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SA justified, SACU states should have listened’

Business Section

By Teetee Zwane - SWAZI OBSERVER-09-Jun-2009

SOUTH Africa is justified in its reaction towards the Southern African Customs Union (SACU) member states that signed economic partnership agreements (EPAs) with the European Union (EU) despite that country expressing concerns against such, analysts sugge

This comes in the wake of South Africa’s threat to review customs revenue allocations and tighten border controls with Botswana, Lesotho and Swaziland after these countries broke ranks with SACU and signed an interim trade deal with the European Union (EU).

However, trade economists were alarmed at prospects that South Africa may break up the customs union, warning that this could have devastating economic and humanitarian consequences for countries in the region that could spill over into SA. An analyst reportedly warned that the unshackling of Swaziland and Lesotho from SA would be a catastrophe for these countries, adding that he was ‘astounded’ that the parties seemed not to have considered the fallout.

If South Africa pulled the plug on SACU, it was reported, Lesotho could lose up to 25% of its gross domestic product (GDP) overnight while Swaziland could lose 20%. The economist suggested that substituting income by raising taxes would require both countries to double their VAT rates and increase corporate tax threefold.

“South Africa can be justified in its reaction regarding other SACU members signing the interim agreement because it is not supposed to be like that; countries are supposed to sign agreements as a bloc not individually,” said a local independent economist who preferred anonymity. disgruntled

However, he said it must be noted that South Africa signed a Trade, Development and Cooperation Agreement (TDCA) with the EU while the other SACU member states were trading under the Cotonou Agreement. The economist said the smaller states were disgruntled at this fact, saying South Africa was hogging everything and yet it has its own trade agreement with the EU. The TDCA, signed in 1999, created a free-trade area (FTA) between South Africa and the EU over a 12-year period. In terms of the agreement, the EU and South Africa were to open their markets to each other at a different pace. For South Africa, in the case of trade and development cooperation, the TDCA takes precedence over the Cotonou Agreement.

The local economist said it must also be understood that the signatories of the countries that signed the agreement might have been pressured into doing so. He said the EU was of the notion that if SACU would not negotiate as a bloc then it (EU) would do so individually with the member countries.

“Some factions have said the EPAs (economic partnership agreements) are a colonisation of some sort, so maybe we should have listened to what South Africa was saying,” he added. “The signatories were put under pressure. If someone comes to you dangling a carrot and tells you to sign or else, what would you do?”

He noted that because negotiations involve bargaining from both ends, terms should be considered so as to create fair playing ground. “There are many issues involved here, including those raised by SA. There’s need to know the rules of origin, market access and so on. So, the solutions cannot be an overnight thing, they have to be holistic.”

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