCA. These include Article 18 of the TDCA, which provides scope for further liberalisation of tariff lines - spanning industrial goods, agriculture, and fish and marine products - that are either presently excluded or subject to partial liberalisation, quotas or backloading.
One of the key objectives of the EPA negotiations is to enhance regional integration among the ACP states. Whether this goal can be accomplished in the SADC context is doubtful, in light of the regional bloc’s lukewarm commitment to deeper integration. Even so, the EPA negotiations are likely to compel SADC countries to make hard choices regarding their membership in the overlapping regional trade structures and agreements.
SACU as the fulcrum of wider regional integration?
The revised SACU Agreement provides for accession by new members. The idea of expanding SACU is not new: it was previously mooted by the then apartheid regime as part of a policy to broaden South African hegemony and to counter anti-apartheid forces in the region.
But it has gained currency in recent years, largely in response to a number of strategic developments in southern Africa, including the current EPA negotiations between the EU and several countries in the region, and the increasing political and economic presence of external powers such as China and India.
This is particularly pertinent in light of SACU’s ongoing parallel FTA and multilateral negotiations. The prospect of expanding SACU triggers a number of questions. A number of SADC countries - notably Mozambique, Zambia, Malawi and Zimbabwe - have been touted as potential contenders for extended SACU membership.
Among other things, it has been suggested that enlarging SACU could overcome the ‘spaghetti bowl’ problem of overlapping regional membership of SADC countries; to this end, it has been proposed that SACU should swallow up SADC.
Given the revised SACU’s patchy track record, coupled with the institutional difficulties that the new customs union has been experiencing since its inauguration, it is perhaps unrealistic to expect SACU to effectively and adequately cope with the consequences that would result from incorporating SADC into its structures.
It has also been mooted that SACU expansion would advance domestic investment and economies of scale, even though possible industrial relocation effects would have to be properly assessed.
In spite of its allure, the idea of enlarging SACU is fraught with potential drawbacks. One of the important reasons for SACU’s relative success has to do with the unique history of deep integration of the BLNS countries into the South African political economy.
Historically, the economies of the BLNS states have been integrally enmeshed into the South African economy. To be sure, successive apartheid governments tried without success to incorporate these countries politically too.
This is not the case with other SADC countries which - notwithstanding their significant linkages to South Africa - developed different institutional arrangements and traditions to those of the BLNS states.
Enlarging membership is also likely to run into difficulties as negotiations - in a democratised SACU setting - about the common revenue pool and the CET become bogged down by attempts to accommodate the needs and interests of countries at different levels of development. Moreover, it would spark debate about the revenue-sharing formula, especially in terms of how this should be restructured and extended to new members.
This is particularly important in respect of the reconfiguration of the development component of the revenues, which would have enormous fiscal ramifications for South Africa.
Moreover, proponents of SACU expansion have to overcome a perception among some SADC nations that SACU has been a hindrance to faster and deeper regional integration. Some SACU members are intent on clinging to, and safeguarding, their privileges within the customs union and are sceptical of the SADC-wide integration project.
Any changes to the size of the development component require the consent of all of the SACU states. Taking into account domestic constraints it is unlikely that South Africa, the only contributor to the development component, would agree to increase its contribution to make up for diminished tariff revenue, at least in the short-term.
On the contrary, South Africa is more likely to put pressure on the BLNS nations to implement fiscal reforms so as to diversify their revenue base, while also revising their government expenditures.
SA and the burden of regional leadership
The southern African region constitutes a central priority in South Africa’s post-apartheid foreign economic policy. This explains why post-apartheid South Africa has made the pursuit of regional economic rejuvenation - mainly through the instruments of regional trade integration - the keystone of its foreign policy.
In this respect, the South African state has used trade policy reform as a foreign economic policy tool not only to rebuild political and economic cooperation with African countries (damaged during the apartheid era), but also to advance its leadership ambitions, particularly in the southern African region.
Yet foreign policy has not been preoccupied only with economic issues, it has also been concerned with political and security matters. As an active champion of the African Union (AU) and New Partnerships for Africa’s Development (NEPAD), South Africa has played an essential role in reshaping the security discourse on the continent.
One of the crucial challenges that confronted the emerging South African democracy was the extent to which its foreign policy would reflect the ethical and democratic values that had guided the anti-apartheid struggle. Albeit with limited success, foreign policy during the Mandela presidency strove to propound the cardinal tenets of human rights, democracy, justice and international law.
Under the leadership of Thabo Mbeki, South Africa has assiduously sought to cultivate a position as a ‘natural’ leader of the SADC region and, indeed, of the African continent. Invoking the rhetoric of ‘African renaissance’, Mbeki has set out to reaffirm South Africa’s African identity and legitimise its leadership ambitions.
Although it accounts for the bulk of Africa’s economic output, South Africa has been careful not to throw its weight around. The South African government has actively championed NEPAD and has spent enormous financial and diplomatic capital on efforts to end conflicts in several African countries.
On Mbeki’s watch, South African foreign policy assumed a strong multilateralist thrust: the emphasis was on working with other countries to fashion common solutions to global and regional concerns. South Africa sees itself as a bridge between the developed and developing worlds. And it has used multilateral diplomacy to burnish its South credentials.
Objectives
Pursuing South Africa’s national objectives through the multilateral setting has been seen as essential to providing the country with an avenue to “leverage its moral and political authority based on its democratic, non-racial and constitutional credentials”, while also reversing the African continent’s precarious position in world affairs.
As such, foreign policy became more ever geared towards shoring up South Africa’s international profile and towards using multilateral institutions to promote human rights and democratic global governance.
In this context, the apartheid-era policy of regional destabilisation made way for a policy that emphasised dialogue and mediation as the key means of conflict resolution in the region. The new policy, which South Africa has sought to export to the rest of Africa, focused on finessing political solutions to conflicts and sponsoring initiatives designed to limit regional insecurity.
This has entailed, among other things, promoting conflict prevention and conflict resolution, advancing human rights, providing assistance in monitoring and dealing with domestic issues, such as elections, that have a bearing on regional stability. It has also involved propagating regional cooperation through the evolving conflict resolution mechanisms of the AU.
Democratic South Africa’s formative experience of conflict resolution dates back to 1996, when the country tried to broker a peace deal between the president of the then Zaire (which subsequently became known as the Democratic Republic of Congo), Mobutu Sese Seko and Laurent Kabila, who marshalled the rebel forces that deposed Mobutu from power.
In recent years, South Africa has actively championed a negotiated settlement to the Congolese conflict, and its mediation efforts resulted in the conclusion of the Inter-Congolese Dialogue in 2003 (which cost the South African taxpayer about US$20m), initiated under the Lusaka Ceasefire agreement.
The emerging security doctrine was also evident when the country, backed by the United States (US), succeeded in discouraging the former Zambian president, Frederick Chiluba, from changing his country’s constitution in order to seek a third term in office.
Controversially, however, the policy suffered a setback when South Africa bungled a military intervention in Lesotho in 1998. This sparked questions about South Africa’s true intentions in the region. Beyond its ‘near abroad’, South Africa has been involved in mediating an agreement between Burundi’s warring factions in that country’s civil war.
Culminated
South Africa’s mediation efforts culminated in the conclusion of a power-sharing agreement between the rebel forces and the government of Burundi. Moreover, South Africa has committed material and human resources to bring peace and stability in Eritrea, Ethiopia, the Comoros and the Cote d’ Ivoire. And it has continued to play a role in addressing the issue of ‘conflict diamonds’ through the Kimberley process, which is designed to stamp out the use of illicit diamonds that have stoked conflict, particularly in Sierra Leone and Liberia.
Central to these activities has been a determination to foster political stability, good governance and sustainable development across the African region as a prerequisite for general prosperity. To this end, Pretoria has, among other things, invested heavily in developing the AU and its constituent structures, including the Pan African Parliament.
This is in recognition of the reality that South Africa’s destiny is inextricably tied to that of Africa. Leading the continent into an era of stability and prosperity - encapsulated in Mbeki’s ‘African renaissance’ doctrine - has thus become the leitmotif of South Africa’s external policy.
The idea of expanding SACU raises questions regarding what the attitude of South Africa, the dominant state within the current customs union, would be towards the new SACU set-up. Viewed through the conceptual lens of hegemonic powers, South Africa qualifies as a leader in the SACU region.
Capabilities
Not only does it politically and economically dominate its SACU partners, it has the requisite material capabilities to advance their economic aspirations. South Africa accounts for virtually 93 percent of SACU’s GDP and is a key supplier of manufactured goods to the SACU market. Barring some exceptions, South Africa has demonstrated its ability and willingness to provide public goods for its smaller SACU neighbours. This is manifested, for example, in the revised revenue-sharing formula, which recognises the fact that trade relations between South Africa and its SACU counterparts have continued to be skewed in favour of the former.
But whereas South Africa has skilfully legitimised its dominant role in SACU and positioned itself as the pivotal state around which the SACU integration process has revolved, such a scenario is unlikely to be replicated in an enlarged SACU arrangement. This is principally because of the historical of the ongoing regional tensions within the SADC over issues of security, leadership and democracy.
The failure of South Africa’s policy of ‘quiet diplomacy’ in Zimbabwe bears eloquent testimony to the limits of Pretoria’s regional power. It speaks to the constraints imposed on regional governance by SADC’s principle of noninterference in the internal affairs of member states.
In part, these constraints have to do with the fact that the new regional security paradigm propounded by South Africa has been challenged by some states within the region - notably Angola and Zimbabwe - which have refused to accept South Africa as the guardian of their interests.
Fundamentally, this has to do with power politics and relations among the regional states. As Mda observed: South Africa’s overwhelming economic dominance of the SADC region is a key reason why Zimbabwe opted to negotiate EPAs under the Eastern and Southern Africa configuration created by the Common Market for Eastern and Southern Africa (COMESA).
COMESA’s attraction to Zimbabwe derives partly from Harare’s calculation that it has a competitive advantage over its COMESA regional partners that it does not have within the SADC.
Considering its historical role in the political and economic destabilisation of the region, South Africa has been anxious to prove that it is a good regional citizen and has striven to ensure that it acts in a manner that does not undermine the cohesion of the SADC. Over the past few years, South African regional diplomacy has focused on fostering regional unity and consensus-building, tackling SADC’s institutional problems, and on pursuing multilateral solutions to regional conflicts.
However, South Africa’s security role has been impeded by SADC’s steadfast observance of the principle of non-interference. Bar the ill-fated invasion of Lesotho in 1998, SADC has never intervened in an intrusive fashion in the internal affairs of a member state in the same way as, for example, the Economic Community of West African States has done in West Africa.
Furthermore, South Africa’s position has been hampered by SADC’s deficiencies, typified by institutional differences over leadership, security and democracy, as well as the problem of poor managerial expertise. As such, the regional body has not been able to perform its security mandate effectively, highlighted by the failure to ensure credible, free and fair elections in the region, notably in Zimbabwe.
An expanded SACU, which includes countries intent on challenging South Africa’s leadership, is likely to be hobbled by the politics of power. And this, in turn, is likely to strain decision-making processes. Considering its long history of political and economic domination within SACU, South Africa has become accustomed to driving policy processes and wielding sway over its BLNS partners; the new democratic SACU structures notwithstanding.
As one commentator averred: “The region is characterised by the dominance of the South African economy and a long history of more than a hundred years of co-operation in a particular kind of custom union that has existed since colonial days. SACU has not known supra-nationality up till now”.
The dictates of realpolitik suggest that South Africa (especially if it continues to underwrite the bulk of regional integration costs) will continue to demand exercising prerogatives commensurate with its contribution to regional integration efforts. As such, it is unlikely to allow its power to be eroded even in a larger SACU, particularly in cases where it feels that its fundamental interests are being threatened.
To be sure, South Africa’s enduring power and ‘control’ of decision-making remains a source of concern among the small SACU states. Domestic concerns and interests are likely to impinge on South Africa’s role in an enlarged SACU. Despite its political and economic primacy in SACU, South Africa still has to contend with the pressing domestic challenges of consolidating democratic transformation and redressing apartheid-inherited social and economic inequalities.
In light of these considerations, policymakers would have to work very hard to convince anxious domestic constituencies about the wisdom of increasing South Africa’s contribution to SACU finances in order to absorb the impact of increased membership.
Already, South Africa’s Department of the Treasury has questioned the continuation of payment on customs receipts and has called for the introduction of changes. As the Treasury’s director-general, Lesetja Kganyako, warned: In sum, regional integration in southern Africa will not succeed unless South Africa, by far the biggest and most diversified economy in the region, discharges its responsibilities in accordance with its hegemonic status.
Whether South Africa can assume a hegemonic regional role will depend on three considerations: first, the extent to which the country’s political and bureaucratic elites are able to balance the country’s regional obligations against domestic pressures; second, the manner in which the country deals with the legacy of apartheid South Africa’s historical destabilisation of the region; and third, the degree to which the country’s leadership credentials are accepted by other regional states.
