SADC urged to liberalise services and improve business environments

4th August 2017

By: Keith Campbell

Creamer Media Senior Deputy Editor

     

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In addition to making intraregional trade in goods easier, the member countries of the Southern African Development Community (SADC) should facilitate intra-bloc trade in services and improve their business environments, the Organisation of Economic Cooperation and Development (OECD) argued in its July 2017 economic survey of South Africa. “Services are an important part of GDP (gross domestic product): in South Africa the services sector already represents 70% of GDP and 16% of its exports,” it pointed out.

The SADC has agreed to liberalising intraregional trade in services, in principle. A Protocol on Trade in Services was agreed in 2012; this was amended four years later as “the negotiations dragged on”, the survey observed. “Service trade liberalisation within the region would allow consumers and businesses to have access to better services at lower prices through competition.”

The OECD noted that a directive could be issued, which would set out guidelines and a timeline for services trade liberalisation to ensure effective implementation of the SADC services protocol. This directive could also include any required derogations. “Also, services trade liberalisation should respect service regulations taking into account norms and standards.” In addition, SADC member countries must adopt coherent regulations for regulated services and must achieve regulatory cooperation across the region.

But strengthening regional economic cooperation also requires the reform of the business environments in SADC countries. Although the SADC has prioritised industrialisation within the region – the bloc adopted the SADC Industrialisation Strategy and Roadmap 2015–2063 in 2015 – little progress has been made. To date, SADC countries have failed to increase the value added in their mining and raw materials sectors. “Even in South Africa, which has the most sophisticated industry in the region, the share of manufacturing in GDP is low.

“The main barriers to the development of industry in the region are related to the business environment,” affirmed the OECD. “Lack of proper infrastructure and institutions, skill shortages and complex regulations are common across SADC countries, as well as regulatory barriers and monopolistic behaviours that hamper competition.” For example, only in Mauritius have special economic and processing zones proved successful. The reason is that most of those established in the other countries have been based on tax holidays and other tax incentives, “which are ineffective if the business environment remains complex”.

“To enhance the business environment, increasing the stock of human capital is necessary,” stated the report. “More effort should be put into developing vocational and training skills, and access to higher education. A complementary policy at regional level would be advancing the negotiations on the mobility of workers and businesspeople.” Regarding special economic and processing zones, “[m]ore focus should be put on infrastructure quality, business environment and linkages with the rest of the economy to create agglomeration effects to make special economic zones successful”.

This leads to the topic of infrastructure, which “plays a major role in Southern Africa”. But significant infrastructure gaps remain in the SADC. While South Africa is almost on a par with the OECD average in terms of transport infrastructure, the others lag behind, many badly. In an index of one to seven, in which seven indicates the best, the OECD average is just under five, and South Africa lies a fraction below that. Next are Namibia, Mauritius and Seychelles, at four each. Behind them are Botswana and Swaziland, at just over three each. Tanzania is just under three, followed by Zimbabwe, with Zambia following at about two-and-a-half. The lowest-ranking country is the Democratic Republic of Congo, which is at two. “Even in South Africa, there is ample room to improve the quantity and quality of infrastructure, and lower costs,” affirmed the OECD.

Regional infrastructure cooperation has progressed, but slowly. Regarding highways, however, regional cooperation has been made easier by the creation of road agencies in most SADC countries. And progress in energy cooperation has been accelerated by the setting up of the Southern African Power Pool power trading platform and grid.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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