The Organisation for Economic Cooperation and Development (OECD), in its July 2017 survey of the South African economy, has urged South Africa to promote further economic integration within the Southern African Development Community (SADC). “The SADC is already the largest export market and a major investment destination for South Africa,” affirmed the OECD report. “South Africa, as the largest member of the SADC, should exercise more leadership in deepening regional integration and implementing existing agreements.”

The SADC was founded in 1992 (it replaced the Southern African Development Coordination Conference, which had been set up in 1982). But a SADC Free Trade Area (FTA) was only completed in 2008, the OECD pointed out. The FTA removed tariffs on 85% of the goods traded between 13 of the community’s 15 member States. (Angola and the Democratic Republic of Congo, or DRC, have still not joined the FTA.)

“Economic integration in practice has been slow”, however. The SADC intraregional trade accounts for only 10% of its member countries’ total trade. This compares poorly with the equivalent figures for the Association of South East Asian Nations (some 25%) and the European Union, or EU (40%). South Africa dominates intraregional SADC trade and exports more to the other community countries than it imports from them. “This makes SADC trade dependent on South Africa’s economy and interest in fostering regional integration.”

SADC countries are very different in terms of their gross domestic products (GDPs), GDPs per capita, and revenues per capita. In 2015, South Africa accounted for 52% of the total SADC GDP. Angola was in second place, with 17%, Tanzania third, with 8%, and the DRC fourth, with 6%. Lesotho and Seychelles came in at well below 1% each. In GDP per capita (purchasing power parity) terms, however, the Seychelles came in first, at slightly more than $25 000. Mauritius was second, at about $18 500, Botswana third, at $15 000 and South Africa fourth, around $12 500. The DRC was last, at some $720.

Further, the OECD noted, the members of the community have similar economic structures, similar resources and similar exports: in the main, unprocessed natural resources, including crops and minerals. Manufactured exports are also similar. The situation is exacerbated by high trade barriers, which stop cost-based comparative advantages being exploited. The survey observed that, while the development of manufacturing in West Africa had increased trade within the Economic Community of West African States, “it had negative effects in the SADC, confirming the low complementarity of SADC countries”.

While the creation of the SADC FTA did increase bilateral trade between the member countries, this increase came to 62%, in sharp comparison with the 90% rise within the EU and the 141% increase between the members of the Andean Community in South America. “These results suggest that deeper SADC regional integration can boost growth substantially.”

The region needs better trade policies. Thus, SADC countries have tariffs on external (non-SADC) trade that are higher than those of many other regional trade blocs, so there is the opportunity to lower these tariffs. Low external tariffs facilitate the import of intermediate manufacturing inputs, which can then have value added to them and be re-exported.

“Customs procedures are complex within the SADC, compared with the OECD and emerging economies on average,” stated the survey. A number of SADC countries belong to different FTAs, which causes problems for customs officers seeking to ascertain what preferential tariffs apply to which goods. “Transporters complain that borders do not operate on a 24-hour basis, of electrical and technical shutdowns in the border systems, and incompatibility of customs between countries raising costs. Customs strategies often focus on revenue mobilisation at the expense of trade facilitation. Some SADC members have even raised import tariffs on products originating from the region to raise revenue – in flagrant violation of their regional tariff liberalisation commitments. Moreover, the incidence of customs corruption remains high.”

On top of all this, the SADC has complex rules of origin, unlike, for example, the Common Market for Eastern and Southern Africa. These complex SADC rules were developed to protect existing industries from increased competition from within the region – in particular, to protect South Africa’s textile and clothing manufacturers. This both reduces trade within the bloc and reduces its attractiveness to foreign investors.

Apart from lowering external tariffs, the OECD recommends that SADC countries introduce one-stop computerised border control points (which will boost coordination between member countries, cut red tape and help fight corruption). The SADC should also adopt simpler rules of origin or, at least, all member countries should apply the SADC Secretariat’s manual on rules of origin.