D I S C U S S I O N P A P E R REGIONAL INTEGRATION SOUTHERN AFRICA IN OVERVIEW OF RECENT DEVELOPMENTS Lolette Kritzinger-van Niekerk Emmanuel Pinto Moreira December 2002 REGIONAL INTEGRATION AND COOPERATION AFRICA REGION THE WORLD BANK Copyright © 2002 The International Bank for Reconstruction and Development/ THE WORLD BANK Africa Region Human Development Department 1818 H Street NW Washington DC 20433 USA Callisto Madavo, Vice President Paula Donovan, Sector Director Philippe Le Houerou, Sector Manager Lolette Kritzinger van-Niekerk, Task Team Leader A copy of this report may be obtained from: Internal Document Unit The World Bank 1-202-473-4641 For further information about the Africa Region Regional Integration Unit, please send an e-mail message to the following address: promandheuyer@worldbank.org The views and conclusion expressed in this report are those of the authors and do not necessarily reflect the opinions of the World Bank or any of its affiliated organizations. Cover design by World Bank Printing and Graphics Department Photo of Oil Workers © dos Santos, Quintilhano 2002 / from "A Day in The Life of Africa". Other photos courtesy World Bank staff members and the World Bank Photo Library. REGIONAL INTEGRATION IN SOUTHERN AFRICA Overview of Recent Developments Lolette Kritzinger-van Niekerk Emmanuel Pinto Moreira December 2002 The findings, interpretations, and conclusions expressed in this paper are entirely those of the author(s). They do not necessarily represent the views of the World Bank Group, its Executive Directors, or the countries that they represent and should not be attributed to them. Foreword This study is published by the World Bank in its informal series of Discussion Papers on regional integration in Africa, and specifically covers recent developments in Southern and Eastern Africa. In accordance with the April 2, 2001 Board Presentation on the Africa Region's greater focus and new approach to regional integration, the teams for regional integration in southern and eastern Africa have: · renewed interaction with the Southern Africa Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA) and the East African Community (EAC) in order to establish their objectives and priorities for regional integration in their respective arrangements; · undertaken an update of the Bank's knowledge base on the status of and prospects for regional integration in southern and eastern Africa. The purpose of this background paper is to inform the Bank and others about challenges and opportunities for strengthening socio-economic integration in southern Africa, and specifically in SADC, by: · highlighting some salient political, socio-economic and geographical features of the sub-region, · giving an overview of recent developments in regional integration in southern Africa, and · giving an indication of selected international development partners' support for regional integration in sub-region. Without the benefit of `regional' economic and sector work, the paper provides a `broad-brush and impressionistic' picture of selective developments within the southern African region. Each of the issues covered requires further study, while some other important issues might not have received attention at all. The paper finds that the political, institutional and socio-economic environment between countries in the southern Africa region is heterogeneous in the extreme, converging in policies, but not necessarily in outcome. Together with the multiple memberships of countries in regional integration arrangements, this is posing particular challenges and opportunities for regional cooperation and integration efforts and no less to development partners' support for integration in the sub-region. Currently, SADC finds itself in the midst of major reforms of its institutions, processes and management as well as of its regional integration agenda. One of the outcomes of SADC's restructuring process would be a regional indicative strategic development plan. This plan would also be important for the Bank in designing a responsive regional integration assistance strategy with the sub-region We hope that this paper would contribute not only to updating the Bank's knowledge base on regional integration in the southern and eastern Africa region, but also to wider discussions and debate that will help the sub-region move forward towards a better future. Marie-Françoise Marie-Nelly Program Manager Regional Cooperation and Integration, SSA The World Bank December 2002 This is an informal study by World Bank staff, published for discussion purposes. It is not an official World Bank document. TABLE OF CONTENTS Acronyms and Abbreviations .............................................................................. viii Executive Summary........................................................................................... xiii Introduction.................................................................................................... xxi PART I: POLITICAL, INSTITUTIONAL AND SOCIO-ECONIMIC FEATURES OF THE SOUTHERN AFRICAN REGION................................................... 1 I.1 INTRODUCTION.............................................................................. 1 I.2 POLITICS OF REGIONAL INTEGRATION........................................... 1 I.2.1 Multiple Membership of Regional Integration Arrangements.............................. 1 I.2.2 Overlapping Mandates but Different Approaches to Regional Integration................ 2 I.2.3 Multiple Membership Seems to be Inefficient and Costly ................................. 2 I.2.4 Trade and/or Development Agreements within the International Context make for a Fluid Operating Environment in Southern Africa .......................................... 5 I.2.5 Implications for the Bank........................................................................ 6 I.3 THE POLITICAL SITUATION IN THE SOUTHERN AFRICA REGION ...... 7 I.4 THE SOCIO-ECONOMIC SITUATION IN SOUTHERN AFRICA .............. 9 I.4.1 A Relatively Small Sub-Regional Market but Size More than 50% of SSA's GDP ... 9 I.4.2 Wide Disparities in Socio Economic Development among Countries within the Sub- Region Associated with Small and Weak Markets .......................................... 9 (i) Vast Differences in Population Size and Dispersion .............................. 9 (ii) Uneven Levels of Income across and within Countries............................ 10 (iii) Low Levels of Human Development: A Structural Economic Weakness, Compounded by HIV/AIDS ......................................................... 12 (iv) Insufficient and/or Inefficient Infrastructure: An Obstacle to Production and Trade Development in General, Especially for Landlocked Areas............... 14 (v) Uneven Development of Financial Systems ....................................... 25 (vi) Uneven Economic Size, Undiversified Production Structures and Commodity Dependence............................................................... 26 I.5 ECONOMIC REFORMS AND OUTCOMES .......................................... 28 I.5.1 Economic Reforms .............................................................................. 28 (i) Macroeconomic Reforms ............................................................ 28 (ii) Changes in Investment Regimes...................................................... 29 (iii) Trade Reforms......................................................................... 29 I.5.2 Economic Outcomes............................................................................. 30 (i) Budget Performance................................................................... 30 (ii) Inflation ................................................................................. 31 (iii) Real Interest Rates...................................................................... 32 (iv) Savings and Investment................................................................. 32 (v) External Performances: Current Account Balance................................. 35 (vi) Trade .................................................................................... 35 (vii) External Debt and Aid Dependence.................................................. 38 (viii) HIPC and Poverty Reduction Strategy............................................... 39 (ix) Economic Growth ..................................................................... 41 (x) Income Convergence in SADC ...................................................... 42 ii I.6 CONCLUDING REMARKS.................................................................. 43 PART II REGIONAL INITIATIVES AND ACTIVITIES......................................... 47 II.1 INTRODUCTION .............................................................................. 47 II.2 PROGRESS IN THE PROTOCAL DEVELOPMENT PROCESS .................. 47 II.3 TRADE, INDUSTRY, FINANCE AND INVESTMENT .............................. 48 II.3.1 Trade................................................................................................ 48 II.3.1.1 Limitations and Implications of the SADC Trade Protocol................................. 49 II.3.1.2 Relationships with other Regional Groupings ­ The Case of COMESA.................. 50 (i) Differences in Rules of Origin ....................................................... 50 (ii) COMESA Free Trade Area: Implementation Status and Related Issues ....... 51 II.3.1.3 The Way Ahead .................................................................................. 52 II.3.2 Finance and Investment ......................................................................... 52 II.3.2.1 Background to Cooperation...................................................................... 52 II.3.2.2 Cooperating Mechanism and Cooperation Agenda.......................................... 52 II.3.2.3 Protocol Development Process and Way Forward........................................... 56 II.3.3 Industry............................................................................................. 56 II.3.3.1 Background........................................................................................ 56 II.3.3.2 Mining.............................................................................................. 57 (i) Reforms in the Mining Sector ....................................................... 57 (ii) Recent Investments in Mining ....................................................... 58 II.4 INFRASTRUCTURE AND SERVICES.................................................... 59 II.4.1 Transport and Communications................................................................. 59 II.4.1.1 Regional Cooperation and Integration through the Transport, Communications and Meteorology Protocol............................................................................ 60 II.4.1.2 Implementation Status of SADC Protocol on Transport, Communications and Meteorology....................................................................................... 61 (i) Institutional Framework for Managing and Implementing the Protocol ....... 61 (ii) Monitoring of Progress in Protocol Implementation .............................. 61 (iii) Reforms to Attract Private Investments ............................................. 62 II.4.1.3 Regional Cooperation in the Road Sub-Sector............................................... 63 II.4.1.4 Transport Corridors .............................................................................. 63 II.4.1.5 Communications ................................................................................. 66 II.4.2 Energy ............................................................................................. 67 II.4.2.1 The SADC Protocol on Energy: Objectives and Implementation Status................. 67 II.4.2.2 SADC Energy Sector Activity Plan 2000-2005 ............................................. 68 II.4.2.3 Energy Sector Reforms.......................................................................... 69 II.4.2.4 The Southern African Power Pool: An Example of a Promising Regional Cooperation 70 Initiative ........................................................................... II.4.3 Water................................................................................................ 72 II.4.4 Tourism............................................................................................. 74 II.4.4.1 Protocol for the Development of Tourism: Objectives and Implementation Status...... 74 II.4.4.2 Tourism Development Strategy, 2001-2005, Actions and Projects............................ 75 II.5 FOOD, AGRICULTURE AND NATURAL RESOURCES ........................... 76 II.5.1 Background ....................................................................................... 76 II.5.2 Regional Strategy, Policy Objectives and Institutional Arrangements.................... 78 II.5.3 Food Security Program.......................................................................... 79 iii II.5.4 Agricultural Research and Training............................................................. 80 II.5.5 Crops................................................................................................ 81 II.5.6 Livestock Production and Animal Disease Control........................................... 82 II.5.7 Fisheries............................................................................................ 82 II.5.7.1 Marine Fisheries and Resources ............................................................... 82 II.5.7.2 Inland Fisheries................................................................................... 83 II.5.8 Forestry............................................................................................. 84 II.5.9 Wildlife............................................................................................ 85 II.5.10 Land and Environment........................................................................... 86 II.6 SOCIAL AND HUMAN DEVELOPMENT............................................... 88 II.6.1 Education and Training.......................................................................... 88 II.6.2 Employment and Labor Initiatives.............................................................. 90 II.6.3 Health and HIV/AIDS ........................................................................... 90 II.7 SADC: RECENT INSTITUTIONAL DEVELOPMENTS............................. 91 II.7.1 SADC: Recent Institutional Machinery, 1992-2001 ....................................... 91 II.7.2 SADC Institutional Mechanisms and Systems, 2001 and Onwards........................ 95 (i) SADC's Common Agenda ............................................................ 95 (ii) New Structure............................................................................ 96 II.8 CONCLUDING REMARKS.................................................................. 97 PART III: DONOR STRATEGIES, INVOLVEMENT AND PROJECTS IN SOUTHERN AFRICA.......................................................................................... 101 III.1 The World Bank Programs and Projects ...................................................... 101 (i) Regional Transport ..................................................................... 101 (ii) Financial System Infrastructure ...................................................... 101 (iii) Strengthening Statistical Capacity ................................................... 101 (iv) Education ................................................................................ 102 (v) Energy and Telecommunications: Southern African Power Market Project ... 102 (vi) Environment and Natural Resources Management ................................ 102 (vii) African Connection Initiative ......................................................... 103 (viii) Macro and Trade Dialogue ............................................................ 103 III.2 The IMF Strategy and Work Program in the Eastern and Southern African (ESA) Region.............................................................................................. 103 III.3 The European Union (EU) Projects in ESA and Indian Ocean.............................. 104 (i) EU/SADC Regional Projects ......................................................... 104 (ii) Priority Areas of EU Financing Support ............................................ 105 (iii) Other Activities Under Preparation .................................................. 105 (iv) EU/COMESA Regional Projects ..................................................... 105 III.4 Development Bank of Southern Africa's Financing Role in SADC...................... 106 III.5 United States Agency of InternationalDevelopment Strategy and Focal Areas......... 107 (i) Background for the USAID's Involvement in SADC ............................. 107 (ii) Focal Areas.............................................................................. 107 III.6 African Development Bank (AFDB) Strategy and Projects................................. 108 III.7 Conclusion......................................................................................... 109 PART IV: CONCLUDING REMARKS................................................................. 111 iv REFERENCES ................................................................................................ 115 Attachment 1 Trade and/or Development Arrangements in Southern Africa and by Southern 121 African Countries ......................................................................... Attachment 2 Socio-Economic and Political Information ............................................ 157 Attachment 3 Regional Initiatives and Progress in Regional Integration .......................... 183 Attachment 4 Involvement by International Development Partners in Regional Integration in Southern Africa ........................................................................... 229 Lolette Kritzinger-van Niekerk (AFTP1), Task Team Leader, and Emmanuel Pinto Moreira, Consultant, prepared this report as a broad introductory and background work on regional integration in southern Africa for the World Bank to promote its dialogue aimed at a coherent support initiative for regional cooperation and integration in the sub- region. Members of the southern Africa team provided valuable inputs for and comments on earlier drafts. LIST OF BOXES Box 1.1 Development Impacts of HIV/AIDS in Southern Africa ..................... 15 Box 1.2 The Yamoussoukro Decision. The Liberalization of Access to Air Transport Markets in Africa....................................................... 21 Box 2.1 Mauritius Automated Clearing and Settlement System (MACSS): An Example of Progress in Payment System........................................ 54 Box 2.2 Corridors: Opportunities, Strengths and Weaknesses......................... 64 Box 2.3 The Maputo Development Corridor............................................. 65 Box 2.4 The Southern African Power Pool............................................... 72 v LIST OF FIGURES Figure 1.1 Population, Labor Force and Unemployment (million)..................... 11 Figure 1.2 Sectoral Distribution of Employment........................................... 11 Figure 1.3 Freight Tonnage................................................................... 18 Figure 1.4 Number of Passengers............................................................ 18 Figure 1.5 SADC Ports' Share of SADC Transit Traffic, 1999.......................... 19 Figure 1.6 Domestic Aircraft Movements: SADC vs. Africa, 2000..................... 19 Figure 1.7 Share in Nominal GDP (%)...................................................... 27 Figure 1.8 Share in Total Volume of Exports US$, 1995 (%)............................ 27 Figure 1.9 Inflation Rate in 2000 (Changes in CPI)....................................... 33 Figure 1.10 FDI Inflows (Average 1995-98 million of US dollars)....................... 34 Figure 1.11 SADC: Destination of Exports, 1990........................................... 37 Figure 1.12 SADC: Destination of Exports, 1999........................................... 37 Figure 1.13 COMESA: Destination of Exports, 1990....................................... 37 Figure 1.14 COMESA: Destination of Exports, 1999....................................... 37 Figure 1.15 Evolution of Real GDP Growth in SADC...................................... 41 Figure 1.16 Evolution of Income Divergence in SADC (Standard Deviation of Real GNP per capita).................................................................... 42 Figure 1.17 Convergence-Divergence of Real Income Per Capita, 1990-2000 ......... 43 Figure 2.1 Annual Growth Rate of the Volumes of Electricity Trade, 1994-1998..... 70 Figure 2.2 Energy Traded, 2001............................................................... 71 vi LIST OF TABLES Table 1.1 Eastern, Southern and Indian Ocean Countries' Membership in Selected Regional Integration Arrangements ............................................. 1 Table 1.2 Mandates of Regional Integration Groupings in Eastern and Southern Africa................................................................................ 3 Table 1.3 Existing Bilateral Trade Agreements - SADC Member States............... 5 Table 1.4 Political Issues...................................................................... 7 Table 1.5 Population, GDP, Exports and Income, 1970-2000........................... 9 Table 1.6 Population Density and Urbanization .......................................... 10 Table 1.7 Social Data.......................................................................... 10 Table 1.8 Education Indicators for SADC and COMESA Countries................... 12 Table 1.9 The Economic Impact of AIDS in Southern Africa........................... 14 Table 1.10 SADC General Water Statistics.................................................. 15 Table 1.11 Top 10 African Domestic Aircraft Movement Forecast, 2000-2012. 21 Table 1.12 Growth in Mobile Telephony.................................................... 22 Table 1.13 Size of Information Infrastructure Relative to Population, Selected Indicators, 1999................................................................... 23 Table 1.14 Main Telephone Lines, SADC Countries....................................... 24 Table 1.15 Waiting List: SADC Countries................................................... 24 Table 1.16 Telephone Tariffs: SADC Countries............................................. 25 Table 1.17 Some Features of Financial Systems in Southern African Region.......... 26 Table 1.18 GDP and Exports: Share of Individual Countries............................. 26 Table 1.19: Contribution of Each Sector to GDP in SADC Countries.................... 28 Table 1.20 Income Effect of Terms of Trade Variability.................................. 29 Table 1.21 Intraregional Trade in Selected Sub-Saharan African Regional Trade Arrangements in 1999............................................................. 36 Table 1.22 SADC and COMESA: Intraregional and Extraregional Trade............... 38 Table 1.23 Net ODA Per Capita, 1970-1999................................................ 39 Table 1.24 Southern African Heavily Indebted Countries and Status in Debt Relief Initiative, October 2001 (Million of US$)...................................... 40 Table 1.25 The PRSP and Southern African Countries.................................... 40 Table 1.26 Selected Income Per Capita Differences Between SADC Countries....... 42 Table 2.1 Proportion of Liberalization Achieved in First Four Years (%)............. 50 Table 2.2 Proportion of Liberalization Achieved in First Eight Years (%)............ 50 Table 2.3 Tariff Reduction in COMESA................................................... 52 Table 2.4 Employment in the SADC Mining Industry, 1994-2000..................... 57 Table 2.5 Reforms and Policy Developments in the Mining Sector.................... 58 Table 2.6 Mineral Investment Projects in the SADC Mining Industry, 2000......... 59 Table 2.7 Policy and Regulatory Frameworks and Status of Privatization and Competition........................................................................ 67 Table 2.8 Status of Reforms in SADC Electric Sector.................................... 69 Table 2.9 Agricultural Sector Contribution to GDP, 1990-2000........................ 76 Table 2.10 Land Tenure in Selected Southern African Countries (approximate percentage of national territory)................................................. 77 Table 2.11 Regional Collaborative Networks Coordinated by SACCAR.............. 81 Table 3.1 List of Ongoing Regional Projects Funded by EDF8/7 and Implemented by COMESA...................................................................... 106 Table 3.2 DBSA's Cumulative Loans by Country........................................ 106 vii Acronyms and Abbreviations AASA Airlines Association of Southern Africa ACP African, Caribbean and Pacific States ADI African Development Indicators AfDB African Development Bank AGOA African Growth and Opportunity Act AIDS Acquired Immune Deficiency Syndrome ANC African National Congress ANG Angola ANSARA Association of Southern African National Road Agencies ASEAN Association of South Africa East Asian Nations ASYCUDA Automated System for Customs Data Analysis AU African Union BBR Beitbridge Bulawayo Railway BLNS Botswana, Lesotho, Namibia, Swaziland BOT Botswana BR Botswana Railways CARICOM Caribbean Community CAS Country Assistance Strategy CBI Cross-Border Initiative (See RIFF) CCBG Committee of Central Bank Governors CEAR Central East African Railway CEMAC Central African Economic and Monetary Union (Communauté Economique et Monétaire de l'Afrique Centrale) CET Common External Tariff CFA Communauté Financière Africaine CFM Caminhos de Ferro de Mocambique CFM-C Caminhos de Ferro de Mocambique-Centro CIDA Canadian International Development Agency CIF Cost, Insurance and Freight CISNA Committee on Insurance, Securities and Non-Banking Financial Authorities CMA Common Monetary Area (SACU members minus Botswana) CMG Corridor Management Group COMESA Common Market for Eastern and Southern Africa CNS/ATM Communications Navigation Surveillance/Air Traffic Management CPCs Corridor Planning Committees CU Customs Union DANIDA Danish International Development Agency DBSA Development Bank of Southern Africa DCA Department of Civil Aviation DFI Development Finance Sub-Committee DMC Drought Monitoring Centre DRC Democratic Republic of Congo EAC East African Community viii ECA Economic Commission for Africa ECOWAS Economic Community for West African States EDF European Development Fund EEC Commission of the European Communities EIB European Investment Bank EPZ Export Processing Zone ESW Economic Sector Work EU European Union FAO Food and Agriculture Organization of the United Nations FDI Foreign Direct Investment FESARTA Federation of East and Southern African Road Transport Association FISCU Finance and Investment Sector Coordinating Unit FOB Free On Board FTA Free Trade Area GATS General Agreement on Trade in Services GATT General Agreement on Trade and Tariffs GDP Gross Domestic Product GEF Global Environmental Facility GNP Gross National Product GSP Generalized System of Preferences GTZ German Association for Technical Cooperation HCB Hydroelectrica de Cahora Bassa HDI Human Development Index HIV Human Immune Deficiency Virus HRD Human Resources Development HS Harmonized System HSCU Health Sector Coordinating Unit HYCOS Hydrological Cycle Observing System (SADC) IBRD International Bank for Reconstruction and Development ICAO International Civil Aviation Organization IDA International Development Association IFC International Finance Corporation IGAD Inter-Governmental Authority for Development ILO International Labor Organization IMF International Monetary Fund IMO International Maritime Organization IOC Indian Ocean Commission IPA Investment Promotion Agency IPP Independent Power Producer IRRN Interconnected Regional Rail Network IT Information Technology ITF International Transport Workers Unions ITU International Telecommunications Union JTC Joint Trade Commission KADCO Kilimanjaro Airport Development Company LDC Least Developed Country LES Lesotho ix MAL Malawi MACSS Mauritius Automated Clearing and Settlement System MAUR Mauritius MDC Maputo Development Initiative MFN Most-Favored Nation MICAP Micro Action Plans MIGA Multilateral Investment Guarantee Agency MINEDAF Meeting of Ministers of Education in Africa MPL Model Legislative Provisions MOU Memorandum of Understanding MOZ Mozambique MR Malawi Railways NAFTA North American Free Trade Agreement NAM Namibia NEPAD New Partnership for Africa's Development NGO Non-Governmental Organization NORAD Norwegian Agency for Development NORTEL Northern Telecom N-PICT National Protocol Implementation Coordination Team NPIW National Protocol Implementation Workshops NTB Non-Tariff Barriers NRZ National Railways of Zimbabwe OECD Organization for Economic Cooperation and Development ODA Official Development Assistance OHADA Organisation pour l'Harmonisation du Droit des Affaires en Afrique OPEC Organization of Petroleum Exporting Countries PMAESA Ports Management Association of Eastern and Southern Africa PPP Purchasing Power Parity PRSP Poverty Reduction Strategy Papers PTA Preferential Trade Area for Eastern and Southern Africa QR Quantitative Restrictions RAPID Regional Activity to Promote Integration through Dialogue and Policy Implementation RERA Regional Electricity Regulatory Association RETOSA Regional Tourism Organization of Southern Africa REVOCA Regional Vehicle Overloading Control Association REWU Regional Early Warning Unit RIA Regional Integration Arrangement RIAS Regional Integration Assistance Strategy RIFF Regional Integration Facilitation Forum (See CBI) RMI Road Maintenance Initiative RISDP Regional Indicative Strategic Development Plan (SADC) ROO Rules of origin RPK Revenue Passenger Kilometer RSA Republic of South Africa RSIS SADC Railways Rolling Stock Information System RTA Regional Trade Arrangement RTRP Regional Telecommunications Restructuring Program x SA South Africa SAA South African Airways SACU Southern Africa Customs Union SADC Southern African Development Community SAMSA South African Maritime Safety Authority SAPOA Southern African Postal Operators Association SAPP Southern African Power Pool SARA Southern African Railways Association SATA Southern Africa Telecommunications Authority SATCI Southern African Tuberculosis Control Initiative SATTC Southern Africa Transport and Communications Commission SARB South African Reserve Bank SCU Sector Coordinating Unit SDI Spatial Development Initiative SIDA Swedish International Development Agency SIMA Statistical Information Management and Analysis SITC Standard International Trade Classification SITCD SADC Industry and Trade Coordination Division SPT Spoornet SR Swaziland Railway SSC Sub-sectoral Committees STEP SADC Transport Efficiency Project SWA Swaziland TAAG Linheas Aereas de Angola TAN Tanzania TAZARA Tanzania Zambia Railway Authority TCM Technical Comité Meeting TCU SADC Tourism Coordinating Unit TNR Namibia Railways TOR Terms of Reference TRC Tanzania Railways Corporation TRAC Trans African Concession TRASA Telecommunications Regulators Association of Southern Africa TWGs Technical Working Groups TZR Tazara Railways UEMOA Union Economique et Monétaire Ouest Africaine UNAIDS United Nations Program on HIV/AIDS UNCTAD United Nations Commission for Trade and Development UNDP United Nations Development Program UNIDO United Nations Industrial Development Organization USA United States of America USD United States Dollar USAID Agency for International Development (USA) VAT Value Added Tax WB World Bank WDI World Development Indicators WDR World Development Report xi WRTC Water Resources Technical Committee WTO World Trade Organization WTO World Tourism Organization ZAM Zambia ZIM Zimbabwe ZRL Zambia Railways Ltd. xii REGIONAL INTEGRATION IN SOUTHERN AFRICA OVERVIEW OF RECENT DEVELOPMENTS Executive Summary 1 SALIENT POLITICAL, thorough planning and effective management, INSTITUTIONAL AND SOCIO- these seem to result in confusion and conflict for ECONOMIC FEATURES OF both governments and the private sector. SOUTHERN AFRICA Membership fees and participation in the activities of these RIAs are also costly, while Membership of a regional integration particularly SADC and COMESA do not arrangement is a political choice of any one effectively use non-payment as a sanction country, whether based on political, social, mechanism on participation. geographic and/or economic considerations. A salient feature of Eastern and Southern African The southern Africa region constitutes a small (ESA) is the existence of multiple overlapping market, smaller than that of Turkey and about regional agreements, namely the Southern 5% of the United States market, but within the African Customs Union (SACU), Southern African context, SADC's aggregate gross African Development Community (SADC), domestic product (GDP), amounting to Common Market for Eastern and Southern US$187.7 billion in 2000, is more than double Africa (COMESA), East African Community that of the Economic Community for West (EAC), Indian Ocean Commission (IOC) and African States (ECOWAS) and equivalent to Inter-governmental Authority for Development more than half (56%) of Sub-Saharan Africa's (IGAD). These regional integration aggregate GDP. SADC's total volume of arrangements (RIAs) are supplemented by exports (estimated at US$66 billion) is three regional arrangements such as the Regional times that of the CFA Zone and more than Integration Facilitation Forum (RIFF) and the double that of ECOWAS. With almost 200 Multilateral Monetary Agreement (MMA). million inhabitants in 2000, the sub-region's Most of the countries belong to at least two of total population, which is about a third of that of these regional groups, except for Mozambique. sub-Saharan Africa (SSA), is nearly double that For instance, South Africa and Botswana are of the CFA zone. members of both SADC and SACU, while Namibia and Swaziland hold membership of However, intra-regionally, socio-economic three regional integration agreements, are part of development is highly uneven, with long-term the common monetary area and also participate internecine war in some countries contributing in the RIFF. to such development patterns, as indicated by the following: From a brief overview of these RIAs within the ESA region, it is apparent that conflicts may · Diversity in political regimes and arise from multiple memberships in RIAs, which differences in levels of political stability have similar mandates but different modalities characterize the sub-region. Over the past for achieving these. If these RIAs were seen as few years some countries in the sub-region variable geometry and multi-speed approaches have witnessed consolidation of a to regional integration, they could have democratic culture, good governance, the reinforced regional integration, particularly in rule of law and respect for human rights. the areas of sectoral cooperation. However, as Angola and the DRC (with nearly 40% of practiced in the sub-region and in the absence of the sub-region's population) are slowly xiii emerging from decades-long internecine education (except Mozambique and war, which also drew in other southern and Tanzania) they are under-performing central African countries. The second most (including SA) in providing secondary and economically diversified country, tertiary education. This could be seen as a Zimbabwe, is facing a serious political and serious structural weakness, given the economic crisis, which have resulted in its increasing importance of skills in the de-linking from international and regional globalizing world economy (with financial support. knowledge-intensity being crucial in · The combined sub-regional population of enhancing competitiveness). The sub-region almost 200 million is unevenly distributed. is facing yet another threat to its South Africa (SA), Tanzania and the development in having the highest adult Democratic Republic of the Congo (DRC) HIV/AIDS prevalence rate in the world. have 64% of the population, with the Estimated HIV/AIDS prevalence rates remainder unevenly distributed among the among adults in 1999 ranged from about other 11 countries. The five smallest 36% in Botswana, 25% in Zimbabwe and countries in terms of population (Botswana, Swaziland, and 20% in SA and Zambia. Lesotho, Mauritius, Namibia, and the Estimates indicate that the adverse social Seychelles) account for only 3.4% of the and economic impact of HIV/AIDS will be sub-regional total. substantial, affecting GDP growth, labor · SA accounted for nearly 70% of the sub- supply, income inequality, domestic saving, region's total GDP of US$187.7 million in productivity, and human, physical and social 2000. The five smallest (Seychelles, capital. The spread of the HIV/AIDS Lesotho, Swaziland, Malawi and Namibia) pandemic will most probably further accounted for 4%. SA's economy was 138 compound the problem of poverty in the times larger than that of Lesotho, the second region in the foreseeable future. smallest economy. · Insufficient and often poorly maintained · The average GNP per capita for the sub- infrastructures as well as limitations in region (in nominal dollars) was US$932 in regional linkages, no less due to legislative 2000, with a difference of nearly 90 times and administrative constraints, are deterrents between the highest (Seychelles) and lowest to trade and investment. (DRC). The United Nations Development · In terms of economic structure, the sub- Program (UNDP) human development index region seems to be struggling to diversify its (HDI) ranked Mauritius1 the highest among productive base with progressive SADC countries (71st of 175 countries with industrialization remaining elusive in most an HDI of 0.761) and Mozambique the countries. Between 1970-98, the share of lowest (168th with an HDI of 0.341). agriculture in GDP increased in Zambia and · About 40% of the sub-region's population or Zimbabwe, while in Mozambique, Namibia, 76 million people is estimated to be living in SA, Tanzania, Zambia and Zimbabwe the extreme poverty. Poverty is increasing share of industry in GDP decreased as did despite the recent higher growth rates in the the share of manufacturing in the more sub-region, due to increasing unemployment. industrialized countries of the sub-region Unemployment is estimated to have (SA and Zimbabwe). Overall, economies in increased from 30.5% in 1986 to nearly 59% the sub-region are largely undiversified, (51 million people) in 2000. Even in resulting in a lack of complementarity, Botswana and Mauritius, which are among which limits the scope for trade, except the region's best economic growth between SA and the rest of the region. The performers, unemployment is rising. economies are reasonably open, and given · Whereas SADC countries appear to be that most countries in the sub-region are performing well in providing universal basic heavily dependent on exports of primary and semi-processed agricultural and mineral 1 Seychelles, a small island-state, is excluded. commodities, the sub-regional economy xiv remains excessively vulnerable to rainfall the Seychelles, SA, Swaziland and variations and commodity price fluctuations. Tanzania) recorded single digit inflation As an emerging market, SA is vulnerable to levels. However, given some of the the volatility in financial flows for such countries' aid-dependence and high debt- markets. The impacts of financial volatility burdens, their maintenance of sound macro- on the SA economy are transmitted through economic policies may, for the foreseeable both the real and financial sides of the future, depend heavily on massive debt economy to other SADC countries due to write-downs; very large continued aid flows; trade and financial linkages between these and very large foreign direct investment economies. flows, the latter which are unlikely to materialize quickly. The absence of any one Stabilization and adjustment experiences have of these three essential conditions, therefore, seen significant convergence in the broad would jeopardize the sustainability of sound policies that have been pursued, although the macroeconomic policies and the apparent outcomes of such policies and programs are macroeconomic achievements. varying significantly, even widely in some · Financial system reforms: SADC countries instances, across countries. Since the beginning have been opening up competition within of the 1990s, seven countries, have been their financial systems, are becoming more undertaking International Monetary Fund compliant with international standards of (IMF)/World Bank (WB) financed stabilization rules of supervision, and are moving and adjustment programs, six are implementing towards increased central bank autonomy. home-grown programs (SA, Botswana, According to an IMF study on financial Swaziland, Namibia, Seychelles and Mauritius), sector development in SSA, Botswana, while Angola and the DRC have opened lines of Lesotho, Namibia, and Tanzania have taken communication with the Fund and the Bank and steps toward full autonomy of their central are receiving post-conflict reconstruction banks2, while the independence of the South support. Overall over the last decade, the African Reserve Bank is constitutionally outcomes of adjustment in the sub-region have enshrined, giving it full(er) responsibility to been mixed, although the sub-region has made conduct monetary policy with price stability some progress in macroeconomic stabilization. as its ultimate goal. Except for SA, however, financial markets remain small, · Macroeconomic stabilization: Most SADC narrow and shallow. countries have undertaken reforms, · Strengthening of investment frameworks: including measures aimed at improving Several SADC countries have also reformed monetary and fiscal policies and the legal, judiciary and regulatory management. Their interest rates are more frameworks governing business activities, flexible and they have been eliminating including through accession to multilateral preferential interest rates for state-owned conventions and entering into bilateral enterprises; they have strengthened their tax investment treaties. Many state-owned administrations and have been broadening enterprises have been or are in the process of their revenue bases through the introduction being restructured and privatized, while of e.g. value-added tax; and they have been private sector involvement in the liberalizing their exchange control regimes management, financing and provision of and adopted flexible exchange rates. infrastructure is encouraged through a range Mauritius and Zambia have achieved the of modalities ­ albeit at varying speed and highest degree of external current account scope. They are actively promoting and capital account liberalization on the sub- investment including through offering a host continent. Fiscal deficits have fallen sharply and inflation is under control in many 2 countries. In 2000, eight countries See IMF, 1998. Financial Sector Development in Sub-Saharan African Countries. Occasional Paper No. (Botswana, Lesotho, Mauritius, Namibia, 169, IMF, Washington D.C. xv of investment incentives. Although, on high sovereign risk perceptions and generally aggregate, the sub-region has maintained its underdeveloped financial systems, access proportional level of foreign investment remains limited or closed to official sources of flows to Africa (about 35-37%) between funds, apart from on highly concessional terms, 1990 and 1999, it has failed to attract a as well as to international and domestic capital proportionate share of growing foreign markets. Many of the countries thus remain direct investment (FDI) flows to developing highly dependent on official development countries. Its share in 1999 was roughly assistance for filling the savings-investment gap. 50% of that in 1990. Furthermore, it failed Aid dependence in SADC remains high: in 1999, to attract the kind of investment that it has received US$19.7 per capita in aid, buttresses economic development, i.e. roughly the same level as in 1980, and more investment in industry, specifically the than the average of US$18 per capita for SSA. manufacturing sector, which is necessary for production and trade diversification. They Economic growth has recovered in many have attracted largely resource-seeking FDI countries since 1995. In 2000, real GDP growth and project finance, associated with was estimated at more than 8% in the privatization and public-private provision of Democratic Republic of Congo (DRC), more infrastructure. Intra-regionally, cross-border than 7% in Mauritius, nearly 6% in Botswana investment, particularly from SA and and more than 5% in Tanzania 5. However, of Mauritius, has increased. particular concern is the poor growth · Liberalization of trade and exchange performance of the largest economy, SA, and the regimes: Trade flows across SADC in the second-largest SADC economy, Zimbabwe, last decade have been influenced by changes which has been experiencing a socio-economic in: tariffs, non-tariff barriers (NTBs), and political setback, with threatening disruptive exchange rates and various types of trade implications for regional integration in SADC. taxes and subsidies including export The slowdown in growth since the 1980s and in incentives. Non-SACU governments in particularly since the latter half of the 1990s in SADC have changed their policies SA and Zimbabwe, reflects in the declining unilaterally; while changes in bilateral trade growth levels for the sub-region as a whole. agreements with SA and in macroeconomic policies (e.g. fiscal and monetary policies) Overall, the sub-region's economies share also have had an inevitable impact on trade important failures. So far, their efforts have competitiveness in relation to neighboring failed to achieve: sufficiently high and countries. Although recorded intra-regional sustainable rates of growth; sufficient expansion trade levels remain low, a distinct outcome of employment opportunities and sufficient of changes in the sub-region's trade regimes progress with poverty alleviation. These failures has been a growing annual trade surplus for reflect, in turn, their inability to improve the SA vis-à-vis the rest of SADC. quality of investment; to enhance human or social capital sufficiently and to increase labor Debt burdens and aid-dependence: Five of the mobility to the extent that circumstances warrant eight low-income countries in the sub-region3 within and across the countries6. can be considered as severely indebted4, while one is considered a moderately indebted low- Socio-economic performance and outcomes in income country. Due to their debt overhang, the sub-region are attributable to both policy reforms and other influences. Exogenous 3 The low-income countries in SADC are Angola, the DRC, Lesotho, Malawi, Mozambique, Tanzania, 5 World Bank, SIMA, Regional Database, 2001. Zambia and Zimbabwe. 6 SADC Finance and Investment Sector 4 Severely indebted low-income countries are Angola, Coordinating Unit, 2000. Executive Summary of the the DRC, Malawi, Mozambique, Tanzania and Studies on Convergence & Adjustment, Investment Zambia, while Zimbabwe is classified as a and Development Finance. Pretoria, FISCU, June moderately-indebted low-income country. 2000. xvi influences such as adverse changes in climatic observed that the countries in the sub-region conditions, political instability and deteriorating have identified many common challenges risk perceptions as well as the global economic amenable to region-wide solutions ranging from environment and commodity markets have been macroeconomic issues, trade and industry, driving a wedge between domestic economic education and health to infrastructural policies and outcomes. In addition, other non- developments and service delivery. In SADC, policy factors operating in the sub-region's member states have developed a number of economies such as their weak institutional, protocols which provide a legal framework for financial and physical infrastructure and their cooperation in various areas such as administrative capabilities may also explain the transport and communications, industry and observed discrepancies between policies and trade, finance and investment, natural resource outcomes and the shared failures in terms of low management, water, mining, energy, health, economic growth, unemployment and poverty. education, human resource development and on These issues raise a question for intensified aspects of security and politics. The protocols, cooperation on macroeconomic policies at when signed and ratified, are mechanisms for regional level as to whether such cooperation locking countries into the same policies and would necessarily result in better outcomes for approaches to development. For SADC, the individual countries or the sub-region as a development and negotiation of protocols are whole? The answer to this question is not clear. seen as progress per se, given that the time for In contrast, these issues clearly point to this often allows preparation on the country level strengthening cooperation on the structural for their implementation - by adopting issues, which are weakening the link between appropriate policies and associated institutional policies and outcomes. These structural mechanisms for their implementation. This then weaknesses are observed in all countries in the often explains the long time taken for such sub-region, albeit to different extents, and protocol development and negotiation. By include weak financial systems, infrastructural August 2001, 10 regional legal instruments have inefficiencies, and insufficient human capital come into force, another 10 have been signed or and institutional capabilities. ratified but are not yet in force, while a host of others are in the preparation phase. SA, by virtue of its size and level of economic development, is perceived to pose a threat to Currently, there is no mechanism in place for other countries in the sub-region, given the monitoring and evaluating the direction and pace potential for unbalanced development within the of regional integration. This background paper RIA. However, it is also widely seen as an has also not attempted to design such a important regional actor - both as a resource monitoring and evaluation system. In stead, it upon which other SADC countries can draw in has merely reported on progress made in the sphere of technical expertise and as a cooperation of the various sectors, and even then catalyst for deeper economic integration. such progress cannot be unambiguously Moreover, the sheer size and purchasing power attributed to membership of the RIA. Many of the South African economy holds important policy and institutional changes in the benefits for other SADC member countries constituent countries have come about through whose economic development has been unilateral decisions, although their pace of constrained by small and weak domestic implementation might have been accelerated economies. through complementary regional-level obligations. On the one hand, it seems that 2 INTENTIONS AND PROGRESS WITH political problems, inappropriate institutional REGIONAL INTEGRATION IN mechanisms and the uncoordinated pace in SOUTHERN AFRICA implementing sectoral programs and projects are bogging down regional integration. On the other From the brief overview of recent developments hand, it seems that much progress has been in regional integration in southern Africa, it is xvii made in some discrete areas of cooperation, i.e. institutional arrangements. Some of the either in entire sectors or in specific sub-sectors. institutional constraints have related to the SADC Secretariat's lack of power, authority and Henceforth, the shift in SADC's agenda from resources required for facilitating regional sectoral cooperation to market integration would integration; the sector coordinating units' highly require not only continued cooperation in uneven capacity to pursue and implement specific sectors/areas, but also stronger linkages policies; the SADC Program of Action's lack of within and between the various sectors or areas a clear regional focus; the limited capacity to of cooperation if it were to be successful. Thus, mobilize the region's own resources and the implementation of the Trade Protocol has resultant over-dependence on external financial given rise to new challenges to the sub-region's resources; and the failure to address governance, objective of economic integration, foremost of peace and security issues in the wake of growing which is the strengthening of multisectoral political divisions within SADC. SADC's linkages and the coordination of the activities of decision to realign its institutional machinery the various sectors within the framework of and processes with its regional integration market integration. The few protocols in force, agenda, by clustering its 20 odd sectors into four and then only for a short period, has not been directorates and centralizing these within a sufficient to achieve greater policy credibility strengthened Secretariat, as well as that of and anchor all member countries to continued designing and managing a regional development pursuit of sound policies. However, the strategy are thus important steps towards deeper implementation of the Trade Protocol has set in regional integration. Apart from a more clearly motion a seemingly self-accelerating mechanism articulated and focused `common agenda', for regional economic integration as the deeper regional integration would critically adoption of certain sectoral protocols hinge on the speedy implementation and smooth necessitates the adoption of others, especially functioning of the new regional institutional where the interests of the private sector are mechanisms. concerned. Unlike in the past, SADC is now forced to deal, over the short term and in very 3 INVOLVEMENT OF practical ways, with sectorally crosscutting `INTERNATIONAL COOPERATING issues such as e.g. competitiveness, regional PARTNERS' dimensions of poverty and trade efficiency. The issues embodied in e.g. the trade efficiency The sub-region is attracting huge annual concept namely customs, transport, banking and amounts of grant funding from bilateral and insurance, information for trade, business multilateral sources such as the EU and its practices and telecommunication have been the constituent countries as well as the USA, and to responsibility of mainly four SADC sectors: a lesser extent from the African Development trade and industry; finance and investment; Bank, the World Bank and sub-regional transport, communication and meteorology; and institutions such as the Development Bank of employment and labor. Up till now, the Southern Africa. Bilateral cooperating partners interface between these sectors as captured by such as the EU and OECD countries are making the trade efficiency concept has not been grant funds available for SADC's regional pursued in a region-wide, integrated and coordination function, regional `public goods coordinated way, mainly due to the institutional and services' and/or multi-country projects. In division of sector coordination among member relation to the EU and the USAID, the World states, apart from the predominant paradigm of Bank is not only a relative newcomer to the cooperation and harmonization as opposed to regional integration arena in southern Africa, but integration. in terms of grant financing, even if leveraged by trust and other funds, it is also a `small player' Deeper integration in the sub-region has been on the supra-national level, particularly for the precluded therefore also by SADC's coordination function. However, as the decentralized, sectorally- and project-based experience of the DBSA shows, a small budget xviii need not be equated with insignificance. This is particularly so for multi-country or regional goods and services which require implementation on the country level whether through projects, which could be amenable for financing through Bank financial products, or policy and institutional reforms, which could lend themselves for inclusion in Bank country operational work. Similar to the lack of a centralized and accessible management information system for monitoring and evaluating progress in SADC's cooperation and integration agenda, SADC seems to have failed to comprehensively record the sourcing and application of funds for its SPA. In the last section of the document an attempt is made to record some of the international cooperating partners' involvement in SADC. However, much more detailed information would be required on the content of at least the EU's and USA's support programs to identify opportunities for leveraging its much larger allocation of grant funding with that of the Bank's own resources, should that be deemed desirable. This type of information is particularly important to avoid overlap in support, which seemingly exists even between the sub-region's two major international cooperating partners ­ the EU and USA. Furthermore, a good grasp of the modus operandi of the various international cooperating partners would be critical for the Bank to form `smart partnerships', particularly given its relatively limited resources for regional cooperation activities that cannot carry any cost recovery. xix REGIONAL INTEGRATION IN SOUTHERN AFRICA Overview of Recent Developments Introduction · Since 1998, the Bank has extended a number of grants for SADC initiatives and has In accordance with the presentation to the Board undertaken some economic work, although on 2 April 2001 on the Africa Region's greater the latter has been largely confined to the focus and new approach to regional integration SA-SADC trade relationship and sub- in Africa, the teams for regional integration in regional transport issues. Eastern and Southern Africa have: · In contrast with COMESA and the EAC, an · renewed interaction with the Southern understanding of the regional integration Africa Development Community (SADC), process and dynamics in SADC has been the Common Market for Eastern and more difficult due to inter alia its Program Southern Africa (COMESA) and the East of Action which has lacked a clear regional African Community (EAC) in order to focus, the wide scope of its Program of establish their objectives and priorities for Action or regional integration agenda, regional integration in their respective spanning some 20 sectors, and its hitherto arrangements; and decentralized institutional structure. Since · been updating its knowledge base on the March 2001, SADC has embarked upon a status of and prospects for regional process of aligning its institutions and integration in Eastern and Southern Africa. management processes with its vision, objectives and principles. This process is The purpose of this background paper is to envisaged to take place over a two-year inform the Bank about challenges and period. In addition, it is designing a regional opportunities for strengthening socio-economic development strategy within the context of a integration in southern Africa by: broadened set of objectives, and redefined · highlighting some salient political, socio- priorities and underlying principles for economic and geographical features of the regional cooperation and integration. sub-region, · giving an overview of recent developments Although the paper focuses on the southern in regional integration in southern Africa, Africa region and the SADC regional integration and agreement, it provides a brief overview of the · indicating the current involvement of the multiple, overlapping regional arrangements, sub-region's most important international both in mandate and membership, among the development partners. countries in the wider SADC/COMESA economic space. The differences between the The paper focuses on the southern Africa region SADC and COMESA regional trade agreements for the following reasons: receive specific attention, given the fact that · nine countries (out of SADC's 14 and The World Bank Africa Region's first regional strategy paper focused on southern Africa. The Southern Africa Regional Strategy Paper was presented to the Board subsequently. The Comores, Madagascar and in April 1998 and included the countries that Reunion, which are members of COMESA, but not are falling within the geographic remit of SADC, have also not been included in this overview SADC7. of southern Africa. Tanzania, another SADC member, has been included in the southern African group of countries due to its functional relations (mainly 7 The Seychelles and the Democratic Republic of the infrastructural and to a certain extent trade) with this Congo have not been covered by the April 1998 group although it has probably closer socio-economic Strategy, but are included in the group of southern ties with Kenya and Uganda within the East Africa African countries as they have acceded to SADC Community (EAC). xxi COMESA's 20) hold membership of both strategies and programs. Their major arrangements. contribution, at this stage, lies in accelerating the convergence in policies and Given that the Bank has done little analytical in institutional reforms associated with these work on regional cooperation and integration in policies. However, as the implementation of ESA, from which this paper could draw, it rather the various regional agendas evolve, it is provides a broad-brush and impressionistic anticipated that the countries' multiple picture of selective developments within the obligations to conflicting regional agendas southern African region. Each of the issues would intensify. This is most apparent in covered could represent an area for further the area of trade as represented by the study, while some important issues, equally SADC, SACU, COMESA and EAC worthy of in-depth analysis, are not explored at arrangements. all. For example, although of great importance · Part II gives an overview of recent to the region's development, the paper does not developments in regional integration in attempt to provide detailed descriptions or southern Africa, largely from the perspective analyses of international trends and changes in of SADC, dealing with the progress made in the sub-region's or its constituent countries' specific areas ranging from trade and international relationships, beyond a mere finance to the infrastructural and human description of the current involvement of major resource areas, while also outlining the international development partners and of the agreed changes to SADC's institutional nature of e.g. the Cotonou Agreement and the machinery and intentions to focus its Africa Growth and Opportunity Act. Analysis `common agenda'. of the impact of these international trade and · Part III outlines the involvement of the sub- development relationships as well as that of region's major development partners in its South Africa's international economic relations regional integration endeavors and on socio-economic developments in the sub- highlights the support provided for this region may require attention through separate purpose by the World Bank. study. · Part IV concludes with a few remarks on the way forward for the Bank in the The document is organized as follows: immediate future. · Part I highlights some salient political, institutional, socio-economic and geographical features of the sub-region. The countries within southern Africa are heterogeneous in the extreme, posing particular challenges for cooperation and integration at the sub-regional level. This discussion also includes a brief outline of the various regional integration arrangements within which the countries under consideration hold membership. Some of these, such as the Southern Africa Customs Union Agreement (SACU) and the Multilateral Monetary Agreement (MMA) may explain the findings in terms of macroeconomic stability, economic growth and patterns of trade across countries in southern Africa. Apart from these two, similar impacts of the other regional integration arrangements seem to be limited due to the slow implementation of their xxii PART I POLITICAL, INSTITUTIONAL AND SOCIO-ECONOMIC ENVIRONMENT I.1 Introduction Eastern and Southern Africa, one salient feature is the evidently large number of overlapping This part of the document, first, gives a brief regional integration agreements, namely SACU, overview of the regional integration SADC, COMESA, EAC, IOC and IGAD. arrangements in the region, second, discusses These RIAs are supplemented by regional the prevailing political environment, and, third, arrangements such as RIFF and the MMA. As gives an overview of the socio-economic indicated in Table 1.1, most of the countries environment, including recent economic belong to at least two of these regional groups, adjustments and outcomes. except for Mozambique. For instance, Botswana and SA are members of two RIAs, namely I.2 POLITICS OF REGIONAL SADC and SACU, while SA is also part of the INTEGRATION (See Attachment 1) common monetary area. Namibia and Swaziland, two other SACU member countries, I.2.1 Multiple Membership of Regional hold membership not only of SADC but also of Integration Arrangements COMESA, are part of the common monetary area and also participate in RIFF. Membership of a regional integration arrangement is a political choice of any one country, whether based on political, social, geographic and/or economic considerations. In Table 1.1: Eastern, Southern and Indian Ocean Countries' Membership in Selected Regional Integration Arrangements SADC COMESA SACU EAC IOC IGAD MMA RIFF Angola · · Botswana · · Burundi · · Comoros · · Congo, Dem. Rep. · · Djibouti · · Egypt · Eritrea · Ethiopia · · Kenya · · · · Lesotho · · · Madagascar · · · Malawi · · · Mauritius · · · · Mozambique · Namibia · · · · · Rwanda · · Seychelles · · · · Somalia · South Africa · · · Sudan · · Swaziland · · · · · Tanzania · · · Uganda · · · · Zambia · · Zimbabwe · · · Notes: SADC: Southern African Development Community; COMESA: Common Market for Eastern and Southern Africa; SACU: Southern African Customs Union; RIFF: Regional Integration Facilitation Forum; EAC: East African Community; IOC: Indian Ocean Commission, IGAD: Inter- Governmental Authority for Development. MMA: Multilateral Monetary Agreement. 1 I.2.2 Overlapping Mandates but Different SADC, a move which is also firmly entrenching Approaches to Regional Integration8 the overlap in mandate with COMESA and which, in turn, is associated with potential A number of these institutions have also similar conflicts for governments and the private sector mandates, but their modalities for achieving operators. Furthermore, it is particularly in the similar objectives vary widely. The two most area of sectoral cooperation where the variable significant regional integration agreements in geometry approach is appropriate for regional terms of membership, COMESA and SADC, are integration, but the implementation of its trade following very different approaches to regional protocol would require thorough planning and integration. Since its inception as the PTA, effective management to bring the various COMESA has been following an approach sectoral cooperation initiatives within its market based on classical Vinerian arguments, looking integration framework, apart from further at the benefits of regionalisation to derive almost strengthening intra-sectoral cooperation. exclusively from a trade angle. Its integration programs are thus centered on trade, e.g. I.2.3 Multiple Membership Seems to be removal of tariff and non-tariff barriers; Inefficient and Costly programs embodied in the concept of trade efficiency; and other trade-related issues such as Multiple membership of overlapping RIAs with trade and investment, trade and competition different trade regimes can introduce particular policy, trade and labor migration (not labor complexities and concerns for such countries - standards yet), trade and finance (payment and their governments and private sector. Suffice to settlement systems, currency convertibility, say that it is particularly joint members of trade finance, etc.), trade and procurement SADC and COMESA that are increasingly policy, etc. However, although seemingly facing confusing and conflicting situations as the functioning smoothly on the regional level and respective integration agendas are deepening. in pushing forward its regional integration Traders have to operate within a number of trade agenda, the latter has not necessarily been regimes each with its own tariff rates, rules of effectively supported by country-level origin and procedures. The risk of trade institutional changes and by addressing deflection becomes high as goods that have been prevailing structural constraints, which are preferentially imported from say Kenya (a required to successfully implement this agenda. member of one of these regimes) by say Malawi (a member of both regimes) are subsequently In contrast, SADC, stemming from the preferentially re-exported to say SA (a member economic independence desires and political of only the other regime). The official barriers to security needs of the Front Line States, has had a trade become very porous in such situations. development approach to regional integration. Whilst it is technically possible (although For it, the strongest argument for regionalisation difficult) for the COMESA and SADC FTAs to has been hinging on issues other than trade, with co-exist, it will be impossible for any member structural weaknesses being regarded as the state to belong to more than one regime when critical constraint to intra-regional trade. Thus, (if) they adopt a Common External Tariff (CET) up till now, it has followed largely a sectoral and become a Customs Union (CU), unless each cooperation approach to regional integration. regime adopts the same CET and the same CU The implementation of its trade protocol, regulations. Should COMESA become a CU in however, heralds an era of market integration for 2004, those COMESA countries that are also 8 See Imani Development, 2001. Rationalization of Regional Integration Institutions in Eastern and Southern Africa. An Overview of the Current Situation and separate studies on SADC, COMESA, EAC, SACU, RIFF, IGAD & IOC for the Global Coalition for Africa Economic Committee meeting of 2-3 May, 2001, SA. 2 Table 1.2: Mandates of Regional Integration Groupings in Eastern and Southern Africa Mandate COMESA RIFF EAC IOC IGAD SACU SADC Sustainable growth and development x x x x x x x Economic cooperation x x x x x x x Harmonisation of macro-economic policies x x x x x Investment facilitation x x x x x Development of science and technology x x x x Natural resource management x x x x Food security x x x x Peace and security x x x x x International representation x x x Private sector development x X x x x Free trade area x x x x x Customs union x x x Monetary and economic union x x Development of infrastructure x x x x Free movement of persons x x x Development of social services x x x x Cultural cooperation x x x x Political cooperation x x x x x Source: Adapted by Authors based on various annual reports. participating in the SADC FTA9 implementation have not given their consent to such action by program may well be in violation of GATT Namibia and Swaziland, because once the CET Article XXIV if they seek to maintain wall is broken it would be very difficult to preferential tariffs for imports from the SADC prevent goods illegally crossing to other SACU countries. members without payment of duty. This is probably also in violation of GATT Article In addition, for Namibia and Swaziland, their XXIV paragraph 8 (a) (ii). joint membership of COMESA and SACU has become a dilemma with the introduction of the The constituent countries' overlapping and COMESA FTA. These countries have been differential membership of several RIAs have unable to implement preferential tariffs for other tempered the expectation that the EAC would COMESA countries and cannot introduce free introduce an FTA and CU based on the trade for imports from other COMESA countries COMESA model. Tanzania is a member of in terms of this FTA. The SACU agreement SADC and purportedly favors adoption of CET cannot be broken by some members SADC rules by the EAC, whilst the other two granting preferences in terms of other FTA countries are already trading in terms of the regimes, unless all the other members agree to COMESA FTA. Nevertheless, the EAC also this arrangement. SA, Botswana and Lesotho aims to become a CU in 2004, posing particular problems for Kenya and Uganda should 9 COMESA also achieve its 2004 CU target date. The SADC Trade Protocol, signed in 1996 and with implementation that has commenced on September 1, 2000, aims at establishing a SADC Free Trade Area The dilemma of the multiple memberships is not within eight years. The agreement allows for tariff confined to trade issues, but also extends to cuts on 12,000 defined product areas in the sub-region. other areas ranging from finance, where By 2008, 85% of intra-SADC trade would be tariff free and from 2008 to 2012, sensitive products will be divergent solutions to development or liberalized to create the FTA. compensatory funds and payment and settlement 3 systems are sought, to the infrastructural sectors, Although the problems of overlap and multiple where different policy harmonization options memberships cannot be resolved through closer and strategies are being pursued in e.g. working relations between RIAs, it should be telecommunication and transport. acknowledged that since 2001 SADC and COMESA and COMESA and the EAC have The multiplicity of membership in RIAs is also a been working more closely in areas such as burden on limited institutional capacities and regional trade analysis, capacity building and resources. Membership of several RIAs facilitation; transport, e.g. air transport; and on increases both the direct and indirect costs of the EU/ACP relationship within the Cotonou membership and participation. Budgetary framework as well as on multilateral trade contributions from member states towards the issues. Both the Cotonou Agreement and administration costs only of the various RIAs for NEPAD provide a further stimulus for closer the year 2000 were approximately as follows: functional cooperation between RIAs such as COMESA: US$6 million; EAC: US$2 million; SADC, COMESA and the EAC. IGAD: US$2 million; IOC: US$0.4 million; and SADC: US$9 million. These direct costs In addition to regional arrangements, most excluded costs for participation in meetings and SADC countries are engaged in or considering events, and in the case of SADC, the financing bilateral trade and investment agreements10. of sector coordinating units. From a review of Malawi, Mozambique, and Zimbabwe, membership payments, it seems that some respectively, have seven, eight and ten bilateral countries find it increasingly difficult to meet agreements with other SADC countries. Angola their financial commitments to the respective has six, while South Africa and Botswana have RIAs as indicated by e.g. the cumulative four bilateral trade agreements with other SADC (annual) arrears in membership contributions member states (See Attachment 1 for further and as in the case of SADC, also in the under- information). Significant differences in the funding and understaffing of the hitherto interpretation and enforcement of the terms and decentralized institutional structure. conditions of these bilateral trade agreements Furthermore, they find it difficult to fully have resulted in disruptions in local industries implement all their commitments and to fully serving markets covered by bilateral agreements. participate in the activities, even meetings, of the various RIAs. 10 See Attachment 1, Box 1h. 4 I.2.4 Trade and/or Development Namibia whom through SACU are de facto but Agreements within the International not de jure part of the SA-EU- TDCA, but also Context make for a Fluid Operating the entire sub-region, e.g. in the question of Environment in Southern Africa whether SADC should join COMESA, the EAC, the IOC and/or IGAD in a regional Economic In addition to regional and within-SADC Partnership Agreement with the EU in order for bilateral agreements, major international trade such an agreement to result in a WTO and/or development cooperation frameworks, compatible FTA by 2020. It is apparent that the notably the WTO, the Cotonou Agreement, the Cotonou Agreement would not be `regionally Everything-but-Arms Initiative, the SA-EU neutral' as it exposes the difficulties inherent in Trade and Development Cooperation Agreement the multiple membership of overlapping regional (SA-EU TDCA), the USA's African Growth and agreements. It is not clear how all the SADC Opportunities Act (AGOA), a potential US- countries would negotiate as a group with the SACU FTA and other relationships currently EU when 10 of its 14 members may be members being negotiated (e.g., China-SACU and of three different customs unions from 2004, Mercosur-SACU), are having both national and while one member, SA, has already entered into regional level impacts. They are influencing the a legally binding trade and development respective SADC members' economies and their agreement with the EU. options for international relations, as well as the socio-economic dynamics and agreements on a In contrast, AGOA is a trade and development regional level. agreement between individual countries and the USA for a fixed period and currently provides The WTO framework and Cotonou Agreement 11 SADC countries, designated as eligible for are evolving, while the SA-EU TDCA and this agreement, with liberal access to the USA relationships with the USA, China and Latin market. It is also promoted as a `regionally America are unfolding, making for a particularly neutral' cooperation agreement as it allows for fluid operating environment in southern Africa cumulation among AGOA beneficiary countries and beyond. Within the next five years the ­ an AGOA beneficiary may include imports SADC WTO members will negotiate the from other AGOA beneficiaries in meeting the `development round', while those being GSP requirement of 35% value added. members of the ACP-EU Partnership Agreement However, according to recent announcements, it will negotiate Economic Partnership seems that the US and the SACU countries may Agreements. With regard to the latter, difficult negotiate an FTA in the near future, implying a choices are facing not only the respective move away from AGOA trade preferences to countries e.g. Botswana, Lesotho, Swaziland and individual countries to a reciprocal trade Table 1.3: Existing Bilateral Trade Agreements - SADC Member States Ang Bot DRC Les Mal Mau Moz Nam SA Swa Tan Zam Zim Ang T T T T T T Bot T T S S S T T DRC Les S T S S S Mal T T T T T T T Mau T Moz T T T T T T T T Nam T S S S T SA S S T T T S S T Swa S S T T S S T T T Tan T T T T T T Zam T T T T T T T T Zim T T T T T T T T T T Source: Adapted by authors based on DBSA, 1996. Bilateral agreements on trade concluded by SADC Member States. Development Paper no 111, January 1996. Midrand, DBSA. T= Trade agreement 5 agreement between the US and an African RIA. national/unilateral action within a coherent, enforceable regional framework11. I.2.5 Implications for the Bank However, they are useful forums for information exchange and as a peer-pressure The ESA regional landscape makes for a fluid mechanism. operating environment: the unfolding intra- · in its Economic and Sector Work on regional efforts towards deeper integration, regional integration issues in southern notably towards forming CUs, and evolving Africa, to identify and analyze specific areas international trade and development of current and future conflict and overlap. A relationships are increasingly exposing problems focus area for such research over the short- of overlap and multiple membership; while the term may be to analyze the implications for five SACU countries seems to be pulling away active member countries of both SADC and from the non-SACU SADC members in terms of COMESA (specifically Zambia, Zimbabwe, the evolving international relationships with the Malawi and possibly Mauritius) and of EU, USA, China and Latin America. These SADC, COMESA and the EAC (Tanzania, forces could well result in different RIA Kenya and Uganda)12 of rationalizing their configurations ­ whether in depth or regional and bilateral trade agreements with geographical/sectoral coverage ­ than at present. countries within the sub-region; and To strengthen the basis of regional development · encouraging or supporting on regional-level in the ESA, for the immediate future, options for (in the case of a CU) and country-level (as the Bank include: far as members of FTA's are concerned), the · providing support within the wider lowering of trade barriers vis-à-vis the rest SADC/COMESA economic space by of the world. This support should not only identifying potential opportunities for entail that for liberalization of trade in functional cooperation on very specific goods, but also in services as well as for issues, such as by bringing the non-SADC addressing institutional and structural COMESA countries within the folds of the constraints inhibiting their competitiveness SADC payment and settlement initiative, and supply response within a more open which the Bank is already supporting. Such economic environment. This option stems support could be focused on approaches from the hypothesis that, regional trade which deal with the structural weaknesses integration, particularly among developing on a country level, but within a `common countries, could be regarded as second-best framework' if then not in either the type policies, although it could not be stated COMESA or SADC's regional frameworks. a priori whether any one regional trade This option would depend on inter alia the agreement would be detrimental to member SADC-COMESA and COMESA-EAC task countries without closer analysis. In general forces identifying common issues for and under reasonable assumptions, analysis harmonization or joint programs, which, in has indicated that regional trade integration turn, would reflect their needs in the Bank's among small countries could be trade support for such issues. Furthermore, opportunities for functional cooperation 11 RIFF's predominant regional framework is that of within common frameworks may also arise COMESA. from continental or international agreements 12 Angola, the DRC and the Seychelles have neither such as the Yamoussoukro Decision on the acceded to the SADC Trade protocol nor are they liberalization of access to air transport trading within the COMESA FTA of October 2000. markets in Africa or strengthening of the Swaziland & Namibia receive derogations in terms of the COMESA FTA as they are members of SACU. architecture of the international financial Mozambique and Tanzania are members of SADC system. The usefulness of concerted only, although the latter is also a member of the EAC, liberalization efforts for strengthening aiming to establish a CU. Nine countries have regional integration by a group of countries, acceded to the COMESA FTA are Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, e.g. RIFF, is debatable as they do not embed Zambia and Zimbabwe 6 diverting and thereby lowering member Southern Africa Regional Strategy Paper countries' welfare. In this context, a key commended the demise of apartheid, the step to minimize any costs of trade diversion independence of Namibia, the return to civil would be to sufficiently lower protection order in Mozambique and noted the prospects against non-member countries to counter for peace, democracy and development in the trade-diverting effects. sub-region. It also expressed concerns about the unresolved civil strife in Angola and the I.3 THE POLITICAL SITUATION IN THE Democratic Republic of Congo at the time. SOUTHERN AFRICAN REGION (See Attachment 2) Political stability, peace and security are preconditions for the success of a regional integration arrangement. Therefore the 1998/99 Table 1.4: Political Issues Country Political System/Stability Legal System Media Independence Angola 1994 Peace accord ha been shattered since Code Civil, `law habit' is absent Media dominated by MPLA; Unita has the end of 1998, but prospects improved had own radio broadcasts for maintenance of peace since the death of Unita's top leadership. Botswana Stable democracy ­ no change in ruling Roman Dutch legal system Government-owned media, but ready party since independence in 1967; unitary availability of other publications political dispensation DRC Unitary republic, but no nation-state yet. All executive, legislative and military Sporadic crackdowns on media for Peace talks underway for establishment of powers are vestedin the president. "discrediting" government inclusive 2-yr interim government up till Uncertain legal system based on the first national election since 1960. Belgian civil law and tribal law; lack of `law habit', problems with property rights and enforcement of contract Lesotho Monarch as head of stat e. Present Roman-Dutch legal system State-owned broadcasting, but wide constitution and restoration of multi-party availability of alternatives; censorship democracy since 1993; strong military under earlier military rule influence Malawi Democracy restored in 1994 after three English Common Law Opening up after democratization decades of single-party rule Mauritius Stable democracy with coalition English Common Law for procedural Active press; competition in broadcast governments; republic since 1992 and commercial purposes; Code Civil media for substantive issues Mozambique Constitutional reform in 1990, 1st multi- Code Civil; `Law habit' property rights Some relaxation following 1994 elections party elections in 1994; engaged in and enforcement of contracts evolving democratic nation building Namibia Stable democracy Roman Dutch legal system Relatively large number of newspapers for small population; radio and television dominated by public broadcaster Seychelles Unitary Republic. Democracy restored in Based on English common law, the Government control of some strategic 1991 after 14 years of single-party rule. Napoleonic Code & the amended 1993 media Constitution Swaziland Traditional monarchy; slow movement Parallel systems of Roman-Dutch law Press strictly controlled; permission towards political system modernization and customary law required to publish critical articles South Africa Constitutional Democracy since 1994; Roman Dutch Legal System Press Freedom & in dependent media three-tiered governmental system Tanzania Constitution adopted in 1997; Multi-party English Common Law; leasehold title Rapid growth in independent media in democracy re-introduced in 1992; to land; `law habit' evolving recent years separatist movement on island of Zanzibar Zambia Democracy; multi-party elections since English Common Law Government-owned press; radio and 1991; coup attempt in October 1997 television permitted to criticize the government Zimbabwe Constitutional democracy; de facto one Roman Dutch Legal System; Property Tightly controlled government party rule since independence in 1980 rights to farm land has become newspapers, radio and television, and low uncertain tolerance for critical independent press. Source: Compiled by Authors 7 Similar to their uneven levels of socio-economic one-party rule, the persona of its incumbent development and performance, the countries in leader(s) and its direct involvement in the southern Africa are diverse in their political DRC war. systems and the prevailing levels of political · Controversial constitutional amendments in stability, which are posing particular challenges Namibia and Zambia and their direct and for cooperation and integration in the region. involvement in the wars in the DRC and the Political systems range from a traditional DRC and Angola, respectively. monarchy to constitutional democracies on a · The need for SADC's military involvement continuum from de facto one-party rule, unclear to restore civil order in the Kingdom of division between legislative, administrative and Lesotho, thereby creating a precedent on judicial powers and functions and state-control regional level. of the media to decentralized political, fiscal and · The incidents of civil discontent with the administrative functions, widespread current political dispensation in the participation by civil society and media Kingdom of Swaziland and apparent independence. In general, democracies are intolerance with dissenters calling for young and fragile, with many of the countries in constitutional reforms. a stage of democratic nation building, with the · The disagreement on the sub-regional occasional setback as witnessed by level about the incorporation of SADC's constitutional amendments and clampdowns on political arm within the framework of the freedom of speech. SADC Treaty, as well as on appropriate and consistent approaches to deal with peace, Over the past few years some countries in the security, and political issues in member sub-region have indeed witnessed consolidation countries led to political division among of a democratic culture, good governance, the countries. rule of law and respect for human rights. This is reflected in a number of positive developments, On the sub-regional level, in March 2001 the such as the holding of `free and fair' national Extraordinary Summit decided to bring the and/or sub-national elections and the smooth political arm of SADC within the folds of the transfer of power between ruling parties such as Treaty institutions through the establishment of in Mauritius and changes in leadership, such as the Organ on Politics, Defense and Security Co- in Botswana and South Africa. Notwithstanding operation, thereby renewing the efforts and these positive developments, international resolve to attend to matters of regional security, political risk perceptions of the sub-region have peace and politics. In August 2001, all but one deteriorated due to a number of factors. These member signed the long-awaited Protocol on include: Politics, Defense and Security Cooperation. The · The internecine wars in Angola and the Organ will deal with issues such as the DRC (with nearly 40% of the sub-region's following: military, peacemaking, peacekeeping population), with both countries slowly and peace enforcement; conflict prevention, emerging from conflict situations supported management and resolution; crime prevention; by regional and international efforts to find intelligence; foreign policy; disaster lasting and/or generally observed diplomatic management; and human rights, indicating the solutions to these wars and or internal strife. depth and breadth of regional cooperation on The DRC war(s) also drew in neighboring these matters. countries such as Angola, Namibia, Zimbabwe, Rwanda and Burundi and at times countries such as Chad and Libya, with one country yet to fully withdraw from such military involvement. · The political and economic crisis in Zimbabwe closely linked to the 20-year 8 1.4 THE SOCIO-ECONOMIC SITUATION IN SOUTHERN AFRICA (See Attachment 2) 1.4.1 A Relatively Small Sub-Regional Market but Size More than 50% of SSA's GDP The sub-region constitutes a small market, smaller than that of Turkey and about 5% of the United States market, but within the African context, SADC's aggregate gross domestic product (GDP), amounting to US$187.7 billion in 2000, is more than double that of ECOWAS and equivalent to more than half (56%) of SSA's aggregate GDP. SADC's total volume of exports (estimated at US$66 billion) is three times that of the CFA Zone and more than double that of ECOWAS. With almost 200 million inhabitants in 2000, the sub-region's total population, which is nearly a third of that of SSA, is e.g. nearly double that of the CFA zone. While, gross national product (GNP) per capita fell over the past two decades (US$ 932 in 2000 compared with US$1023 in 1980), the sub-region still has had the highest level of income per capita compared to other regional arrangements in the continent. The 2000 income per capita was $US932, almost three times that of ECOWAS. Table 1.5: Population, GDP, Exports and Income, 1970-2000 Groups Population (million) Nominal GDP Exports GNP per capita $US, ($US billion) (Volume, 1995 $US billion) (Atlas Method) 1970 1980 2000 1970 1980 2000 1970 1980 2000 1970 1980 2000 SADC 88.8 116.1 199.2 32.4 130.6 187.7 32.2 35.7 65.9 355 1023 932 COMESA 149.8 200.4 346.7 24.0 76.0 97.8 NA 15.1 28.2 NA NA 260 WAEMU 30.0 39.7 70.0 4.4 21.8 27.8 3.6 6.4 10.5 155 529 384 CFA ZONE 43.9 57.9 101.1 6.8 36.5 45.9 5.7 10.4 19.1 161 577 439 ECOWAS 101.7 133.7 236.3 21.0 97.2 81.9 14.4 22.1 29.3 176 622 316 SSA 288.6 380.7 658.6 63.8 270.9 333.2 52.1 66.6 112.1 205 648 492 SSA (excl.. SA) 266.5 353.2 615.8 46.3 191.1 204.9 29.1 42.6 69.3 159 509 306 SSA (excl.. SA and Nigeria) 213.3 282.0 488.9 33.9 124.0 164.2 NA 29.0 56.1 155 446 318 Source: World Bank, SIMA, Regional Database, 2001. 1.4.2 Wide Disparities in Socio-Economic countries also display a wide dispersion in Development among Countries within population density. Eleven of the 14 countries the Sub-region, associated with Small have urban populations constituting less than and Weak Markets 50% of their total populations, with only SA (50.4%), Botswana (50.3%) and the Seychelles (i) Vast differences in population size and (63.8%) exceeding this level of urbanization. dispersion Population density varied in 1999 from 2.8 and 2.1 people per km2 for Botswana and Namibia, The combined sub-regional population is almost respectively, to 114.7 in Malawi, 176.9 in 200 million, but the countries display vast Seychelles and 576.3 people per km2 in differences in population size . SA, Tanzania Mauritius. Population density varied between and the DRC have 64% of the population, with 20 and 70 people per km2 for the DRC, the remainder unevenly distributed among the Mozambique, Zimbabwe, SA, Swaziland and other 11 countries. The five smallest countries Lesotho (in ascending order). (Botswana, Lesotho, Mauritius, Namibia, and the Seychelles) account for only 3.4% of the sub-regional total. Six countries' populations numbered less than 10 million people. The population growth rate from 1999 to 2000 ranged from 1.1% in Mauritius to 3.2% in Angola and the DRC. Furthermore, these 9 Table 1.6: Population Density and Urbanization Land Population Population Density Urban Population as % of Area (million) Total Population Km2 1970 1980 2000 1970 1980 1999 1970 1980 2000 SADC 9 066 840 88.8 116.1 199.2 9.8 12.8 21.5 24.9 27.8 36.8 Angola 1 246 700 5.59 7.02 12.72 4.5 5.6 9.9 15 21 34.2 Botswana 566 730 0.64 0.91 1.60 1.1 1.6 2.8 8.4 15.1 50.3 DRC. 2 267 050 20.27 27.01 51.39 8.9 11.9 21.9 30.3 28.7 30.3 Lesotho 30 350 1.06 1.35 2.15 35.0 44.3 69.3 8.6 13.4 28 Malawi 94 080 4.52 6.18 11.04 48.0 65.7 114.7 6.0 9.1 24.9 Mauritius 2 030 0.83 0.97 1.18 406.9 475.8 576.3 42 42.4 41.3 Mozambique 784 090 9.40 12.10 17.58 11.9 15.4 22.0 5.7 13.1 40.2 Namibia 823 290 0.79 1.03 1.74 0.96 1.25 2.1 18.6 22.8 30.9 Seychelles 450 0.05 0.06 0.08 119.1 143.1 176.9 26 40.8 63.8 South Africa 1 221 040 22.09 27.58 42.80 18.1 22.6 34.5 47.8 48.1 50.4 Swaziland 17 200 0.42 0.57 1.05 24.4 32.8 59.2 9.7 17.8 26.4 Tanzania 883 590 13.69 18.58 33.70 15.5 21.0 37.3 6.7 14.8 32.9 Zambia 743 390 4.19 5.74 10.09 5.6 7.7 13.3 30.2 39.8 39.6 Zimbabwe 386 850 5.26 7.01 12.11 13.6 18.1 30.8 16.9 22.3 35.3 Source: World Bank, SIMA DATABASE, 2001. (ii) Uneven levels of income across and within Mozambique, Tanzania, Malawi, Tanzania and countries Zambia in the poorest grouping with GNP per capita of US$110 - 320. Roughly the same The average GNP per capita for the sub-region groupings emerge when countries are ranked in (in nominal dollars) was US$932 in 2000, with a terms of the UNDP Human Development Index. difference of nearly 90 times between the The UNDP's 1998 human development index highest (Seychelles) and lowest (DRC). Fairly (HDI) ranked Mauritius the highest among Table 1.7: Social Data Country GNP per capita HDI Index 1998 HDI Rank 1998 Illiterate population as Life expectancy (Nominal 2000) US$ share of population 15+ (years), 1998 (%), 2000 Angola 270 0.405 160 NA 46.5 Botswana 3630 0.593 122 21.9 46.1 DRC 110 0.430 152 37.0 50.8 Lesotho 550 0.569 122 16.2 55.5 Malawi 170 0.385 163 39 42.3 Mauritius 3900 0.761 71 15 70.6 Mozambique 220 0.341 168 54.5 45.2 Namibia 1890 0.632 115 12 54.5 Seychelles 9920 0.786 53 NA 71.7 South Africa 3090 0.697 103 14.3 63.4 Swaziland 1400 0.655 112 19.7 56.3 Tanzania 260 0.415 156 23.2 47.2 Zambia 320 0.420 153 21.1 42.6 Zimbabwe 690 0.555 130 10.6 50.9 Source: Various UNDP Human Development Reports, Authors' calculations and SIMA Data Base, 2001. clear-cut groupings emerge with regard to GNP SADC countries (61st out of 175 countries with per capita: Mauritius, SA and Botswana (and an HDI of 0.761) and Mozambique the lowest Seychelles) fall in the highest grouping with real (168th with an HDI of 0.341). GNP per capita of US$3000 - 9920 in 2000; Swaziland and Namibia in a second grouping About 40% of the sub-region's population or 76 with GNP per capita of US$1400 - 1890; million people are estimated to be living in Zimbabwe and Lesotho in a third grouping with extreme poverty. Poverty is increasing despite GNP per capita of US$550 - 690; and higher growth rates in the sub-region, due to 10 increasing unemployment. Unemployment in countries13 and employment (in 1000) by sector. the southern African region was estimated by the It is estimated that employment in the sub-region DBSA at 18.6 million in 1986 or 30.5% of the declined by 16.2% between 1986 and 1998, with Figure 1.1 Population, Labor Force, and Unemployment (million) 250 200 150 100 50 0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Population Labor Force Unemployment Figure 1.2 Sectoral Distribution of Employment 50000 45000 40000 35000 30000 25000 20000 15000 10000 5000 0 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 Total 42429.1 43572.4 43920.5 43219 42436.6 41699.9 39390.6 35997.4 36114.1 35268.9 35662.1 36046.6 35549.1 35853.7 Agriculture, etc26225.4 26873 26960.5 26250.425640.8 25290.8 23594.9 21205.8 21340.6 20666.5 20900.1 21244.3 21047.8 21258.5 Services 11004.6 11397.8 11581.4 11639.611636.5 11439.8 11103.4 10391.6 10393.7 10244.7 10359.8 10426.8 10278.2 10341.8 Industry 5199.11 5301.54 5378.59 5328.985159.35 4969.28 4692.32 4400.05 4379.77 4357.774402.16 4375.54 4223.13 4253.4 population and increasing to more than 50.9 the decline of 18.7% in the agricultural sector million in 2000 or 58.7%. Unemployment is exceeding that of the industrial sector, while the rising even in Botswana and Mauritius, which decline in the services sector was only 6.6%. are among the best economic growth performers Employment in the agricultural sector dipped in the region. significantly from 1992, when a severe drought hit the SADC area, and then stabilized only four The graphs indicate the total population, labor or five years later. force and unemployment in the SADC 13 Figures 1.1 and 1.2 use data from DBSA, 2001. Regional Support Strategy. Unpublished Mimeo. 11 Given the near-absence of official lack of skills and technology on the part of unemployment benefits in the SADC countries, labor, lack of information on the availability of the unemployed people are apparently surviving job opportunities and, to a large extent, some through unrecorded economic activity in the laws and regulations in most Member States are subsistence and informal sectors or through still restrictive on labor mobility and income remittances and support by family international migration of workers within the members and friends, owing to the traditional, SADC region.' It also notes that the region is private social security network found in Africa. beset by a number of labor-market problems A huge proportion of the labor force in the sub- such as those related to the low rate at which region is thus surviving on very low incomes productive employment opportunities are being from sporadic employment or from income in created, the low levels of productivity, unrecorded economic activity. Should such adversarial industrial relations, resulting in work incomes be indeed very low and sporadic, a stoppages, and the generally low levels of significant proportion of SADC's population income in many of the countries. seems to be extremely vulnerable to relatively minor mishaps. (iii) Low levels of human development - a structural economic weakness, The 1999 SADC Employment and Labor compounded by HIV/AIDS Annual Report attributes the declining trend in formal employment to `the negative impact of · Relatively low levels of skills economic reforms on the economies of the region, especially with regard to the labor- The relatively low level of skills, although shedding effects of privatization and the showing a lesser degree of diversity across the `contractionary consequences of liberalization, sub-region, is one of its most important Table 1.8: Education Indicators for SADC and COMESA Countries Adult Literacy % Enrolment ratio % Public education Country Rate Index Primary Secondary Tertiary expenditure, as % of Pupil/Teacher Ratio (1996-97) 1999 (1985=100) school school school total government 1999 (net), 1997 (net), 1997 (gross), expenditure, 1996-97 1996-97 Angola 45/1 n.a. 34.7 31.2 n.a. 4.7/6 n.a. Botswana 76.4 121 80.1 88.8 5.8 20.2 25:1 prim; 17:1 second. Burundi 46.9 140 35.6 17.1 n.a. 18.3 n.a. Congo, Dem. Rep. 60.3 149 58.2 37.1 n.a. n.a. n.a. Djibouti 63.4 136 31.9 19.6 0.3 n.a. 34:1 prim, 22:1 second Eritrea 52.7 139 29.3 37.9 1 n.a. 44:1 prim, 22:1 second Ethiopia 37.4 158 35.2 24.8 0.8 13.7 n.a. Kenya 81.5 128 65 61.1 n.a. 16.7 n.a. Lesotho 82.9 111 68.6 72.9 2.4 25/6 47:1 prim; 24:1 second. Madagascar 65.7 124 58.7 n.a. 2 16.1 n.a. Malawi 59.2 123 98.5 72.6 18/4 16.2 62:1 Mauritius 84.2 109 96.5 68 6.1 18.3/4 14:1 prim; 24:1 second. Mozambique 43.2 150 39.6 22.4 0.5 17.4 60:1 prim; 30:1 second Namibia 81.4 115 91.4 80.7 n.a. 25.6 29:1 Rwanda 65.8 141 78.3 n.a. n.a. n.a. n.a. Seychelles 84/1 n.a. n.a. n.a. 45/4 24.1 17:1 prim; 13:1 second. SA 84.9 108 99.9 94.9 57/4 23.9 36:1 prim; 28:1 second Sudan 56.9 141 50.9/2 21.2/5 n.a. 9/4 29:1 prim; 26:1 second Swaziland 78.9 119 91/3 38 6 18.1 34:1 prime; 19:1 second Tanzania, U. Rep. of 74.7 131 48.4 5.6/5 0.6 21.1/6 36:1 prim; 17:1 second Uganda 66.1 130 74.3/4 12.0/4 1.9 21.4/4 n.a. Zambia 77.2 122 72.4 42.2 n.a. 7.1 40:1 prim; 25:1 second. Zimbabwe 88 116 93.1 59.2 6.6 33/6 29:1 prim; 27:1 second Source: UNDP Human Development Report 2000; UNESCO Database 2000 and Country statistics Note: 1/ 1997 data; 2/ 1996 Gross enrolment; 3/ 1996 data; 4/ 1995 data; 5/ Gross enrolment; /6 Member states estimates 12 structural weaknesses, given the growing · gender disparity in enrolment rates for importance of skills in the globalizing world higher levels of education; economy (with knowledge-intensity being · a brain drain, within the region from the crucial in enhancing competitiveness). Whereas other countries largely to SA, and from SA SADC countries appear to be performing well in to the rest of the world; and providing universal basic education (except · the social, economic and financial impact of Mozambique, Tanzania, the DRC and Angola) HIV/AIDS on the education and training they are under-performing in providing systems. secondary and tertiary education. Most SADC member states have net enrolment rates at · Health and HIV/AIDS primary education level within the range of 80- 100%. Illiteracy rates have thus fallen over the Although life expectancy has increased in last three decades. In 2000, SADC recorded the SADC over the last three decades from 46 years lowest level of adult illiteracy rates (27%) in 1970 to 51 years in 199814, high infant and among the comparator group of regional maternal mortality rates and a high burden of arrangements in SSA. However, the communicable diseases, such as tuberculosis, performance of secondary and tertiary levels of malaria and diarrhea, characterize the region. education lags far behind the potential of the Countries in the sub-region such as Angola, region - it is estimated that, on average, less than Botswana, the DRC, Malawi, Mozambique, the 50% of students progress to secondary school Eastern and Northern parts of South Africa, level, and less than one percent to tertiary Tanzania, Zambia and Zimbabwe, suffer from education. endemic and epidemic malaria. An estimated 65% of the sub-region's population is afflicted Another phenomenon eroding the skills base of by endemic malaria. the sub-region is the brain drain through emigration of entrepreneurs and high-skilled The sub-region faces a further threat to its people, particularly as experienced by SA. human development efforts and economic Intra-regionally the composition of skills is potential. During the late 1990s the countries in shifting across countries. It is particularly the the sub-region have become increasingly aware southern part of the sub-region that is attracting of the fact that they would also have to seek higher-level skills, apart from being host to large region-wide solutions to the common problem of numbers of low-skilled illegal immigrants, HIV/AIDS. The following description of the whether displaced by political or economic devastating consequences of infectious diseases hardship from their home countries. in the African continent as a whole summarizes the situation in southern Africa, the region with Although countries in the sub-region have made the highest prevalence rate of HIV/AIDS some progress in developing human resources, (among adults) in Africa. education and training in most if not all the countries face problems and challenges that `Two-thirds of the world's HIV/AIDS cases include: are in Africa. Every three seconds an · a growing number of students in the wake of African child dies - in most cases from an high population growth rates; infectious disease. In some countries one in · a weak link between resource allocation on five children die before their fifth birthday. education and training and outcomes in Almost 90% of deaths from infectious terms of quantity, quality and relevance, disease are caused by a handful of diseases: inter alia due to low levels of existing acute respiratory infections, diarrheal diseases, HIV/AIDS, malaria, measles, infrastructure, instruction and learning material and qualified and motivated trainers/teachers; and the weak relationship between educational and training programs and labor markets; 14 World Bank, SIMA, Regional Database, 2001. 13 tuberculosis, and sexually transmitted water-rich north. The southern states are already infections'15. reaching the limits of water availability while the northern states are in need of development. Table 1.9: The Economic Impact of AIDS in Southern Africa (1999, unless otherwise noted) HIV Prevalence Estimated AIDS Deaths Demand for AIDS Health Expenditure (% of population, age Health Services1 1994-98 15-49) (% of GDP) (% of GDP) Botswana 35.8 24,000 1.8 2.0 Lesotho 23.6 16,000 0.9 4.8 Malawi 16.0 70,000 0.8 NA Mozambique 13.2 98,000 0.6 1.0 Namibia 19.5 18,000 1.3 3.8 SA 19.9 250,000 0.7 3.0 Swaziland 25.3 7,100 0.9 2.3 Zambia 20.0 99,000 1.3 2.8 Zimbabwe 25.1 160,000 1.6 2.2 Sources: UNAIDS, Report on the Global HIV/AIDS Epidemic (Geneva: UNAIDS, 2000); and IMF Estimates. Note: Estimated cost of treating all AIDS patients at local standards. In practice, rationing may reduce cost s. 1 The United Nations Program on HIV/AIDS The extent to which each country utilizes its (UNAIDS) estimated that at the end of 1999, resources through annual freshwater about 36% of the adult population in Botswana, withdrawals indicates that, apart from South 25% in Zimbabwe and Swaziland, and 20% in Africa most of the countries only exploit a small South Africa and Zambia was infected. These percentage of the water available to them and figures are even more alarming when compared then largely for irrigation. to the average prevalence rate in SSA as a whole (8.6%) and the world (1.1%). In a recent World Bank mimeo16, the authors argue that Africa's (and for that matter southern The implications of HIV/AIDS for the region go Africa's) unique water legacies of hydrological beyond the scope of health issue and patient care variability, low investment in water storage to embrace the devastating social and economic capacity to buffer variability, and the shared impact of this disease. The social and economic nature of many of its rivers are significant impact of HIV/AIDS could be substantial contributory factors to the prevalence, depth and through its effects on GDP growth, poverty, continued existence of poverty. Hydrological labor supply, income inequality, domestic variability results in constant economic risk to saving, productivity, and human, physical and both small and large investors and to nations at social capital (see Box 1.1). large. The perception of risk is exacerbated by periodic, but endemic, catastrophic droughts and (iv) Insufficient and/or inefficient floods. infrastructure and services - an obstacle to production & trade and development in general, especially for landlocked areas · Water The constituent countries of southern Africa are experiencing large imbalances between water availability and water usage. The overall picture is one of a water-deficient south as against a 16 World Bank, 2002. Water Resources and Poverty in Africa: Essential Economic and Political Responses, 15 World Bank, 2000. Can Africa Claim the 21st Unpublished Mimeo prepared by D. Grey and Century. A World Bank Report, p. 109, Washington C. Sadoff for the African Ministerial Conference on D.C. 2000. Water, April 2002 14 Box 1.1: Development Impacts of HIV/AIDS in Southern Africa 1 The economic effects of the HIV/AIDS epidemic are expected to be substantial: The main direct impact will be concentrated in the public sector. The increase in health care expenditures, the erosion of revenue bases and the multiplicity of deaths of public sector workers will exert pressures on government budgets. The estimated costs of HIV/AIDS would range from 1.6% of GDP (South Africa) to 14.5% of GDP (Mozambique). The combination of early loss of qualified employees, absenteeism and prolonged sick leaves may result in a decline in productivity and the quality of public services. The impact on public sector pension funds is also expected to be substantial. Pension expenditures may likely fall as a result of the diminution of the number of government employees reaching retirement age. Death-related benefits and pensions for surviving dependents are estimated to rise to 5% of wage bills. In Botswana, orphan allowances may well exceed 1% of GDP by 2010. Likewise private sector performance would be adversely affected. The major channels include the adverse impact on the productivity, reduction of labor supply and the increase in death-related benefits. The overall cost of an infected employee is estimated at up to 50- 100% of the worker's salary. A study conducted by Metropolitan Life for the manufacturing sector, in South Africa, reached the conclusion that, due to AIDS, the costs of death-related benefits across all employees will more than double between 1997 and 2007 (from 5.5% to 12% of total payroll). Estimates suggest that some Southern African countries will lose over 25% of their skilled and educated population. The impact on labor supply, the likely upward pressures on workers' wages, and the lowering of human capital may result in a decline in total factor productivity. The combination of an increase in medical spending and a decrease in income stemming from the fact that ill adult family members can no longer work may result in a dissaving. GDP growth may also decline. Recent studies suggest a reduction in annual GDP growth by one to two percentage points. Estimates by IMF staff reach a similar conclusion: GDP per capita in 2010 may be about 5% lower in the most affected countries than it would be without the impact of HIV/AIDS. The reduction in economic growth and income will result in an increase in poverty. In turn, poverty will facilitate the rapid spread of HIV/AIDS as household food and heath spending declines, reducing resistance to opportunistic infections. According to the U.S. Census Bureau, by 2010 life expectancy will fall by half from approximately 60 years to 30 years for the worst affected countries in the sub-region. Many orphans may grow up without the support and guidance of their parents. It was estimated that the epidemic could create a generation of orphans reaching up to 10% of the population in some countries. 1This Box has been adapted from the IMF, 2002. The Economic Impact of HIV/AIDS in Southern Africa. World Economic Outlook, October 2000, Focus on Transition Economies. International Monetary Fund, Washington, DC. Table 1.10 SADC: General Water Statistics Country Population without access to Internal renewable Annual freshwater withdrawals (%) water resources per capita 1998 Safe Water Sanitation As % of water Per capita reserves 1987-95 1987-95 Angola 68 84 15, 376 1.3 57 Botswana 7 45 1, 870 3.9 84 DRC 66 31 19, 001 NA 10 Lesotho 38 62 2, 395 1.0 30 Malawi 63 94 1, 690 5.3 98 Mauritius 2 0 1, 915 16.3 410 Mozambique 37 46 5, 350 0.6 40 Namibia 43 66 3, 751 4.0 179 South Africa 33 47 1, 011 29.7 359 Swaziland 40 30 2, 836 24.9 1, 171 Seychelles NA NA NA NA NA Tanzania 62 14 2, 485 1.5 40 Zambia 73 36 9, 229 2.1 216 Zimbabwe 21 48 1, 182 8.7 136 SSA 48 55 6, 283 1.5 132 World NA NA 6, 918 7.3 626 Source: Adapted from UNDP Human Development Report 1998. Note: NA: Data not available. 15 In a number of SADC countries, safe water for 1999 less than 40 million people or about 22% household consumption is a scarce resource. of a total regional population of more than For instance, in Angola, the DRC, Zambia, 180 million have had access to electricity in Tanzania, and Malawi, about two-thirds of the their homes. South Africa (58 % of dwellings population lack access to safe potable water. have access), Namibia (27 % of dwellings have Moreover, the quality of the region's waters has access), Swaziland and Zimbabwe (both 21 % of sharply deteriorated over the last few decades dwellings have access), have made considerable due to a combination of factors such as mining progress in terms of national electrification over and industrial pollution, nutrient enrichment and the past few years, but from a regional point of sediments from poor agricultural practices, and view the situation has in fact deteriorated in untreated sewage reaching water bodies. This Angola, the DRC, Malawi, Mozambique and situation is compounded by inadequate Tanzania as the annual number of new regulatory measures and poor control. As a connections is considerably lower than the result, the poor quality of water is one of the growth in the number of households in these primary causes of disease and poor health within countries. The electrification drives also tend to the region. focus more on urban and peri-urban areas while the rural population is increasingly being · Energy marginalized. The result is that the majority of the population relies upon wood fuel (75% of The region has large energy resources in various the total energy consumed by the residential forms such as: hydro-power, concentrated sector) as their main source of energy. This mainly in central Africa on the Zambezi and contributes to environmental degradation. Zaire Rivers, although there is additional potential in a number of other countries; coal, Most, if not all, SADC countries are undertaking but as is the case with hydro-power, it is not steps to reform their energy sector with the uniformly distributed; natural gas in Namibia, purpose to attract private investment and Angola, Mozambique and SA; while it is also broaden access to electricity to domestic rich in renewable energy resources such as solar consumers, but the restructuring process has energy. been rather slow. There have been a variety of constraints to developing the sub-region's The region's total energy production and energy potential including economic, consumption are relatively low compared to institutional, political and technical barriers such international standards. In 1999, SADC as: inadequacies in the legal and regulatory produced 7.62 quadrillion British thermal units frameworks; dominance of publicly owned (Btu) of commercial energy (2% of total world entities; limited experience with attracting production) and consumed 5.14 quadrillion Btu private sector investors; government (1.3% of total world production); it generated interventions (subsidies); small national 112.8 million metric tons of carbon emissions; markets; shortages of equipment; inability of and its total installed electric generating capacity SADC utilities to meet demand; and tariff and was 49541 megawatts (MW). At the same time, pricing rules. Most countries' retail tariffs are total electricity generation for the whole of below the economic cost-of-service. For SADC was 215.06 billion kilowatt hours instance, average international retail prices range (bkwh). Net hydroelectric generation was 21.26 from 6 to 10 cents/kWh, compared to 3 to 5 bkwh. Zambia and the DRC are the largest cents/kWh for the less advanced SADC generators with respectively 7.6 bkwh and 5.16 countries. To overcome some of these bkwh. problems, the electricity utilities in the region are cooperating under the Southern Africa However, the sub-region displays large Power Pool (SAPP) initiative to provide reliable electricity imbalances across and within and economically viable electricity supply to countries. Although there are on aggregate consumers of the SAPP members. surpluses of electricity within the region, in 16 · Transport eastern part of the sub-region or lack of maintenance and often a combination of these A well-developed transport and communications factors. The trends in using larger vehicles, high infrastructure has tremendous economic axle-mass loads, the failure to control advantages in facilitating production and trade, overloading, and the continued inefficiency of while also having the potential to attract FDI. A rail in some countries, have led to an increasing recent paper17 argues that improving transport diversion of rail freight to road transport. This, infrastructure in Africa is an important factor for in turn, has increased the need for road increasing the continent's trade. It demonstrates maintenance. that if improvements in infrastructure services could halve transport costs in the region, this The effectiveness of road traffic is adversely would stimulate increases in trade volumes by a affected by the consequences of heavy goods factor of five. Currently, the unit cost of vehicle overloading and by high levels of road transporting goods in the SADC region is much accidents. In order to solve these problems, higher on average than that in the US and other SADC has undertaken reforms aimed at developed countries. Apart from the unit cost, controlling vehicle overloading. While road large distances must be covered in the sub- transport services are regarded as adequate in region with the result that total transportation the region, their efficiency is hampered by e.g. costs are also quite high, particularly for the restrictions to market entry, delays at border landlocked countries. Freight costs are thus an posts and operating limitation. important economic consideration in the sub- region's intra-regional and international trade and in market- and efficiency-seeking investment. Although much progress has been made in improving transport services in the region, the sector remains to varying degrees a constraint to development on the national and sub-regional levels. 1 Roads SADC is endowed with approximately 900,000 kilometers of road of which the primary road network represents more than 100,000 kilometers, the secondary roads less than 300,000 kilometers and the tertiary roads about 489,000 kilometers. While the primary road network is in good condition, the secondary and tertiary roads are not and require substantial improvements. Moreover, the conditions of roads vary across countries. Generally, the quality of roads in the southern countries (SACU and Zimbabwe) is superior to that in the north. The road sector has suffered from inter alia civil strive (Mozambique Angola and the DRC), natural disasters such as the recent floods in the 17 Limao N. and A.J. Venables, 1999. Infrastructure, Geographical Disadvantage and Transport Costs. World Bank Development Research ­ Policy Research Working Paper 2257 17 2 Railways Figure 1.3 Freight Tonnage (000 MT) The SADC region is equipped with 14 186843 182655 operating, mainly government-owned, railways. 18200 Eleven of these railways form the 16200 Interconnected Regional Rail Network (IRRN), 14200 which serve the major ports of the region. SA's 12200 SPOORNET dominates the network and accounts for nearly 62%of services18. The graph 10200 shows the decline in use - for both freight and 8200 passengers - of railways as a mode of transport 6200 in the sub-region and the distribution of services 4200 among the railways in the sub-region. 2200 The performance standards of rail transport have 200 1998 1999 suffered from a number of inadequacies: BR MR CFM-C CFM-N shippers had to deal with more than one railway CFM-S TZR TRC TNR for through-freight shipments, which delayed SR ZRL NRZ SPT quoting of freight rates; appropriate wagons were frequently unavailable; transit times were long also due to poor maintenance of tracks and delays at border crossing; consignment delivery Figure 1.4 Number of Passengers (000) times were unpredictable; and information difficult to obtain on wagon and consignment locations (except in SA, Namibia and Swaziland, using Spoornet's SPRINT system). 5005 4000 However, the railways are now attempting 3000 jointly to raise performance standards, inter alia 2000 through the introduction of the Rolling Stock 1000 4635 Information System (RSIS) and establishment of 1998 0 the Southern African Railways Association 1999 SR (SARA), which deals with governments, and BR MR TZR TRC TNR ZRL NRZ SPT CFM-CCFM-NCFM-S played a role in the operation of the RSIS and in standardization of operational issues for the BR MR CFM-C CFM-N CFM-S TZR efficient functioning of the integrated regional TRC TNR SR ZRL NRZ SPT railway network. Source: For both Figures 1.3 and 1.4, Authors based on data from SATCC Annual Report, 1999-2000. Note: For both Figures 1.3 and 1.4: BR: Botswana Railways ; MR: Malawi Railways; CFM-C:Caminhos de Ferro de Mocambique-Centro. This is the acronym of the Mozambican Rail and Port Parastatal, central section comprising port of Beira and machipanda line to Zimbabwe; CFM-N: Norte-northern section comprising Nacala port and rail line to Malawi/Lichinga ; CFM-S:Sul-southern section comprising Maputo port and rail lines to South Africa, Swaziland and Zimbabwe; TZR: Tazara Railways ; TRC: Tanzania Railways Corporation; TNR: Namibia Railways; SR: Swazi Railways; ZRL: Zambia Railways Limited; 18 Estimate from Official SADC Trade, Industry and NRZ:National Railways of Zimbabwe; SPT: Spoornet. Investment Reviews, various editions from 1997- 2001. 18 3 Maritime Transport and for non-SADC member countries such as Uganda, Rwanda and Burundi. The SADC region comprises a system of 15 ports, excluding those in the DRC and the 4 Civil Aviation and Air Transport Service Seychelles. The main transit ports are Dar es Salaam, Nacala, Beira, Maputo and Durban While good progress has been made on the along the Indian Ocean and Walvis Bay on the legislative and institutional sides, SADC has Atlantic coast. The port of Durban is the much more to accomplish on civil aviation region's major dry cargo port. It handles about issues. The performance of this sector is 50% of the region's containerized cargo. Most hindered by legal constraints including barriers of the cargo handled by the port is for South to entry, traffic safety concerns, inadequate Africa. However, the port also handles traffic for airport cargo terminals, inadequate intra-country Zimbabwe, Botswana, Swaziland, Zambia, connections, with Johannesburg International Lesotho, Malawi and Mozambique. The serving as a hub for air transport in the sub- Tanzanian port of Dar es Salaam also handles region. Market liberalization has been slow and transit cargo for Zambia, the DRC and Malawi government-owned airlines dominate the airline Figure 1.5: SADC Ports' Share of SADC Transit Traffic, 1999. 17.2% 0.1% 4.9% 3.7% 40.7% 33.5% Walvis Bay Dar es Salam Nacala Beira Maputo Durban Source: By Authors based on data from SATCC Annual Report, 1999-2000. Figure 1.6: Domestic Aircraft Movements: SADC vs. Africa, 2000 35% South Africa Seychelles 55% Zimbabwe Africa 6% 4% 19 sub-sector. In nine SADC countries (Angola, SATCC-TU Annual Report. As a result of these Botswana, Lesotho, Malawi, Mozambique, problems, intra-regional air passenger services Namibia, the Seychelles, Tanzania, and do not adequately meet market demand, is Zimbabwe), airline companies are dominated by expensive and time consuming (except for state interests that hold 100% of the shares. Few traveling to and from Johannesburg). countries possess an airline company with mixed ownership. Ownership of Air Mauritius is shared between the government (51% of shares is held Recently, there has been some movement through Air Mauritius Holdings, Ltd.), other towards liberalizing the airline industry and local institutions, British Airways, Air France developing a regulatory framework along the and Air India. South Africa Airways (SAA) was lines of the Yamoussoukro Declaration, which 75% government owned, with Swissair having became effective on 12 August 2000. The aim bought 25% of SAA shares. Subsequently, due of this initiative is to reach full integration by to Swissair's financial troubles, the 25% stake in 2002. (See Box 1.2). SAA was bought back by the South African government. 5 Performance of SADC Airline Industry While SADC Members States are signatories to the International Civil Aviation Organization (ICAO), SADC Airlines do not submit statistics to ICAO, making it difficult to assess the industry's performance. However, the Airline Association of Southern Africa (AASA) has provided traffic statistics for July to December 1999 (See Attachment 3). According to this source, three SADC countries (SA, Seychelles and Zimbabwe) feature in the list of the top 10 countries in Africa with respect to domestic traffic movements. SA is by far the largest domestic market in the continent with 35% of total Africa's traffic movements (See chart 1.6). In 2000 SADC airlines carried 3.6% more passengers, performed 5% better in terms of revenue passenger kilometers (RPK) and carried 5.9% more freight than in 1999. In 2000 passenger traffic totaled 10.2 million, which was an improvement of more than 12% compared to the 1999 figures. These figures show that the growth potential for SADC airline industry is huge. However many obstacles hamper its performance. The SADC airlines are generally inefficient, poorly managed and grossly unprofitable. Fuel prices and labor cost affect productivity. The graph also shows the skewed distribution of SADC domestic traffic movements as well as that in Africa as derived from figures provided in the 2000-2001 20 Table 1.11: Top 10 African Domestic Aircraft Movement Forecast, 2000-2012 Country 2000 2001 2002 2007 2012 South Africa 131,653 136,102 140,710 157,490 176,564 Kenya 270,032 28,501 30,232 37,944 47,769 Algeria 23,287 24,558 25,836 31,518 35,694 Egypt 22,637 23,873 25,115 30,638 34,697 Seychelles 21,593 22,792 24,176 30,343 38,200 Ethiopia 20,844 22,555 24,632 34,593 48,582 Madagascar 17,660 18,641 19,773 24,817 31,243 Morocco 14,200 14,975 15,754 19,219 21,765 Zimbabwe 13,079 13,521 13,978 15,645 17,540 Cape Verde 12,921 13,537 14,127 16,557 19,404 Rest of Africa 68,558 71,658 74,778 87,576 101,861 Total Domestic 373,343 390,713 409,111 486,340 573,319 Box 1.2 The Yamoussoukro Decision: The Liberalization of Access to Air Transport Markets in Africa Definition and Objectives: The Yamoussoukro Decision is an initiative to the gradually liberalize scheduled and non-scheduled intra-Africa air transport services. The Yamoussoukro Decision was signed in November 1999, endorsed by the Heads of State and Governments at the OAU Summit in Lomé (Togo) in July 2000 and became effective on 12 August 2000. The aim is to establish arrangements on the gradual liberalization of both scheduled and non-scheduled intra-Africa air transport services. The Decision takes precedence over all multilateral and bilateral agreements affecting air transport services between and within signatory States. Granting of Rights and Designation: Article 3 of the Yamoussoukro Decision stipulates that State Parties grant to each other the free exercise of the rights of the first, second, third, fourth and fifth freedoms1 of the air on scheduled and non-scheduled passenger, cargo and/or mail flights performed by an eligible airline to/from their respective territories. However, a State Party may limit its commitment in respect to fifth freedom rights for a period no longer than two years. A State Party has the right to designate at least one airline to operate the intra-Africa air transport services (Article 6). It may also designate an eligible airline from another State Party to operate air services on its behalf. It can also designate an eligible African multinational airline in which it is a stakeholder and the other State Parties shall accept this airline. Eligibility Criteria (Article 6.9): To be eligible, an airline should: (i) be legally established in accordance with the regulations applicable in a State Party to this Decision; (ii) have its headquarters, central administration and principal place of business physically located in the State concerned; (iii) be duly licensed by a State Party as defined in Attachment 6 of the Chicago Convention; (iv) fully own or have a long-term lease exceeding six months on an aircraft and have its technical supervision; (v) be adequately insured with regard to passengers, cargo, mail, baggage and third parties in an amount at least equal to the provisions of the International Convention in force; (vi) be capable of demonstrating its ability to maintain standards at least equal to those by ICAO and to respond to any query from any State to which it provides air services; and (vii) be effectively controlled by a State Party. Monitoring Body (Article 9): A Sub-Committee on Air Transport of the Committee on Transport, Communications and Tourism has been established. It will be responsible for the overall supervision, follow-up and implementation of this Decision. An African Air Transport Executing Agency will be established to ensure successful implementation of the Decision. Its responsibilities include: (i) to formulate and enforce appropriate rules and regulations; (ii) to promote healthy competition; and (iii) to ensure that consumer rights are protected. Bank's Involvement and Implementation Status: The Bank supports Western and Central Africa to implement the Yamoussoukro Decision through an IDF grant of US$ 300,000. 23 Western and Central African countries (ECOWAS, CEMAC and Mauritania) have signed a Memorandum of Understanding (MOU) to set out the guidelines for: (i) implementing the liberalization process; (ii) strengthening safety and security in the sector; and (iii) sustaining financing of air transport in Western and Central Africa. These countries established a Coordination and Monitoring Committee comprising representatives of the signatory states and an Implementation Committee with a limited number of countries (Mali, Nigeria, Guinea, Congo and Central African Republic). In March 2001 in Bamako (Mali), these two committees were formally established. The Bamako meeting also approved an implementation program comprising four themes: (i) Updating national legislation and bilateral agreements to comply with the Yamoussoukro Decision; (ii) Developing an action plan to improve safety and security and develop an appropriate technical regulation mechanism to comply with ICAO standards; (iii) Set up a regional economic regulatory body; and (iv) Review the financing of the sector. Source Adapted by authors based on Economic Commission for Africa, 1999. Decision Relating to the Implementation of the Yamoussoukro Declaration Concerning the Liberalization of Access to Air Transport Markets in Africa, December 1999. Note: 1First freedom traffic right: Right of an eligible airline of one country to fly over the territory of another country (Technical Freedom); Second freedom traffic right: Right of an eligible airline of one country to land at an airport of another country for technical reason; Third freedom traffic right: Right of an eligible Airline of one State Party to put down, in the territory of another State Party, passengers, freight and mail taken up in the State Party in which it is licensed; Fourth freedom traffic right: Right of an eligible Airline of one St ate Party to take on, in the territory of another State Party, passengers, freight and mail for off-loading in the State Party in which it is licensed; Fifth freedom traffic right: Right of an eligible airline of one State Party to carry passengers, freight and mail between two state Party in which it is licensed. 21 SADC has endorsed the Yamoussoukro telephone line - the lowest level in the region. Decision for the gradual liberalization of On a region-wide basis, the penetration of the scheduled and non-scheduled intra-African air fixed network is low, representing only one- transport services. SADC has already started quarter of the world average. In some countries with preparations to implement the (Lesotho, Malawi, Mozambique and Zambia) Yamoussoukro Decision. It has drafted an the waiting time for a telephone line exceeded 7 implementation plan and has analyzed the years and even ten years in 1999. Network impact (positive and negative implications) of growth since 1993 has lagged behind demand, the plan. It also held a regional Yamoussoukro which is reflected in longer waiting lists for Decision Promotion Conference. The airlines connections. This is discouraging many and the aeronautical authorities and other individuals from applying for fixed lines. stakeholders participated to address pertinent Furthermore, although varying across countries, issues and facilitate implementation. the quality of fixed-line services remains generally poor by international standards, as SADC Member States seem to fully support the measured by the rate of unsuccessful local calls, development of competition rules and arbitration intra-country call completion rates, and the rules to harmonize the Decision with national occurrence of faults. This situation is attributed laws and ICAO rules. They will take into to: account developments in other sub-regions and · traffic congestion due to capacity are working particularly closely with COMESA limitation; and the EAC in this regard. In addition, · institutional inefficiency; and mechanisms for monitoring implementation of · maintenance problems, including due to the Yamoussoukro Decision would be inadequate skills, funds and lack of established. complimentary infrastructure. For example, in certain countries microwave · Communications routes are not easy to maintain because they need a parallel transport network to Although the sub-region remains inadequately allow for such maintenance. equipped with communications services, the region has made progress in the 1990s. The The mobile network has experienced remarkable number of fixed lines has grown and is around growth as witnessed by the proliferation of 6,747,824 - equivalent to an average regional cellular phone operations, internet services teledensity of nearly five per 100 inhabitants. providers, and the use of electronic mail in the However, the range varies from country to region. It was estimated that electronic mail country. While in Seychelles more than 24 out operations grew by 30% and mobile cellular of 100 inhabitants on average are equipped with access by 60% in only one year from 1997-1998. fixed telephone lines (the highest level of equipment within the region), in Malawi, less than one inhabitant out of 100 has access to a Table 1.12: Growth in Mobile Telephony Services 1997 1998 % Growth Basic telephone subscribers 5 232 615 6 134 385 17 Mobile cellular access 1 628 052 2 750 698 60 Internet hosts 138 509 178 576* 30 Source: ITU; * July 1999. 22 Mobile telephony has an extremely important after an initial period of zero-duties. The cost of role to play in SADC for two reasons: handsets thus remains a deterrent to greater use, · the poor state of the fixed network and although costs of handsets and service fees have the high cost of extending it; and declined due to increased competition. Such · telephony that can be extended more policies in the sub-region result in revenue gains rapidly into rural areas and to poorer for the fiscus, but it adds to transaction costs for households via the cellular networks economic activity and retards the extension of which have been innovative in telephony to poorer groups in society. Although introducing prepaid cards. The prepaid the cellular network has become an essential part market is the most rapidly growing one of business in the sub-region, there are still in previously under-serviced areas in the countries in which roaming is impossible or sub-region. difficult due to a failure to establish roaming agreements or to a lack of signaling links. Because telecommunications are so important in socio-economic development, it is assumed that Due to all these problems, the sub-region is governments in the sub-region would encourage lagging behind international standards, although the expansion of the mobile network. To the it compares well with the averages for SSA, contrary, high duties (of 60-70%) on handsets excluding SA. are imposed in some countries in the sub-region, resulting in relatively expensive handsets. Even in South Africa duties have again been imposed, Table 1.13: Size of Information Infrastructure Relative to Population, Selected Indicators, 1999 Region Main Telephone lines per Mobile phones per 100 Leased lines per 1000 100 inhabitants inhabitants inhabitants Asia and Pacific 7.1 3.1 1.0 East/Central Europe and Central Asia 23 4.5 0.8 Latin America and Caribbean 14 6.6 1.3 Middle East and North Africa 11 4.0 1.3 SSA 3.5 1.9 1.1 SSA excl. SA 0.8 0.3 0.04 Southern Africa (1998) 4.7 1.67 N/A Subtotal non-OECD 9.3 3.6 1.0 OECD 56 33 38 Source, InfoDev, World Bank, in Telecommunications Policy 23 Table 1.14: Main Telephone Lines, SADC Countries Main telephone lines Main telephone lines per 100 inhabitants 1995 (unit =1000) 1999 (unit=1000) Growth (%) 1995 1999 Growth (%) 1995-1999 1995-1999 Angola 52.7 96.3 16.3 0.49 0.77 12.1 Botswana 59.7 123.8 20.0 4.09 7.69 17.1 DRC 36.0 20.0 -13.7 0.08 0.04 -15.8 Lesotho 17.8 21.0 5.7 0.88 1.02 5.1 Malawi 34.3 41.4 4.8 0.35 0.39 2.6 Mauritius 148.2 257.1 14.8 13.21 22.36 14.1 Mozambique 59.8 78.1 6.9 0.34 0.40 4.2 Namibia 78.5 108.2 8.4 5.06 6.38 6.0 Seychelles 13.1 19.6 10.6 17.41 24.42 8.8 SA 4002.2 5492.8 8.2 10.14 12.53 5.4 Swaziland 21.1 30.6 9.7 2.32 3.12 7.7 Tanzania 90.3 149.6 13.5 0.30 0.46 10.6 Zambia 76.8 83.1 2.0 0.95 0.93 -0.6 Zimbabwe 152.5 239.0 11.9 1.40 2.07 10.3 World 691601.0 906713.6 7.0 12.15 15.16 5.7 Africa 12579.6 18617.1 10.3 1.77 2.43 8.2 Americas 221402.5 271006.1 5.2 28.71 33.27 3.7 Asia 183492.4 297140.6 12.8 5.41 8.32 11.3 Europe 263183.7 307809.6 4.0 33.24 38.66 3.9 Oceania 10942.7 12140.2 2.6 38.81 40.38 1.0 Source: International Telecommunications Union (ITU), World Telecommunications Indicators, 2000-2001. Table 1.15: Waiting List, SADC Countries Waiting list for telephone lines Total demand Satisfied Waiting time 1995 1999 Growth (%) 1999 demand (years) (unit=1000) (unit=1000) 1995-1999 (Unit= 1000) 1999 1999 (%) Angola Na 21.1 NA 117.5 82.0 1.5 Botswana 11.5 11.8 1.2 135.6 91.3 0.7 DRC 6.0 NA NA NA NA NA Lesotho 5.4 20.0 54.5 41.0 51.2 > 10 Malawi 24.9 31.6 6.1 72.9 56.7 > 10 Mauritius 46.6 29.1 -11.2 286.2 89.8 1.2 Mozambique 16.5 39.7 24.5 117.8 66.3 7.0 Namibia 7.0 5.4 -6.1 113.6 95.2 0.7 Seychelles 2.9 1.8 -39.1 21.4 91.8 1.3 South Africa 136.6 116.2 -7.7 5609.1 97.9 0.3 Swaziland 12.8 15.3 6.2 45.9 66.6 5.8 Tanzania 118.0 29.6 -29.2 179.2 83.5 1.6 Zambia 34.4 12.3 -22.6 95.4 87.1 7.2 Zimbabwe 101.9 109.0 3.4 348.0 68.7 5.1 World 41114.9 34497.2 -4.3 914480.3 96.3 0.6 Africa 3642.7 3610.3 -0.2 21913.2 83.8 2.2 Americas 2620.6 4955.8 17.3 270429.2 98.2 0.4 Asia 13419.1 11987.2 -2.8 295235.5 96.1 0.4 Europe 21420.4 13932.9 -10.2 314872.5 95.7 1.3 Oceania 12.2 10.9 -2.8 12029.8 99.9 NA Source: International Telecommunications Union (ITU), World Telecommunications Indicators, 2000-2001. 24 Table 1.16: Telephone Tariffs, SADC Countries Residential Business Local call (US$) Subscription as Connection Monthly Connection Monthly 1999 a % of GDP per (US$) 1999 subscription (US$) 1999 subscription capita 1998 (US$) 1999 (US$) 1999 Angola 39 3.9 72 7.2 0.06 20.7 Botswana 49 3.3 49 3.5 0.02 1.4 DRC NA NA NA NA NA NA Lesotho 73 4.1 NA NA 0.02 10.1 Malawi 27 2.3 27 2.3 0.03 23.0 Mauritius 79 2.4 119 4.0 0.04 0.8 Mozambique 38 8.7 38 8.7 0.09 46.6 Namibia 42 7.7 42 8.6 0.05 5.3 Seychelles 88 10.5 88 11.5 0.17 1.9 South Africa 34 9.1 34 11.9 0.08 3.8 Swaziland 26 2.3 61 4.0 0.05 2.4 Tanzania 48 4.1 48 4.1 0.08 21.2 Zambia 21 2.1 63 4.2 0.05 2.0 Zimbabwe 18 2.0 18 2.0 0.03 3.2 World 94 6.5 128 10.4 0.08 5.6 Africa 71 4.9 94 6.5 0.09 12.8 Americas 100 7.9 134 16.3 0.06 3.3 Asia 113 5.1 152 9.2 0.05 5.2 Europe 103 7.9 151 10.1 0.10 1.0 Oceania 57 9.2 69 14.2 0.11 3.9 Source: International Telecommunications Union (ITU), World Telecommunications Indicators, 2000-2001. · Regional Postal Services and Networks (v) Uneven development of financial systems, many of which could be described as According to SATCC-TU, in 1999, the region underdeveloped and/or with shallow and was endowed with 4818 Post Offices and Postal narrow financial markets (see Attachment Agencies. There were 4.3 million Privates 2). Boxes, an increase of nearly 7% from 1998. The number of applicants for private boxes declined Departing from the viewpoint that financial by almost 30% from 63 000 in 1999 to 45 000 in systems are important for economic growth and 2000. Performance of this sector is hampered by development, southern African countries provide poor quality of service, low productivity and a mixed picture in terms of their prospects for unsatisfactory service standards. In general, the growth should this hinge on their financial service standards are not met in all mail systems. In general, there is a trend towards operational routes. financial market liberalization, with the most disadvantaged countries in this regard engaged in extensive financial sector adjustment and reform programs. The following summary gives an indication of the status of the financial sector in the sub-region: 25 Table 1.17: Some Features of Financial Systems in the Southern African Region Country Financial system features Angola Banking system reforms underway. However, the money & capital markets remain underdeveloped with informal money markets filling the vacuum. Botswana Central bank conducts traditional central bank role in an autonomous and efficient manner. Small but efficient banking sector carrying out normal retail and commercial and merchant banking activities. Stock exchange with 15 listed companies & market capitalization of US$1 042 million in 2000. DRC Financial sector is underdeveloped & functions unreliably. Commercial banks mostly subsidiaries and associates of Western banks. The governor of the Central Bank, respected for his capabilities among his colleagues in the sub-region, has been re- instated in his governing role of central bank activities. Lesotho Member of SACU & MMA, with limited monetary & fiscal policy autonomy. Financial sector is small ­ central bank, commercial banks, an insurance sector and DFIs. Malawi Financial sector liberalization and modernization underway. Active commercial banks, a merchant bank and DFIs. Malawi Stock Exchange extremely small, with 2/3 listed companies and one stockbroker. Mauritius Highly sophisticated financial structure & has next to SA, probably the most developed (not the largest) system in the sub- region. Capital market is limited. The Stock Exchange of Mauritius has 41 listed companies with a market capitalization of US$1 485 million in 2000, but with low turnover activity. Mozambique Financial sector adjustment program underway; commercial banking and insurance are gaining ground; and a stock exchange was launched in 1999, trading largely in treasury bills. Informal financial sector still playing an important role. Namibia Member of SACU & MMA, with limited monetary & fiscal policy autonomy. Domestic money and forex markets are nascent but developing rapidly. Stock exchange opened in 1992 & has 21 listed companies, with market capitalization value at US$410 million. Seychelles Financial system administratively efficient, but liquidity management is complicated by the thinness of financial markets; international and state-owned banks operate in the country. SA Highly sophisticated, strong & liberalized financial system. JSE had 649 listed companies with market capitalization value of US$213 billion in 2000. Formalized exchanges for futures & options and for debt instruments are active and growing. SARB has full autonomy in conducting monetary policy. Swaziland Member of SACU & MMA, with limited monetary & fiscal policy autonomy. Strong commercial banking sector & money market; stock exchange small & illiquid. Tanzania Rapid liberalization of financial sector; opened a stock exchange in 1997. Zambia Liberalization of financial system underway; active commercial banking sector & money market. Lusaka Stock Exchange established in 1994 & had 4 listed companies in 2000. Zimbabwe Sophisticated and dynamic financial system, and most restrictions have been reviewed. Stock Exchange since 1974 & had 69 listed companies with a market capitalization value of US$2 751 million in 2000. (vi) Uneven economic size, undiversified thirds of SADC's total volume of exports in production structures and commodity 2000. The five smallest (Seychelles, Lesotho, dependence Swaziland, Malawi and Namibia) accounted for 4%. SA's economy was 138 times larger than · Uneven economic size that of Lesotho. SA's dominance in economic size is also associated with economic strengths SA accounted for nearly 70% of the sub-region's such as its relatively sophisticated financial total GDP of US$187.7 million and about two- markets, its physical and social infrastructure, its Table 1.18: GDP and Exports: Share of Individual Countries Share in Nominal GDP (%) Share in Total Volume of Exports, $US (%) 1970 1980 1990 2000 1970 1980 1990 2000 SA in SADC 55.3 61.7 68.8 68.6 69.2 67.7 62.5 65 Nigeria in ECOWAS 12.5 64.2 28.5 40.4 46.7 58.5 46.7 45.4 Côte d'Ivoire in WAEMU 33.0 46.6 38.7 40.0 37.2 48.3 53.6 51.3 Cameroon in CEMAC 47.7 45.9 47.7 47.8 29.4 33.0 37.1 35.7 Cameroon and Côte d'Ivoire in CFA Zone 38.2 46.3 42.8 43.0 34.3 42.3 46.0 44.3 Source: Authors' calculations based on Data from World Bank, SIMA, Regional Database, 2001. 26 business capacity, etc. This predominance is exports of primary agricultural and mineral even more evident when comparing SA's data to commodities, the sub-regional economy that of counterparts in other SSA regional remains excessively vulnerable to rainfall arrangements. In 2000, Nigeria represented variations and to commodity market 40.4% of ECOWAS' GDP and 45.4% of its fluctuations. exports. Similarly, Côte d'Ivoire accounted for 40% of the West African Economic and With regard to the overall evolution of the terms Monetary Union (WAEMU) aggregate GDP and of trade, SADC countries may be classified in 51.3% of its volume of exports. For Cameroon two categories. The first group includes in the Central African Economic and Monetary countries that have benefited from an Union (CEMAC), the percentages are 47.7% improvement in the terms of trade: Angola, and 35.7%, respectively. Mauritius, the Seychelles, the DRC, South Africa, Zimbabwe, and Lesotho. Gains in · Undiversified economic structure income in terms of GDP due to terms of trade improvement range between 0.003% (Lesotho) Overall, economies in the sub-region are and 0.7% (Angola). In particular, the first three largely undiversified. In terms of economic countries have recorded a significant rise in their structure, the sub-region has not transformed its terms of trade: Angola since the mid-1990s; productive base sufficiently with progressive Mauritius, in the mid­1970s and mid­1980s, industrialization proving elusive in most and the Seychelles, in 1987­88, 1992-93 and Figure 1.7: Share in Nominal GDP (%) Figure 1.8: Share in Total Volume of Exports US$ (%) 80 70 60 60 50 40 40 30 20 20 10 0 0 1990 2000 1990 2000 South Africa Other SADC Countries South Africa Other SADC Countries Source: By Authors based on Data from World Bank and SIMA, Regional Database, 2001. countries. Between 1970-98, the share of 1997­98. This reflects the substantial gain in agriculture in GDP increased in Zambia and income that these countries have derived from Zimbabwe, while in Mozambique, Namibia, the long-term evolution of barter terms of trade. South Africa, Tanzania, Zambia and Zimbabwe the share of industry in GDP decreased as did The second group is comprised of countries that the share of manufacturing in the most have lost from the evolution of the terms of industrialized countries (South Africa and trade: Zambia, Tanzania, Namibia, Zimbabwe). The lack of complementarity in Mozambique, Malawi, Swaziland, and production limits the scope for trade, except Botswana. The loss of income in terms of GDP between SA and the rest of the region. caused by deteriorating terms of trade ranges between -1.5% (Zambia) and -0.3% (Botswana). · Impact of Terms of Trade Variability: In Zambia, the improvement in terms of trade `Income effect' observed in 1983­90 and mid 1990s, reflecting the rise in diamond export prices, did not fully The economies in the region are reasonably compensate huge declines observed in the early open, and given that all countries in the sub- 1970s and within the period 1996­99. In the region, including SA, are heavily dependent on case of Tanzania, changes in the terms of trade 27 have been negative since 1988. The impact in · high levels of savings and investment to terms of income is a loss equivalent to nearly support sustained growth; one percent of GDP. · running low budget deficits of a size which could be financed on a sustainable basis Table 1.19: Contribution of Each Sector to GDP in SADC Countries Agriculture Value Added Industry Value Added Manufacturing Value Added Services, etc Value Adde d % of GDP % of GDP % of GDP % of GDP 1970 1980 1990 1998 1970 1980 1990 1998 1970 1980 1990 1998 1970 1980 1990 1998 Angola NA NA 18 12 NA NA 41 51 NA NA 5 6 NA NA 41 36 Botswana 28 11 5 4 31 45 56 46 7 5 5 5 41 44 39 50 DRC 15 25 30 NA 42 33 28 NA NA 14 11 NA 43 42 42 NA Lesotho 35 24 17 11 9 29 43 42 4 7 13 NA 56 47 41 47 Malawi 44 44 45 36 17 23 29 18 NA 14 19 14 39 34 26 46 Mauritius 16 12 12 9 22 26 32 33 14 15 24 25 62 62 56 58 Mozambique NA 37 37 34 NA 34 18 21 NA NA 10 11 NA 28 44 45 Namibia NA 11 12 10 NA 55 37 34 NA 9 13 14 NA 34 51 56 Seychelles NA 7 5 4 NA 16 16 24 NA 7 10 13 NA 78 79 72 SA 7 6 5 4 38 48 40 32 23 22 24 19 55 46 55 64 Swaziland 33 24 14 16 28 32 43 39 12 22 36 32 39 44 43 45 Tanzania NA NA 48 46 NA NA 16 15 NA NA 9 7 NA NA 36 39 Zambia 11 14 18 17 55 41 45 26 10 18 32 11 35 44 37 56 Zimbabwe 17 16 16 19 31 29 33 24 18 22 23 17 52 55 50 56 Source: World Bank, World Development Indicators (WDI), 2000. 1.5 ECONOMIC REFORMS AND without crowding out private investment; OUTCOMES · moving gradually but progressively towards fully open current and capital accounts; 1.5.1 Economic Reforms (See Attachment · adopting an open market economy approach 2) with emphasis on export growth and diversification of non-traditional exports, as Since the beginning of the 1990s, seven well as efficient import substitution which is countries, have been undertaking IMF/World not dependent on prolonged protection; Bank supported stabilization and adjustment · development strategies which build on programs, six have been implementing home- agriculture, tourism, etc, and realize the full grown programs (SA, Botswana, Swaziland, productive and employment potential of Namibia, Seychelles and Mauritius), while small scale enterprises and the informal Angola and the DRC have opened lines of sector; communication with the Fund and the Bank. · reducing aid dependence and exiting from Across the countries, there seems to be a shared the external debt trap; view in the importance of:19 · enhancing the investment climate; and · orderly, transparent economic management · rationalizing government and the public to achieve internal and external balance with sector by focusing the role of the state and reduced volatility and full utilization of parastatals on those activities which they can capacity; perform efficiently. · monetary stability with low inflation, positive but low real interest rates and stable (i) Macroeconomic reforms exchange rates; Although there are differences in the pace and sequencing of reforms across countries, on the 19 SADC Finance and Investment Sector fiscal side, most countries are: reforming their Coordinating Unit, 2000. Executive Summary of the tax structures, including by introducing taxes Studies on Convergence & Adjustment, Investment such as VAT, improving their tax and Development Finance. Pretoria, FISCU, June administrations; implementing public 2000. 28 expenditure reform, including through right- actively promoting investment through their sizing civil service, reallocation of expenditure investment promotion agencies. (See between recurrent and capital outlays, changes Attachment 2). in their sectoral priorities, public investment reform; reform of budgetary processes; and (iii)Trade reforms enhancement of debt management policies and practices. Monetary policy reforms include In the 1990s, many ESA countries made moving away from directed credit policies and remarkable progress in liberalizing their external other direct interventions and controls on sector. Trade reforms took place unilaterally, Table 1.20: Income Effect of Terms of Trade Variability Countries Period Income Effect (Average in% of GDP) Winners Angola 1985-98 0.7 Mauritius 1970-2000 0.6 Seychelles 1986-2000 0.5 DRC 1970-99 0.3 SA 1970-2000 0.2 Zimbabwe 1977-2000 0.04 Lesotho 1970-2000 0.003 Losers Zambia 1970-2000 -1.5 Tanzania 1988-99 -0.9 Namibia 1981-99 -0.8 Mozambique 1981-99 -0.7 Malawi 1970-2000 -0.6 Swaziland 1970-2000 -0.3 Botswana 1983-2000 -0.3 Source: Authors' calculation based on data from World Bank SIMA Database. Note: The `income effect' of changes in the terms of trade in a given year is calculated by multiplying the value of exports of goods and nonfactor services in 1995 dollars for that year by the percentage change in terms of trade index. The result is calculated as a percentage of GDP in 1995 dollars for that year. The average over the period was therefore calculated depending on the availability of data. interest rates as well as introducing exchange bilaterally as well as on a multilateral basis, rate flexibility. They have been opening up while SADC-COMESA countries have also competition within their banking systems liberalized their trade within the COMESA through privatization of state-owned banks and framework. Trade reforms within the region are becoming more compliant with international include the following elements (see Attachment standards of rules of supervision, while moving 2): towards increased central bank autonomy. · Reduction or elimination of nontariff (ii) Changes in investment regimes barriers (NTB) such as import and export quotas, bans, state trading and other NTBs. Many SADC countries have undertaken actions At the end of 1998, three SADC countries to improve their investment climates through (Lesotho, Malawi and Zambia) had acceding to international conventions that eliminated all NTBs that were in place at the guarantee the rights of investors; the adoption of beginning of the decade, with the exception new business laws and regulations aimed at of restrictions related to health, facilitating investment procedures and environmental, and security reasons. encouraging FDI inflows, e.g. through reducing Mauritius, Mozambique, SA and Tanzania investment licensing requirement, introduction maintained only a few restrictions on of investment incentives, often associated with imports. Two COMESA (non-SADC) EPZs, privatization, adoption of public-private countries, Madagascar and Kenya had also partnerships in the provision of infrastructure, made progress in eliminating NTBs. active encouragement of foreign partners as · Reduction in maximum and average import shareholders in restructured assets; and by tariffs: Many SADC countries, including the 29 Seychelles, Zambia and the SACU 20% only in the DRC, Malawi, Mozambique members, have substantially reduced and Zambia. There is a strong (and expected) maximum and average import tariffs. The correlation between countries with ratios below SACU countries and Malawi, Mozambique, 20% and high aid dependency. Uganda, and Zambia have the lowest trade taxes (less than 15% in 1998) among ESA Apart from the Seychelles and, to a lesser extent, countries. Mauritius, all SADC countries have improved · Simplification of the tariff regime: Most their fiscal position between the first and second ESA countries have simplified their tariff half of the 1990s. On average, budget deficits systems. The foremost reformer countries have been reduced in a number of countries. (Kenya, Uganda and Zambia) have reduced The control of both current and capital the number of non-zero rates to only three. expenditures, the reforms of the tax · Reduction or elimination of export taxes: In administration (including the improvement of this field, ESA countries have also tax collection and the broadening of the tax accomplished remarkable progress in base), and privatization of parastatals were the reducing export taxes. Apart from Burundi underlying elements of these improvements (see and the DRC, ESA countries have lowered Attachment 2). export taxes to less than five percent of exports. This general observation conceals different · Liberalization of exchange restriction: ESA evolutions over time. Angola and Malawi have countries have substantially liberalized their significantly reduced their budget deficits by exchange regimes. At the end of 1999, 10 almost half and 3%, respectively (see SADC countries (Botswana, Lesotho, Attachment 2b). The combination of a rise in oil Malawi, Mauritius, Namibia, the Seychelles, prices and the depreciation of the currency have SA, Swaziland, Tanzania and Zimbabwe) changed these countries' fiscal positions from had removed restrictions on current high deficits in the early 1990s to surpluses in international transactions and adopted the 2000. An increase in revenue, from income obligations under Article VIII of the IMF's taxes and taxes on international trade as well as Articles of Agreement. the fall in wages and salaries as a proportion of · Reductions in exemptions: In this area, GDP helped control the budget deficit in ESA's record of progress has been limited. Malawi. However, Malawi's fiscal position As of 1998, many countries continued the remains highly dependent on grants. practice of exemptions. For instance, Mozambique and Zambia use discretionary Since 1996, Zambia has embarked upon a exemptions to promote foreign investment. stabilization effort with a tightening of the fiscal In Mauritius, the share of total exempted balance. A number of restrictive measures have imports in total imports increased by about aimed at controlling the budget, including a 10% during the 1990s. sharp fall in purchases of goods and services and capital expenditures. On the revenue side, 1.5.2 Economic Outcomes actions were undertaken to improve the collection and remittances of fees and charges. (i) Budget Performance Revenues were also drawn from specific measures such as vehicle registration fees. Budget deficit control depends partly on the While budget deficits declined throughout the ability of governments to raise revenue 1990s, it is worth noticing that fiscal domestically despite reduced revenue from trade performance in Zambia is also related to grants taxes under adjustment. In all SADC countries from abroad. (except Zambia, Tanzania and Malawi) the government revenue-to-GDP ratio has been Mozambique and SA have improved their fiscal rising between 1990-2000. The ratio is below performance as well, while Mozambique's fiscal position is also highly dependent on grants. 30 Since 1996, budget deficits have been declining The second group includes countries where in Mozambique, but this trend was interrupted in inflation declined but remained at high levels. 2000 mainly due to the impact of floods. On the Mozambique and Tanzania fall into this contrary, SA has maintained a declining trend in category. These countries have undertaken its fiscal deficit since 1994. Significant stabilization programs to correct macroeconomic improvements in tax administration, particularly imbalances. However, policy reversals as well as in the area of income taxation, increases in exogenous elements led to a resumption of excise revenues, and a strengthened tax inflation. Within the third group, inflation has administration explain these records. declined steadily and seems to be under control. Continued efforts to stabilize prices through Overall, fiscal deficits in Tanzania and restrictive monetary and fiscal policies resulted Zimbabwe also depend strongly on grant in sharp falls in inflation rates. Mauritius, receipts. Swaziland and Lesotho's fiscal Seychelles and the SACU/CMA countries, performance have deteriorated since the late Botswana, Lesotho, Namibia, SA and Swaziland 1990s, reflecting a relaxation of budgetary belong to this category. control. However, these general trends may gloss over Botswana has enjoyed good performances in its inflation performances from year to year, public finance, owing to the large revenues from specific cases, and recent developments. Indeed, exports of diamonds and prudent fiscal policy. over the past decade, individual SADC countries However, given the heavy fiscal reliance on have enjoyed different fortunes regarding the revenues from diamonds, international diamond evolution of inflation rates. In the early 1990s, market conditions have a significant influence Angola and the DRC experienced high inflation on budgetary outcomes. E.g. the past good rates. The worsening of their political and budgetary performance of the 1990s was economic situations, a sharp rise in broad money somewhat lost in 1997 when the budget surplus growth (12 850%) and currency depreciation (including grants) shrank drastically to 2.6% of (99.9%) were the combined factors explaining GDP in 1999 compared with more than nine hyperinflation in the DRC during 1991-94. percent in 1992 due to a slump in international Since 1996, inflation has declined steadily and diamond market conditions. remains at relatively lower levels in the DRC. Although inflation rates have seen a falling trend (ii) Inflation since the mid-1990s in Angola, the increase in prices accelerated in the last two years of the When observing trends in inflation over the past decade. These increases were associated with an three decades in SADC, three categories of accommodating monetary policy, a major countries can be distinguished. The first realignment in the exchange rate, and the effect includes countries whose inflation performances of public utility prices and supply bottlenecks worsened and reached two or three digit levels: that the country's civil war produced. Angola, the DRC and, to a lesser extent, Malawi, Zambia, and Zimbabwe. In some cases, Botswana and SA have made remarkable high inflation rates reflected the consequences of progress in keeping inflation under control. In political instability and civil strife as in the cases Botswana, inflation has steadily decelerated of Angola and the DRC. In other cases, since 1993 associated with the evolution of macroeconomic mismanagement, with sharp prices (tradable goods) in SA. The tightening of nominal exchange rate depreciation, or monetary and fiscal policies, the adoption of a exogenous factors such as droughts that affected formal inflation targeting policy in February agricultural production were the main roots of high inflation and sometimes hyperinflation20. 50% a month. Based on this criterion, Zaire's hyperinflation began in October 1991 and ceased in 20 According to P. Cagan (1956), hyperinflation is September 1994. See P. Beaugrand, Zaire defined as beginning when inflation levels exceed Hyperinflation, 1990-96. IMF, WP/97/50. 31 2000 and the fall in unit labor costs resulted in (iii) Real Interest Rates the weakening of inflation in SA. Closely tied through their financial and trade linkages with Though the inflation picture is mixed, real SA, it is not surprising that inflation in Lesotho, interest rates show a more positive, consistent Namibia, and Swaziland have followed a similar and less volatile trend. In the mid-1980s few path than that in SA. On the contrary, in the SADC countries had positive real interest rates. Seychelles inflation accelerated in 1999 and By the mid-1990s that number had increased further in 2000, reflecting many regulations and significantly. Apart from Seychelles (in 1999 price controls (for example on alcoholic and 2000) and Swaziland (in 2000), all SADC beverages, electricity, and other utilities). As in countries have recorded positive real interest many other SADC countries, the tightening of rates since 1998 (see Attachment 2). Interest monetary and fiscal policies was the underlying rate regimes (and structures) have been reason for the fall in inflation rates in the late liberalized and stabilized in eight SADC 1990s in Tanzania. countries; but problems persist in Angola, Malawi, Tanzania and Zambia. The shift In Zambia, while inflation increased in the early towards positive real interest rates across most 1990s as a result of expansionary financial of SADC raises a fundamental question about policies, the abundant food supply and the the level at which real rates should settle and the tightening of financial policies dampened shape of the yield curve between short and long inflationary pressures. However, inflation rates maturities of deposits and debt. The opening of remained at relatively high two-digit levels in capital accounts in SADC should lead to 2000. The reduction in inflation rates observed converging regional rates at first and, eventually, in Malawi and Mozambique during the end of to convergence with global interest rates with a the 1990s has been reversed, when in 1999 and risk premium. The size of the premium will 2000 inflation accelerated again in both depend on market perceptions of credit risk, countries. The sharp depreciation of the political risk, exchange risk and the general exchange rate against the US dollar at the end of economic outlook for different member April 2000 and the increases of petroleum prices countries. If logic and international experience have put pressures on prices in Malawi in 2000. are taken as reliable guides, the level and High private and public expenditure levels structure of rates (and the steepness of the yield (demand) after the floods in the first quarter of curve) will obviously need to be higher in the 2000 and monetary expansion resulted in the weaker SADC economies than in the stronger resurgence of inflation in Mozambique in 2000. ones. Overall most SADC countries have performed (iv) Savings and Investment well in stabilizing inflation rates, particularly since the early 1990s. As indicated in the table, With regard to the savings and investment over the last decade, six countries (Lesotho, performance in SADC economies undergoing Mauritius, Namibia, Seychelles, SA, and adjustment, no clear pattern is discernible across Swaziland) recorded single digit inflation. In the sub-region. Lesotho is an outlier because the 2000, this number increased to eight countries Lesotho Highlands Water Project is so large (Botswana, Lesotho, Mauritius, Namibia, the relatively to the size of its economy that it Seychelles, South Africa, Swaziland and distorts the investment picture completely. Tanzania). Sound macroeconomic policies and Mauritius and the other small SACU economies inflation targeting (SA) are the underlying (BNS) ­ which have been under the least factors contributing to the lowering of inflation adjustment pressure ­ have relatively high within the region. savings and investment ratios which have either increased or been sustained between 1990-2000. In Mozambique, Tanzania, Zimbabwe and Angola investment is high (sometimes off a very low base) but funded principally by aid or FDI 32 Figure 1.9: Inflation Rate in 2000 (Change in Consumer Prices Index) Zimbabwe 80.3 Zambia 25.9 Tanzania 5.6 Swaziland 7.3 South Africa 5.4 Seychelles 9.5 Namibia 6.5 Mozambique 12.3 Mauritius 6 Malawi 26.4 Lesotho 8.3 Congo, Dem. Rep. 8.3 Botswana 3.6 Angola 312 0 50 100 150 200 250 300 350 (project finance and privatization) because these investment is lost with SADC economies countries have low domestic savings ratios. investing inefficiently because of: imperfect Axiomatic though it is that high growth requires domestic markets, weak institutions, and weak high levels of investment, evidence suggests that infrastructure. Consequently, current in SADC this relationship is somewhat consumption is foregone and saving is increased distorted21. A high proportion of the gain from to finance investment, but the deferred gains (from future output) on the supply-side do not materialize as expected, seemingly resulting in a 21 Although no attempt was made to calculate an ICOR `double wastage'. On the face of it, this situation up till 2000, a previous attempt for the period 1991-95 may call for higher levels of savings and showed an investment-to-GDP ratio of 18% and a weighted average growth rate of 1%, yielding a investment to offset the effects of `frictional correspondingly high ICOR of nearly 20 for SADC losses', but it could be questioned whether (excluding the DRC and Seychelles). Excluding SADC could afford such a `margin for South Africa, the investment-GDP ratio for the inefficiency'. It would be difficult therefore to remaining 11 countries was nearly 24%, with average estimate precise targets for investment and real GDP growth of 2.4%, giving a corresponding average ICOR of 5.3. This average appears savings as a proportion of GDP for SADC to `reasonable', but it incorporates both exceptionally sustain a particular growth rate in the sub- high values (23 for Zimbabwe) and negative values region. (Angola and Zambia), corresponding to situations of continued investment accompanied by declines in GDP. It should be noted though that the very high As far as foreign direct investment (FDI) is ICOR for the 1991-95 period could be partly attributed concerned, SADC as a group attracted only to the poor growth performance during that period US$691 million on average in the early 1990s, associated with the region-wide drought of 1991/92, but FDI to the region has quadrupled in the which was the most severe on record. It had a devastating effect on the economic performance of second half of 1990s standing at US$3061 most SADC countries. Other factors that affected million on average in 1995-98 (see Attachment growth included rapid political changes in Angola, 2). This figure accounts for more than half Mozambique and South Africa. From 1995, climatic conditions were equally erratic, characterized by alternative periods of floods and droughts in different continued, involving other countries as well as those parts of the region, while political instability has forming part of the 1991-1995 calculations. 33 (55%) of all FDI flows directed to the sub- investment. Efficiency-seeking investment, in continent. Individual SADC countries appear to turn, requires22 a combination of adequate and have performed relatively well compared with efficient infrastructure, a workforce with skill other SSA countries. Six SADC countries (SA, levels that allow for a timely and cost-efficient Angola, Zambia, Lesotho, Tanzania and production and delivery of goods to international Namibia) were among the 10 top recipient markets, supported by liberal trade policies and countries of FDI in SSA during the second half easy access to the export markets. An example of the 1990s. SA has emerged as a strong pole of `efficiency-seeking investment', although for attracting foreign investment to the region, somewhat of a different type, may be that in the with more than 27% of FDI to SSA being sugar industry, taking advantage of both directed to SA from 1995-1998. Mozambique's agricultural potential and lower wage levels. For both market- and efficiency- With regard to the type of FDI flows, it seems seeking investment, regional integration efforts, that privatization and public-private provision of not only in terms of reduction in intra-regional infrastructure have been serving as avenues for tariff and non-tariff barriers, but also in terms of foreign investment, while most countries are an open competitive market and the Figure 1.10: FDI Inflows (Average 1995-98, US$ millions) 3 2 5 0 3061 3 0 0 0 2 7 5 0 2 5 0 0 2 2 5 0 2 0 0 0 1 7 5 0 1631 1 4 9 4 1 5 0 0 1 2 5 0 1155 1 0 0 0 7 5 0 5 0 0 2 5 0 0 S A D C C O M E S A E C O W A S C F A Z o n e Source: Authors based on data from World Bank, SIMA Database, 2001. also attracting resource-seeking foreign improvement of intra-regional infrastructural investment flows, for example oil in Angola, facilities to link the small, and in some cases diamonds in Botswana and Namibia, copper in segmented markets in the region, would be of Zambia and gold in Tanzania. In general, great importance. Such integration could also efficiency- and market-seeking investment flows lead to a flow of FDI wanting to take advantage remain proportionately small. The small of an intra-regional division of labor. The absolute size of the markets and limited effective demand due to widespread poverty serve as important deterrents to market-seeking 22 UNCTAD, World Investment Report, various issues. UNCTAD: Geneva 34 spatial development corridors such as the since 2000 due to a further weakening of Nacala, Beira and Maputo development macroeconomic policies and performance, corridors could play a significant role in this disruptions in farming activities, erosion of context. SA accounts for 50% of other SADC competitiveness and deteriorating country risk countries' FDI inflows. Mauritius and perceptions. Zimbabwe are also sources of cross-border investment into other SADC countries. The third category is represented by Botswana, Namibia, and Swaziland, which enjoyed current (v) External Performances: Current Account account improvements. Among these countries, Balance Botswana's record is noteworthy, with a surplus that rose sharply from 1.7% of GDP to 6.6%. Its Perhaps the greatest progress under adjustment external position has improved steadily over the has been made in foreign exchange markets after past two decades, owing to a combination of several rounds of devaluation and the rapid export growth, prudent fiscal management, liberalization of exchange rates. Ten SADC and earnings from the sustained accumulation of countries had almost eliminated premia in financial resources. The increasing surpluses parallel markets for forex by the mid-1990s; but along with the significant inflows in the such premia persisted in Angola and financial account have led to an increase in Mozambique. Adjustment of exchange rates has international reserves from a level of 4.5 months had a positive impact on the relative prices of of imports in 1982 to 20 months of imports in tradable and exchange rates across SADC 1990. However, a deterioration of diamond (except Angola and the DRC) are now closer to market conditions in 1998 had a significant equilibrium levels than they were before. effect on Botswana's balance of payments. The However, there is considerable concern across current account surplus fell sharply from 11.3% SADC about the volatility in the external value of GDP in 1997 to 3% in 1998. This movement of the South African Rand (SAR) ­ the region's has continued over the period 1999-2000. anchor currency ­ and its implications for the region. (vi) Trade An analysis of trends in current account position As a result of the liberalization of their trade reveals three categories of countries. A country regimes the average trade restrictiveness index whose external position worsened drastically for the region has fallen from 9.7 in the early throughout the period, Angola, represents the 1990s to less than 6 in 199823. In general, first category. The deficit increased from 2% of SADC countries are good performers with GDP in the decade 1980-90 to 34% in the period regard to trade liberalization: as of 1998, nine 1992­99 and stood at more than 60% in 1999. out of 14 members of SADC (Botswana, the DRC, Lesotho, Malawi, Namibia, South Africa, The second category includes Malawi, Swaziland, Mozambique, and Zambia) have Mozambique, the Seychelles, Tanzania, Zambia, moderately opened or fully opened their trade and Zimbabwe. In these countries, the current regimes.24 account also deteriorated over the two periods. In Mozambique, the deficit increased by ten Like all regional trade arrangements in SSA, percentage points. Meanwhile due to a intra-regional trade in ESA remains low, deterioration of macroeconomic policies, it more although trade intensified since the early than doubled in the Seychelles. In Zimbabwe, nineties, particularly within SADC, while SA is weakening of economic policies, rising investor prominent in terms of intra-regional trade skepticism, depressed commodity prices, and the slowdown of external financing were the major underlying factors that put pressure on the 23 IMF, 2000. Trade and Trade Policies in Eastern and balance of payments. While the current account Southern Africa. Occasional Paper No. 196, IMF: slightly improved in 1999, it has deteriorated Washington, DC. 24 This result is based on Sachs-Warner Criterion. 35 volumes and patterns. In 1999, the share of Africa's imports came from other SADC intra-regional imports of total imports amounted countries. to 12% in SADC and four percent in COMESA · Other SACU countries: very low degree of compared with four percent and 13% in dependence on imports from non-SACU WAEMU and ECOWAS respectively. At the SADC countries. same time, the share of intra-regional exports of · Mauritius and Tanzania: relatively low total exports, representing less than nine percent dependence on imports, about 11%, from in SADC and COMESA, is roughly identical to SADC. that of West African regional integration · Malawi, Zambia, and Zimbabwe: very high arrangements. degree of dependence on imports from other SADC countries - between 40 and 55%. This low level of intra-regional trade reflects the structure of production of countries composing SADC Exports these regional groups and which are dominated by few commodities exports to international In terms of exports, the figures are as follows: markets. It is also due to the poor quality of · SA: 24% of its exports go to SADC. infrastructure and financial linkages, as well as · Mozambique: the most dependent of all the restrictions on trade and exchange regimes SADC countries on exports to SADC, most adopted by most of the countries in previous of which go to South Africa and, to a lesser decades. Indeed, in many ESA countries, the extent, Zimbabwe. practice of multiple exchange rate systems, surrender requirements for export proceeds, high · Malawi, Zambia, and Zimbabwe: moderately large shares of their exports go tariff protection, restrictive import licensing requirements, and other restrictive nontariff to SADC (21, 20 and 24% respectively). Table 1.21: Intra-regional Trade in Selected Sub-Saharan African Regional Trade Arrangements in 1999 Regional Trade Arrangements Imports (% of total) Exports (% of total) SADC 11.7 8.3 COMESA 3.7 7.6 WAEMU 3.6 8.9 CEMAC NA 2.0 ECOWAS 13.1 8.4 Source: Adapted by the Authors based on IMF Data (Direction of Trade Statistics), 2000. barriers have limited the scope of intra-regional South Africa accounts for more than 70% of the trade. According to IMF staff estimates, the imports of other countries in the region and overall degree of restrictiveness for the whole enjoys a large and growing trade surplus with region was relatively high: in the early 1990s it the region, estimated at $US4 billion in 1999. was 9.7% (on a scale from 0 to 10, where 10 The BLNS countries, Malawi, Mozambique, indicates the most restrictive regime). Using Zambia, and Zimbabwe are the most dependent data from the IMF Direction of Trade Statistics, on imports from South Africa. The degree of the main features of SADC intra-regional trade reliance on South Africa's imports ranges from can be summarized as follows25: 35% to 60%26. SADC Imports Trade relations have also intensified since the early 1990s within SADC. The share of intra- The degree of dependence on imports of each regional exports of total exports has more than SADC country from other SADC countries: doubled: it rose from 3.1% in 1990 to 8.3% in · SA: degree of dependence extremely low. 1999 (see graphs). In contrast, intra-COMESA In 1998, less than two percent of South exports have remained unchanged. 25 IMF, 2000. Occasional Paper No. 196, op. cit. 26 IMF, 2000. Occasional Paper No. 196, op. cit. 36 Figure 1.11: SADC - Destination of Exports, 1990 Figure 1.12: SADC - Destination of Exports, 1999 3.1% 3.6% 8.3% 2.2% Intra-Regional Intra-Regional Rest of Africa Rest of Africa 47.7% 27% EU 44.8% EU 28.2% USA USA Japan Japan 12.7% Rest of World Rest of World 6% 4.7% 11.7% Figure 1.13: COMESA - Destination of Exports, 1990 Figure 1.14: COMESA - Destination of Exports, 1999 6.1% 1.1% 3.3% 2.2% Intra-regional 1.0% 25.9% South Africa 29.9% South Africa Rest of Africa Rest of Africa EU 37.0% EU 40.6% USA USA 4.0% 3.3% Japan Japan Rest of World Rest of World 19.8% 18.3% Source: By Authors based on IMF data, Direction of Trade Statistics, 2000. This record reflects the liberalization reforms countries' imports previously originating from undertaken by most SADC countries as well as industrialized countries. At the same time, SA's the intensification of links between other SADC exports to the European Union have increased. countries and SA following the demise of the apartheid regime. SA has displaced some ESA 37 Table 1.22: SADC and COMESA: Intraregional and Extraregional Trade Imports (%) Exports (%) 1990 1999 1990 1999 SADC trade Intra-regional 5.2 11.7 3.1 8.3 By SACU from/to rest of 0.3 1.4 1.2 5.9 SADC region By rest of SADC region 3.3 8.6 0.5 1.2 from/to SACU Between rest of SADC 1.6 1.6 1.4 1.2 region Extra-regional 94.8 88.3 96.9 91.7 Rest of Africa 1.3 1.6 3.6 2.2 European Union 42.8 38.9 27.0 28.2 United States 10.5 10.1 12.7 11.7 Japan 8.1 5.5 6.0 4.7 Rest of World 32.0 32.2 47.7 44.8 Total 100 100 100 100 COMESA trade Intra-regional 3.9 3.7 6.1 7.6 Extra-regional 96.1 96.3 93.9 92.4 South Africa 3.7 8.9 1.1 3.3 Rest of Africa 1.5 0.7 2.2 1.0 European Union 44.0 36.2 37.0 40.6 United States 8.8 9.7 19.8 18.3 Japan 5.0 4.2 4.0 3.3 Rest of World 33.2 36.6 29.9 25.9 Total 100 100 100 100 Source: Adapted by Authors from IMF, Direction of Trade Statistics, 2000. (vii) External Debt and Aid Dependence filling the savings-investment gap. To this end, FDI flows have made a small contribution, but Most SADC countries have experienced an such FDI remains largely of the resource- increasing external debt burden over the past seeking and project-finance type. two decades. External debt in terms of GDP has more than doubled in Angola, the DRC, Consequently, aid dependence in SADC remains Mozambique and Zimbabwe. In several high at roughly the same level in 1999 than in countries, the debt burden has exploded. On 1980 as measured in net ODA per capita. Given average over the period 1992-2000, it some of the countries' aid-dependence and high represented 173% of GDP in Angola, 175% in debt-burdens, their maintenance of sound DRC, 124% in Malawi, and 116% in Tanzania, macro-economic policies may, for the 202% in Zambia and 238% in Mozambique (see foreseeable future, depend heavily on massive Attachment 2). In contrast, the external debt of debt write-downs; very large continued aid Botswana, Namibia and SA has remained stable flows; and very large foreign direct investment at relatively low levels in terms of GDP. flows, the latter which are unlikely to materialize quickly. Thus, in the absence of any Due to their debt positions, low country one of these three essential `conditions' the creditworthiness and generally underdeveloped sustainability of sound macroeconomics might financial systems, access to official sources of be difficult to obtain. funds, other than on highly concessional terms, and international and domestic (and others in the region) capital markets remain limited if not inaccessible. These countries remain highly dependent on official development assistance for 38 Table 1.23: Net ODA per capita, 1970-1999 1970 1980 1990 1999 SADC 2.6 19.5 34.2 19.7 Angola 0.0 7.5 29.2 31.4 Botswana 22.3 117.1 115.1 38.3 Congo, Dem. Rep. 4.4 15.8 24.0 2.7 Lesotho 9.3 70.1 82.3 14.8 Malawi 8.2 23.2 59.1 41.3 Mauritius 7.4 34.3 83.9 35.5 Mozambique 0.0 14.0 70.8 6.9 Namibia NA NA 89.8 104.4 Seychelles 75.0 337.4 513.4 162.2 South Africa NA NA NA 12.8 Swaziland 14.5 88.6 70.0 28.4 Tanzania 3.7 36.5 46.1 30.1 Zambia 3.2 55.5 61.7 63.1 Zimbabwe 0.1 23.4 34.8 20.5 Groups 1970 1980 1990 1999 SADC 2.6 19.5 34.2 19.7 ECOWAS 4.0 16.2 28.3 16.5 SSA excl. SA and Nigeria 4.4 26.1 45.0 22.8 SSA 3.6 19.4 33.8 18.0 Source: World Bank, SIMA Database, 2001. (viii) HIPC and Poverty Reduction Strategy assistance beyond the US$2.9 billion originally committed in April 1998 to ensure Mozambique Poverty, compounded by high levels of external reaching the agreed debt sustainability target of debt, is a widespread phenomenon in the ESA an NPV of debt-to-export ratio of 200%. The region. Many SADC/COMESA countries are total debt-relief package was about US$3.7 eligible for the HIPC (Heavily Indebted Poor billion, or US$1.7 billion in NPV terms. Table Countries) initiative. There are 41 HIPC 1.25 indicates that ten ESA countries have countries in the world, of which 13 are located already prepared Interim PRSPs and 3 of those in the ESA region: five are SADC countries have even completed their PRSPs.27 (Angola, Democratic Republic of Congo, Malawi, Mozambique, Tanzania and Zambia), and seven COMESA non- SADC countries (Burundi, Ethiopia, Kenya, Madagascar, Rwanda, Sudan, Uganda). Table 1.24 below shows the status of the ESA HIPC countries regarding the Debt Relief Initiative. In April 1998, Uganda became the first country to reach its completion point under the HIPC Initiative. Uganda has received assistance equivalent to approximately US$650 million in nominal terms, or 20% of its outstanding debt; which reduced Uganda's NPV of the debt-to-export ratio to less than 200%. The IMF has provided funds covering about US$80 million of debt service over the next nine years. Malawi, 27 Mozambique, Tanzania, Zambia, Madagascar In order to benefit from the initiative the Debt Relief Initiative requires HIPC countries to complete a and Rwanda have reached their completion point Poverty Reduction Strategy Paper (PRSP), laying out (floating completion point). In Mozambique, in the policies and programs aimed at the poor that will 1999, the IMF and IDA agreed to increase the be implemented with the money saved from debt payments. 39 Table 1.24: Southern African Heavily Indebted Countries and Status in Debt Relief Initiative, October 2001 US$ Millions) Assistance Levels1 Reductio % Estimated total Country Decision Completion n Reduction Point Point nominal debt Total Bi- Multi- of NPV in NPV lateral lateral IMF WB of debt of debt2 relief (US$ million) SADC countries Angola4 Not yet reached Congo, Dem. Rep. Not yet reached Malawi Dec-2000 Floating 643 163 480 30 331 643 44 1000 Mozambique3 Apr. 2000 Floating 254 159 95 16 53 1970 NA 4300 Tanzania Apr. 2000 Floating 2026 1006 1020 120 695 2026 54 3000 Zambia Dec-2000 Floating 2499 1168 1331 602 493 2499 63 3820 COMESA (non-SADC countries) Burundi Not yet reached Ethiopia5 Not yet reached Kenya4 Not yet reached Madagascar Dec-2000 Floating 814 457 357 22 252 814 40 1500 Rwanda Dec-2000 Floating 452 56 397 44 228 453 71 810 Sudan Not yet reached Uganda3 Feb-2000 May-00 1003 183 820 160 517 1003 50 1950 Sources: IMF and World Bank Board decisions, completion point documents, decision point documents, preliminary HIPC documents, and staff calculations. Notes: NA: Data not available. 1/ Assistance levels are at countries' respective decision or completion points, as applicable. 2/ In percent of the net present value of debt at the decision or completion point (as applicable), after the full use of traditional debt - relief-mechanisms. 3/ For Mozambique and Uganda the decision and completion point refer only to the enhanced framework of the HIPC 4/ Angola and Kenya are expected to achieve debt sustainability after receiving debt relief under the traditional mechanisms 5/ Preliminary document updated on Feb.2001. It foresees Decision Point to be reached by fall 01 Table 1.25: The PRSP and ESA Countries Country Stage of PRSP Process Lesotho · Interim PRSP presented in June 2000; · WB/IMF assessment, February 5, 2001 Malawi · Interim PRSP, August 2000 Mozambique · Interim PRSP presented on February 16, 2000; · WB/IMF assessment of Interim PRSP, March 2000; · Final PRSP, approved by Council of Ministers, April 2001; WB/IMF assessment of final PRSP, August 2001 Tanzania · Interim PRSP submitted to WB/IMF August 2000; · WB/IMF assessment of Interim PRSP, Nov. 2000; · Final PRSP submitted on 2001 Zambia · Interim PRSP, July 2000; · WB/IMF assessment July 2000 Ethiopia · Interim Nov. 2000; · WB/IMF assessment presented in January 01 Kenya · Interim PRSP, early 2000; · WB/IMF assessment July 12th, 2000 Madagascar · Interim PRSP presented on Nov. 20, 2000 Rwanda · Interim PRSP presented in November 2000 Uganda · PRSP, March 2000; · WB/IMF assessment March 2001; · PRSP Progress Report March 2001. Source: World Bank, 2001. Adapted by authors from IMF, 1999. Debt Relief for Low-Income Countries. The Enhanced HIPC Initiative. Pamphlet Series No 51. IMF, Washington, DC. 40 (ix) Economic Growth (see Attachment 2) decade (1980-90) prior to SADC's creation. At the same time, Botswana still recorded an annual In the 1970s, a number of SADC countries average increase in real GDP of two digits recorded high growth performance. Among the (10.3%). In general however, growth declined SACU countries, the strong growth performance drastically by six percentage points on average of particularly Botswana is noticeable. In over the first eight years of SADC's existence: Botswana, the driving force behind the rapid 4.3% in 1992-2000 compared to 10.3% in the economic growth of the 1970s has been the preceding decade. While Mauritius' economic mining industry. The discovery of diamond growth slowed in the period 1980-90, annual mines at the end of 1960s and subsequent average growth remained relatively strong at exploitation boosted growth enormously. 4.4%, higher than the population growth rate and Mauritius and the Seychelles have also enjoyed increased in the 1990s to 5.4%. Both Swaziland strong growth in the 1970s, at seven percent and and Zimbabwe, despite improved growth about nine percent, respectively. This buoyant performance between 1970-79 and 1980-90, economic growth was primarily related to the recorded an economic slump in the 1990s, with dynamics of the tourism sector and in Mauritius an annual average decline in real GDP growth of also to the creation of an export-processing approximately four percentage points. zone. Overall, economic growth has recovered in Since the 1980s, growth has lost its momentum SADC since the mid-1990s, and more in the sub-region. The deterioration of the terms particularly since the late 1990s. Apart from of trade, following sharp falls in the prices of the Lesotho and Zambia in 1998 and Zimbabwe in subregion's major exported commodities 2000, SADC countries have enjoyed continuous (petroleum and copper) coupled with policy real growth during the past three years. The failures, has reversed the good performance of major contributing factors to the recovery of the 1970s. The extent of this economic growth within the region are the increase in slowdown varies across countries. In most foreign direct investment, particularly in Angola, SADC member countries, including Lesotho, SA, Mauritius, Mozambique and Botswana, the Malawi, the Seychelles, SA and Zambia, growth sound macroeconomic policies, structural fell sharply under four percent on average, in the reforms and the buoyant export sector. Figure 1.15: Evolution of Real GDP Growth in SADC 10 8 6 Real GDP Growth 4 (%) 2 Standard Deviation 0 RGDP 1992 1993 1994 1995 1996 1997 1998 1999 2000 Growth -2 -4 Source: By Authors based on Data from World Bank, SIMA Database, 2001 41 (x) Income Convergence in SADC? high. With the DRC, this gap increased throughout the decade and stood at 13:1 in 1979 An analysis of income-convergence in SADC as compared with 10:1 in1970. In the meantime, reveals an increasing widening of real income Seychelles' income per capita, which rose differences between SADC countries over the steadily, represented 30 times and 15 times that last three decades. While in 1970, the ratio of of Malawi and the DRC in 1979. The figures for the country with the largest GNP per capita (SA) Mauritius relative to those of these two countries to that of the smallest (Malawi) was 32:1, this are 13 times and six times. It is noteworthy that gap grew considerably and stood at 90:1 in the differences between SA and its SACU 2000, representing the ratio of the Seychelles' partners have narrowed. This situation is well GNP per capita to that of the DRC. In fact, the illustrated by the decline of the ratio of SA's real dynamics of income convergence-divergence income per capita to that of Lesotho from 13:1 suggest three different phases: 1970-79, 1980-84 in 1970 to 6:1 in 2000. and 1985-2000. In the 1970s, income differences between SADC countries widened This trend changed within the first half of the gradually as represented by the regular increase 1980s. While some countries (Lesotho, in the standard deviation of real GNP per capita. Mauritius, Namibia and Swaziland) kept the Within this period, the most striking divergences income gap with SA unchanged, others (for are those between SA, the Seychelles, Mauritius instance, Botswana) reduced the difference in and Botswana with Malawi and the DRC. income level with the most industrialized country in SADC. In 1979, while declining, the gap between SA's GNP per capita and that of Malawi remained In general, since 1985, the gap between SADC Table 1.26: Selected Income Per Capita Differences Between SADC Countries 1970 1979 1990 2000 South Africa/Malawi 32 26 27 25 South Africa/DRC 10 13 17 29 South Africa/Lesotho 13 7 5 6 Seychelles/Malawi 24 30 42 44 Seychelles/DRC 7 15 27 90 Seychelles/Angola NA NA 12 35 Seychelles/Mozambique NA NA 45 36 Seychelles/Tanzania NA NA 34 35 Mauritius/DRC 3 6 13 33 Source: Authors' calculations based on data from World Bank, SIMA, Regional Database, 2001. Figure 1.16: Evolution of Income Divergence in SADC (Standard Deviation of Real GNP per Capita) 2200 2000 1800 1600 1400 1200 1000 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 42 countries' real income per capita has been average growth rates over the two periods. widening. As GNP per capita increased in However, there may exist a `club of Botswana, Mauritius, and the Seychelles, the convergence' between SACU countries. differences between the performance of these countries and least developed SADC countries The absence of convergence among southern rose drastically over time. For example, in African countries may stem from exogenous 2000, Seychelles's real income per capita factors such as differences in external shocks ­ represented 35 times that of Angola, different impacts of oil and exchange-rate Mozambique and Tanzania. At the same time, shocks of the 1970s - and policy responses. It the ratio of Mauritius's real income per capita to may also be due to domestic factors, such as that of the DRC stood at 33:1 (See Table 1.26). political conditions, the impact of civil wars in some countries (as in Mozambique) and political The graph below shows that using the second instability (for example in the DRC). and most common measure of convergence (- Figure 1.17: Convergence-Divergence of Real Income Per Capita, 1990-2000 6 Mauritius %) 4 Mozambique (In 2 Namibia Botswana Swaziland 1990-2000 Malawi Tanzania Seychelles 0 Zimbabwe Capita, Lesotho South Africa Per -2 Zambia GNP -4 Real DRC -6 Growth -8 Average Angola -10 Log Real GNP Per Capita, 1990 Source: By authors based on data from World Bank, SIMA, Regional Database, 2001. convergence), there is no pattern of convergence 1.6 CONCLUDING REMARKS among SADC countries. On the contrary, divergence in income level seems to have A number of overlapping regional integration increased during the 1990s as expressed by the arrangements (RIAs), in terms of mandate trend lines. Almost all below-average countries, and membership, exist in southern Africa, i.e. measured in real GNP per capita, had below- SACU, SADC, COMESA, the IOC and the 43 EAC, supplemented by arrangements such as the Over the past few years, the political risk MMA and the RIFF (formerly the CBI). All the perceptions of the sub-region have thus countries, except Mozambique, are members of deteriorated. two or more RIAs. However, as practiced in southern Africa and in the absence of thorough · Socio-economic development is highly planning and effective management, these result uneven in the region. Incomes remain low, in confusion and conflict for both governments populations are small and dispersed, and the private sector. RIAs are also costly in financial markets and infrastructure are terms of multiple membership fees and weak and inefficient, the limited human participation in their activities, while non- capital is threatened by the HIV/AIDS payment is not effectively used as a sanction pandemic and economies are largely mechanism on participation, particularly by undiversified, limiting the scope for trade SADC and COMESA. However, in spite of and constraining investment. many efforts to argue the economic case for rationalization of these RIAs with the countries · In spite of widespread macroeconomic and in the sub-region, also by UNECA and the GCA, structural reforms and convergence in membership of multiple RIAs is motivated by policies, macroeconomic outcomes are non-economic factors as well, resulting in mixed. Nearly half of the countries are political expediency precluding drastic crippled by debt burdens and remain rationalization options for the foreseeable future. dependent on official development A way out for the Bank is to promote assistance. Some distinct economic cooperation, whether in the harmonization of problems are shared by most of the southern policies and regulatory frameworks or in project African countries. These range from investment, within specific functional areas persistent negative resource balances across the wider SADC/COMESA economic combined with a weak relationship between space, while analytical work should be investment and growth; high unemployment, undertaken on particular areas to equip the Bank open, but unbalanced, trade and capital in its understanding and for advocacy of feasible accounts with the developed world; weak and sustainable regional cooperation and international reserve positions, insufficient integration options within and between RIAs. economic growth to alleviate poverty, to increasing levels of unemployment. The countries within southern Africa are heterogeneous in the extreme, posing · A unique feature of SADC is the extent of particular challenges for cooperation and one country's economic predominance in integration at the sub-regional level as relation to the situation in other SSA indicated by the following salient features: regional arrangements. SA is by far the largest economy in the region with its GDP · Political systems vary greatly among representing nearly 70% of that of the sub- countries in southern Africa, which is region and since the end of its economic mirrored in the levels of freedom of voice, isolation and subsequent accession to SADC the existence and enforcement of in 1994, it has had a profound impact on independent, consistent, transparent and intra-regional trade patterns. Its share in competent legal frameworks and judicial SADC's total volume of exports was 65% in systems, etc. Although some countries in 2000. Indeed, SA has emerged as the single the region have experienced a deepening in economy that is linked to all other SADC their democratic culture, in others peace and countries in terms of trade. stability remain elusive goals, while the · The more successful SADC economies have flexibility of constitutions and some non- begun to diversify their economic bases and democratic political systems is being tested. 44 made themselves more attractive business addresses. Many SADC countries have moved from gloomy socio-economic prospects to a more promising phase of economic and social development. For example, Mauritius, described in 1967 by British economist James Meade as an example of a country where the `outlook for peaceful development is poor' has since developed and diversified its economy. In 30 years, income per capita increased fourteen fold, reaching US$3900 in 2000 compared to US$280 in 1970. Real GDP growth averaged seven percent in the 1970s and more than five percent between 1992 and 2000. Another example is Botswana, the best growth performer in the SADC region, albeit with an economy still largely based on diamond production and exports. Due to prudent economic policies, amongst others, Botswana was assigned sovereign ratings in the `A' grades by Moody's and Standard and Poor in the first half of 2001. These ratings are the most favorable awarded to any country in Africa, and are comparable to ratings for countries such as Greece, Malta and Slovenia. In contrast, countries such as Angola and the DRC are struggling to emerge from decades of internecine war, while the second largest economy in SADC, Zimbabwe, has been experiencing a backward political and economic slide, associated with adverse region-wide spillover effects. In general, over the last three decades, and particularly since 1985, an increasing widening of real income per capita differences between SADC countries is observed. 45 46 PART II REGIONAL INITIATIVES AND ACTIVITIES (see Attachment 3) II.1 INTRODUCTION Development of Tourism, as well as the Charter of the Regional Tourism This Part of the paper, first, discusses progress Organization of Southern Africa (RETOSA) made in the various areas constituting the sub- and the Memorandum of Understanding on regional or common agenda. These areas or Cooperation in Standardization, Quality `sectors' are grouped, for discussion purposes, Assurance, Accreditation and Metrology in similar to the groupings of sectors that will SADC (SQAM). constitute the new SADC directorates. This · 10 Protocols have been signed but not discussion is rather uneven, due to the uneven entered into force due to insufficient level of cooperation or integration in SADC and, numbers of signature or ratification, i.e. in some cases, to limited information on the the Protocols for Health; on Wildlife various sectoral groupings as published in Conservation and Law Enforcement; on official SADC documentation such as sectoral Shared Watercourses (revised version); on annual reports. Second, the paper gives an the Politics, Defense & Security; Control of overview of the current institutional and agenda firearms, ammunition and other related changes, which SADC is undertaking to align its materials, Corruption, and on Legal Affairs; institutions and common agenda with its vision, Culture, Information and Sport; the Protocol objectives and principles. on the Tribunal and the Rules of Procedures Thereof; and the Protocol on Inland II.2 PROGRESS IN THE PROTOCOL Fisheries and Marine Fisheries and DEVELOPMENT PROCESS (see Resources. Attachment 3) · Protocols which are in the process of development/under preparation include Accession to the SADC Treaty commits member those on: the Forestry; Food Security, states to accepting a series of principles, Crops, Livestock Production and Animal objectives and strategies on mutually benefic ial Disease Control and Agricultural Research and equitable cooperation and integration; to and Training; Facilitation of the Movement participating in the structures and institutions of of Persons; Environment; and Finance & SADC; and to negotiating a series of protocols Investment. to give practical effect to its aims. Specific obligations are to be contained in the respective The small number of protocols that have been protocols, which have to `spell out the objectives ratified by the Member States reflects the myriad and scope of, and the institutional mechanisms of problems that have beset protocol for cooperation and integration' [Treaty Art. development in SADC up till now. These 22(1)]. These protocols are to be negotiated by include: development of protocols according to the member states and, after approval by the international models rather than being tailored to Summit, become an integral part of the Treaty. specific conditions in the Region; insufficient capacity to negotiate agreements before protocol As at the end of August 2001: design as well as insufficient institutional · 10 Protocols and Instruments have capacity, human and financial resources to entered into force. They are: the implement protocols; inadequate involvement of Declaration and Treaty of SADC & Protocol all sectoral stakeholders (private sector and civil on Immunities and Privileges; the Protocols society at large) in the design and on Shared Watercourse Systems, Energy, implementation of protocols; and insufficient Transport, Communications & Meteorology, prior analysis of the costs and benefits of Combating Illicit Drug Trafficking, Trade regional integration efforts through particular and the Amendment protocol on trade, protocols for the respective Member States, Mining, Education and Training, resulting in a lack of political commitment. It is 47 also noticeable that SADC's latest members, i.e. II.3 TRADE, INDUSTRY, FINANCE AND the DRC and the Seychelles, have largely failed INVESTMENT to accede to or sign protocols up till now, while also failing to contribute their membership fees. II.3.1 Trade Among the founder members of SADC, Angola is also lagging behind in protocol accession. The SADC Trade Protocol was signed in 1996 and came into force in January 2000 when 11 In an attempt to avoid such problems, it should countries signed and ratified it (Angola, the be noted that the Finance and Investment Sector DRC and the Seychelles have not signed or is following an approach of simultaneously ratified). The SADC Ministers of Trade agreed developing a broad principles framework for its to implement the Protocol on 1 September 2000, protocol, while concluding a set of Memoranda with implementation hinging on a Member State of Understanding on functional cooperation in depositing its instrument of implementation with various areas within the Sector. It is believed, the SADC Secretariat. By August 2001 all 11 that through such a pragmatic approach the signatories had deposited their instruments of pitfalls of many other SADC protocol processes implementation. The first round of tariff cuts will be avoided and that SADC-wide commenced with implementation (during the `ownership' will be achieved over the short period September 2000-July 2001), the second term, thereby enabling broad-based acceptance round of tariffs cuts were scheduled for 1 and ratification by the time that the protocol January 2002 and annually thereafter. would be tabled for signature. Furthermore, over the long-term, it will facilitate the Part 1 of the protocol deals with definitions and necessary degree of SADC-wide and Member objectives; Part 2 provides for the elimination of State political and budgetary commitments to tariff and non-tariff barriers to intra-SADC trade greater regional economic and monetary and allows for general exceptions on the grounds integration. of public morals, public order, health, safety and security considerations; Parts 3 & 4 provide for The fact that most of the protocols have entered rules of origin, cooperation in customs into force only since 1998 indicates that SADC administration, trade facilitation, cooperation in still stands rather at the very beginning of its technical standards, sanitary and phytosanitary regional integration process. Therefore, up till regulations as well as trade remedies such as now, the gains from cooperation and integration anti-dumping and countervailing measures; Parts within SADC may relate more to non-traditional 5, 6 & 7 deal with trade-related issues such as gains of RIAs such as `lock-in' into policy the promotion of cross-border investment, trade reforms and improved international bargaining in services, intellectual property rights, as a group, rather than to the traditional gains of competition policy and trade development; Part an open regional economic space28. However, 8 regulates trade relations, including preferential the implementation of the Trade Protocol has set trade agreements, coordination of trade policies in motion a seemingly self-accelerating and cooperation with third parties; and Part 9 mechanism for regional economic integration as provides for institutional arrangements and the adoption of certain sectoral protocols dispute settlement procedures, the ratification necessitates the adoption of others, especially process and the depository of the instruments of where the interests of the private sector are ratification. concerned. During the period between signing of the 1996 protocol and the amendment protocol signed in 2000, the SADC countries were involved in a long and intensive negotiation process to find agreement on matters such as the schedules in terms of which member states undertake to 28 World Bank, 2000. Trade Blocs. Policy Research Report. World Bank: Washington, DC. phase out tariffs on goods originating in each 48 other's territories; rules of origin on the basis of to achieve 73% and 76% of the free trade target which SADC products would qualify for duty- on non-SA SADC imports. Malawi and free trade; market access arrangements for Zimbabwe lag far behind with 40% and 38%, textiles & clothing, sugar and other sensitive respectively, of their free trade targets on non- products; strengthening of customs cooperation SA SADC imports unachieved at the end of and the elaboration of other mechanisms for eight years (See Table 2.2). trade facilitation; the creation of a dispute settlement mechanism for the efficient and Furthermore, the Protocol leaves much room to speedy resolution of trade-related disputes participant countries to maintain protection: between SADC member states; and the some goods and sectors are excluded from the institutional framework to support protocol agreement; and countries are allowed to practice implementation. anti-dumping and safeguard measures to protect their infant industry (Articles 18 and 20), while II.3.1.1 Limitations and Implications of the particularly Article 21 allows countries to SADC Trade Protocol suspend trade liberalization obligations. Through the Trade Protocol, SADC countries In a number of sectors (for example, textiles and have made a clear commitment to liberalizing garments, sugar, wheat flour and food products trade within the group. Although the trade using wheat flour, spices, plastics, machinery protocol is a step towards increased co-operation and equipment, motor vehicles and components and integration within SADC, the agreement is and certain products in Chapter 90), complex limited in a number of respects. rules of origin were set to protect SADC countries' industries. The sugar agreement An assessment of progress towards zero tariff allows major producing countries to access the rate on intra­SADC imports reveals that the South African market at preferential prices pace of liberalization is very slow. For instance, higher than the world market prices. the share of agreed tariff reductions is very small in the first four years. No SADC country has The implementation of the Trade Protocol will committed to achieve more than 50% of its tariff have revenue implications for all of the SADC reduction in the first four years. At the end of countries. The revenue losses would differ from eight years of implementation of the Trade country to country, depending on their relative Protocol, a number of countries will have reliance on import duties. The estimated loss in achieved only 75% or less of the target of intra- terms of total revenue is expected to be SADC tariff-free trade29. For instance, SACU insignificant for SA (0.1%) and relatively members, which are the speediest liberalizing modest for Tanzania (1.6%)30. In contrast, the countries, offered only 47% of their estimated revenue loss of more than 4% could liberalization of SADC imports in the first four be of some consequence for Malawi, Mauritius, years (See Table 2.1) Zambia and Zimbabwe are Zambia, and Zimbabwe. It is also important to the second speediest countries with 39% and note that indirect revenue loss may stem from 37%, respectively, of their tariff reductions trade diversion particularly in the case of non- provided in the first four years. At the end of SACU SADC countries. The main reason for eight years, SACU members are once again the this likely effect is related to the importance of speediest countries offering 99.5% of SA's exports in the trade flows composition of completely free trade. Tanzania is the second these countries. SA supplies over 75% of the speediest with a commitment to achieve 88% of imports for products representing 22% of the free trade on non-SA SADC imports, while Mauritius and Mozambique follow with a plan 29 The indicator used to assess the phase-in of the trade 30 These estimates are derived from IMF, 2000. The protocol is the reductions in trade weighted average Revenue Implications of the Elimination of Intra- tariff rates applicable to intra-SADC trade. SADC Tariffs. IMF: Washington, DC. 49 Table 2.1: Proportion of Liberalization Achieved in First Four Years (%) Offer to RSA Offer to Rest of SADC SACU NA 46.8 Malawi 1.0 12.0 Mauritius 26.4 7.4 Mozambique 9.2 8.7 Tanzania 8.3 31.4 Zambia 18.5 38.7 Zimbabwe 18.6 37.4 Source: Derived from SADC Trade Protocol Project 2001. Table 2.2: Proportion of Liberalization Achieved in First eight Years (%) Offer to RSA Offer to Rest of SADC SACU NA 99.5 Malawi 70.4 60.0 Mauritius 70.4 72.5 Mozambique 62.7 76.3 Tanzania 87.3 87.9 Zambia 62.7 76.9 Zimbabwe 68.3 57.7 Source: Derived from SADC Trade Protocol Project 2001. Malawi's imports, 21% of Zambia's, 17% of and other trade-related arrangements, provided Zimbabwe's, 4% of those of Mauritius and 1.5% that they are not inconsistent with the Protocol of Tanzania's. provisions. However, given that nine SADC countries are also members of COMESA, it is The considerable and growing trade imbalance particularly the ongoing evolution of this RIA's between SA and the non-SACU SADC countries trade agenda that may result in inconsistencies in could be seen as a divergent force in terms of the provisions, difficulties in enforcing provisions distribution of perceived or real gains and costs and other problems, no less for the countries of integration. Should the preferences allowed being members of both the RIAs. by SA within the regional free trade agreement, together with its current policy measures to (i) Differences in Rules of Origin. encourage reverse flows of investment capital to the region prove to be insufficient equilibrating According to the requirements provided by both compensatory measures, the risks are high of SADC and COMESA Trade Agreements, other SADC economies incurring large welfare significant difference may appear in the losses with South Africa realizing the interpretation of rules of origin. Both agreements counterpart gain. If these risks materialize they allow goods that have been wholly produced in a could exacerbate negative spillovers for them, Member State to be accepted as originating in a such as further de-industrialization in other Member State if they are consigned directly SADC economies and increased illegal labor from a Member State to a consignee in another migration into the SACU countries, particularly Member State. The difference appears when SA, Botswana and Namibia. Thus, if a potential dealing with partially produced goods with intra-regional rift is to be avoided, SADC may imported materials. COMESA has recently need to consider not only trade preferences for changed its rules of origin. Its new rule its least developed members, as is being done in indicates that to qualify as an `originating good', the implementation of the Trade protocol, but (i) the c.i.f. value of imported materials also other ameliorative measures. contained in such good shall not exceed 60% of the total cost of the materials used in the II.3.1.2 Relationships with other Regional production of such good, or (ii) the value added Groupings ­ The Case of COMESA resulting from the process of production accounts for at least 35% of the ex-factory cost The SADC Trade Protocol allows for Member States to continue with their existing preferential 50 of the goods31, or (iii) the goods are classified or The COMESA FTA is regarded as a first step become classifiable under a tariff heading other towards deeper regional integration. The next than the tariff heading under which they were step will be the introduction of a Common imported. By contrast, sub-paragraph b) of Rule External Tariff (CET) and a Customs Union, 2 of the SADC Amendment Trade Protocol which is expected to be in place by December 8, allows goods that incorporate imported materials 2004. Although the preliminary agreement on to qualify provided that such materials have CET rates specified four tariff rates of 0%, 5%, undergone `sufficient working or processing in 15% and 30% on capital goods, raw materials, any Member State'. In addition, SADC's rule intermediate goods and final goods respectively, appears less restrictive. Non-originating the rates may have to be adjusted to reflect the materials may be used in the manufacture of a lower rates already achieved by a number of product provided that their total value does not countries. Moreover, a Draft COMESA Tariff exceed 10% of the ex-works price32 of the Nomenclature harmonizing classification of product. goods has been prepared by the Secretariat. COMESA Member States have decided to (ii) COMESA Free Trade Area: establish a specialized committee and to conduct Implementation Status and Related Issues workshops in order to consider all technical details. Before the CET could enter into force In 1993 COMESA countries agreed to establish there are a number of problems that would have a Free Trade Area by 2000. In October 2000, to be resolved. For this purpose the Secretariat the FTA entered into force with 9 members: has identified the following activities: Djibouti, Egypt, Kenya, Madagascar, Malawi, · Study and decide on problems stemming Mauritius, Sudan, Zambia and Zimbabwe. The from multiple memberships of some other Member Countries of COMESA have not countries to different Free Trade Areas and joined but are applying tariff reductions from Customs Unions in the region (SADC, 0% to 80%.33 Table 2.3 summarizes the status COMESA, EAC, SACU). of these countries: · Analyze the impact of the introduction of the CET in terms of revenue loss and Two issues seem to emerge from the competitiveness. implementation of the COMESA FTA, so far, · Study the possible implementation of a namely (i) the rules of origin issue, and (ii) the revenue-sharing scheme. For the moment, need to eliminate non-tariff barriers (NTBs). COMESA has decided that upon introducing Given the importance of NTBs for the CET each country will collect and keep implementation of the FTA, the COMESA its own import taxes. Secretariat has commissioned a study, which · Agree on the conditions for temporary provides an initial overview of existing NTBs admission, re-exportation of goods and and their application across some COMESA transit of goods. This is a key issue for the countries. grouping, since it affects directly the free circulation of goods within the FTA. A Customs Bond Guarantee Scheme has been designed and is being implemented by the 31 Only Egypt has maintained a 45% value added Member States. criteria. 32 `Ex-works price' means the price paid for the product ex work to the manufacturer in any Member State in whose undertaking the last working or processing is carried out, provided the price includes the value of all the materials used, plus the profit and minus any internal taxes which are, or may be, repaid when the product obtained is exported. 33 Angola, DRC and Ethiopia, 0%; Burundi and Rwanda have achieved 60% tariff reduction; Comoros, Eritrea and Uganda, 80%. 51 Table 2.3: Tariff Reduction in COMESA Country Rate of Tariff Reduction Burundi 60% Comoros 80% Eritrea 80% Rwanda 60% Uganda 80% Angola Nil DRC Nil Ethiopia Nil Namibia Pending derogation dialogue to join the FTA Swaziland Pending derogation dialogue to join the FTA Source: COMESA, Briefing Paper prepared for the World Bank and the IMF, September 2001. II.3.1.3 The Way Ahead II.3.2 Finance and Investment Initially, the SADC Trade Protocol negotiations II.3.2.1 Background to Cooperation have been focusing largely on tariff reductions on goods, neglecting negotiations on services After South Africa was allocated the and NTBs. While tariff reductions on goods are responsibility for SADC Finance and Investment important to achieve trade liberalization, the in 1995, the SADC Ministers of Finance adopted deepening of regional integration would require the following broad sector objectives: urgent attention to be paid to particularly the · to encourage movement towards regional removal of NTBs and quantitative restrictions. macroeconomic stability through prudent The success of the Trade Protocol is directly fiscal and monetary policies; related to the elimination of all obstacles to · to provide a framework for cooperation in trade. Another area that deserves particular the area of finance in collaboration with attention is trade in services. An improvement central bankers, other regulatory and in service provision in areas such as financial supervisory authorities, commercial banks services, telecommunications and transport and other financial intermediaries to services may facilitate trade in goods among mobilize resources for investment; SADC countries and is therefore complementary · to promote the coordination of national to trade reforms. structural adjustment programs; and · to promote the development of sound The long-term success and the dynamics of the investment policies of member states in Protocol will also depend on private sector order to establish an enabling environment involvement. Therefore, beyond the Trade for investment in the region. Protocol, the improvement of the entire business environment becomes an important element of II.3.2.2 Cooperating Mechanism and SADC agenda if it were to achieve deeper Cooperation Agenda integration. Enhancing the regulatory framework and strengthening enforcement of To achieve these objectives, the Finance and business laws, rules and regulations are essential Investment Sector established a Finance and elements that will send clear signals to the Investment Sector Coordinating Unit, FISCU34, private sector about SADC's willingness to to coordinate the sector's work and serving as a facilitate investments. Furthermore, secretariat and clearing house, facilitator, complementary reforms such as strengthening of catalyst and mechanism to encourage intra- and financial sector cooperation and elements inter-sectoral cooperation in the sub-region, and embodied in the trade efficiency concept would two main committees, namely the Committee of need urgent attention. 34 FISCU were abolished in 2001 and its activities have been incorporated in a centralized Directorate for Trade, Industry, Finance and Investment, within the SADC Secretariat. 52 Central Bank Governors to focus on monetary of Treasury Officials. Also linked to the policy and issues, and the Committee of SADC Governors' Committee are two private Senior Treasury Officials to focus on fiscal sector associations, the Committee of Stock policies and issues: Exchanges and the SADC Bankers' Association. · The Committee of Senior Treasury Officials comprises government officials This Committee for Central Bank Governors drawn from the different Finance Ministries, has done or is doing the following (see and any other Ministries that deal with Attachment 3): finance and investment issues. Accordingly, · It has developed an information bank on this committee is concerned chiefly with policies and structures of SADC central government policy issues. Reporting via the banks and the financial markets in SADC Committee of Senior Treasury Officials are Countries; various sub-committees formed by the · It is monitoring exchange controls of the SADC Ministers of Finance at their meeting countries and annually report on the status in July 1997. These are the sub-committees pertaining in the region; on Macroeconomic Policy, Taxation, · It coordinates training of central bank Development Finance, and Investment. The officials in SADC, maximizing the use of Committee of Senior Treasury Officials the region's training facilities and expertise; maintains a watching brief over two promote training in the field of central independent structures, namely the banking; Committee on Insurance, Securities and · Is developing the payments, clearing and Non-Banking Financial Authorities settlement systems of SADC countries, by (CISNA) and the Association of assisting them to develop a strategic Accountants and Auditors. framework for their payments system; and · The Committee of Central Bank will be looking next at integration Governors (CCBG) consists of the objectives; governors of the SADC central banks and · Is developing a statistical database. A their officials and deals with development of central monetary and financial statistical well-managed financial institutions and database for the region has been set up, markets, cooperation regarding international while the definition of the variables have financial relations, and monetary, been established; investment and foreign exchange policies. · Is devising legal and operational The Secretariat of the Committee, which is frameworks of central banks. A steering responsible for coordinating the committee is formulating recommendations Committee's activities, is located in the on central banks legislation for the region. South African Reserve Bank. The Study areas include the legal basis, Committee also has a Working Group, ownership and structure of central banks, the which meets regularly to discuss the relationship between central banks and the progress of the projects in which the government and relevant institutional Committee is involved. The Working arrangements. Group is chaired by the Secretariat, with participation by the fourteen SADC The CCBG has also established an Information countries being on a rotating basis - Technology Forum (IT Forum) to support the representatives from three SADC countries initiatives of the CCBG and to support the attend each meeting. The Finance and improvement of the information technology Investment Sector Coordinating Unit function in each SADC central bank. A project (FISCU) has also attended the meetings of aiming at defining a common architecture for the Working Group, to enable it to fulfill its banking supervision has been launched. task of coordinating the activities of the Committee of Governors and the Committee 53 With regard to the payment system project, The Eastern, Central and Southern African amongst others, Mauritius has made great strides Federation of Accountants, the SADC in improving its payment system through the Organization of Supreme Audit Institutions adoption of the Mauritius Automated Clearing and the Eastern and Southern African and Settlement System (MACSS) (See Box Association of Accountants-General met at a 2.1). workshop in 1999 and again in 2000 to jointly Box 2.1 Mauritius Automated Clearing and Settlement System (MACSS). An Example of Progress in Payment System. On December 15, 2000, the Mauritius Automated Clearing and Settlement System (MACSS) was introduced based on Real Time Gross Settlement (RTGS) principles to meet international standards for safety, soundness and efficiency. Definition: MACSS is a system that electronically links all the commercial banks in Mauritius to the Bank of Mauritius via a secure, reliable and efficient payments network. It is a large-value interbank payment system that allows funds to be transferred between two counter parties immediately. Advantages: · The MACSS provides a customer the opportunity to link electronically all transaction accounts within the banking system. In addition, the time at which a customer's account is debited is entirely within its control because he/she can determine the time at which the payment instruction ­ a credit transfer or payment order is processed. · The customer will therefore benefit from the speed, certainty and security of its transactions. The banks also share these advantages. Also, the MACSS provides opportunities to the banking industry to offer new cash-management related services that take advantage of intra day finality. · The MACSS can be used to send funds from any account with a commercial bank in Mauritius to any other account maintained with a commercial bank in Mauritius. · A commercial bank receiving the payment instruction incurs no risk in making the associated funds immediately available to its customer because each payment will be settled across the books of the Bank of Mauritius on a transaction-by-transaction basis in real time. · There are no unsettled debts left between the banks as the funds are transferred between the banks at the same time as the payment instructions. There is therefore a risk reduction. The East and Southern Africa Banking discuss matters relating to the accounting and Supervisors (ESAF) have formalized their auditing profession in the broader sub-region cooperation through an MOU with a view to and to decide how to institutionalize cooperation implement and maintain internationally among the private-sector and public-sector acceptable standards of banking supervision related initiatives that they respectively across the sub-region. represent. The Committee for Insurance, Securities, and The inaugural meeting of the SADC Banking other Non-bank Financial Regulators has Association was in March 1998 and is identified some areas where cooperation could cooperating on issues such as good banking take place, including training opportunities, practices; money laundering; and robberies, implementing, regulating and operating central fraud and fraud prevention. securities depositories in member countries, accounting disclosure, and the harmonization of The Committee of Stock Exchanges in SADC legislation concerning collective investment was formed in late 1997 and has identified a schemes. Possible other strategic issues to be number of projects: (i) harmonization of listing addressed include: (i) the supervision of requirements; (ii) development of a model for intermediaries; (ii) harmonization of listing clearing and settlements (based on international requirements; (iii) stock-broker qualifications; standards); (iii) electronic communication; and and (iv) consumer protection. (iv) common level entry exams for stock- brokers. 54 Since the level of development varies greatly the elimination of barriers to intra-SADC trade; between the stock exchanges of the different S identifying and promoting areas in which ADC member states35, membership of the coordination of direct taxation would Committee is to a large extent a learning significantly enhance the attractiveness of exercise for a number of members. One SADC as an investment area; working towards concrete action early on in this Committee's coordination of direct and indirect taxes; existence was by the JSE, which made its minimizing opportunities for tax fraud and systems (back office, accounting, etc) available smuggling and building institutional capacity in to other stock exchanges in the region. member states with particular emphasis on tax policy-making and revenue collection. Since its establishment, the following exchanges have harmonized their listing requirements The Macro-economic Policy Sub-committee, based on 13 principles extracted from the JSE's chaired by Mauritius, has investigated the listing requirements: Botswana, Malawi, feasibility of achieving macroeconomic Namibia, Zimbabwe, Tanzania and Mauritius. convergence in the sub-region and subsequently This was done on the premise that common SADC member countries have signed an MOU listing requirements could lead to cross-border to implement macroeconomic policies that investments and dual listings. The JSE has also would eventually result in the economies offered its technology platform to other converging on inflation, budget deficits, debt exchanges in SADC ­ a common trading and levels of external account positions. platform would facilitate the movement of According to the MOU, the Committee of capital and give foreign investors access to all Ministers of Finance and Investment will stock listed in the region. The Namibian Stock establish a collective surveillance procedure to Exchange was the first to take up the offer and monitor macroeconomic convergence in the subsequently achieved record trade volumes. region, to determine specific targets, to assess The Committee has also reached an advanced progress relative to these targets and to provide stage in preparing recommendations for a central advise on corrective measures. depository system for the region, under its electronic clearing and settlement project. The The Investment Sub-committee, currently SADC exchanges have also successfully consisting of the investment promotion agencies completed the rationalization of entry-level (IPAs), is developing a joint website to examinations for stockbrokers, aimed at communicate investment information and improving the level of expertise in the region's opportunities in the region, is in the process of financial markets. developing a consolidated regional investment promotion strategy, is implementing joint The Tax Sub-committee, chaired by SA, was training programs for IPAs and is developing an established in July 2000 and subsequently an MOU on a Regional Investment Agreement. MOU on Tax Policy Harmonization has been sighed. Its primary objective is `coordination of The Development Finance Sub-committee is taxation policies to the extent necessary to facilitating cooperation among development improve efficiency in tax collection, safeguard finance institutions (DFIs) in the sub-region. regional tax bases and reduce obstacles to intra- The CEOs of DFIs in the region have signed a SADC trade and investment. Amongst others, broad framework MOU in May 2000, which the sub-committee is tasked with compiling a outlines the various areas for their cooperation. comprehensive SADC tax database; determining Subsequently they have decided to pool a common policy on tax incentives, especially resources and establish a development finance those aimed at attracting FDI; working towards resource centre that will coordinate training and other capacity building activities, with a view to establish viable DFIs in the region, which would 35 SADC member countries with stock exchanges are then work within a closer network approach. Botswana, Malawi, Mozambique, Mauritius, Namibia, SA, Swaziland, Tanzania, Zambia and Zimbabwe. 55 They are also investigating the feasibility of a case of no exchange controls, movement of regional development fund for SADC. funds and securities across borders may be inhibited by `friction points' associated with II.3.2.3 Protocol Development Process legal and regulatory differences among and Way Forward countries as well as for bureaucratic or administrative reasons. As part of During the annual meeting of the SADC establishing a common financial sector Ministers responsible for Finance and infrastructure is the issue of accounting and Investment in July 1998, the Ministers adopted auditing and corporate governance an Aide Memoire, which set out the approach to standards. Although the issue is touched developing a Protocol for the Sector. Work has upon in different sub-groupings of the begun on drafting a SADC Finance & sector, it requires coherent and more Investment Protocol and at their annual meeting comprehensive treatment. in July 1999, Ministers reached consensus on the process and timetable for developing the SADC II.3.3 Industry Finance and Investment Protocol. The process is as follows: (i) Sectoral sub-committees and II.3.3.1 Background associations to develop and conclude principles guiding memoranda of understanding (MOUs) The former SADC Trade and Industry Sector in each of their respective areas by July 2000; Coordinating Unit developed an Industrial (ii) A period of at least one year for MOUs to be Development Policies and Strategy document in developed and operationalized and for reviewing 1989, which has not been officially replaced yet progress (July 2000 to June 2001); (iii) despite major political changes, socio-economic Development of a sectoral protocol and specific development paradigm shifts and the move attachments over a two-year period (July 2001 to towards deeper integration in SADC. June 2003); (iv) Agreement on a SADC Finance Amendments to this document have been and Investment Protocol by July 2003; and (v) proposed at various occasions to the Sector Ratification by parliamentary legislatures of Ministers, but these have not been adopted yet. Member States by July 2004. The SADC Industrial Development Policies and To further the regional integration agenda, the Strategy document seems to focus on the question of integrated financial markets beyond manufacturing sector and although it that envisaged in the sub-sectoral finance and acknowledges the linkages with the resource- investment groupings requires consideration of based sectors, the strategy does not elaborate on issues such as: measures to develop these sectors. Critical · How to increase access to financial services? issues for the industrialization process in SADC, Access relates to (i) availability of finance, which will have to be taken into account in the i.e. physical access; and (ii) affordability, amendments or a new Policy and Strategy i.e. income and other quantitative and document, would be to clarify what issues on qualitative constraints as well as price industrial development would call for regional efficiency of various financial service. actions versus those amenable to national level · The free movement of capital remains an actions. Furthermore, linkages between issue for many SADC countries and would economic sectors, particularly cross-cutting require elimination of exchange controls issue, and between the economic and within SADC, as a crucial issue for financial infrastructural, trade, finance, investment, labor system integration. and human resource development sectors would · How could stronger regional financial warrant particular attention, no less with a view markets be developed? What is the scope to address constraints to industry and firm-level for developing a comprehensive regional competitiveness as well as to contemplate the financial regulatory framework? Even in the thorny issue of existing and potential industrial polarization in the region. 56 The remainder of this section focuses on the exports, SADC countries' shares of the mining sector, which has been incorporated international market are relatively important and within the new sectoral grouping related to vary between 10 to 45%.37 trade, industry, finance and investment. On September 8, 1997, SADC signed the II.3.3.2 Mining Protocol on mining to serve as an instrument for cooperation between member States. The Mining is the backbone of most SADC Protocol entered into force on February 8, 2000. economies. It represents an important source of As of February 2001, ten countries (Botswana, foreign exchange earnings, output formation and Lesotho, Malawi, Mauritius, Mozambique, employment within the region. In 2000, it Namibia, South Africa, Tanzania, Zambia, and accounted for nearly 60% of the region's foreign Zimbabwe) have ratified the Protocol. SADC exchange earnings equivalent to 10% of GDP has initiated an important Mining Program of and about 5% of formal employment. SADC Action comprising 38 projects spread into six Table 2.4: Employment in the SADC Mining Industry 1994-2000 Country 1994 1995 1996 1997 1998 1999 2000 Angola 23638 24692 24220 25680 25215 24000 24000 Botswana 13272 12779 13024 13055 15255 14345 12961 DRC NA NA NA NA NA NA NA Lesotho NA NA NA NA 550 NA 636 Malawi NA NA NA NA 2700 3700 NA Mozambique 974 1032 929 872 NA NA NA Namibia 9693 9775 8540 8214 7686 5427 6248 South Africa 610294 595384 562249 551677 469045 436702 425752 Swaziland 1373 1301 1417 1220 NA NA NA Tanzania NA NA NA NA 60000* 1000000* 1500000* Zambia 47036 45461 42522 37150 36065 25000 NA Zimbabwe 44835 82846 70087 53432 48449 48091 NA Total 751115 773270 722988 691300 1675337 1532265 1978845 Source SADC Mining Sector Annual Report (July 2000-June 2001). Note: NA: Data not available; * Tanzania data includes informal sector employment. countries produce and export a number of sub-sectors: Information, Geology, Mining and mining commodities, including chromite, cobalt, Marketing, Mineral Processing, Environment diamonds, gold, manganese, copper, platinum, and Human Resources Development. uranium and other industrial minerals. Considerable progress has been made in Moreover, the DRC is exceptionally abundantly implementing these projects, in particular those endowed with mineral resources including under the Geology subsector, and the Mining copper, cadmium, petroleum, and diamonds. SA and Marketing subsector. Most of the projects is the world's largest producer of gold, under the Environment subsector are either producing 430778 kg in 2000 followed by the completed or nearly completed. USA 340000 kg in 1999 and Australia 265,000 in 2000.36 It is also the world's largest producer (i) Reforms in the Mining Sector of the platinum group of metals, followed by Russia, and accounts for over 46% of the total Many SADC countries have improved the legal world production while having about 55% of and regulatory framework in the mining sector global reserves. With 50% of world production, to facilitate inflows of FDI and attract mining De Beers (a South African company) is the investment. For instance, in July 1999, world's largest producer of gem quality Botswana's Parliament passed a new Mines and diamonds. With regard to mining commodity Minerals Act and introduced a new mining 36 SADC Mining Sector Annual Report (July 2000-June 37 See Official SADC Trade, Industry, and Investment 2001). Review, 1997-2001. 57 Table 2.5: Reforms and Policy Developments in the Mining Sector Countries Mining Reforms and Policy Developments Angola · Revision and regulation of the Mining Law 1/92and the Diamond Law 16/94; · Establishment of company for commercialization of Angolan diamonds, and a new system for diamond marketing; · Reduction of the size of the diamond concessions for better control of mining and avoid sleeping investors; · Creation of the Guiche Unique for diamond security; · Creation of computerized Geological and Mining Data Base of the country; · Establishment of Geographical Information System (GIS). Botswana · 1999: New Mines and Minerals Act was passed by Parliament and became effective on 1st December 1999. DRC · February 2000: First Mining Policy Dialogue Seminar was held in Kinshasa; · The Government has committed to adopt an attractive set of mining regulations to encourage foreign investment. Lesotho · The Government is currently working on a new minerals Act. Malawi · The process of reviewing the current Mines and Minerals Act is underway. Namibia · New Diamond Act came into operation on the 1st of April, 2000. SA · A white paper on A Minerals and Mining Policy has been finalized in October, 1998; · A new Mine Health and Safety Act was implemented in January 1997; · The new Mineral Development Bill is currently being drafted. Swaziland · The existing mining legislation is being reviewed; · Legislation specific to small scale mining is being developed. Tanzania · The Government has undertaken the commitment to no longer directly involve itself in mineral exploration and extraction activities. Zambia · The Government has withdrawn direct participation in the operations of the mines. · A mining policy has been developed. Zimbabwe · Proposals for a revised and Consolidated Fiscal Framework for Mining has been developed. Mining incentives include: (i) corporate tax rate at 25%; (ii) mining companies have the right to carry over losses indefinitely; and (iii) exploration expenses may be deducted as it is incurred or carried forward until income is realized. Source: SADC. Mining Sector Annual Report (July 2000-June 2001). taxation system. South Africa has recently earths, gold, gemstones, graphite, coal, iron, introduced its new Mineral Development Bill. dimension stone, heavy mineral sand, bentonite Zimbabwe is developing a revised and and phosphates. In Namibia, progress has been consolidated fiscal framework for mining. Most achieved on the Langer Heinrich Uranium SADC countries are supporting initiatives for project. TCL mines re-opened in March 2000 developing Small Scale Mining (SSM) with the under a new company, Ongopolo Mining and view to alleviate poverty. In Angola, the Processing Limited. In addition, Malawi is Government has considerably simplified developing an offshore mining activity. licensing procedures for SSM activities. In Tanzania is developing a new gold mine through addition, the supervision of their activities has the Anshanti Goldfields Ltd/AngloGold been eased. SSM projects are not required to company. Rehabilitation programs have started submit detailed reports on the operations carried in mining sector in Zambia. In this regard, out. Table 2.5 summarizes some of the main Bwana Mkumbwa Mining Limited is exploring reforms that SADC countries have been the possibility of cross-border mining in the undertaking. Democratic Republic of Congo for copper oxide ore. Moreover, Zambia Consolidated Copper (ii) Recent Investments in Mining mines, Smelter Company Limited is rehabilitating the Nkana smelter, Refinery and In many SADC countries, the mining sector has Acid Plants. experienced remarkable development in recent years. In Lesotho, the Government signed an With the collaboration of the European Union, agreement on June 13th 2001 with Liqhobong SADC has held mining investment forums to Mining Development Company (Pty) Ltd inform investors from Europe, North America, (LMDC) on commercial development of the Australia, South Africa and Japan of potential Liqhobong Diamond Mine. In Malawi, two benefits and high returns that may arise from companies, Granite Limited and Raval Building investing in this sector.38 These forums Contractors came on stream and are involved in contributed to attracting new investments into extraction of Green Granite and various Dimension Stones. Mozambique is in a process of rehabilitating ten deposits destroyed during 38 Since 1994, two SADC Mining Investments Forums the war. These cover commodities such as rare have been held with the collaboration of the European Union. 58 Table 2.6: Mineral Investment Projects in the SADC Mining Industry, 2000 Country Company Mineral Cost US$ million Planned Date of commencement (Unless otherwise output per and/or status specified) annum Botswana 1)Debswana Diamond Co. (Orapa Diamonds 275+ 12 m carats In operation Expansion Project) 2)Debswana Diamond Co. Diamonds 76+ - - (Jwaneng Aquarium Project) Malawi Paladin Uranium 60 - - Mozambique Billiton (Mzal Project) Aluminum 1.3 billion 250 kt In operation Namibia 1) Anglo American Plc Bateman Zinc 450 150000 tons 1st quarter, 2003 and SNC-Lavalin (Skorpion Zinc Project) 2)Rossing Uranium Ltd Uranium 5.8 - Construction of ore sorting plant 3)Rosh Pinah Zinc Co. Zinc 4 - Expansions of ore production capacity SA Various Companies Primary 3326 - - minerals, gold, platinum, processed minerals, other Tanzania 1)Ashanti Goldfields Ltd and Gold 165 500,000 ozt June 2000 Anglogold 2)Kahama Mining Corporation Gold 350 400,000 ozt 2nd quarter of 2001 3)Africa Masharki Gold Mines Gold 80 200,000 ozt Late 2001 Zambia 1)Chambishi Metals Plc Cobalt, Copper 130 4200 (Cu) 6000 (Co) 2)Chibuluma Mines Plc Copper 34 480000 tons May 2001 3)Non-Ferrous Corporation Africa Copper 150 - February 2001 Mining Plc 4) Konkola Copper Mines Copper 523 160000 tons - Zimbabwe 1)Zimplats and BHP Minerals Platanium 69.09* 2.2 m tonnes 2nd quarter of 2001 2)Rio Tinto Diamonds 13.36* - 2002 3)Sino-Zimbabwe Cement Project Cement 69.09* 900 tonnes In operation Source: SADC. Mining Sector Annual Report (July 2000-June 2001). Note: + at a Pula/dollar exchange rate of 4.7281 (February 2000); * At a Zim$/dollar exchange rate of 43.4197. the mining sector, including the Golden Pride instance, the expansion of tourism, agriculture or Mine in Tanzania, the Gamsberg zinc-lead mining activities depends on adequate deposits in the Northern Cape Province in South infrastructure systems; (ii) in the case of a sub- Africa and the Zimplats Platinum project in region such as SADC, the development of Zimbabwe. Other new investments include that transport and communications will promote of Chibuluma Mines Plc, which commenced the complementarities between the member development of a new mine at Chibuluma South; countries, enhance intra-regional trade and may construction of the Skorpion zinc project started contribute to increasing the international in Namibia; the Mozambique Aluminum competitiveness of the region's products and Smelter Project (MOZAL) started to produce exports. For example, inadequate transport metal in June 2000; while in Botswana, the infrastructure services represents a critical Orapa expansion project, which has doubled the obstacle to intra-regional trade and the high cost mine's annual production to 12 million carats, of transport in the sub-region - estimated at started in May 2000. about 30-40% of the total value of goods sold within the sub-region - is an important non-tariff II.4 INFRASTRUCTURE AND barrier to trade; and (iii) private sector SERVICES involvement in infrastructural development and service delivery per se have the potential to II.4.1 Transport and Communications attract considerable amounts of FDI. The economic advantages of a well-developed II.4.1.1. Regional Cooperation and transport and communications infrastructure Integration through the include: (i) serving the need of other sectors. For 59 Transport, Communications and The substantive provisions contained in chapter Meteorology Protocol 8 include: the development of harmonized maritime and inland waterway transport policies; The Transport, Communications and a call for Member States to undertake Meteorology Protocolprovides a comprehensive appropriate institutional restructuring to improve framework for cooperation in all modes of port operations; the application of international regional transport. It includes all policy, legal, standards and human resource development. regulatory, institutional, operational, logistical, technical, commercial, administrative and Chapter 9 creates a framework for cooperation human resource issues related to the region's in civil aviation. Its primary objective is to transport. In addition, it incorporates ensure the provision of safe, reliable and international, continental, regional and national efficient services with a view to improving dimensions of transport and all public and levels of service and cost-efficiency in support private actors in the region. of socio-economic development in the region. In addition, it aims to overcome the constraints Chapters 4 (road infrastructure), 5 (road of small national markets, market restrictions transport) and 6 (road traffic) provide a and the small size of some SADC airlines in comprehensive, albeit ambitious, framework for order to further ensure the competitiveness of achieving harmonization of regional road traffic regional air services in a global context. and transport systems. The Protocol refers explicitly to the involvement Chapter 7 provides a comprehensive framework of the private sector, restructuring of state for regional cooperation in rail transport. Its enterprises and cooperation between the private objective is to `facilitate the provision of and public sectors. It also seeks integration of seamless, efficient, predictable, cost-effective, regional systems through compatible policies safe and environmentally-friendly railway and legislation, rather than through explicit service which is responsive to market needs and operational or investment activities, and provides access to major centers of population emphasizes the importance of competition as a and economic activity.' To this end, the means of improving the diversity of services. provisions of chapter 7 include: a harmonized Specific obligations on Member States are in regional railway policy which incorporates a attachments. A number of attachments have phased and coordinated economic and already been prepared, including: (i) model institutional restructuring of railways; legislation on flexible investment by the private monitoring the adequacy of rail infrastructure sector in infrastructure and the provision of required to meet the region's developmental services; on establishing road funds, road boards needs; cooperation on operational matters, the and autonomous road agencies; on economic development and implementation of compatible and institutional restructuring of railways, on technical standards in respect of infrastructure port restructuring; and on the economic and and operational equipment and human resource institutional restructuring of the development. telecommunications industry and postal services; and (ii) MOUs on border-post design Chapter 8 provides a comprehensive framework operations; on road vehicle overloading control; for regional cooperation in the areas of maritime on economic and institutional restructuring of and inland waterways transport. Its objectives civil aviation; and on the establishment of are inter alia: to maximize regional and regional multi-modal search and rescue systems. international trade and exchange; to provide appropriate frameworks for economic and In 1999, three attachments were incorporated concomitant institutional restructuring; to into the Protocol, namely those on: (i) common establish a customer-sensitive and demand- definition of SADC regional trunk roads and driven approach; and to promote the common route numbers; (ii) harmonized codes establishment of an integrated transport system. and format for driving licenses; and (iii) 60 establishment and management of the SADC Africa and Tanzania­ have established permanent mission to ICAO. autonomous road agencies (see Attachment 3). II.4.1.2 Implementation Status of SADC At regional level, the railways sub-sectoral Protocol On Transport, committees were established in April 2001. Communications and Meteorology Many operator and other associations have been (see Attachment 3) established, including: the Southern African Railways Association (SARA), the Airlines The Protocol entered into force on 6th July 1998, Association of Southern Africa (AASA), the but three countries (the DRC, the Seychelles, Federation of East and Southern African Road and Zambia) have to ratify it yet. Eight Transport Association (FESARTA), the Ports countries (Angola, Botswana, Malawi, Management Association of Eastern and Mauritius, Mozambique, Swaziland, Tanzania Southern Africa (PMAESA), the Federation of and Zimbabwe) have completed their national Clearing and Forwarding Associations of micro-actions plans (MICAPs)39. The signatory Southern Africa (FCFASA), Southern Africa countries to the Protocol have made Telecommunications Administrations (SATA), considerable progress in achieving policy, legal, Telecommunications Regulators Associations of and institutional reforms in accordance with the Southern Africa (TRASA), and the International Protocol. Particular progress is evident in Transport Workers Unions (ITF). building an institutional framework for managing and implementing the Protocol as well (ii) Monitoring of Progress in Protocol as enhancing the business environment for Implementation attracting private investments. The effective monitoring of progress on Protocol (i) Institutional Framework for Managing implementation requires that SADC Member and Implementing the Protocol States submit quarterly reports based on the MICAPs. During the reporting year 2000-2001, Each SADC country has formed a national it transpired that SA, Zambia, Namibia, protocol implementation coordination team Seychelles, the DRC, and Lesotho have not been (N-PICT). The team includes a national able to complete their MICAPs. The main coordinator, sub-sectoral coordinators (SSCs) reason offered for this failure was the lack of and deputy SSCs for each of the eight sub- financial resources subsequent to the termination sectors, namely roads, railways, maritime and of the USAID financed STEP/PAAS project at inland waterways, civil aviation, integrated the end of 1999. A comprehensive monitoring transport, telecommunications, postal services, and evaluation initiative of Protocol and meteorology. implementation is being impeded by the fact that most SADC countries have been failing to A number of SADC countries have established a provide the required quarterly reports to roads board, an autonomous road authority SATCC-TU. For the period 2000/2001, only and/or a road fund as required by the Protocol. Namibia and Mozambique submitted all four For instance, eight countries ­Lesotho, Malawi, quarterly reports. Mauritius, Mozambique, Namibia, South Africa, Tanzania and Zambia­ have established road (iii)Reforms to Attract Private Investments boards and road funds. Five SADC Member States ­Malawi, Mozambique, Namibia, South SADC countries are also undertaking reforms to attract private sector investment in infrastructure 39 National micro action plans (MICAPs) are strategic and involvement in service delivery. As far as planning instruments. They could also serve as a tool ports are concerned, these include to detect and monitor delays in reforms on a case-by- concessioning of ports and restructuring of port case basis. MICAP development is supposed to be activities (see Attachment 3). For example, initiated by the National and Sub-sectoral Coordinators in an inclusive fashion. Mozambique has concessioned most terminals in 61 the port of Maputo, the container terminal in the discernible, e.g. from 1997-1999, real transport port of Beira and all port operations at the port cost of a container on the Durban-Ndola railway of Nacala (as part of the privatization of CFM- route declined from US$3100 to US$2500. North and the Nacala Corridor Development). Tanzania has concessioned the container Civil aviation is the sub-sector where progress terminal in the port of Dar es Salaam as well as have been mixed up till now. Only three all freight operations at the inland port of countries (SA, Tanzania, and Zimbabwe) have Kigoma on lake Tanganyika. Zambia autonomous civil aviation authorities. Seven concessioned the inland port of Mpulungu at the countries (Angola, Malawi, Mauritius, Namibia, southern end of lake Tanganyika. In SA, SA, Tanzania and Zambia) have established PORTNET was split into two autonomous autonomous airport companies. Aeroport di divisions: a landlord port authority division and Roma has acquired 20% of the SA airport a port operations division. Angola and company shares. In Tanzania, the private sector Mauritius have passed Port Authority Acts. participates in the civil aviation sub-sector through the management lease by KADCO, a The road transport industry has always been private SA consortium of companies, of the dominated by the private sector. However, more Kilimanjaro international airport. Tanzania's recently, the private sector has become involved regulatory framework is not fully developed, but in the provision of road infrastructure e.g. the its Civil Aviation Committee has initiated a N4 toll road, i.e. the section between Maputo in regulatory harmonization program that began in Mozambique and Witbank in SA. In addition, May 2000. SADC has also been establishing an the private sector participates in road funds and integrated communications navigation road boards in eight countries (Lesotho, Malawi, surveillance/air traffic management (CNS/ATM) Mauritius, Mozambique, Namibia, SA, system to ensure air traffic safety. Tanzania, and Zambia). With regard to airlines and air transport In the railways sub-sector, progress in the services, the airline sub-sector is dominated by institutional framework relates to setting down government-owned airlines. Few countries have the SADC Regional Trunk Route Network restructured and privatized their national airlines (RTRN) and the establishment of the Railway partially or fully. Zambia is the only SADC Sub-sectoral Committee in April 2001, with its country whose government does not currently primary functions being: (i) the coordination of own an airline - Zambia Airways has been policy, legislative and institutional reforms and liquidated after accumulating huge losses and (ii) the facilitation of the public/private sector credit. Linhas Aereas de Mocambique has been partnerships. Although SADC has still a restructured and improved its operations by considerable way to go in reforming the railway reducing its fleet, retrenching and setting up system, some progress has been made in management information and financial system. involving the private sector or other operators SA has sold 25% shares of its national airline to with a view to improve efficiency: Malawi has Swissair (but bought back this equity stake when concessioned its national railway to a private Swissair was liquidated early in 2002), while consortium; Mozambique has agreed with the Swaziland has privatized its airline and taken same consortium for concessioning of the CFM- 60% in the replacement airline, Airlink North; Tanzania and Zambia are in the process Swaziland. of concessioning their railways; and Botswana, SA and Zimbabwe are considering strategies to II.4.1.3 Regional Cooperation in the Road attract the private sector in the development and Sub-sector operations of their railways. Although it would probably not be easy to reduce the SADC SADC has undertaken many actions to improve average railway tariff, which is in the order of 4 regional cooperation in the road sub-sector. US cents per tkm, to the USA's levels of 1.5-2 · Harmonized road design standards: Most US cents per tkm, progress is already member States are implementing the road 62 design standards and specifications as II.4.1.4 Transport Corridors agreed to on the sub-regional level. The following five documents represent these Southern Africa is endowed with well- standards: (i) SATCC Standards established historical trade routes or transport Specifications for Road and Bridge works; corridors. Corridors carry 50% of SADC port (ii) SATCC Code of Practice for the Design throughput (excluding SA's bulk commodities) of Roads, Bridges and Culverts; (iii) and nearly 100% of landlocked countries' SATCC Code of Practice for the Design of exports/imports. Corridors (including their Pavements; (iv) SATCC Code of Practice ports) carry more than 20% of intra-regional for the Geometric Design of Truck Roads trade and almost 80% of the region's trade with and (v) SATCC Code of Practice for the the rest of the world.40 Despite efforts to Pavement Rehabilitation. In addition, the enhance the corridors' performance, key Association of Southern African National constraints persist, which limit the corridors' Road Agencies (ASANRA) was formed in contribution to the sub-region's growth and March 2001. Its responsibilities include development (see Box 2.2). However, the operational issues such as identification and Maputo Development Corridor is an example of harmonization of best practices of regional a concerted multi-country effort to address such standards (material safety, design, constraints and, moreover, to turn a traditional construction and maintenance); development transport corridor into a development corridor and harmonization of road management (see Box 2.3). Another example may be the systems; implementation of harmonized Trans-Kalahari Corridor, involving three SACU road user changes and promotion of one- countries, i.e. SA, Botswana and Namibia, stop border concept. which are working in a concerted fashion to · Road traffic: SADC has designed the address such constraints. However, the three Model SADC Driving License. Angola, countries have still to formalize some of the South Africa and Zambia are already issuing critical understandings reached before they the model license, while Malawi has made could be fully implemented. preparations to launch the license in 2001. · Road transport: Efforts are made to improve cross-border traffic facilitation including through harmonization of axle load limits and gross vehicle mass. In addition, the creation of the Regional Vehicle Overload Control Association is underway to deal with issues regarding overload control in the region. 40 World Bank estimates. 63 Box 2.2: Corridors: Opportunities, Strengths and Weaknesses The Corridors are systems of physical infrastructure of transportation (by road or rail) that link major ports to their hinterland and to landlocked countries in Southern Africa. There are seven main corridor systems: § Beira-Lusaka-Beira(Mode:Road/Rail);Beira-Lilongwe/Blantyre-Beira(Mode:Road); § Maputo-Johannesburg-Maputo(Mode:Road/Rail);Maputo-Harare-Maputo(Mode:Rail);Maputo-Manzini-Maputo(Mode:Road/Rail); § Nacala-Lilongwe/Blantyre-Nacala(Mode:Rail); § North/South-Harare (via Beitbridge)-Durban (Mode: Road/Rail); North/South-Lusaka (via Plumtree)-Durban (Mode: Road/Rail); Nort/South-Lilongwe/Blantyre (via Tete)-Durban (Mode: Road/Rail); § Tazara-Lusaka-DarEsSalaam(Mode:Road/Rail);Tazara-Lilongwe-DarEsSalaam(Mode:Road); § Trans/Caprivi-Lusaka-WalvisBay(Mode:Road); § Trans/Kalahari-Pretoria/Johannesburg-WalvisBay(Mode:Road). Main import/export corridors are those linking the ports of Dar Es Salaam, Nacala, Beira, Maputo, Durban, and Walvis Bay to their hinterlands. There are also smaller road corridors: Johannesburg/Manzini; Durban/Manzini; Cape Town/Windhoek and Johannesburg/Windhoek through Upington. Usefulness and Importance of Transport Corridors The usefulness of transport corridor systems stems from the major benefits they provide to the region: (i) corridors facilitate intra-regional, inter- continental and domestic trade of SADC countries; and (ii) they ease regional transport and transit flows and increase transport efficiency. It was estimated that corridors carry 50% of SADC port throughput (excluding SA's bulk commodities) and nearly 100% of landlocked countries' export/imports. In terms of their contribution to intra-SADC trade and between those countries and the rest of the world, measured by freight tonnage, corridors (including their ports) represent 22% of intra-regional trade and 78% of the region's trade with the rest of the world. The relative importance of corridors depends on their transport mode and the performance indicator used. Measured by total international traffic carried, the North-South Corridor system is the most important one. This record reflects the fact that this corridor system is the most extensive of all and SA's dominant share in intra-regional traffic is moving along these axes. Major Constraints and Weaknesses There are several factors that limit the efficiency of transport corridors: § Cost-raisingfactors: Longborder post delayswheretheaveragewaitingtimescanreachahighofmorethan30hoursforBeitbridge(the most important road border post of the region) and Victoria Falls, and with incidents reported of shipments from Durban to Harare spending about one quarter, and from Johannesburg to Harare up to one third of the total transit time at the border. Furthermore, higher vehicle operating costs on certain substandard road sections, fuel price differentials, high tariffs, losses due to theft, costs of bribes/fines are, among others, elements that limit corridor efficiency. For instance, data for the port of Durban show that approximately 60% of the ships that arrived at the container terminal in 1995, 1996, and 1997 had been delayed by 20 hours on average while waiting time could last more than a week in some cases. The SADC rail tariffs range of US cent 3-5/tkm are considered high by international standards. § Theeconomicand physicalenvironmentinfluencescorridors'performance. Thelowproductionlevels,lowpopulationdensity,andlong distances to either import/exports ports result in small traffic volumes. § Deficienciesinthebusinessenvironment: Poorpolicyandregulatoryframeworks, managementconstraintse.g.cancellationofscheduled trains and unpredictable delays; lack of information systems to facilitate communication between the different rail companies and the absence of technical cooperation and marketing exert additional constraint on the corridors' performance. Railway transport also faces several problems including overstaffing, dependence on government subsidies and tariffs barely sufficient to cover operating costs. Proposed Measures to Improve Transport Corridors Performance These measures are stipulated in the SADC Protocol for Transport, Communications and Meteorology and aimed at committing and encouraging member states to implement reforms to improve the efficiency of their transport systems. In railways and ports, reforms include reducing the role of governments in operations, increasing private sector involvement in infrastructure ownership and operations and improving information systems. In orderto promote regional co-operation and integration in transport corridors, SADC countries are urged to: · Harmonize technical standards for infrastructure and operational equipment (such as signaling and communication systems); · Establish regional traffic rights for railway operators across borders in order to enhance competition and minimize delays at borders posts; · Standardize reporting and accounting procedures and performance indicators. Similar measures are proposed to enhance cooperation between ports. Actions Undertaken Some SADC countries have taken measures to enhance performance of their transport system. Malawi has restructured and concessioned its railway system; Mozambique has signed a concession for its northern system; Zimbabwe has concessionedone main rail line from Beitbridge to Bulawayo and is promoting private sector involvement in its total rail system. Some measures have also been taken to address the issues of delays at border posts, low quality of border design and services and the lack of coordination and extension of operating hours. E.g., the coordination and extension of hours have resulted in significant reductions in delays at the Botswana border. The establishment of a good clearing facility at the Ressano-Garcia/Komatipoort border post has led to some improvements on the Maputo Corridor. For ports, there are already, among others: the harmonization of regional port policy and standards and the development and implementation of uniform port performance indicators based on the UNCTAD model. Potential Gains of Improvement of Transport Corridors Implementation of the proposed measures may result in a number of benefits: (i) reduction of costs: regional cooperation and integration in railways, road and ports may enhance the quality of service provided by corridors and their ports, with an immediate advantage being reduction of delays at the border posts. Estimates indicate that a reduction in ship delays could lead to potential annual savings of $US330 million from reduced user charges for transport and handling, savings on inventory costs and user benefits; and (ii) increases in productivity, improved financial management and service provided to customers at lower prices are potential gains stemming from private sector participation. 64 Box 2.3: The Maputo Development Corridor Background The Maputo Development Corridor (MDC) links the port of Maputo in Mozambique with Gauteng, the SA province that is the nation's industrial heartland and in which Johannesburg is located. In the 1970s the corridor was a major export route for SA and a significant generator of foreign exchange for Mozambique. However, after Mozambique's independence, political considerations led SA to develop alternative routes, primarily through Natal on SA's east coast. The combination of this event with the inefficiency in Mozambique's state-run ports and railways and disruptions from the country's civil war resulted in a substantial decline in the Maputo Corridor activity: Port volume fell from about 11 million tons per annum at independence in 1975 to about 1.6 million tons per annum in the mid-1980s. The MDC was the first of the Spatial Development Initiatives (SDIs) to be initiated in 1995. The MDC has been developed through a joint initiative of the governments of SA and Mozambique and with the participation of various public and private groups including the World Bank. The initiative focuses on rehabilitation and upgrading of the traditional trade and transport links. Core elements · The upgrading/construction of a toll road linking Johannesburg in South Africa to Maputo in Mozambique · The improvement of rail and port operations in Mozambique to re-establish competitiveness of the transport route. The Key Objectives are · To rehabilitate the core infrastructure along the corridor with minimum impact to the fiscus (road, rail, port, energy, border post); · To maximize investment in both the inherent potential of the corridor area and in the added opportunities which the infrastructure rehabilitation will create; · To ensure that the development impact of this investment is maximized, particularly to disadvantaged communities; · To ensure sustainability by developing policy, strategies and frameworks that encompasses a holistic, participatory and integrated approach to development. Key Activities and Progress · Development of key infrastructure: the two governments decided to pursue the reconstruction of the Witbank-Maputo road (N4 Toll road) as a BOT toll road project. They awarded a 30-year concession to Trans African Concession (TRAC) in 1997, with a total anticipated investment of US $ 250 million. · Rehabilitation of Maputo Port: the Government of Mozambique expected to achieve `financial closure' by June 2001 for a 15-year management agreement with Mersyside Docks and the Harbour Company from Liverpool (UK). · Concession of the Southern Mozambique Railways Network in two parts. First part (Limpopo line to Zimbabwe, the Global line to Swaziland and the marshalling yards near Maputo) has been concessioned to Consortia 2000 with the second part (Ressano Garcia line to South Africa) to be concessioned to Spoornet. · Development of new energy supply: a common project between Eskom (SA), EDM (Mozambique) and the Swaziland Electricity Board, known as Motraco, with the objective of constructing electricity lines from South Africa into Mozambique. · Upgrading of the border post between South Africa and Mozambique at Ressano Garcia. Private Sector Involvement · The Mozambique Aluminum Smelter (MOZAL): private partners involved are Billiton (47%), Mitsubishi (25%), the IDC of South Africa (24%) and the Government of Mozambique (4%). Future output expected is 500 000 tons of aluminum per year. · The Maputo Iron and Steel Plant (MISP): construction of an iron and steel plant in Mozambique. · Beluluane Industrial Park (BIP): establishment of an industrial free zone adjacent to Mozal. Joint venture involving CPI (Mozambique), Chiefton (Australia) and Grinaker (South Africa). · Natural Gas Industry Projects: Sasol is constructing a 1000 km pipeline from the Mozambique gas fields to Secunda in Mpumalanga. Impact of the MDC · Private sector financing: it is estimated that some US$ 600 million (mainly private sector) in investment has been committed to the key infrastructure projects. · Job creation: it is estimated that some 15000 jobs have been created in the MDC area through the larger infrastructure and sector projects. · Movement of freight and people through the Ressano Garcia/Komatipoort border post have seen strong and steady growth. The number of `import entries' has increased from 267 in 1995/96 to 4130 in 2000/01 or 58% per annum. `Export entries' have increased from 8070 in 1995/96 to 112595 in 2000/01, or 55% per annum. Movement of people (both ways) through this border post have increased from 365 229 (1993) to 1 946 329 (2000) representing a growth of about 27% per annum41. World Bank's Involvement The Bank Group has been directly or indirectly involved in supporting many of these projects through a combination of loans, grants, and technical assistance. The Maputo Corridor development is widely supported in Mozambique and SA, and it has raised considerable interest in neighboring countries such as Swaziland, Botswana, Namibia, and Zimbabwe. The initiative is fully consistent with the Bank's Country Assistance Strategies for Mozambique and SA, as well as with the 1998 Southern Africa regional strategy. It provides an attractive example of public-private partnership, with the private sector providing most of the investment. 41 Source: Immigration ­ Lebombo Border post 65 II.4.1.5 Communications · enhance service interconnectivity in the region and globally. As indicated earlier, although the SADC region is not well equipped in the area of The provisions of Chapter 10 of the Protocol communications, the region has made some provide a comprehensive framework for progress in reforming the sector, resulting in a achieving these objectives. They define the roles relatively rapid expansion of particularly the of both the public and private sector in the mobile network, while the fixed-line network provision of telecommunications, pronounce has also seen some growth in the 1990s. At the upon ways of procuring finance to implement turn of the century, the number of fixed lines the region's agenda, and establish an stood at around 6,747,824 - equivalent to an institutional framework for the implementation average regional teledensity of five per 100 of a regional telecommunications network. inhabitants, with access varying widely across countries. The sub-region still lags far behind In the telecommunication sub-sector, in order other regions in the world, although it fares to develop cooperation between member states, better when compared to the averages for SSA, SADC countries have set up associations of excluding SA. telecommunications regulatory authorities and of telecommunications operators, namely Chapter 10 of SADC's Protocol on Transport, Telecommunications Regulatory Association of Communications and Meteorology, adopted in Southern Africa (TRASA) and Southern Africa August 1996, creates a framework for Telecommunications Associations (SATA). cooperation in telecommunications. It outlines a TRASA established its office in South Africa. regional telecommunications policy; develops a TRASA's main objective is to enhance service common understanding of `universal service'; provision by establishing efficient creates a framework for monitoring regional telecommunications networks and services telecommunications provision and maintenance; within the region. One of its major activities is exhorts Member States to achieve cooperation in to develop guidelines on specific regulatory telecommunications; provides for a regulatory functions that its members can adopt and framework for the region's telecommunications; implement at the national level. Its main defines the responsibilities of national regulatory achievements include: (i) completion of a bodies; calls for the harmonization of technical guideline on interconnection; (ii) development standards; seeks to achieve cooperation in the of a regional frequency band plan; and (iii) realm of human resource development; and establishment of a joint telecommunications- creates a framework for the region's relations broadcasting committee. With the restructuring with international bodies. of SATA in December 1999, this association has also modernized its functioning. In order to take advantage of international technological developments and developing There are also a number of other developments national telecommunications networks for the noticeable in the telecommunications sub-sector, provision of reliable, effective and affordable e.g. new mobile telephony operators are being telecommunications services, the objectives of licensed; internet demand is growing; and regional cooperation are to: institutional frameworks are being transformed · ensure adequate high quality and efficient to enhance the competitive environment. services responsive to the diverse needs of Independent telecommunications regulatory commerce and industry in support of bodies exist in Angola, Botswana, Lesotho, regional social and economic growth; Malawi, Mauritius, Mozambique, Namibia, SA, · achieve regional universal service with Tanzania, and Zambia. Although the regard to telecommunications services and privatization process is progressing steadily, full regional universal access to advanced private sector participation remains limited, information services; and while the process of enabling other fixed service operators to establish is slow. Lesotho is the 66 only one that has completely privatized its II.4.2 Energy telecommunications sub-sector, while Seychelles and SA have partially privatized their The sub-region is richly endowed with huge and national telecommunications operations. Six of a variety of energy sources. However, the incumbent fixed service providers (Lesotho, development of these resources is constrained by Malawi, Mauritius, Seychelles, SA and Zambia) factors such as the shortage of equipment, the are operating privately with strategic equity inability of SADC energy utilities to meet partners. Seven countries, Botswana, Mauritius, demand, and tariff and pricing rules. These and Seychelles, SA, Tanzania, Zambia and other obstacles limit energy's potential to serve Zimbabwe have two or more cellular phone effectively the needs of the people of SADC, operators. Ten countries have more than two with an average 75% of the SADC population internet services providers each. lacking access to electricity, while in some countries energy supply is unreliable and In the postal services sub-sector, the Protocol expensive, contributing to an uncompetitive provides for an independent Postal Regulator business environment. Table 2.7: Policy and Regulatory Frameworks and Status of Privatization and Competition Country Policy and Regulation Regulation Market Operation New Policy New Law Autonomous Incumbent Privatization Competition Regulator Mobile Internet Angola Y Y Y N N F Botswana Y Y Y N D F DRC n/a n/a n/a n/a n/a n/a Lesotho Y Y Y Y N N Malawi Y Y Y Y I/P F Mauritius Y Y Y Y F N Mozambique Y Y Y N I/P F Namibia Y I/P I/P(R) N N F Seychelles Y Y N Y D F South Africa Y Y Y Y F F Swaziland I/P I/P N N N F Tanzania Y Y Y I/P F F Zambia Y Y Y Y F D Zimbabwe I/P I/P I/P N F F Progress/Y 11 10 9 6 7 10 Source : SATCC-TU. March 2001. Note: n/a: Not available; Y:Yes; N: No; I/P: In progress; Non-basic: Services other than fixed telephone; F: More than two service providers; D: Duopoly progressing to full; R: Regulatory authority exists but yet to be strengthened under new law. which has as primary duty the promotion of consumer/user interests by encouraging II.4.2.1 The SADC Protocol on Energy: competition and high standards of service from Objectives and Implementation Status operators as well as by regulating prices. Five countries (Malawi, Mozambique, Namibia, SA Recognizing that energy problems are common and Tanzania) have established regulatory issues within the region and that countries may authorities and most countries have separated benefit from cross-border cooperation in the postal services from telecommunications. With energy sector, SADC countries signed the regard to the meteorology sub-sector, Energy Protocol in August 1996, which then Mozambique and Tanzania have established entered into force on April 17, 1998. The autonomous meteorology authorities or Protocol focuses on the following major executive agencies. objectives: · Harmonization of national and regional energy policies, strategies and programs on the basis of common interest; 67 · Co-operation in the development and power exchange in the region. Reforms utilization of energy and energy pooling to have been made to introduce new pricing ensure security and reliability of energy regimes to ensure more sustainable and cost- supply in the most efficient and cost- reflective energy pricing. However, the effective manner; effectiveness of the pricing regime may be · Promotion of joint development of human hampered by high inflation. In fact high resources and organizational capacity inflation, stemming from high currency building in the energy sector; and devaluations, had led to tariff increases of · Standardization in appropriate energy over 100 per cent in local currency terms for development and application. some countries without any movement in real prices. With the exception of the DRC, Mozambique and the Seychelles, all SADC countries have · Investment and Finance: The objective is ratified the Protocol (see Attachment 3). to mobilize investment and financing for the Implementation is under way in many member energy sector, with focus on the following: states. Since May 2000, SADC has been (i) facilitation of financing of commercially implementing a list of 43 projects representing a viable regional investments projects; (ii) total amount of USD 608,04 million. mobilization of finance for the biomass energy sector through appropriate valuation SADC has created the SADC Energy of the existing biomass resource base (i.e. Commission Technical Unit with the view to forest stocks) and leveraging finance on the pursue the realization of optimal social and basis of such valuation; (iii) financing of economic benefits arising from the use of priority pre-investment programs, task-force regional energy resources. In addition, the activities, expert assistance and studies as Energy Commission also aims at ensuring that defined in the Action Plan; and (iv) the sector attracts the investments. It focuses mobilization of climate change funding to primarily on harmonization of current policies, address the environmental concerns and development of new policies, definition of challenges facing the SADC energy sector. regional strategies, and initiation and monitoring of macro resource planning issues at the regional · Training and Organizational Capacity level. Building: The Energy Co-operation Policy and Strategy Document (1996) emphasizes II.4.2.2 SADC Energy Sector Activity Plan the needs of well-trained human resources 2000-2005 for SADC and cites the following as specific needs, amongst others: (i) professional The SADC Energy Sector Activity Plan has managerial training at executive and middle recently been completed and serves as a key management levels; (ii) organization document guiding the activities of the SADC development, (iii) strategy development and Energy Sector in the short and medium term. It strategic management; (iv) energy policy, includes 30 activities and defines priorities in analysis and advocacy; (v) energy economic four areas: energy trade; investment and finance; analysis; and (vi) finance mobilization organizational development and capacity through climate change and clean building and information and experience development mechanisms. exchange.42 · Information and Experience Exchange: · Energy trade: The Southern African Power Areas which can benefit from exchange of Pool (SAPP) has established principles and information and experience include: (i) co- pricing schedules that form the basis for operation in energy sub-sectors that are characterized by a high degree of 42 Refer to SADC Energy Sector, Annual Report May commonalties, e.g. biomass/wood fuel; (ii) 2000-June 2001. co-operation to utilize synergies, e.g. 68 standardization, joint policies and strategies; § an electricity supply industry structure that and (iii) co-operation to share resources, does not allow for efficiency through utilize economies of scale, and to strengthen competition. the political impact of the SADC region in international bodies, e.g. joint representation The purpose of reforms includes the need to in climate change fora. attract private investment and to broaden access to electricity to domestic consumers. However, The implementation of the SADC project the process of restructuring is slow as indicated `Regional Energy Planning Network' has started in Table 2.8. No SADC country has privatized officially in May 2000. SADC is also mobilizing state-owned electricity sector assets. Only South financial and human resources to implement the Africa and Zambia have established an energy SADC Energy Sector Program Action. regulatory body (the National Electricity Regulator-NER and the Energy Regulation II.4.2.3 Energy Sector Reforms Board-ERB, respectively). Mozambique has established an Energy Policy Coordination Unit The power sector is undergoing reform both at and its National Electricity Council resolves national and regional level in southern Africa. disputes and makes recommendations to the Reform agendas are generally motivated by: government. Mozambique and Zimbabwe, to a § inefficiencies; certain extent, are the only SADC countries that § technical weaknesses (particularly in the have significant independent power producers distribution area); (IPP), namely Hidroelectrica de Cahora Bassa § poor financial performance of electricity (HCB) in the case of Mozambique. In supply industry participants (return on Swaziland, the Electricity Act of 1963 is still the investment < cost of financing) and strong basis for energy regulation. There are no limitation on public sector financing; regulators in the DRC or Lesotho. § electricity prices being used as political instruments; § unsustainable subsidies to various consumers groups; and Table 2.8: Status of Reform in SADC Electric Sectors Average Private Power Privatization of Restructuring Regulatory Interconnects Electricity Price IPPs Assets Body US cent/kWh Angola No No No No No Botswana 15 No No No Yes Lesotho No No Yes Malawi 4.6 No No In progress Quasi No Mozambique 5.0 Yes No No No No Namibia 2.9 No No In progress In progress Yes South Africa 2.0 No No In progress Yes Yes Swaziland No No Yes Tanzania 10 No No No Zambia 3 Yes Some Yes Yes Yes Zimbabwe 3 Quasi No No Yes No Source: USAID (The Regional Center for Southern Africa). Energy Program Sub-Strategy for Legal, Regulatory and Policy Assistance to the SADC Countries. March, 2001. 69 II.4.2.4 The Southern African Powe r Pool conclusion that total savings will amount to (SAPP): An Example of a US$785 million over the 1995-2010 period. The Promising Regional Cooperation total savings amounts to 20% when compared to Initiative the costs that each country will support by following a self-sufficiency strategy. The The SAPP is a cooperative effort in the energy savings are likely to be higher due to the fact sector, which aims at developing strong power that SA and the DRC have joined the SAPP. On interconnections between SADC Member States the regional basis, the SAPP increases the and providing reliable and economical electricity regional system reliability and is a forum for supply to the consumers of the SAPP Members. regional solutions to electricity energy problems. The SAPP has a number of economic, social and On the social side, the population of Southern environmental benefits that make it an important Africa would benefit from the improvement and project. The Short Term Energy Market, which expansion of its electricity supply. Particularly, started live trading in April 2001, is expected to final consumers would benefit from the lower the average price of energy within the reduction of the price of electricity. In addition, region. For instance, it is estimated that the some environmental benefits will derive from average kWh price on an ESKOM-supplied the displacement of thermal generation by long-term contract will be reduced by 50%. The hydropower. SAPP would also reduce operating costs of existing national electricity power agencies. Since the creation of the Southern African Indirect benefits may also stem from the SAPP Power Pool (SAPP) in 1995, regional electricity as the reduction of electricity prices and the trade within the SADC region has increased improvement of electricity supplies will raise tremendously. In 1998, the volume of electricity industrial competitiveness of the region. In traded between SADC countries increased and addition, the build-up of the Short Term Energy reached the order of 1,500 MW and 11,500 Market will be an incentive for attracting GWh compared to 1000 MW and 7,700 GWh in domestic and foreign investments in the energy 1997. The annual trading value exceeded the sector. Savings from additional bilateral estimated value US$140 million. The following contracts are expected to be huge: a study by chart illustrates the increase in the volumes of SADC on electricity power in the early 1990s, electricity trade region within the SADC region comparing integrated regional development with from 1994 to 1998. independent development, reached the Figure 2.1: Annual Growth Rate of the Volumes of Electricity Trade, 1994-1998 60 50 40 % 30 20 10 0 1994 1995 1996 1997 1998 Source: SADC Energy Sector, Annual Report May 2000-June 2001. 70 Figure 2.2: Energy Traded, 2001 350,000 300,000 ] 250,000 MWh[ 200,000 Traded 150,000 Energy 100,000 50,000 - April May June July August SUPPLY DEMAND ACTUAL ENERGY TRADED Source: SAPP Coordination Centre, 2001 Eskom dominates the market - its exports A new regional body, the Regional Electricity represented about 50% of the regional electricity Regulatory Association (RERA), was trade in 1998. Cahora Bassa is the other major established. RERA has three main objectives: regional trading player with an annual output · Capacity building and information sharing estimated at 12,000 GWh. In 1998, it supplied and skills training at national and regional approximately 600 MW of power on firm level. contracts to Namibia, Botswana, Zimbabwe, · Coordination of regional electricity trade, Swaziland and Lesotho. The DRC supplied 110 with the aims to provide a framework for MW of peaking and mid-merit type power to cross-border trading and develop a policy, SA. SA accounted for 83% of the total regional strategy and legislation to coordinate electricity demand of 33,310 MW in 1998. electricity trade. Zimbabwe was the second biggest market with · Regional regulation, with the main goals about 6% while Zambia and the DRC being the design of economic regulation for represented 3% and 2% respectively. In terms electricity interconnections and trade of sectoral demand, industrial and commercial between SADC member states. demand accounted for more than half of electricity demand in SA, but less than 40% in There are a number of constraints to the the rest of the region. Mining demand was less development of the regional power market. important in SA than in the rest of the region These include: (20% and 30% respectively). · An inadequate accounting system to deal with increasing energy trades; The priority projects that have been identified by · The lack of a system to monitor and predict the SAPP include the development of the link electricity flows on tie-lines; between Tanzania and Zambia, transmission · Lack of transmission lines connecting non- from Mozambique to Malawi and the operating members to SAPP; strengthening of linkages between Zambia and · Insufficient capacity of some of the existing the DRC. tie lines. 71 Box 2.4: The Southern African Power-Pool (SAPP) Background The Southern African Power Pool is an association of 12 member countries represented by their respective electricity power utilities. The members of SAPP include: Botswana Power Corporation (BPC, Botswana), Electricidade de Moçambique (EDM, Mozambique), Empresa Nacional de Electricidade (ENE, Angola), Electricity Supply Commission of Malawi (ESCOM, Malawi), ESKOM (South Africa), Lesotho Electricity Corporation (LEC, Lesotho), NAMPOWER (Namibia), Societé Nationale d'Electricité (SNEL, the Democratic Republic of Congo), Swaziland Electricity Board (SEB, Swaziland), Tanzania Electricity Supply Company Ltd (TANESCO, Tanzania), ZESCO Limited (Zambia), and Zimbabwe Electricity Supply Authority (ZESA, Zimbabwe). The SAPP is the first formal international power pool established outside Europe and North America. The SAPP covers an area of 9.09 million km2 and the total number of electricity users of the combined national interconnected systems is estimated at 3.1 million. Cooperation in the electricity sector is not a new phenomenon in Southern Africa. Two bilateral cooperative projects already existed in the late 1950s. The first project was set-up in 1958 between the DRC and Zambia, consisting of the construction of a line between Nseke in the DRC and Kitwe in Zambia, and aimed at supplying electricity to Zambian copper mines. The other project linked Zambia to Zimbabwe and consisted of the construction of the Kariba dam and associated hydro-electric power stations, which connected the two countries' power systems. SADC recognized the importance of energy to the development of the region and took the following actions to strengthen regional cooperation in the region: § 1980:creationofaTechnicalandAdministrativeUnit(TAU)toactasacoordinatingagencyfortheregionalenergysector. § 1990: establishment of the Electricity Sub-Committee (ESC), as a forum for the regional power utilities to discuss and plan the improvement of regional electricity supply. § 1995:sevenoftheelevenSADCmemberssignedtheInter-GovernmentalMemorandumofUnderstanding(IGMOU). § September28,1995:TheSouthernAfricanPowerPoolenteredintoeffect. Main objective, priority and constraints The SAPP aims at coordinating planning and operation of electric power systems among member utilities, reducing capital and operating costs through coordination and improving the reliability of the electric power systems. The multi-country electricity trade in the Pool is mostly done through long-term bilateral contracts. The SAPP focuses on the increase of trade through a short -term energy market in order to progressively replace some long-term bilateral contracts between members. The SAPP Coordination Centre aims at implementing SAPP objectives and has four main functions: (a) technical oversight with emphasis on secure and reliable operation of the Pool; (b) facilitating the short -term energy market (matching bids and offers of energy by daily, weekly and monthly contracts); and (c) gathering and disseminating information, including technical and financial data; (d) liaising with national control centers and electricity regulators. It also provides a training facility for power market operators. Physical constraints may hamper the expected advantages of the development of regional trade in electricity in SADC. These relate to insufficient transmission infrastructure such as missing links within and between national transmission lines, lack of connection of the non- operating members, and required reinforcement of existing internal transmission. These constraints limit the speed at which the system could have been developed. World Bank involvement Currently, World Bank involvement consists of providing support, including planned IDA credits of about US$260 million, to the Coordination Centre and appraisal of two of the three priority inter-connections that have to be either constructed or improved. These are the Malawi- Mozambique and Zambia-Tanzania transmission lines. The other priority is the strengthening of the link between the DRC and Zambia with possible rehabilitation of the Inga power plant and DC converter stations, but in which other development partners are involved. The aims of the Bank's involvement, in the SAPP include: · facilitating regional electricity trade; · ensuring that all participants in the market have equal access to information; · financing assets for which private sector financing is difficult to obtain; · enabling increased private sector involvement in generation; · reducing need for onerous power purchase agreements. II.4.3 Water cooperation between southern African states in relation to particular river basins. Examples Given the general water insecurity of the sub- include the Lesotho Highlands Water Project region, the imbalances in water availability and (LHWP) and the Zambezi basin ZACPLAN demand, deteriorating water quality and shared project. Cooperation, however, was not water courses, the countries in the sub-region coordinated on a regional level. have recognized the benefits that may be derived from regional cooperation on water issues, SADC member states have thus signed a including reducing the costs and mitigating the Protocol on Shared Watercourse Systems in risk of rainfall variability through coordinating August 1995 and, subsequently a refined version their actions. Historically, there was extensive of this protocol, the `Revised Protocol on Shared 72 Watercourses' in August 2000. Although all Many international agencies are supporting SADC Member States but the DRC signed the SADC's effort to improve water management Protocol, by mid-2001 only two countries within the region. (Botswana and Mozambique) have ratified it. SADC has also developed programs and projects The main objectives of the protocol is to develop in order to address challenges such as close co-operation for judicious and coordinated floods/droughts, pollution and water supply and use of the resources of shared watercourse sanitation. These are: the SADC Hydrological systems in the SADC region; to coordinate Cycle Observing System (SADC HYCOS), The environmentally sound development of shared Groundwater Management Program for the watercourse systems in the SADC region in SADC region, The Regional Project to Control order to support socio-economic development; the Infestation and Translocation of Aquatic to hold regional conventions on equitable Weeds and the Program on Water Supply and utilization and management of the resources of Sanitation for the SADC region. The Water shared watercourse systems in the SADC region; Resources Technical Committee (WRTC) has to consolidate other agreements in the SADC appointed four Technical Sub-committees to region regarding the common utilization of oversee the implementation of these certain watercourse; and to promote the SADC programs/projects. A Strategy on Floods and integration process in accordance with Article Droughts has also been initiated to take into 22 of the treaty establishing the Community. account the devastating effects of recent events of floods. A Strategic Approach to improve For implementation purposes, the revised Security Against Floods and Droughts has protocol has created regional institutions, such therefore been developed by the Water as committees of Water Ministers and Water Resources Technical Committee in early May Senior Officials respectively; a Water Sector 2001. Key objectives include: Coordinating Unit and Water Resources · To operationalize the recommendations Technical Committee and sub-committees. contained in the indicative framework for These are in addition to Shared Watercourse floods and droughts management in the Institutions, which were the main institutional SADC region; mechanisms for implementation of 1995 · To contribute as a building block to the protocol. Although responsibility is still placed SADC multisectoral disaster management on the states within a river basin, which should strategy currently being developed by the establish appropriate institutions (watercourse SADC Secretariat; commissions, authorities or boards) to cooperate · To develop the necessary capacity for with one another on matters pertaining to the vulnerability reduction against floods and rivers of the basin, a common watercourse droughts related in the SADC region. would henceforth be managed within the context of the regional objectives and principles. The strategic approach focuses on five substantive areas to be pursued over the short- In order to improve the regional management of term (2001), the medium-term (2002-2003) and watercourses, a Regional Strategic Action Plan the longer-term (2004 and beyond). These areas on Water Resources (1999-2004) was are: developed in 1998 and contains 44 projects in (i) Preparedness and Contingency Planning all. A list of 31 priority projects was established for Response: The objective is to (see Attachment 3). In order to facilitate the identify contingency plans that will be implementation of the RSAP at national level, needed at the regional and national SADC has developed a networking structure levels to improve flood and drought called the National Focal Persons (NFP). The preparedness for 2001-2002 rainy role of the NFP is to coordinate activities related season. to the implementation of the RSAP at national (ii) Early Warning and Vulnerability level and in close collaboration with WSCU. Information Systems: The Water Sector 73 along with other SADC technical units II.4.4.1 Protocol for the Development of will identify and implement the most Tourism: Objectives and Implemen- appropriate technical means in order to tation Status improve security of areas and communities most vulnerable to The Protocol on the Development of Tourism droughts and floods. was signed in Mauritius on September 14, 1998 (iii) Mitigation Measures: The objective is and was ratified subsequently. It aims at using to design appropriate policy, legal and tourism as a vehicle to achieve sustainable social institutional reforms to run the program. and economic development by increasing Floods and droughts monitoring, competitive advantage in the Region vis-à-vis forecasting and warning systems will be other destinations, contributing towards the developed particularly for the shared human resource development of the region watercourse systems or river basins and through job creation and improving tourism flash flood prone areas. service and infrastructure in order to foster a (iv) Response: The main purpose is to assist vibrant tourism industry. The Protocol also disaster authorities to better identify intends to create a favorable investment climate rainfall, river flow and possible for tourism within the Region and improve the inundations changes. A particular focus standards of safety and security for tourists. One will therefore be paid to hydrological of the main objectives of the Protocol is to and meteorological monitoring systems. facilitate intra-regional travel for the (v) Recovery: The Water Sector will development of tourism. For this purpose, travel attempt to provide support to the water and visa restrictions should be eased or authorities in SADC Member States to removed. The Protocol thus deals inter alia with address issues related to national matters related to cross-border travel, a unified, recovery. Its main action will be to help regional system of collecting and analyzing rebuild critical elements of the floods tourism statistical data, and the establishment of and droughts management systems that a regional quality and standards control policy, may be damaged/affected during the including the harmonization of registration, occurrence of disasters as well as other classification, accreditation and grading of water-related infrastructure and services. tourism facilities and operators. In order to promote tourism within the region, SADC has II.4.4 Tourism undertaken a number of initiatives, including The countries in the sub-region have · Preparation of five-year Tourism Policy and acknowledged that they might benefit through Development Strategies, the latest which is cooperation in tourism and tourism-related for 1999-2004; matters through inter alia economies of scale · Contribution to the SADC Multi-sectoral and scope, resulting from the joint development HIV/AIDS Strategy and Plan of Action of infrastructure, facilities, and services; joint · Harmonization of tourism legislation in the marketing efforts; pooling of scarce resources respective countries for research and development, and education and · Creation of the Regional Tourism training thereby avoiding unnecessary and Organization of Southern Africa (RETOSA) expensive duplication; and through offering in 1996. greater diversity in destinations and products. In order to develop the tourism industry, SADC Recently, a number of initiatives have sprung up countries have undertaken regional initiatives, at sub-regional level, which - in complementing including the signing of a Protocol on the RETOSA's overall marketing efforts - have Development of Tourism, the creation of the started to address some of the above-mentioned Regional Tourism Organization of Southern investment and integration bottlenecks regarding Africa (RETOSA). nature conservation and tourism. Probably best 74 known amongst them is the transfrontier · the various cross-border tourism projects national park concept to merge parks across attached to the Maputo Development countries such as the South African Kruger Corridor, the Lubombo SDI, and the Beira National Park and the Mozambican Gaza Park, Development Corridor which all explore the which at a later stage may even be linked with potential for joint marketing and the the Gonarezhou National Park in Zimbabwe. development of a cross-border tourism Other approaches and initiatives are: infrastructure; · an initiative between the border towns of · the South-East African Tourism Committee Beitbridge (Zimbabwe) and Messina (SA) (SEATOC), established in December aimed at exploring a synergetic approach to 1997,43 representing Southern Mozambique, make the best out of the existing tourism the three Eastern Provinces of SA,44 and attractions and the busy border post; Swaziland. SEATOC consists of · various `borderland' initiatives instigated representatives of Tourism Authorities, and promoted by the SDIs between the Government Departments and the private eastern part of SA, Mozambique, Swaziland sector and is predominantly a marketing and Zimbabwe.47 initiative; · the Upper Zambezi Region Development II.4.4.2 Tourism Development Strategy, 2001- Initiative (UZAREDI), which was formally 2005, Actions and Projects established in November 1998,45 comprising local authorities of four countries In order to develop the tourism sector, a Sectoral (Botswana, Namibia, Zambia and Strategic Development Plan was prepared in Zimbabwe)46 bordering the Zambezi River 1993 with a key objective to define a framework up- and downstream from the Victoria Falls. along which tourism development within the The major objective of this initiative is the region would take place. This Development development of a sub-regional tourism Plan ended in 1999 but has been followed by a master plan; new strategy. The objective of the new strategy · an initiative between Botswana, Namibia is the same as that of its predecessor i.e. to and SA to jointly manage the Kalahari promote equitable and sustainable growth of the Gemsbok National Park, which is mainly tourism sector. One of its activities will be the following a nature conservation approach; evaluation of the implementation of the first · an initiative along the border areas of tourism 5-year development strategy to learn northern Malawi and southern Tanzania also from the experiences of the first five years and looking into the possibility of utilizing the build on the successes achieved. tourism potential of the sub-region; In addition to the new development strategy, SADC has been undertaking several actions to 43 The Mpumalanga Tourism Authority and the SADC- promote tourism within the region. These project of the KAF initiated SEATOC, which acts as a include the following: neutral broker between the interests of the different · UNIVISA System: The main objectives of partners. 44 Northern, Mpumalanga and KwaZulu/Natal Provinces. this system is to facilitate intra-regional 45 UZAREDI has two different roots: one is the KAF travel for the development of tourism facilitated town partnership between Livingstone through the easing or removal of travel and (Zambia) and Victoria Falls (Zimbabwe), the other an visa restrictions and the harmonization of initiative by the Development Bank of Southern Africa (DBSA) to facilitate a nature conservation area immigration procedures and movement of along the upper Zambezi. The SADC-project of the international tourists in the region in order to KAF was instrumental in combining both initiatives increase the market share and revenue of the into UZAREDI through a number of stakeholder region in world tourism. meetings. 46 The local authorities are: Kasane (Botswana), Katima Mulilo (Namibia), Livingstone and Sesheke (Zambia) and Victoria Falls (Zimbabwe). 47 De Beer, et. al. (1998) 75 · Harmonization of standards: The of foreign earnings for most SADC Member objectives of this project are to design and States. Although the agricultural sector's share implement a standard grading and in GDP varies widely among countries in the classification system for hotels, other sub-region, due to its linkages with the accommodation establishments and ground manufacturing and other economic sector and operators and to achieve harmonization of with large portions of the population based in service standards throughout the region. rural areas (often dependent on subsistence or · Model Tourism Legislation: The objective small-scale farming), variations in agricultural is to develop model legislation on tourism performance, in general, has a significant impact within SADC, which would be used to help on overall growth, macroeconomic stability member states align their national tourism (particularly through food prices) and poverty. legislations to that of SADC. · A Regional Website: The goal is to According to SADC sources, of the gross establish, disseminate and maintain relevant available land base in the sub-region, about 5% information with particular emphasis on is under crops, 41% is rangeland, 33% is forest tourism development policy of SADC and woodland, and 21% is classified as member states. unsuitable for agricultural use. Potential for the · A Common Tourism Signage Policy: The extension of the arable area is significant in main aim is to help tourists by developing Angola, the DRC, Mozambique, Tanzania and effective signs guiding them to various Zambia. SADC has thus considerable facilities and services. unexploited natural resources available for agricultural production. Furthermore, irrigation II.5 FOOD, AGRICULTURE AND development is limited and uneven in the sub- NATURAL RESOURCES (FANR) region: of the total 2 million irrigated hectares, 1.2 million or 60% is in SA due to either high II.5.1 Background costs of shortage of water. Agricultural systems throughout the SADC countries are Over the years, the agricultural sector has characterized by dualism with commercial remained a cornerstone of economic activity in agriculture on relatively large holdings alongside the sub-region. In 2000, it accounted for more traditional subsistence farming on fragile than 11% of SADC's aggregate GDP. Its share ecosystems. The market is thus highly of GDP varied from 3% (Botswana, Seychelles differentiated into an array of production and and SA) to more than 30% (DRC, Tanzania, marketing modalities, from the local informal to Malawi and Mozambique). Agriculture's the highly sophisticated formal large-scale contribution to the region's employment is export markets competing in the global estimated at 70-80%, while it is a major source marketplace. These different sectors each play Table 2.9: Agricultural Sector Contribution to GDP, 1990-2000 1990 1995 1998 1999 2000 Angola 17.9 7.7 13.0 6.4 5.8 Botswana 4.7 4.1 3.4 3.0 2.6 DRC 56.0 56.8 46.5 53.8 53.0 Lesotho 23.8 17.8 17.8 17.3 16.9 Malawi 39.8 30.8 37.4 38.9 38.0 Mauritius 12.1 9.7 7.6 5.4 6.4 Mozambique 28.0 29.0 31.2 30.4 30.0 Namibia 9.4 8.8 4.8 5.1 5.3 Seychelles 4.8 4.2 3.0 3.2 3.0 South Africa 5.3 3.9 3.3 3.1 2.9 Swaziland 11.2 12.4 11.6 11.6 10.4 Tanzania 47.2 43.6 41.2 41.9 41.6 Zambia 16.0 7.1 6.1 6.8 5.6 Zimbabwe 14.8 13.5 18.1 17.0 17.0 SADC 12.3 8.8 9.4 9.2 11.3 Source: SADC. FANR, Annual Report, July 2000-June 2001. 76 distinctive roles in SADC's economic growth Food insecurity is compounded by exogenous performance, on the one hand, and fulfill a factors. The sub-region is particularly particular function in the redistribution of vulnerable to vicissitudes of the weather, as income and wealth and employment creation, on illustrated by recent severe droughts in 1992 and the other. The agricultural production systems 2001/2002 and floods in 2000, adversely in the region are generally undiversified, with affecting the entire regional economy as well as the respective national economies being heavily the large portion of the population dependent on dependent on a few primary commodities. With the agricultural sector. Indeed, the 2000 floods fairly similar climatic and agro-ecological in the region had a particular disastrous impact conditions, region-wide agricultural production on crop output and also led to a human disaster patterns, especially for the major staple cereal in three SADC countries, namely Mozambique, maize, tend to fluctuate in tandem, which, Zimbabwe, and Botswana.48 Furthermore, among others, also limit the scope for regional SADC has acknowledged that a number of other agricultural trade. environmental and agricultural factors contribute Table 2.10 Land Tenure in Selected Southern African Countries (approximate % of national territory) Country Private/ Freehold/ Lease Communal/ tribal/ Conservation/ minerals/ hold customary water catchment reserves and other state land SA 72 14 14 Namibia 44 43 13 Zimbabwe 411 42 16 Botswana 5 70 25 Swaziland 40 602 - Lesotho 953 5 Source: Adams M., 2002. Tenure Security, Livelihoods and Sustainable Land Use in Southern Africa. Paper presented at a SARPN Conference, 4-5 June 2002 Note: 1) includes small-scale farm leases and resettlement up to 1999 2) includes Swazi Nation Land (SNL) held under customary tenure and SNL land leased to companies by the Monarch 3) includes leases in urban areas (all land in Lesotho is vested in the Monarch in trust for the nation) to drought and famine in the sub-region: a Overall, the SADC region is characterized by a combination of unequal distribution of land, food deficit situation as illustrated by the poor farming methods and unfavorable land combined all-cereals deficit of 499,000 tons for tenure and ownership have led to declines in marketing year 2000/2001. Furthermore, productivity of grazing land, falling crops and household food security in SADC is of major diminishing returns from water supplied. Thus, concern. The per capita consumption of staples closely related to exogenous shocks influencing (cereals and cassava) was only 36, 60, and 71kg the productivity of the agricultural sector and annually for Angola, Mozambique, and circumstances in rural areas, is the significant Tanzania, respectively, compared with 191 and development challenge posed by land reforms, 181kg for Botswana and Lesotho in the late which stems from land distribution and 1990s. This is irrefutable evidence that many ownership patterns and land administration. The households in the poorer SADC countries suffer nature and degree of land problems vary in each dire food stress levels. Food security is not only member depending on political, cultural, a production issue, but primarily a poverty issue geographical and historical considerations. that could probably be more effectively Recently, the SADC Member States have addressed through expansion in household acknowledged that unresolved land issues could income and economic growth. For example, disrupt the regional economic and political both Botswana and Lesotho are deficit producers situation. They have thus added this issue to the and reliant on commercial food imports yet have higher per capita consumption rates. 48 It has been estimated that nearly 700 people lost their lives in Mozambique, over 70 people in Zimbabwe and 13 people in Botswana. 77 regional agenda by the proposal to design a The movement toward a market-based economy regional framework for addressing the land issue in the region, agricultural policy and trade and to seek coordinated land reform approaches harmonization, and involvement of the private among the countries in the sub-region. sector in agro-business can be seen as major SADC has started with cooperation in the factors enhancing the agricultural sector's agricultural sector more than 20 years ago. competitiveness. On the other hand, low levels Indeed, together with the infrastructural sectors, of development of SADC economies in terms of cooperation in the food and agricultural sector hard infrastructure (transport and dates back to the inception of SADCC in 1980. communication), soft infrastructure (skills, Against this background, SADC has developed a institutional and technological development) and multidimensional regional strategy aiming at access to financing and financial services e.g. for ensuring food security, agricultural and natural production, trade and insurance are among the resources development in the region so as to factors that work against improved meet the growing demand for food, fostering competitiveness of the food, agriculture and efficient development, utilization and natural resource sectors. For example, due to conservation of natural resources, improving the high transport costs in SADC, producer price capacity of the agricultural and natural resource recovery, that is, farmers' shares of the sector to transform the national economies and commodity price, is low compared to other thereby to raise living standards in a sustainable developing regions such as Asia and the way in the sub-region. Over the years, this developed world. In terms of intra-regional trade sector has seen considerable expansion in the cost of transport also machinates against activities and today it is accounting for more cross-border trade. High transport costs are than 50% of the SPA. It has also seen different reflected in the wide differential in prices paid institutional configurations. Today, the FANR by consumers and those received by primary cluster of sectors include those on food security, producers. The absolute margin in Africa is 55% agricultural research and training, crops, compared to 20% for Asia. Of this margin environment and land management, livestock transport and residual transaction cost make up production and animal disease control, marine 38.5% and 23.1% respectively. Moreover, and inland fisheries, forestry and wildlife. Prior SADC's rural telecommunication system is to its recent centralization in 2001/2002, each of extremely weak making access to market the FANR sub-sectors was coordinated through information and trade opportunities imperfect or units hosted by different member states. In spite non-existent. The lack of electricity distribution of the existence of a FANR Sector Development services in rural and other agricultural areas, Unit, planning for the FANR cluster of sectors which limits irrigation, crop processing, and has remained dispersed thus militating against mechanization options, is a deterrent to labor the development and implementation of an productivity. Another factor of importance for integrated and common vision for agricultural agricultural market development is the removal development, growth and competitiveness, food of intra-regional trade barriers ­ both tariff and security and other objectives. Moreover, the non-tariff ­ and the vexing question of global lack of coordination with other sectors such as agricultural trade barriers. those in infrastructure, finance, investment and trade has left the implementation of whatever II.5.2 Regional Strategy, Policy Objectives integrated regional food, agricultural and natural and Institutional Arrangements resource strategy rather ineffective and partial.49 No protocol exists for the food security, crop, livestock production and animal disease control 49 The SADC Food Security and Rural Development and agricultural research and training. Although HUB has been created to focus on rural strategy and a protocol development process has been policy, capacity building, information generation and initiated for the food security sub-sector, a exchange, trade policy, regional integration, policy collective protocol development process for analysis, and could go some way in dealing with these problems over the medium to longer term. 78 these various sub-sectors is called for due to the As food security becomes a policy objective that strong linkages between them. cuts across many sectors, the FANRDU has the duty to maintain the existing strategic alliances With the view to address constraints to with the other sectors. It also cooperates closely agriculture development and food insecurity, with the following sectors: SADC has developed an integrated policy and (i) The Water Sector in the area of green strategy. The strategy relies on a broader water; approach of food security that goes beyond (ii) Environment and Land Management agriculture and food production. Its ultimate Sector (ELMS) in the area of land use objective is to eliminate poverty and economic planning; vulnerability. The main policy objectives are (iii) Transport Commission to facilitate the the following: mobilization of investment to support agricultural production; (i) increasing agriculture production and (iv) The Human Resources Development productivity so as to ensure food Sector in the area of training; security; (v) The Trade Sector in providing input for (ii) ensuring the effective management and the improvement of trade in agricultural conservation of natural resources; products. (iii) generating domestic savings and foreign exchange to finance a transformation of the region's agriculture-dependent II.5.3 Food Security Program economies; (iv) improving the living conditions of rural The objectives and strategies for food security populations in SADC's member are set out in the FANR Food Security Strategy countries. Framework of 1997. The food security program comprises a number of programs and projects: With the purpose of addressing the growing food insecurity problem, in August 1999, SADC · Regional FANR Coordination and decided to transform the Food Security Unit into Cooperation Program: This program a Sector Development Unit (FANRSDU), which provides technical and financial support so has responsibilities in the areas of providing as to facilitate cooperation within SADC on policy direction, ensuring information flows, all food security, agricultural development, monitoring and evaluation and of ensuring that and natural resources development issues. programs within the five FANR sectors and two The main functions are developing sectoral institutions, the Plant Genetic Resources Unit policy and strategies and coordinating the and the Regional Early Warning Unit, all which activities of the overall cluster of FANR have been based in different countries, are not sectors. duplicated. · Regional Information System for Food Security: This program aims at generating The FANRSDU is responsible for the following and exchanging information between SADC functions: Member States in various aspects of food § Creatingthecapacityforpolicyanalysis; security, including policies and data. § Policy, development and harmonization and Specifically, the project aims at collecting program planning, management and data on the agricultural resource base of the coordination; region; disseminating results of the data § ServiceFANRmeetings; collected; developing crop suitability model; § Monitorandevaluatesectorprograms; promoting capacity building in agricultural § Institutional capacity building and human resource management; and promoting resource development; and coherent agricultural production and trade § Continuing the implementation of the policy planning and infrastructure support. existing food security program. 79 · Food Policy Analysis and Research: The link between universities in SADC and in main objective of this program is to provide other parts of the world, and between and enhance capacity at a regional level so researchers and policy-makers. The network as to coordinate food policy in SADC could become a conduit for funds to support region. policy research into food security and wider · Regional Drought Mitigation Program: economic issues facing the region. Most Southern African countries have · Regional Food Security Training Program: experienced at least one drought in the past The program aims to enhance policy ten years. Accordingly, it was decided that a development, management and regional approach would be required to implementation. mitigate the damaging effects of drought on · Local Indigenous Knowledge Systems all areas of activity in the region and thus to (Links): This program was launched in establish the Drought Mitigation Program. 1998 and is active in a number of countries, · The Regional Early Warning System: This including Swaziland, Tanzania, program aims at improving food security Mozambique and Zimbabwe. It aims to through provision of advance information on raise awareness on the rural populations' use the food and nutrition situation to facilitate and management of bio-diversity and to national and regional policy and decisions acknowledge indigenous farmer knowledge, for dealing with food shortages, surpluses practices and skills, which are natural and problems. This program also provides ecosystem friendly. technical support in the collection, dissemination and usage of information. The food security program is also supported by a · Regional Program for Communication and Vulnerability Assessment Committee, which Development: The main objective of this serves as a regional watchdog on vulnerability program is to promote the use of assessment issues, including methodologies and communication for development, identify coordination, in the sub-region. This committee and implement appropriate policies for comprises members from FANRDU, its sub- economic development, poverty alleviation sectors and international organizations such as and improvements in living standards within FAO and the World Food Program (WFP). the region. · Food Security and Rural Development Hub: Four projects namely, SADC Food Security and This is a regional resource facility, which Rural Development HUB, Regional Food serves as catalyst for rural development Security Training, Agricultural Potential within SADC through capacity building and Information System and Technical Assistance resource mobilization at local and regional Program account for nearly two-thirds of the level. The main activities include: (i) funding of projects in this sector, with SADC Assisting national governments in rural Food Security and Rural Development HUB development and agricultural strategy accounting for more than 25% of the total formulation, policy analysis and research, funding. program preparation, implementation, monitoring and evaluation; (ii) Supporting II.5.4 Agricultural Research and Training regional policy analysis network in food, agriculture and natural resources and In recognition of the importance of agriculture promote regional integration in trade, research and training to food security, trade and investment, phytosanitary regulations and industrial development, SADC has prioritized programs; and (iii) Supporting national and this sub-sector with the view to strengthen regional capacity building through training National Agricultural Research Systems and fellowship programs. (NARS) in Member States. The main functions · Regional Food, Agriculture and Natural of this sub-sector is to provide SADC countries Resources Policy Analysis Network (PAN): with the capacity to plan, implement, manage, The objective of this network is to provide a monitor and evaluate research and training 80 activities to improve productivity in agriculture projects such as the sorghum and millet sector. The Southern African Centre for improvement project, maize and wheat Cooperation in Agriculture Research and improvement project, grain legume Training (SACCAR) aimed to coordinate the improvement project, agro-forestry research regional policy in this regard. It has been project, regional vegetable research project, and responsible also for developing managerial, the animal agriculture research network. Table 2.11: Regional Collaborative Networks Coordinated by SACCAR Sub-regional collaborative networks Executing agency Coordination site Date of Status of the program creation Agro-forestry Research Program ICRAF Zimbabwe 1988 Ongoing. CIDA grant SADC Animal Agriculture Research Network (S- ILRI Kenya 1998 Non active AARNET), Southern African bean research network (SABRN), ICRISAT Malawi 1986 Ongoing, AFDB-CIAT grant Biosystematics Network for Southern Africa ARC Pretoria 1996 Ongoing, Bio net (SAFRINET), (South Africa) International Groundnut and Legume Improvement Program ICRISAT Malawi 1986 Ongoing, GTZ (GLIP), SADC Land & Water Management Training and SRCU Botswana 1987 Under negotiation for a Research Program (L&WMRP), second phase, EU Maize and Wheat Improvement Network CIMMYT Zimbabwe 1994 Under negotiation for a (MWIRNET), second phase, EU Southern African Root Crops Research Network IITA Malawi 1994 On going USAID (SARRNET), Sorghum and Millet Improvement Program (SMIP), ICRISAT Malawi 1984 Ongoing USAID Regional Collaborative Network for Vegetable AVRDC Tanzania 1991 Ongoing, Internal Funds Research and Development in the Southern African Region. (CONVERDS) The SADC Plant Genetic Resources Centre (SPGRC) SADC NARS, Zambia Ongoing, Nordic Nordic Gene Bank Countries professional and technical skills, introducing II.5.5 Crops modern agricultural production technologies, and providing mechanisms for information The Crop sub-sector's mandate is to promote exchange within the region. production and productivity of crops by focusing on crop development policies, crop protection, The regional programs currently being trade in crops, processing and utilization of implemented in the sub-region are called crops as a means to food security and promoting research networks, which go beyond the simple trade and economic development in the region. promotion of information exchanges or added In this sector, regional cooperation thus focuses value of research activities of different partners. on the following areas: They are based on groups of NARS scientists § Harmonizationofsanitaryandphytosanitary addressing issues of common concern, with co- standards; operation mechanisms between the partners to § Controllingthespreadofmigratorypests implement research activities with regional and diseases; programming and coordination. SACCAR has § Harmonizationofpesticideregistration developed and are coordinating a number of procedures and regulations; 81 § Harmonizationofseedlawstopromote the traditional sector through improved trade on seed and planting material; and management and effective control of § Promotionofhorticulturalproductionand parasites. marketing. II.5.7 Fisheries The Crop Program consists of 14 projects, not all, which are necessarily of a regional nature, According to SADC sources, the sub-region has amounting to an estimated US$24.9 million but potential to harvest 3,5 million tonnes per of which only a quarter has been funded (see annum of which about 71% is from marine Attachment 3). waters. The SADC coastline stretches to nearly 10,000 km2 with five Member States (Angola, Namibia, Mozambique, SA and Tanzania) II.5.6 Livestock Production and Animal bordering the ocean. About 1.5 million people Disease Control are employed in the fisheries sector and at least 5.5 million people are dependant on the sector. The livestock industry accounts for a large share of employment, capital and agricultural inputs in A Fisheries Protocol was signed in August 2001, SADC region. While the sub-region is endowed but has not entered into force. It aims at with millions of cattle, sheep, goats, pigs and promoting responsible and sustainable use of the poultry, it still remains a net importer of living aquatic resources and ecosystems and to livestock and livestock products. drive the policies and strategies for fisheries development in the region. Its objectives are to: SADC has developed a regional strategy that · Promote and enhance food security and aims to enhance livestock production and human health; improve control of animal disease. In this · Safeguard the livelihood of fishing regard, an institutional framework has been communities; developed with the establishment of four · Generate economic opportunities for livestock sector sub-committees in the following nationals in the Region; areas: epidemiology and information; veterinary · Ensure that future generations benefit from laboratory diagnostics; and veld, animal these renewable resources; and production and marketing. Moreover, the · Alleviate poverty with the ultimate objective SADC livestock sub-sector has developed the of its eradication. following projects: (i) Livestock Feed Resources: This project II.5.7.1 Marine Fisheries and Resources aims at documenting current use patterns, location and available This sub-sector is an important source of quantities of feed resources. employment and foreign currency income for (ii) Indigenous Chickens: The project SADC. The regional policy aims at: intends to develop appropriate extension (i) raising production an improving packages for poultry production in rural processing methods; areas. (ii) undertaking marine research; (iii) Development of Multipurpose Goats: (iii) protecting and enhancing marine and The objective is to develop goat goods coastal environments; such as meat, milk, skin and fiber. (iv) providing training and assistance to (iv) Livestock Marketing: The overall aim of promote profitability in operations; the project is to bring about sustainable (v) maximizing foreign exchange value of livestock development through fish exports; and improved marketing of livestock and (vi) strengthening and developing small- livestock products within the region. scale and artisanal fisheries. (v) Control of Parasites: The objective is to improve small ruminant productivity in 82 The regional strategy focuses on the following · Information Section: Its main objective is to activities: establishment of a regional research coordinate the management of fisheries network; promotion of common approaches to information, in particular, to facilitate the entering into fishing agreements; facilitation of flow of information within and between the the adoption of a common import and export member States. strategies; promotion of intra-regional trade in · Training Section: Its objective is the fish products; and enhancement of labor- development of the human resources base in intensive and value-adding technologies and the region. industries; and development of mariculture. · Research and Development Section-Capture Fisheries: This section aims at coordinating The regional program comprises six projects: research programs on shared fish resources · Regional Fisheries Information Systems: It to generate information on improved aims at improving sustainable utilization of knowledge of the resource base; SADC's fisheries resources to contribute to implementing efficient fish resources the national economies and development utilization, improved resource management objectives of coastal communities. and effective control mechanisms. · Assessment of Marine Fisheries Resources: · Research and Development Section- This project aims at developing enhanced Aquaculture: The sector aims to identify scientific capability for the best use of which indigenous species are the best marine living resources. candidates. · Marine Fisheries Training: The goal of this project is to uplift the socio-economic The sub-sector has a number of projects, conditions of fisheries communities in including the following: SADC member States. · Regional Fisheries Information Program: It · Monitoring, Control and Surveillance of aims at establishing an effective and Fishing Activities: The main objective is to sustainable information exchange network in improve management of fisheries resources. the SADC Inland Fisheries Sector. Phase I · Harmonization of Marine Fisheries Policy of this project, which includes, among other within SADC Coastal Countries: The project things, the training of IFSTCU staff and aims to identify and analyze priority marine provision of computer hardware and policy issues at the regional level. The software for the Unit, has been completed, purpose is to develop a medium term with financial and technical support from the strategy to support SADC's process of Icelandic International Development harmonization of marine fisheries policy. Agency (ICEIDA). · Benguela Current Large Marine Ecosystem · Aquaculture for Local Communities Project: The objective is to integrate the Development (ALCOM): This main management of the Benguela current objective of the project is to establish ecosystem. improved management and use of available aquatic resources for food security. The II.5.7.2 Inland Fisheries program is active at the local community level through pilot projects in Malawi, The SADC region is endowed with abundant Tanzania, Zambia and Zimbabwe. inland fisheries resources. This sub-sector is an · SADC/GEF Lake Malawi/Nyasa important source of employment, food security Biodiversity Conservation: The project aims and food diversity in SADC region, in particular, to assist the three riparian States, Malawi, in rural areas50. Inland fisheries coordination Mozambique and Tanzania, in creating the comprises four sections with specific objectives. scientific, educational and policy basis for These include: conserving the biological diversity of the Lake and its ecosystem. 50 It is estimated that the Inland Fisheries Sector (IFS) provides close to one million jobs. 83 · Zambia/Zimbabwe Fisheries Project on · develop human resources in the forest sector Lake Kariba: The main objective is to set up through establishing regional facilities for a system of joint fisheries research and building technical capacity and other means; management in order to facilitate the · promote trade and investment based on the utilization of the shared fisheries resources sustainable management and utilization of on Lake Kariba. The project started in 1989. forests, including developing and agreeing It is currently in its consolidation phase that on common standards for sustainable forest will focus on setting up and implementing a management and forest products; mechanism for joint fisheries research and · harmonize approaches to sustainable forest management of the Lake Kariba fisheries management, forest policy, legislation and resources. enforcement, and issues of international concern; II.5.8 Forestry · respect the rights of communities and facilitating their participation in forest The total forest area of the region is 3.97million policy development, planning, and km2. The region is endowed thus seemingly management with particular attention to the endowed with a huge potential in forestry. need to protect traditional forest-related However, forest degradation and desertification knowledge and to develop adequate are key constraints to the region's forest mechanisms to ensure the equitable sharing resources. of benefits derived from forest resources and traditional forest-related knowledge without SADC Member States have not signed a prejudice to property rights; and protocol on forestry cooperation yet, but the · promote the intangible, cultural and spiritual protocol development process is in an advance values of forests; stage. According to the draft protocol, it would · establish equitable and efficient ways of aim at promoting the development, conservation, facilitating public access to forests sustainable management and utilization of all especially by neighboring communities. types of forests and trees and the trade in forest · establish appropriate institutions and products throughout the Region in order to funding mechanisms to support the alleviate poverty, generate economic implementation of this Forestry Protocol; opportunities for the peoples of the Region, and achieve effective protection of the environment, · take other appropriate measures to give and safeguard the interests of both the present effect to this Protocol. and future generations. Its objectives for Member States are to: Currently, the sub-region cooperates in the · assist and support each other to address forestry sector on the basis of the revised issues of common concern including Forestry Policy and Development Strategy of deforestation, genetic erosion, climate 1997. Development projects have been set up change, forest fires, pests, diseases, invasive within six regional forestry programs: forestry alien species, and law enforcement in a training and education, improved forest manner that makes the best use of the resources management, environmental technical, financial and other resources in management, improved knowledge of the the Region; resource base, forest resource utilization and · co-operate in the sustainable management of marketing, forestry research. The following are, shared forests, taking account of other among others, some of the forestry projects. protocols to the Treaty; · facilitate the gathering and monitoring of § Improvement and Strengthening of Forestry information and the sharing and Colleges in the SADC Region-Phase III. dissemination of information, expertise and This project aims at strengthening and technology concerning forests, forestry and improving technical forestry education and forest industries, throughout the Region; training programs and institutions in the 84 SADC region. The project has regional and contributing to the Rio Convention on national components. At the regional level, Biodiversity; developing strategies for the main objectives consist of developing biodiversity conservation; and facilitating curriculum, extending training, developing sustainable utilization of economically college management, forestry education and useful plant resources in the SADC region. training. At the national level, the aim is to The Government of Italy has secured strengthen technical forestry/agriculture funding for the implementation of the colleges through bilateral agreements to be project in 11 member States. implemented under the overall SADC § SADCTimberAssociation. The project aims project agreement. The third phase of this at establishing the SADC timber Association project (1997-2001) started in July 1997 and in which the private forestry sector is funded mainly by the Government of individuals and institutions will play a Finland that has provided US$5.2 million. leading role in the development of the § Management of Indigenous Forests. The region's forest industry. project aims at instituting sound forest § Strengthening of Forestry and Forest management practices for the indigenous Products Research Institutions in the SADC forest of the SADC region; compiling and Region. The objective of this project is to disseminating lessons/experiences on pilot develop an institutional framework for activities on the management of indigenous effective management and use of research forest resources in SADC; and developing capabilities in forestry and forest projects. multiple land use plans. § Development of a Forestry Information § RegionalForestInventory.Theobjectivesof Management Network in the SADC Region. the project are: (i) to undertake an extensive The objective of the project is to strengthen forest inventory of the SADC region; (ii) to capabilities of SADC member States in data assist member States in developing collection and management and develop a appropriate national forest management computer-based information exchange in the inventories; (iii) to establish a network for Forestry Sector. the exchange of forest inventory information and expertise among member States. II.5.9 Wildlife § Tree Seed Centers Network. The objectives of the project are among others: (i) to The SADC region is endowed with wildlife rich support and strengthen SADC member areas and lands where many elephants, predators States in the gathering of information on tree and a plethora of birds, freshwater fish species, seeds in the SADC region; (ii) to establish a diversity of mammals and endemic plants thrive. network for the exchange of information and For example, nearly 40% of African elephants tree seeds among SADC member States; (iii) reside in the SADC region. to develop a follow-up project. The Canadian government has agreed to extend SADC has developed a regional cooperation the funding for the extension of the project. program aimed at promoting the wildlife sector § Southern African Biodiversity Support through sustainable utilization of wildlife Program. The project aims at improving the resources. An institutional framework has been availability and accessibility of biodiversity set up with the creation of the Wildlife Sector information and its application in Coordinating Unit (WSCU). The Protocol on conservation planning and management. The Wildlife Conservation and Law Enforcement Global Environmental Facility (GEF) has was signed in August 1999, but has not entered secured the core funding of the project, into force. It seeks to establish common US$4.5 million. World Bank, USAID, approaches to the conservation and sustainable CIDA, GTZ, NORAD and Ford Foundation use of wildlife resources in the SADC region. It has co-financed US$2.79 million. emphasizes the principle of conservation and § EstablishmentofaPlantResourcesNetwork sustainable use of transboundary wildlife in the SADC Region. The project aims at resources and advocates transfrontier 85 conservation areas. The Protocol also begin the process of developing the Protocol on acknowledges other regional agreements e.g. on Environment. co-operative enforcement operations directed at illegal trade in wildlife Fauna and Flora. An The SADC Protocol on Environment will be an implementation plan for the Protocol has been overarching legal framework committing SADC drafted but not adopted yet. A program Member States to co-operation on all issues and comprising a number of projects has been priorities relating to environment and natural developed with the view to exploit the potential resources. It will bind Member States on key of the wildlife sector. These are the following: environmental and natural resource management priorities namely: (i) land degradation and · Regional Wildlife Training Program. The desertification control; (ii) pollution and waste objective of this project is to improve the management; (iii) water resource management; returns from the SADC region's natural (iii) climate change; (iv) biodiversity; and (v) resource base by upgrading the professional agriculture. competence of its wildlife management agencies. The vision of the ELMS is the achievement of · Regional Development of Community Based sustainable utilization of natural resources and Management and Utilization of Wildlife effective protection of the environment in order Resources. The project aims at developing to improve the livelihoods of present and future community based management and generations in the SADC region and the mission utilization of wildlife resources and their is to promote environmental sustainability by productivity. developing and implementing appropriate · SADC Regional Rhino Conservation policies, strategies, programs and protocols for Program. The main goal of the project is to environment and natural resources management contribute to the long-term conservation of in the region; development of capacities of local the region's biodiversity by targeting two communities and decision-makers and building key species - the Black Rhino and the White partnerships for resource mobilization for Rhino. implementing the SADC environment and · Wetlands Conservation Program. The sustainable development agenda. project aims at: (i) promoting awareness of the role of the wetlands amongst policy- The SADC Policy and Strategy for Environment makers, resource planners and resource and Sustainable Development provides overall managers; (ii) to train personnel in wetlands policy guidance for management of environment planning and management and protection; and natural resources for sustainable and (iii) to provide national governments development and identifies five strategic with the resources to undertake inventories categories for action: of wetlands. · Assessing environmental conditions, trends and progress made and needed for II.5.10 Land and Environment sustainable development; · Reducing significant threats to human health, The focus of the SADC Environment and Land ecosystems and future development; Management Sector (SADC-ELMS), originally · Breaking away from unsustainable to established in 1985, was on land utilization and sustainable development for the benefit of soil conservation. In the beginning of the 1990s, present and future generations; water resources and environmental management · Managing shared natural resources on an were added to its mandate, thereby shifting the equitable and sustainable basis; and focus from soil and water conservation to · Accelerating regional integration and sustainable land management, environment and capacity building for sustainable natural resource management. In 1999, the development. SADC Ministers of Environment directed SADC-ELMS and the SADC Secretariat to 86 The Environment Sector has developed various SADC regional action program under policy frameworks for outlining commitment by UNCCD. SADC Member States to co-operate and · Environment Management Program: aimed harmonize their activities on the following: at (a) monitoring, assessing and reporting on · Environmental Information Systems Data environmental conditions and changes in the Policy Framework region; (b) raising the level of environmental · Natural Resources Management Policy awareness and environmental education and · SADC Environmental Education Policy to build national capacities in this regard; · SADC - ELMS Gender Strategy and (c) developing and implementing harmonized environmental policies, The SADC-ELMS Program of Action, strategies, regional guidelines and standards. influenced by concerns regarding food security · Environmental Information Systems (EIS) and poverty, places a strong emphasis on land Program: to create awareness and management. Furthermore, it includes issues understanding and capacity building for related to climate change, waste management collection, management and exchange of and pollution control. More specifically, it information/data for the sustainable includes the following broad programs management of environment and natural · Land Management Program: aimed at the resources. A SADC EIS Data Policy development and spread of sustainable land Framework was developed recently. management systems based on partnerships · SADC EIS Technical Unit (SETU): aimed at between governments, NGOs, the private collection, management and exchange of sector and rural communities and land users, data/information on environment and natural for the application of production oriented resources. conservation and management of the · SADC EIS Training and Education Sub- region's land resources and to combat land Program (SETES): aimed at strengthening degradation and eradicate poverty. capacity in environmental information · Capacity Building and Methodology: for systems in SADC member states. The integrating conservation into farming University of Botswana, Department of systems (ICFS); land husbandry; integrated Environmental Science, is hosting SETES, land use planning (ILUP); economics of with a number of other countries and sustainable development; and innovative universities also being involved. rural action learning areas (IRALAS) · Environmental Education (EE) Program: · Land Degradation and Desertification aimed at enabling environmental education Control Program: aimed at combating land practitioners in the SADC region to degradation and mitigate the effects of strengthen the environmental education drought in the SADC region, leading to process through enhanced and strengthened improved living conditions in particular at environmental education policy, networking, the local community level; and initiating a resource material and training capacity. process for coordinating of SADC regional · Environmental Monitoring Program: aimed activities in this area and supporting at assessing and reporting regularly on implementation of National Action environmental conditions and trends in the Programs under UNCCD. SADC region. For this purpose it has been · Partnership and Capacity Building for designing an indicator framework and has Resource Mobilization for UNCCD contributed towards the Africa Environment Implementation in Southern Africa: a Sub- Outlook in 1994 and currently to a revised regional Support Facility for Southern version. It is also developing Environment Africa (SSFSA) has been established to Monitoring Instruments aimed at updating support SADC Member States' action and harmonizing existing guidelines already program implementation and enabling developed by SADC-ELMS to those of activities for the implementation of the international environmental conventions. 87 The program is also establishing a database is inadequate professionally and technically on environmental standards / guidelines / qualified and experienced personnel to plan and quality control issue to be disseminated to manage the development process effectively'. Member States. In this context, it calls for a `holistic' approach · Environmental Impact Assessment (EIA) to human resource development, which is Program: aimed at promoting sustainable defined as: `...encompassing all efforts and utilization of the regions natural resources activities intended to make people productive and effective protection of the environment and that goes beyond the narrow focus on by improving capacities and competence in education and training and skills development to EIA nationally and regionally. encompass their interrelated aspects: education, · Brown Environment Management Program: training and skills development; employment, aimed at (a) strengthening the analytical, entrepreneurship, labor and productivity; social decision-making, legal, institutional and welfare, health and shelter." technological capacities for achieving sustainable development in the sub-region; In the southern Africa region, cooperation (b) increasing public information, education initiatives exist in areas such as education and and participation on environment and training, employment and labor, health, development issues in Southern Africa; and HIV/AIDS and mainstreaming of gender. expanding regional integration and global co- operation on environmental and natural II.6.1 Education and Training (see resources management for sustainable Attachment 3) development. For implementation of the program, institutional structures and linkages As far as education and training is concerned, with existing relevant institutions have been the challenges faced in the sub-region are largely established and the program has seen some common to all countries and dissimilar only in action in the areas of pollution and waste degree. In principle and policy, all countries in management; and compliance with the the sub-region emphasize access, equity, quality, United Nations Framework Convention on efficiency, relevance and democracy in their Climate Change, specifically the educational and training policies. Although the management of chlorofluorocarbons (CFCs) share of education and training spending in and on intra-regional transboundary air budgetary allocations has increased during the pollution management 1990s, in about half of the countries education and training absorbs about 20% of their national II.6 SOCIAL AND HUMAN budgets, all countries are facing resource DEVELOPMENT constraints. In practice, resources are allocated largely towards basic education - primary, junior It is noted by SADC (1997)51 `...that the most secondary schooling and non-formal basic binding constraint to development of the region education - with limited (remaining) resources being thinly spread across higher education, teacher education, technical and vocational 51 SADC, 1997. Discussion Paper on a Regional HRD education, adult education and curriculum Strategy and Strategic Policy Framework for SADC. Mbabane: SADC HRD Sector Coordinating Unit, development. In most countries universal access Mimeo; SADC, 1997. Employment and Labour to primary & secondary education, and in Sector: Progress Report 1996/1997. Lusaka, Mimeo; Mozambique and Malawi even for basic SADC, 1997. Employment and Labour, Report. education only, would require large additional Maputo, Mimeo; SADC, 1997. Gender and Development: A Declaration by Heads of Government resources for the expansion of infrastructure and of the Southern African Development Community. instruction/learner material, in primary and Gabarone, Mimeo; SADC, 1997. Record of Council secondary schools and for teachers training. of Ministers Held in Blantyre. Gaborone, Mimeo; SADC, 1997. Record of the Meeting of Ministers and The quality of education in the region is Social Partners of the Employment and Labour Sector. Pretoria, Mimeo. hampered by a number of factors such as the 88 high pupil/teacher ratios, high pupil/classroom establishment of the Sector. These areas (see ratios, un- or under-qualified teachers, Attachment 3 for a more detailed list of regional inadequate textbooks and instructional materials. initiatives/projects in the area of education and These factors, coupled with declining teacher training) include the following: salaries (in real terms) render teacher motivation, professional development and · Regional Cooperation in policy for management areas of concern. At the tertiary education and training: In this area, a major level, under-funding, low pay and staff development is the development of the departures are seen to be undermining delivery. project to improve regional capacity in education policy formulation, planning and Education, particularly tertiary education and management. training, is still not regarded as being in support · Regional cooperation in basic education: of the needs of the economy, having an unduly The Technical Committee on Basic emphasis on formal training. However, recently Education was established in March 2000. most countries have attempted to address this Its main objective is to develop a strategic problem by vocationalizing education and plan that will serve as a framework for broadening the non-formal education curricula implementing the Protocol. to providing education for industry and · Regional cooperation on intermediate education for self-employment or enterprise education and training: A SADC Technical education. Committee on Intermediate Education was established through its inaugural meeting in In general, these and other factors make for a February 2001. weak link between educational spending and · Regional cooperation on distance outcomes in terms of quantity, quality and education: A Technical Committee on relevance of education and training in relation to Distance Education was established in April labor markets and trends in the real economy as 2000 to spearhead cooperation in this area. determined by trade and capital movements in · Regional cooperation in education and the region. training for people with disabilities/special needs: A major activity undertaken by the SADC countries have thus embarked on a series Technical Committee during 2000-2001 was of national and regional initiatives to address the the development of a Strategic plan and issue of education and specifically higher financing proposal thereof. education and training. One of these is the · Regional cooperation on scholarship and development of the SADC Protocol on training awards: The SADC HRD Sector Education and Training tabled for signature on has continued to receive short-term September 8, 1997. The Protocol entered into scholarship offers from donors in areas such force in July 2000. As of February 2001, all as management training for small and Member States except Angola, the DRC, medium enterprises; geological data Mozambique, the Seychelles and Zambia have management; tourism destination ratified the Protocol. The objective of the management, etc. Protocol is `to progressively move towards equivalence, harmonization and standardization Other initiatives include the MINEDAF of the education systems in SADC to reinforce community building and regional identity'52. The (Meeting of Ministers of Education in Africa). The MINEDAF VII Secretariat in Pretoria has Protocol has defined a number of areas of developed a database and website for Ministers cooperation, reflecting its detailed objectives. of Education to interact and share information. Commendable progress has been made in the The Human Resources Development Sector is various areas of regional cooperation since the currently developing the SADC Student and Staff Exchange Program, and which is scheduled 52 SADC, 1999, Human Resources Development, Annual for implementation in 2002. In this program, Report 89 each SADC country commits itself to train a protocol on the free movement of persons, certain number of students from the region other aimed at the eventual elimination of all than its own in its own institutions on an annual restrictions on the movement of persons between basis in designated priorities areas. In order to Member Countries. However, this protocol has facilitate mobility of students and citizens in the not been signed yet by Member States and it region for purposes of study or work, SADC has seems that particularly South Africa and initiated the comparability of qualifications Botswana have been reluctant to sign this program. SADC is also in a process of protocol. developing an action plan for the region in higher education as well as establishing the III.6.3 Health and HIV/AIDS Technical Committee on Higher Education and Training with the view to spearhead the Recognizing the poor quality of health status in development of higher education in the region. the sub-region and its widespread implications, SADC has established a Health Sector in 1997, II.6.2 Employment and Labor Initiatives which aims at promoting, coordinating and (see Attachment 3) supporting the individual and collective effort of member States to provide people of the region The current focus of the SADC Employment and with a high quality of health services. SADC Labor Sector is on social security, occupational countries have also signed a Health Protocol in safety and health, training and education, labor 1999. The Health Sector has adopted a program relations, eliminating the use of child labor, of actions with the following components: acceding to international labor conventions and · Standardization of Data and Surveillance; gender issue. This focus seems to be less · The establishment and coordination of the concerned with the causes underlying the SADC HIV/AIDS Task Force and regional economy' continued problems with low HIV/AIDS policy analysis work; labor absorption capacities. In the wake of · Epidemic Preparedness; various economic reforms by almost all the · Bulk Purchasing ­ a system of coordinated countries, this issue may require more attention procurement of anti-TB drugs for countries at both the national and regional levels than is of Southern Africa; currently the case. Indeed, the national · Human Resource Mobilization; economic reforms, with or without intensive · Reproductive Health; regional economic co-operation, seem to · Disaster Management. preclude the resolution of the pervasive problems of unemployment and under- employment, which are endemic to all the Apart from actions undertaken at the national countries except Mauritius. On the resolution of level, SADC also launched a program of this issue hinges the sustained capability of fighting HIV/AIDS at the regional level. The Member States to deliver social services such as HIV/AIDS Multi-Sectoral Task Force has developed a SADC Strategic Framework and education, training and health, because it relates Program of Action on HIV/AIDS for 2000- to the need to create viable economic bases for 2004, which was approved by the SADC both the state and households. Council of Ministers in August 2000. A five- Furthermore, the current employment and labor year regional plan has been developed with the agenda seems to favor the developmental purpose of enhancing overall coordination and implications of employment and labor markets capacity in HIV/AIDS initiatives. Ten sectors are involved: Heath; Tourism; Mining; in the context of increasing regional co- Transport and Communications; Labor and operation rather than regional labor market Employment; Information Culture and Sports; allocation issues such as those of intra-regional Human Resource Development; Finance and low-skilled and high-skilled labor migration with South Africa as the centripetal force. Investment; Industry and Trade; and Food Nevertheless, this Sector has developed a draft Agriculture and Natural Resources. Each of the 90 relevant sectors incorporates sector-specific II.7 SADC: RECENT INSTITUTIONAL initiatives to combat HIV/AIDS and for risk DEVELOPMENTS53 (see Attachment mitigation in their programs. For example, the 3) Transport Sector has launched a project to combat the spread of HIV/AIDS in the road SADC's institutional mechanisms, systems, transport sector of SA, Zimbabwe and procedures and approaches are remnants of its Mozambique. The focal point of the project will past. These have been superimposed on a be the main transport corridors in Mozambique: regional agreement that is pursuing not only Maputo and Beira/Tete. Actions will particularly sectoral cooperation any more, but also market target long-distance truck drivers and their integration and harmonization of policies and sexual partners. strategies, leading to internal tensions in the functioning of the organization. Since 1992, the Efforts are being made to prevent and control inappropriateness of SADC's institutional HIV/AIDS and other communicable diseases. mechanisms has become increasingly apparent For example, SADC countries agreed to due to the influences of a combination of factors, collaborate on the development of a vaccine that i.e. the broadening and deepening of the scope is appropriate for the region. The Southern of the agreement; the expansion of membership, African Tuberculosis Control Initiative (SATCI) no less due to the accession of such a was adopted to fight tuberculosis. The SADC heterogeneous group of countries in terms of Health Ministers adopted the malaria framework size, and levels of development and stability in May 2000 and the Malaria Task Force was such as SA, Mauritius, the DRC and the established to design a plan for implementing Seychelles; and the shift in political and socio- effective malaria control in the SADC region. economic development paradigms, finding The main goal of the project Roll Back Malaria expression in political and socio-economic in the SADC Region is to halve malaria mortality reforms being unevenly implemented among and morbidity by the year 2010 with further Member States as well as between the regional reduction of the 2010 morbidity and mortality and national levels. The broadening scope and figures by 50% and 75% respectively by 2015. deepening agendas of both SADC and Similar initiatives are on the way to respond to COMESA54 are also accentuating Member the cholera epidemic. States' resource and institutional constraints to effectively participate in the plethora of The health sector enjoys major support from the meetings and activities of these institutions as donor community for combating and dealing well as to comply with their multiple regional with HIV/AIDS. DFID has made available £7.5 obligations. million over a 5-year period to reduce HIV/AIDS related risk behavior among BLNS II.7.1 SADC Institutional Machinery: 1992- people most vulnerable to infection; and the EU 2001 made available Euro7.5 million over a 4-year period to increase the capacity of SADC sectors The SADC institutional machinery and in identifying multisectoral solution for functioning suffered from a number of HIV/AIDS. UNAIDS has provided US$140 000 deficiencies and idiosyncrasies, including: and US $315 000 has been provided by the US to review policies that have an impact on · That the governing structures of SADC HIV/AIDS in SADC Member States and for remained similar to that of SADCC, with the harmonization of such policies. 53 See Kritzinger-van Niekerk, L., 2001. Institutional Developments in the Southern Africa Development Community. World Bank, SA Country Office. Unpublished Mimeo. 54 That is apart from the resource demands of effective participation in other regional and global agreements and fora. 91 exception of the Tribunal (on which a public finance, education, labor and Protocol was signed but only in 2000), and employment, prices, population, the creation of the Organ for Politics, environment, industry, trade, etc. In Defense and Security (in 1996, but then addition, the SADC Program of Action suspended after 15 months, and again (SPA), i.e. all its sectors and associated created, and this time within the folds of the programs and projects, was supposed to overall SADC institutional mechanisms in generate and provide data and information in 2001). A manifestation of the impasse on order for SADC to complement the SADC the Organ for Politics, Defense and Security statistical system to form a comprehensive as well as priorities of the international regional data and information system. The cooperating partners particularly of the EU decentralization of the SPA has effectively and USA (rather than the Treaty) was the ruled out the possibility of proper integration incorporation within the SADC Secretariat and consolidation of the two information (which preferred and was equipped to deal systems at the level of the Secretariat. There with the socio-economic integration agenda has been considerable overlap between the only) various `special programs' such as a SADC statistical system and the SPA, but regional drug control program, landmine together they have still failed to provide clearance, integration of demobilized solders SADC with a reliable, coherent, internally in society, measures against illicit trafficking consistent and comprehensive regional data in small arms, etc. and information system. · In spite of a moratorium on the creation of · The admission of new members without new sectors, in order to consolidate work following appropriate membership criteria within existing sectors, which was declared has had a debilitating effect on regional in 1990 and reaffirmed in 1998, SADC integration. The admission of the DRC and, continued unabated with the creation of new to a lesser extent, the Seychelles has sectors. Aspects of the Legal Sector could contributed in many ways to a serious have been a central coordinating function erosion of SADC's coherence. Furthermore, within the Secretariat, rather than a separate the accession of these two francophone Sector. Other important issues have been countries has increased the running cost of neglected. For example, an issue, which has the organization due to SADC having had to not found a `champion' among any SADC accommodate their language concerns in country or cooperating partners in a meetings and documentation in addition to comprehensive way, has been cooperation the requirements of the lusophone members. on statistics and information. The result has Both the DRC and the Seychelles have not been that the small Statistical Unit within only been slow in acceding to existing the SADC Secretariat, which is supposed to protocols and signing of new ones, but have provide data required for planning, also fallen into arrears in membership monitoring and evaluation of policies and contributions since their accession to SADC. programs (and arguably for a management The Seychelles has also introduced an information system) has remained extremely awareness of the special conditions applying weak, while SADC has been suffering from to small (and island) member states and a dearth of reliable and comprehensive brought these into relation with the equal information for its management, planning member state contributions to SADC. With and monitoring. Up till now, the statistical these two countries having failed to pay unit has been supposed to deal with the their membership contributions, in addition SADC statistical system, composed of to some of the other Member States, the `macro data' on different subject matters, application of Article 33 of the Treaty on i.e. national accounts, transport and Sanctions has become impossible, while the communications, agriculture, fisheries and peer-pressure approach has become largely forestry, balance of payments, tourism, ineffective. 92 · Another practice, a legacy of the SADCC of US$6,8m was outstanding as at 30 July approach, was to seek donor support for 2000. Countries in arrears at that stage SADC activities in the same way and format included the DRC, Seychelles, Tanzania, than in the 1980s, in spite of a significant Zimbabwe, Zambia and Malawi. development paradigm shift (also on national level) in terms of the role of the It is not clear what the annual operational public vis-à-vis private sector during the late cost of SADC institutions amount to. 1980s and early 1990s. The practice of However, an estimate by the Review perpetuating the Annual Consultative Committee on SADC's Institutions and Conference tradition, mainly to seek donor Operations put that figure to at least support for regional integration activities US$43.2 million for the 2000/2001 financial might have contributed to a delay in a year, consisting of: reorientation of SADC in this regard. With * US$15.47 million for SADC institutions ODA having shown a declining trend since such as the Secretariat (about US$6.6 the early 1990s, it is clear that SADC's million), the 2 Commissions (about resource mobilization strategy will have to US$3 million), other programs and shift from foreign donor assistance to institutions funded by SADC (US$2.5 promotion of domestic and foreign million) and US$3.6 million for investment. It will not only become operational cost of the SCUs (which increasingly necessary to involve the were by an large underfunded); and region's private sector in the financing of the * US$27.5 million for Member States to SPA, but also in its management and attend meetings implementation. In the past, the SADC institutional mechanisms have not had Were all SCUs funded at the average level adequate capacity to take maximum of the 2 Commissions, which would have advantage of donor support. Specifically, been more in line with SCU's task at hand, SADC has had technical capacity constraints this amount would have increased to an in the conception and design of projects for estimated US$76m for 2000/2001. inclusion in the SPA, and experienced a related problem of absorptive capacity for · Apart from the remnants of the past such as resources made available by ICPs. the equal member state contribution and donor dependency, no attempt has been · SADC has also chosen to continue with the made to put in place a `compensatory equal membership contribution system as mechanism', structural and/or development under SADCC. Annual percentage funds. Currently, SA's55 countervailing increases have not been sufficient for measures to compensate for potential funding the daily administrative expenses disproportionate benefits in terms of trade and staffing of the SADC Secretariat and and investment in the regional integration Commissions as well as for the `soft SADC arrangement revolve around: projects' such as studies, creation of * its modalities of implementing the databases and capacity building. The SADC Trade Protocol (asymmetrical resource constraints have been compounded trade preferences). It attempted to by the decline in ODA from the negotiate these in a way where the international cooperating partners (which extent of and timeframes for an have also shifted resources to issues of their asymmetric tariff reduction between concerns). In spite of relatively moderate budget increases per annum, SADC has been increasingly suffering from late or 55 Botswana and Mauritius do not have clear strategies in outstanding membership fees. According to this regard. Largely self-interest rather than that of the the Council of Ministers meeting Annotated rest of SADC inspires Mauritius' increasing cross- border investment and entrepreneurial activities in Agenda of 23-24 February 2001, an amount continental SADC. 93 itself and the rest of the region as well as countries in the region, the debate may have the linkages between elimination of to be steered towards the concept of NTBs and tariff reductions would structural and/or development funds, rather reduce the need for a regional than automatic fiscal transfers in order to compensation mechanism. make headway on this issue. * more relaxed exchange controls for the rest of the region vis-à-vis the rest of the · The small number of protocols that have world; been ratified by the Member States, reflect * making the human and financial the myriad of problems that have beset capacities of institutions such as the protocol development in SADC up till now Development Bank of Southern Africa as indicated in section III.3.1. (DBSA) and the SA Industrial Development Corporation available for Due to the misalignment between the deeper operating in the rest of the region integration agenda of SADC and the sector and (although there is a limit of 33.3% of project-led institutions and values of SADCC, shareholders' equity on such investment various problems regarding the functioning of in place for the DBSA); SADC and its institutions presented themselves * encouragement of cross-border during the 1992-2001 period. These, severally investment by public utilities such as or jointly, have been the topic of investigations Eskom and Transnet; and since 1992. During 1996/97, SADC again * technical assistance for promoting the reviewed its institutional mechanisms, policies, Spatial Development Initiative concept ­ strategies and SPA aimed at a rationalization of which is slow to see implementation these. beyond the Maputo corridor. However, the September 1998 Annual Summit These measures have not been seen as decisions regarding the recommendations necessarily sufficient `compensation' for coming out of this review were weak and `balanced, equitable growth and tantamount to a rejection of proposals vital for development' in the region by the least transforming SADC's structures to cater for the developed member countries. Hence the requirements of development integration. At debate on `compensatory mechanisms', that time, the important challenge for SADC was whether in the form of a structural and/or to implement these diluted decisions in order to development fund has been kept alive in the achieve streamlined structures and procedures region by all except for SA, Botswana and aimed at a `lean but efficient' intergovernmental perhaps Mauritius. For SA, compensation machinery and to realign the current policies, mechanisms through automatic fiscal strategies, programs, projects and practices to transfers have been regarded as a `non- reflect the principles and objectives of regional subject', no less as it has maintained that integration as contained in the Declaration and these are notoriously difficult issues in terms the Treaty. Needless to say, the rationalization of calculation of benefits and costs, of the institutional structures did not take place, structuring and financing, apart from the fact although there was a general refocusing of the that no country in SADC is sufficiently SADC sectors more on policy harmonization wealthy and developed to make significant away from identification and implementation of annual fiscal transfers. It is interesting to projects56. note that countries such as SA and Botswana are also reluctant to support a protocol on free cross-border movement of labor, another aspect which would have had an influence on the size and scope of any such regional compensation mechanism. Thus 56 This is not always clear without closer scrutiny of from the perspective of the wealthier activities as SADC still upholds the tradition of calling all activities `projects'. 94 The Review Committee, appointed in 2000, thus (i) SADC's Common Agenda reiterated the problems and shortcomings of the current system57, including: The common agenda should include the · The main actors in the decentralized following: structures (SCUs, Commissions, the · the promotion of sustainable and equitable Secretariat, Sectoral and National Contact economic growth and socio-economic Points) having unclear lines of authority and development that will ensure poverty accountability, resulting in poor alleviation with the ultimate objective of its communication, coordination and eradication. performance as well as duplication of efforts · The promotion of common political values, and resources; systems and other shared values which are · Disparity in and inadequate provision of transmitted through institutions which are resources and staffing by member States, democratic, legitimate and effective; and; leading to inequitable distribution of · The consolidation and maintenance of responsibilities and obligations; democracy, peace and security. · Different management and administrative procedures and rules, varying standards, In order to accomplish the above concerns, a ten qualifications and performance criteria for year strategic development plan - a Regional staff involved in the management of the Indicative Strategic Development Plan regional program; (RISDP) - will be developed based on the · Rapid increase of sectors resulting in a following priorities: plethora of priorities and activities dependent on limited resources, which have · Economic led to a proliferation of meetings and an Development of measures to alleviate increase in associated costs; poverty with a view to its ultimate · Under the current structure and eradication; circumstances, the Secretariat has been Agricultural development and unable to execute its mandate as provided sustainable utilization of natural for in the Treaty, especially that of resources; undertaking strategic planning and Development of a common market management; and through a step by step approach while · Lack of an institutional framework in which restructuring and integrating the Ministers responsible for Foreign Affairs economies of Member States; could discuss and adopt common positions Harmonization of sound macroeconomic on matters pertaining to the organization in policies and a maintenance of an various international fora. environment conducive to both local and foreign investment; II.7.2 SADC Institutional Mechanisms and Development of deliberate policies for Systems, from 2001 onwards industrialization; and At its Extra-Ordinary Meeting held on 9th March Promotion of economic and social 2001 in Windhoek, Namibia, the Summit of infrastructure development. Heads of States of SADC took a number of · Political decisions aimed at restructuring SADC. The To consolidate democratic governance; main points of this evolution are summarized Establishment of a sustainable and below: effective mechanism for conflict prevention, management and resolution. · Social Mainstreaming of gender in the process 57 SADC, 2001. SADC Extraordinary Summit, of Community Building through Windhoek, Republic of Namibia: Draft Annotated regional integration; Agenda, 9 March, 2001. 95 Development, utilization and · Tribunal management of human resources; · SADC National Committees Combating of HIV/AIDS and other · Standing Committee of Officials deadly diseases; · Secretariat. Development of programs for the improvement of quality of Health and The structure of the Secretariat shall comprise Social Welfare the following: · Others · Deputy Executive Secretary; Development of Science and · Legal Affairs; Technology, Research and · Internal Audit; Development; · Information, Communication and Development of an effective disaster Technology including statistics and library preparedness and management services; mechanisms; · Administration; and Consolidation of international · Finance. cooperation with other regional groupings. Four Directorates would replace the Commissions and Sector Coordinating Units, The Regional Indicative Strategic Development namely on. Plan (RISDP) will be developed and · Trade, Industry, Finance and Investment; implemented over two, five-year periods. Its · Infrastructure and Services; main objective is `to provide SADC Member · Food, Agriculture and Natural Resources States, institutions and policy makers with a (FANR); coherent and comprehensive development agenda on social and economic policies over the · Social and Human Development and Special next decade (2002-2011)58. The design of the Programs. They will be based at the SADC headquarters. RISDP will take into account SADC's vision, Their overall functions would include the mission, objectives and priorities as well as a set promotion of regional integration and key issues of principles pertaining to e.g. subsidiarity, additionality, dynamic and scale gains, variable such as gender mainstreaming, poverty geometry and scope, and development eradication and promotion of sustainable socio- integration. Towards the beginning of 2002, the economic development. Secretariat has finalized a terms of reference, The following priority actions had to approach to the RISDP and an inception report commence immediately: to initiate the drafting first of a desk background study and then of the RISDP. · Establishment of the Directorate for Trade, Industry, Finance and Investment (by (ii) New Structure August 2001); · Establishment of the Directorate for Food, The SADC Institutions would include: Agriculture and Natural Resources (by · Summit December 2001); · The Troika. The practice of a Troika system · Establishment of the Department of consisting of the Chair, Incoming Chair and Strategic Planning, Gender and the Outgoing Chair of SADC Development and Policy harmonization (by · August 2001). Organ on Politics, Defense and Security · Council · Recruitment of the Chief Director (by · August 2001). The old position of Chief Integrated Committee of Ministers Economist was abolished. · Formulation of the Regional Indicative 58 SADC Secretariat, 2001. Terms of Reference: Strategic Development Plan. Regional Indicative Strategic Development Plan. 96 · The remaining Directorates to be put in integration. On the one hand, Part II finds that place during 2002 and 2003. much progress has been made in some discrete The total costs of the new structure were areas of cooperation, i.e. in either entire sectors estimated at US$12.1 million against the old or in specific sub-sectors. On the other, it finds structure's costs of US$ 16.2 million. that political problems, inappropriate institutional mechanisms and the uncoordinated II.8 CONCLUDING REMARKS pace in implementing sectoral programs and projects seem to have been bogging down Both SADC and COMESA are implementing or regional integration. Overall, it may be safe to preparing to implement the areas, which they say that SADC is still in the initial design and/or have decided, that could be best dealt with implementation phase of a framework for through a regional approach rather than on a cooperation that would allow, in terms of the national basis. COMESA is implementing SADC Declaration,59 for regional integration in accordance with its · `Deeper economic co-operation and Treaty, while SADC is converting its Treaty integration, on the basis of balance, objectives and principles into concrete equity and mutual benefit, providing for cooperation and integration obligations and cross-border investment and trade, and actions through the development and freer movement of factors of production, implementation of sectoral protocols. This goods and services across national background paper did not attempt to give an borders; account of progress in regional integration in · Common economic, political, social terms of COMESA policies and programs, but values and systems enhancing enterprise rather focused on cooperation within the SADC and competitiveness, democracy and framework. good governance, respect for the rule of law and the guarantee of human rights, Currently, there are no monitoring and popular participation and alleviation of evaluation systems in place to determine the poverty; `destination' and pace of regional integration in · Strengthening regional solidarity, peace SADC. This background paper has also not and security, in order for the people of attempted to design such a monitoring and the region to live and work together in evaluation system. In stead, it has merely peace and harmony.' reported on progress made in cooperation of the respective sectors, and even then such progress As far as its economic objectives are concerned, made cannot be unambiguously attributed to the implementation of its trade protocol heralds membership of the RIA. For example, the levels an era of market integration for SADC, although and patterns of trade between South Africa and the current target date of 2012 for full the rest of the region have occurred in the implementation of the FTA also indicates the absence of any regional trade arrangements. duration towards achieving a common market as Although policy harmonization across sectors mentioned in the Declaration. As far as the and member countries are clearly discernible, scope of developments towards a common many such policy and institutional changes in market is concerned, much remains to be done in the constituent countries have come about the areas of finance and services, apart from the through unilateral decisions, although their pace goods market integration. of implementation might have been accelerated through complementary regional-level Nevertheless, the implementation of the Trade obligations. Changes in the transport sector may Protocol has set in motion a seemingly self- be a case in point. accelerating mechanism for regional economic integration as the adoption of certain From the discussion in Part II it is thus not altogether clear to what extent and at what pace 59 the sub-region is moving towards deeper SADC, 1992. Declaration and Treaty of the Southern African Development Community, pp. 1-11. 97 sectoral protocols necessitates the adoption of compensate for potential disproportionate others, especially where the interests of the benefits from trade integration. private sector are concerned. Unlike in the past, SADC is now forced to deal, over the short term Furthermore, a significant challenge for SADC and in very practical ways, with cross-sectoral in the design of its Regional Indicative issues such as trade efficiency. The broadening Strategic Development Plan, would be to of the sectoral cooperation agenda by market avoid the pitfalls of its past including the integration has contributed, therefore, to a following: visibly increased sense of urgency among SADC · Unclear objectives, i.e. whether SADC is stakeholders to e.g. address structural constraints pursuing an approach of sectoral to diversification and industrialization in order cooperation and policy harmonization or to realize the benefits of trade integration. whether its approach is one of regional SADC now clearly sees that its transport, integration, with time-bound and in-built telecommunications, energy, water, agriculture milestones or targets for the integration and human resource development sectors have a process. critical role to play in both enhancing intra- · Insufficient pragmatism in prioritizing regional trade and developing the region's objectives, goals and intermediate targets for industrial capabilities. Large amounts of regional cooperation and integration, taking resources and major efforts are put into human into account the capacities of Member States and institutional capacity building for and their economies. implementing cooperation agreements within · Lack of clarity regarding the concepts of these sectors on the national level. However, for `regional public goods' and regional SADC to fully exploit multisectoral linkages for priorities, i.e. whether these are a summation purposes of regional integration, a much deeper of national priorities or regional cross- understanding is required of the contribution of sectoral and cross-border issues. Due to the various sectors, e.g. specific infrastructural insufficient differentiation between national investments, and their maintenance and and regional priorities, some of its policies, operations, to objectives such as diversification programs and strategies have clearly failed of production and growth in exports. Without to lead towards regional integration. this, one is merely left with a list of · Insufficient harmonization of national, shortcomings or wish list of projects (as is clear regional, continental and global agendas. from the Attachment elaborating on the `projects' for cooperation within each sector), A critical constraint to progress in its regional and unable to appreciate the particular integration agenda has been SADC's regional- importance of any specific project to the level institutional machinery and functioning. objectives of regional integration. These have precluded the development of linkages within and between sectors, and Another challenge is lying for SADC in meeting thereby failed to draw them all within the its objective of `[d]eeper economic co-operation framework of its market and broader and integration, on the basis of balance, equity development integration agenda. After changing and mutual benefit,...` The considerable and from the Southern African Development growing trade imbalance between SA and the Coordination Conference (SADCC) to SADC, non-SACU SADC countries could be seen as a the Development Community in 1992, SADC divergent force in terms of the distribution of has only recently commenced with a process of perceived or real gains and costs of integration. realigning its institutional machinery and This may call for the design and implementation functioning with its regional integration agenda. of regional equilibrating measures in a far more The new institutional model implies greater deliberate and structured way than at present responsibility to a centralized Executive where it is largely relying on SA's unilateral Secretariat, which would include four countervailing trade and investment measures to directorates: Trade, Industry, Finance and Investment; Infrastructure and Services; Food, 98 Agriculture and Natural Resources (FANR); Social and Human Development and Special Programs60 and strengthened units such as that on knowledge and information. Thus, apart from a more clearly articulated and focused `common agenda', deeper regional integration would critically hinge on the speedy and smooth implementation, reorientation and functioning of the new regional institutional mechanisms. 60 The decision to create these directorates has been taken at the Extra-Ordinary Summit of Heads of State and Government of SADC, held in Windhoek, Namibia, on 9 March 2001. The phasing out of existing Commissions and sectors would be undertaken within two to three years and directorates would be established in accordance with the following time frame: · March-August 2001: establishment of the Directorate on Trade, Industry, Finance and Investment; · August-December 2001: establishment of the Directorate on Food, Agriculture, and Natural Resources; · The remaining Directorates would be established in 2002 and 2003. 99 100 PART III DONOR STRATEGIES, INVOLVEMENT AND PROJECTS IN SOUTHERN AFRICA International development partners of the · Air Transport Liberalization: In this area, southern African countries such as the World the team initiated joint discussions with Bank, the International Monetary Fund, the COMESA, SADC/SATCC and the EAC on European Union, the African Development their programs and especially their actions Bank, the Development Bank of Southern for the implementation of reforms. Africa, and Japan are actively participating in Subsequently it has deepened the dialogue the efforts to promote regional integration within with and technical advice to these three the sub-region. The purpose of this section is to RIAs on various aspects of the highlight regional work programs and projects Yamoussoukro Decision to promote its of some of the major or prominent donors and implementation. financiers in ESA, with emphasis on SADC. (ii) Financial System Infrastructure III.1 THE WORLD BANK PROGRAM AND PROJECTS The main focus for FY02 was extension of a grant for the SADC Payments and Settlement The World Bank is involved in various regional System, for the implementation of payments activities in ESA region. During the 2001/2002 system reforms aimed at harmonizing payment financial year (F02) multi-year grant financing systems in SADC countries, and the Financial for regional integration in the sub-region (from System Infrastructure grant. The main focus either own funds or funds under its areas under this initiative, included: (i) administration) amounted to US$3 million, with Monitoring of the progress being achieved by a further US$4.3 million from the Global the SADC IT Forum core team in implementing Environmental. These grants were in addition to a Bank Grant for a web-site development; annual administrative budgetary outlays, the capacity building and training; development of latter which also supported the preliminary work software applications for off-site surveillance and pre-appraisal activities related to investment and advanced economic analysis tools; SADC lending for a `regional project' amounting to telecommunications status and vulnerability about US$225 million. The remainder of this analysis; annual conference; and forum section gives a broad indication of some of the coordination arrangements; and (ii) Technical Bank's regional activities in ESA. advice, particularly, in regard to central bank computer assisted applications. Another grant- (i) Regional Transport supported focus area was the strengthening of accounting and auditing capacities and For FY02, two main activities were scheduled. frameworks in the ESA region. These included ongoing dialogue, including support to a SATCC conference, and air (iii)Strengthening Statistical Capacity transport liberalization. · Ongoing dialogue and conference support: The main activities financed through Activities included an assessment of the administered grant funds included: (i) Statistics Bank's operations in SADC countries; capacity building to support development and maintenance of contact with SATCC to implementation of evidence-based poverty obtain information on sectoral reduction strategies in SADC member states. developments; support to preparations for This is aimed at strengthening national statistical the SATCC Transport Investors Forum; and systems through developing statistical definition of the main elements of a future development plans and sequenced information regional transport and transit facilitation strategies for poverty monitoring and evaluation. initiative. (ii) Strengthening statistical capacity and monitoring and evaluation through 101 dissemination of the Second Generation Live of the project and preparation of the required Data-Base in 6 SADC countries. agreements; (v) identification or design of the project implementation vehicles on the SAPP (iv) Education and national levels; and (vi) preparation of the Environment/Social Assessment. The SADC Capacity Development Initiative In Education Policy Development, Planning and (vi) Environment and Natural Resources Management grant includes support for Management development of effective capacity for education policy development, planning and management With regard to water resources management, in the SADC Member States, the establishment the main activity was to identify and explore of mechanisms for information capture and opportunities for joint management and exchange on available resources and expertise in development of the Zambezi River Basin the region, and for creating mechanisms for (southern Africa's largest river basin), with a documenting and sharing lessons of good focus on analysis and riparian dialogue. practice. Activities include establishment of Analyses was carried out in the context of Project Management Unit and hiring of project ongoing SADC cooperation, such as the staff; holding an Education Policy Forum; Southern Africa Power Pool (SAPP), as well as development of training plans for policy makers existing Bank and donor supported programs in and planners; and creating a web-site and each of the eight riparian countries (Angola, knowledge management work. Botswana, Malawi, Mozambique, Namibia, Tanzania, Zambia and Zimbabwe). (v) Energy and Telecommunications: Southern African Power Market Project With regard to the environment sector, the main activity included the conceptualization of a In this area Bank activities largely revolved Regional Environment Information Management around preparation for the Southern Africa System (PRISMES). Activities for this Power Market Project. For this project the Bank initiatives included (i) taking stock of on-going involvement would consist of providing support, activities related to environment both in the both financing and advice, to the Coordination Bank and in SADC countries; (ii) identifying the Centre and financing of the construction and possible actors and beneficiaries; (iii) setting up upgrading of the Malawi-Mozambique, Zambia- the initial working group in the field; (iv) Tanzania interconnections (see detail in previous refining the program concept; (v) integrating section on Energy). Activities during FY02 GEF concerns in the proposal; and (vi) included (i) preparation missions to the SADC consultations with regional and national countries involved in the project to make stakeholders as well as with other donors. arrangements for the financing by the Bank of Furthermore, a GEF grant supported project ­ the proposed interconnections (Malawi- the Regional Environmental Information Mozambique, Zambia-Tanzania, Zambia-DRC) Management Project ­ has been ongoing, with and to agree with the SAPP management on the the aim of improving and strengthening natural scope of technical assistance package to the resources management and planning in the SAPP Coordination Centre to be included in the Congo Basin through information provision to proposed Southern African Power Market stakeholders. project; (ii) review of the existing technical studies for the proposed interconnections and initiation of the new studies as required (e.g. in the case of the Zambia-DRC interconnection); (iii) preparation of economic analysis for the proposed interconnections that would take into account recent development in the regional power market; (iv) design of the legal structure 102 (vii) African Connection Initiative The completion of SADC's RISDP, therefore, will be crucial for a full-fledged Bank regional Grant-financed support to the ongoing African assistance strategy for this sub-region. At this Connection Initiative is aimed at creating a point in time, potential areas for cooperation forum to promote policy reform continent-wide. include trade, finance and investment and The objective is to use global connectivity and infrastructure. As SADC progresses with the information technology to enhance Africa's formulation of the RISDP, the World Bank and competitiveness while improving living SADC/COMESA is continuing with information standards through effective access to services for exchanges and policy dialogue on areas of health, education, agriculture, and other sectors. common interest. This initiative contributes to ongoing country programs (Lesotho, Senegal, South Africa and III.2 THE IMF STRATEGY AND WORK Uganda) and to regional programs. PROGRAM IN ESA REGION (viii) Macro and Trade Dialogue The main goals of the Fund's work in the area of regional integration in Sub-Saharan Africa are: This main activities under this initiative was to · To help reduce barriers to the free flow of identify the scope of analytical and capacity goods, services, capital and labor; building support on an inter-regional COMESA- · To encourage an outward-looking approach SADC basis, e.g. in the areas of NTBs, capacity to integration; building for the use of trade information bases, · To assist in the improvement and etc. Together with SADC and COMESA and harmonization of macroeconomic policies; some of their other development partners, such · To facilitate structural reform and regional as the IMF, the Bank has also initiated analytical cooperation through technical assistance; work on trade performance and integration in · To provide surveillance of monetary and ESA. associated institutions. Under this rubric, the Bank has also conducted In its regional initiatives, the IMF emphasizes preliminary work on clarifying concepts and the importance of cooperation between regional points of departure for future assistance for institutions in ESA and the dangers of retreats regional integration. Similar to its approach for from open regionalism. It also intends to developing a country assistance strategy, on the increasingly take into account integration regional level the Bank's assistance strategy initiatives in its country support programs. would be responsive to SADC's RISDP, it Furthermore, the IMF's activities on regional vision, strategies and priority programs. During integration will seek close coordination with FY02 and up till now, that is the design phase of development partners such as the World Bank the RISDP, ongoing dialogue has taken place and European Union. The core elements of the between the Bank and the RIAs in ESA to define work program are the following: ways to align the World Bank's program with their strategic priorities and to explore ways in Technical assistance in the fiscal, which a Bank strategy for the sub-region could · monetary, financial and statistical areas . be developed and how Bank instruments and In ESA the Fund initiated regional approaches could support such a strategy. In surveillance initiatives by preparing this process, a special effort has been made to material on economic developments, ensure that country assistance strategies (CASs) prospects and policies for peer review and are formulated within a broader regional by participating at the RIFF and other perspective by explicitly taking into account activities in ESA at meetings of ministers elements of the Bank's assistance strategy that and central bank governors. Convergence are directed toward deepening regional issues have been analyzed with the objective integration. 103 to forge greater policy consistency within III.3 THE EUROPEAN UNION and between the regional bodies. The PROJECTS IN ESA AND INDIAN Fund's African Department also prepared a OCEAN paper that described recent development in regional integration in ESA and the Fund's The European Union is actively involved in overall approach. regional integration in ESA region (See Attachment 4 for list of EU projects in ESA · In ESA, the IMF's priorities are: region). Ongoing promotion of consistent, outwardly oriented approaches to (i) EU/SADC Regional Projects regional integration by all the RTAs in ESA through analytical material, use of The European Union support to SADC dates RIFF and coverage in Article IV back to the mid-1970s when the Community consultations and program negotiations allocated funds to the Southern Africa region of the implications of overlapping under the first Lomé Convention in 1976. Since preferential commitments. then, the European Commission has allocated Ongoing technical assistance to about ECU 490 million for regional cooperation COMESA and SADC in the areas of in Southern Africa. Under the 8th European financial and monetary management Development Fund (EDF), which entered into (domestic and cross-border payments force in mid 1998, the Commission has made systems; harmonized supervision, available ECU 121million over a five-year regulation and accounting and auditing period to assist regional cooperation in Southern standards; regional capital markets, etc); Africa. response to the fiscal implications of trade liberalization (regional and Other sources of financing available for SADC multilateral); prevention of wasteful tax countries include: the SYSMIN facility that can competition; macroeconomic indicators; benefit to countries that depend on the mining and improved statistics and databases. sector, resources of the European Investment Assistance towards the development of Bank (EIB), humanitarian and rehabilitation aid, policy convergence criteria, the closer co-financing of NGO projects, support for integration of financial markets, and democratization and human rights projects, etc. other work of COMESA and SADC. Under the Berlin Initiatives (created in 1994), the EU supports mechanisms for promotion of · The IMF has initiated more analysis on the trade and investment between SADC and the benefits of broad integration and cross- EU; special programs such as clearance of country issues. It is also considering new landmines; reintegration of former military publications on African regional issues and personnel (most affected countries are Angola, encouraging rationalization of regional Mozambique, Namibia, South African and bodies. Recently, it has undertaken Zimbabwe); a SADC private sector business preparatory studies for the proposed cross- organization; electoral commissions; combating border payment system for COMESA and illicit drug trafficking; water and energy conducted two studies on the fiscal resources management; and combating of implications of a free trade areain SADC HIV/AIDS. and COMESA: (i) The Revenue Implications of the Removal of Tariffs on Intra-COMESA In respect of SA, special financial treatment is Trade. IMF, December 1999; and (ii) The offered under a specific program called the Revenue Implications of the Elimination of `European Program for Reconstruction and Intra-SADC Tariffs. IMF, February 2000. Development', which is a multi-annual program with a regional dimension. The main regional issues benefiting from financing under this 104 program are: health and education, private sector (iii)Other Activities Under Preparation development, governance and democratization. These include: (ii) Priority Areas of EU Financing Support · A livestock development project focusing on combating animal diseases prevalent in the The financial envelope of ECU 121million of region; the EC to SADC is focused on two priority · A sustainable regional training program for sectors: (i) infrastructure and services and (ii) food and security issues; trade, investment and finance. · An intra-regional skills development program concentrating on maximizing the In the area of infrastructure and services, use of regional educational institutions; examples of projects that are being financed or · Assistance with the monitoring, control and considered for financing are: surveillance of fishing activities in SADC · The Namibia Corridor: rehabilitation of coastal waters; sections of road between Lubango (Angola) · A regional drug control program to help and the Namibian border; combat illicit drug trafficking and reduce the · Rehabilitation of sections of the Monze - effects of drug abuse; Zimba road in Zambia, which forms part of · Support for the implementation of the the North-South trunk road to the SADC plan of action to combat the spread Zimbabwean border and the Trans-Caprivi of HIV/AIDS. highway in Namibia; · The Nacala Corridor: rehabilitation of the Other areas for investment projects that could railway line between Cuamba benefit from funds of the European Investment (Mozambique) and the Malawi border. Bank include: energy, water supply, telecommunications, transport and industrial In the area of trade, investment and finance, development. financial support aims to assist SADC in the implementation of the Trade Protocol and other (iv) EU/COMESA Regional Projects mechanisms of intra-regional trade and The following table shows that the EU has investment. Examples of projects include: committed a financial envelope of EUR38 · EU/SADC Investment Program, which million through EDF 7 and 8 to support regional would include Industrial and Business Fora integration in COMESA. As of 22 February in the SADC region; 2001, EUR15 million has been disbursed · Projects to improve the training of equivalent to 40% of the financial envelope. statisticians and the development of Detailed information regarding these projects is statistical methodology. available in Attachment 4. 105 Table 3.1: List of Ongoing Regional Projects Funded by EDF 8/7 and Implemented by COMESA (As of February 2001) Financial Envelope Disbursed Undisbursed (EUR `000) (EUR `000) (EUR `000) EDF 8 1. Regional Harmonization of customs and Trade Statistics Systems 12,600 1,464 11,136 2. Regional Integration Program (Phase II) 8,500 3,308 5,192 3. Air Transport Liberalization 745 0 745 4. East Africa Regional Statistical Training 3,000 0 3,000 5. COMESA Africa Trade Insurance Agency 740 740 0 Sub-Total 25,585 5,512 20,073 EDF 7 6. COMESA SQMT(1) Project 1,998 171 1,827 7. Computerization of Customs and Foreign Trade Statistics 1,000 759 241 8. TA Support in Info. Technology to COMESA Secretariat 500 252 248 9. Advance Cargo Information System (ACIS) 9,300 7,744 1,556 10. Preparation of Regional Export Services Agency (RESA) 150 75 75 Sub-Total 12,948 10,001 2,947 Total EDF 7+8 38,533 15,513 23,020 Source European Commission Note: (1) SQMT Project: Standardization, Quality, Metrology and Testing Project. III.4 DBSA'S FINANCING ROLE IN donors and other financiers. In contrast with SADC donors such as the EU, USAID and others, but similar to the World Bank and the AfDB, the The SA Government has allowed the DBSA, a DBSA has limited annual grant financing for wholly-owned national government regional coordination functions. Its financing is development finance institution to allocate 33% more suitable for regional `public goods and of its shareholder capital to other SADC services' and or multi-country projects. It has countries. As the growing SADC portfolio nevertheless provided grant financing and illustrates, the Bank has a potentially significant technical assistance to e.g. the African developmental role beyond SA, which is driven Connection Initiative, the SADC Finance and by the South African Government's wider role Investment Sector, particularly for the work in the region. The DBSA's focus is primarily on program of the Development Finance Sub- its core mandate of infrastructure funding, but in committee and to SATCC for regional transport the rest of the SADC region, institutional initiatives. coverage of non-core areas such as SMMEs and agriculture is also allowed, although to a limited The following table shows DBSA approved extent. It provides loans, equity and technical loans to countries in SADC. assistance and does that in partnership with Table 3.2: DBSA's Cumulative Loans by Country Rand million % South Africa 17,294 74.0 Botswana 242 1.0 Lesotho 1,449 6.3 Malawi 61 0.3 Mauritius 536 2.3 Mozambique 1,251 5.4 Namibia 770 3.3 Swaziland 568 2.5 Zambia 534 2.3 Multi-state 338 1.7 Total 23,104 100.0 Source: DBSA, Projects of 1999/2000. Building Foundations for Development. 106 III.5 USAID STRATEGY AND FOCAL USAID actively collaborates with other donors AREAS in the region. In promoting regional market integration, USAID works closely with (i) Background for the USAID's Involvement European Union, the World Bank, and the in SADC African Development Bank. USAID collaborates with bilateral donors such as The USAID's involvement in SADC is informed France, Germany and Canada on regional by the view that Southern Africans see regional activities for improving communication and cooperation and integration as the way forward, information exchange; transboundary natural with market integration becoming a priority. resources management; and agricultural Awareness is growing in the region of the need research. In SADC, programs are also for democracy and the rule of law to create and complemented by work and funding from sustain a better environment for trade and bilateral USAID missions such as in SA for investment is growing. However, the fragility of HIV/AIDS and customs controls, which are to democracy in most Southern African countries, the benefit of the entire region. USAID's combined with underdeveloped democratic regional program also compliments bilateral norms and standards, requires constant support development programs and broader U.S. foreign to pro-democracy actors at both the regional and policy initiatives, such as the Africa Growth and bilateral levels to assure that democracy takes Opportunity Act (AGOA). firmer root. Additional development challenges are presented by the devastating HIV/AIDS (ii)Focal Areas pandemic, politico-military conflicts, and recent natural disasters. Although SADC enjoys strong In 2001/2002, the USAID Regional Centre for popular support throughout the region, national Southern Africa (USAID-RCSA) program governments that support SADC and a regional sharpened its focus in the following areas: approach to major problems all too often · building democracy, demonstrate reluctance when asked for · encouraging broad-based economic cooperation on specific issues and can be slow · growth through regional market integration, to implement agreed-upon protocols and · sustainable management of shared natural policies. USAID, therefore, is helping the resources, and region meet these challenges by actively · expanding commercial markets for engaging SADC and its various structures, while agricultural technologies and commodities. simultaneously supporting private organizations that promote the adoption of region-wide Democracy and Governance: Formal democratic standards in governance and human structures for multi-party democracy are in place rights, and public-private sector partnerships in in most of the SADC nations. The effectiveness, trade, transport, agriculture and environmental however, with which these relatively new management. USAID's regional program with nations practice democracy, varies from the SADC focuses on the challenges of regional admirable to abysmal. USAID support for the integration that are largely cross-border in nature promotion of democratic "best practices" and beyond the manageable interest of USAID throughout the region is generating increased bilateral programs. Emphasis is on (i) momentum and achievement by key partners in developing regional norms and standards in the development of regional standards in areas democratic governance; (ii) implementation of such as anti-corruption initiatives, conduct of SADC trade area; (iii) sustainable management elections and political processes, and media of shared natural resources; and (iii) market diversity. If sustained, these strengthened oriented agricultural trade in technologies and standards will make undemocratic behavior less commodities. All of these areas should tolerable at both regional and national levels. stimulate regional integration and economic development at the national and regional levels. 107 Economic Growth: USAID's investments over Projects for 2001/2 are elaborated upon in the past decade to improve rail and road Attachment 4. infrastructure efficiency, liberalize customs and trade, support privatization and restructuring of III.6 AFDB STRATEGY AND PROJECTS telecommunications and railroads are contributing to the flow of trade and information The AfDB has financed a major study titled critical to private sector development. FY Economic Integration in Southern Africa during 2001/2 activities focused on areas critical to the 1991-1993. This seminal work has had a region's economic integration and growth, such material influence on thinking regarding as implementation of the SADC Trade Protocol regional integration in southern Africa. In and development of the Finance and Investment addition, the AfDB has also financed the Trans- Protocol to facilitate foreign investment. Kalahari Highway linking Botswana to Walvis Bay port in Namibia Sustainable Management of Shared Natural Resources: Unsustainable land-use practices, Taking into account its past experience and especially in wildlife areas and ecosystems, lessons learned from regional integration in threaten the region's environment and economy. Africa, in February 2000 the AfDB's Board of USAID's community-based natural resources Directors approved its new Economic management program has demonstrated that the Cooperation and Regional Integration Policy. sustainable use of wildlife and indigenous plants According to this policy, the guiding principles is a viable rural development approach. The for its intervention would be: 2001/2 program built upon this approach as a · Open regionalism; foundation for a new, more ambitious effort to · Private sector participation; promote cooperation across national boundaries · Progressive integration using bottom-up and in the management of shared resources such as variable geometry approaches; water, wildlife and critical ecosystems. · Encouraging member countries to support regional integration initiatives; Agriculture: Strong interest by Southern · Addressing the compensation issue; African countries to take advantage of global · Rationalizing regional integration activities; trade opportunities coincides with RCSA's new · Promoting collaborative work with other focus on promoting market oriented agricultural institutions; and trade that focuses on improving access to improved technologies and establishing grades · Promoting regional cooperation on and standards. The RCSA program strives to crosscutting themes. The focal thematic expand commercial markets for agricultural areas would be: policy-based operations; technologies and commodities in the region by regional cooperation in infrastructure; supporting the development of better private sector promotion; institution technologies and the promotion of rules-based building; and ensuring sustainable agricultural trade through market development development and building capacity for rules-based agricultural trade. Subsequent to the approval of its new policy on regional integration, the following projects have The RSCA functions on a 5-year cycle-program, been financed in southern Africa (up till the the current one which ends in 2003. Its 5-year third quarter of 2001): budget amounts to more than US$100 million, · Africa Rehabilitation Project, through a which is supplemented by funds from the USA- technical assistance fund (TAF) loan under SADC initiative as well as complemented by the ADF of UA1.20 million.61 bilateral USAID program funding. About 60% of the RSCA's funding is allocated for the regional market integration program (falling 61 under the above heading of economic growth). AfDB's Unit of Account (UA) = US$1.26065 as at 31 March 2001 108 · Southern African Development Community financing for `regional public goods and Integration Capacity Building. This entails services' or multi-country projects, while also institutional support and technical assistance providing `seed capital' to crowd in the grant under a TAF to the amount of UA0.8 financing of other donors. million to the SADC Secretariat in order to strengthen its role in promoting regional Given the paucity of detailed information on the integration. EU's program, for both the EC's regional · Tazama Pipelines ­ Single Point Mooring indicative program (RIP) and the EU-SADC Project. This project is for the renewal of `Berlin Initiative' (and the relationship between the Single Point Mooring System (SPM) and these two), it is difficult to determine exactly is made up of the renewal of submarine and what programs are being financed, how they are land pipeline to the Tazama Pipelines Tank being implemented as well as the farm and the provision of handling implementation schedule of these. The `bottom- equipment at the SPM. The project has been up approach' - of collating the various SADC funded by the ADF to the amount of UA8.0 sectors' information (project-by-project) - also million. to determine donor support for regional · Public Procurement Reform in COMESA. integration initiatives, is not yet sufficiently The project consists of the following advanced to gain a clearer insight. However, components: (i) data collection on the what is clear from the past is that SADC has existing public procurement laws, failed to absorb huge amounts of annual EU RIP institutions and practices; (ii) forum of allocations. The reasons for this (usually stakeholders; (iii) development of a attributed to SADC's weak institutional COMESA model that guarantees capacity, but hardly ever to the EC's transparency and accountability in public administrative procedures) might be an issue for procurement; (iv) legislation to support a closer investigation, no less to determine public procurement reform in each member opportunities for the Bank to `unlock' and state; (v) institutional reforms and capacity `leverage' such funds. building in national public procurement agencies; (vi) training of public procurement From the USAID program and experience, it agencies staff; (vii) creation of capacity for seems their modus operandi might be the the procurement information collection and opposite of the more `passive' EU approach. publication (dissemination) at the COMESA USAID is widely involved in SADC programs, Secretariat; and (viii) creation of capacities but in a highly performance-driven way. Due to to sustain good procurement practices in built-in incentives in the functioning of USAID- COMESA. A TAF to the amount of RCSA, they seem to have a much more hands- UA1.35 million was provided for this on approach in the management and project. implementation of issues that they support than the EU. The down side of such an approach is III.7 CONCLUSION that the donor and regional initiatives would not necessarily be synchronized. A great advantage In relation to the EU and the USAID, the World is that they can provide (substantial) grant Bank is not only a relative newcomer to the funding for `regional institutions' such as the regional integration arena in southern Africa, but SAPP coordination centre as well as being in terms of annual grant financing, even if closely involved in institutional strengthening or leveraged by trust and other funds, it is also a day-to day- operations within the sub-region. `small player' in the area of regional This is also due to the size and quality of their coordination functions. However, as the field offices, and specifically the SADC-RCSA experience of the DBSA shows, a small grant in Gaborone. budget need not be equated with insignificance and available funds for regional coordination There seems to be some overlap between the functions could be used to eventually support respective programs of the EU and USAID- 109 RSCA. A case in point is their support for the Finance and Investment Sector, where the EU has allocated a large amount of money for the protocol development process, while USAID focuses on two or three sub-components of this sector such as macro-economic convergence and investment. This again underlines the need for close cooperation among donors in their support of regional integration in the sub-region. 110 PART IV CONCLUDING REMARKS The purpose of this background paper has been organizations agreed to cooperate and work to inform the Bank about challenges and together, although it is acknowledged that better opportunities for strengthening socio-economic cooperation and working relationships would not integration in southern Africa and then be able to address the overlap problems of specifically in SADC by: membership and mandates. Current areas for · highlighting some salient political, socio- cooperation include trade analytical work, economic and geographical features of the capacity building and negotiations; transport sub-region, issues such as the implementation of the · giving an overview of recent developments Yamoussoukro Decision and transit facilitation; in regional integration in southern Africa, and international relations such as preparations and for and negotiations with the EU and in the · indicating the current involvement of the WTO. Both the EU/ACP Cotonou Agreement sub-region's most important international and the NEPAD/AU agreements have been development partners. providing further impetus to cooperation among RIAs such as COMESA, SADC and the EAC. Without the benefit of `regional' economic and The unfolding intra-regional efforts towards sector work, the paper has provided a broad- deeper integration, notably towards forming brush and impressionistic picture of selective CUs, and evolving international trade and developments within the southern African development relationships are increasingly region. Each of the issues covered requires exposing problems of overlap and multiple further study, while some other important issues membership, while the five SACU countries might not have received attention at all. seems to be pulling away from the non-SACU SADC members in terms of the evolving The overview of recent developments in the international relationships with the EU, USA, ESA region finds that the political, institutional China and Latin America. These forces could and socio-economic environment in the southern well result in different RIA configurations ­ Africa region is heterogeneous in the extreme, whether in depth or geographical/sectoral converging in policies, but not necessarily in coverage ­ than at present. outcome. Together with the multiple memberships of countries in regional integration Currently, the ESA regional landscape thus arrangements, this is posing particular makes for a fluid operating environment. To challenges and opportunities for regional strengthen the basis of regional development in cooperation and integration and no less to the ESA, for the immediate future, options for development partners' support for integration in the Bank include: the sub-region. · Providing support within the wider SADC/COMESA economic space by On economic grounds, these difficulties urgently identifying potential opportunities for call for rationalization of RIAs to strengthen the functional cooperation on very specific basis of regional development in southern and issues, such as by bringing the non-SADC eastern Africa. However, given that COMESA countries within the folds of the membership of RIAs is a country's political SADC payments and settlement initiative, choice, based not only on economic but also which the Bank is already supporting. Such political, social and geographical considerations, support could be focused on approaches, collapsing these different RIAs into more which deal with the structural weaknesses rational regional groupings seem to be a matter on a country level, but within a `common for the longer-term, politics permitting. Various framework'. This option would depend on past attempts by SADC and COMESA (also inter alia the SADC-COMESA and their predecessors) to eliminate the overlap in COMESA-EAC task forces identifying membership have failed. Thus, in 2001, the two issues for inter-regional harmonization or 111 joint programs, which, in turn, would reflect goods, but also in services as well as for their needs in the Bank's support for such addressing institutional and structural issues. Furthermore, opportunities for constraints inhibiting their competitiveness functional cooperation within common and supply response within a more open frameworks may also arise from continental economic environment. This option stems or international agreements such as the from the hypothesis that, regional trade Yamoussoukro Decision on the integration, particularly among developing liberalization of access to air transport countries, could be regarded as second-best markets in Africa or strengthening of the type policies, although it could not be stated architecture of the international financial a priori whether any one regional trade system. In contrast, the usefulness of agreement would be detrimental to member concerted liberalization efforts for countries without closer analysis. In general strengthening regional integration by a and under reasonable assumptions, analysis group of countries such as RIFF could be has indicated that regional trade integration questioned, is that they do not embed among small countries could be trade national/unilateral action within a coherent diverting and thereby lowering member regional framework which is enforceable countries' welfare. In this context, a key (although RIFF's predominant regional step to minimize any costs of trade diversion framework is that of COMESA). would be to sufficiently lower protection Nevertheless they may serve as useful against non-member countries to counter forums for information exchange and as a trade-diverting effects. peer-pressure mechanism. · In its Economic and Sector Work on In addition, in its ongoing regional and country- regional integration issues in southern level work: (i) country teams would have to take Africa, to identify and analyze specific areas into account the national implications of of current and future conflict and overlap. A regional commitments, while the reverse would focus area for such research over the short- equally apply, i.e. the regional implications of term may be to analyze the implications for national decision-making (such as countries' active member countries of both SADC and trade regimes or seemingly domestic policies, COMESA (specifically Zambia, Zimbabwe, which could have regional `spill-over effects'); Malawi and possibly Mauritius) and of and (ii) the regional integration team would ­ for SADC, COMESA and the EAC (Tanzania, its interaction and involvement in ESA ­ have to Kenya and Uganda)62 of rationalizing their gain a much deeper understanding of specific regional and bilateral trade agreements with economic and sector issues through focused countries within the sub-region. analysis of e.g. the implications of the myriad of · Encouraging or supporting on regional-level international, regional and bilateral trade and (in the case of a CU) and country-level (as investment agreements for country and the far as members of FTA's are concerned), the regional growth and development prospects. lowering of trade barriers vis-à-vis the rest Other issues which seem to require further of the world. This support should not only analysis and assessment are: a regional entail that for liberalization of trade in compensatory mechanism in a sub-region characterized by a collection of developing and 62 Angola, the DRC and the Seychelles have neither least developing countries, none which are acceded to the SADC Trade protocol nor are they wealthy enough to afford large intra-regional trading within the COMESA FTA of October 2000. fiscal transfers; trade and transport facilitation Swaziland & Namibia receive derogations in terms of the COMESA FTA as they are members of SACU. measures, in a region where tariffs seem not to Mozambique and Tanzania are members of SADC be the most significant barrier to trade, but rather only, although the latter is also a member of the EAC, NTBs and behind-the-border constraints; aiming to establish a CU. Nine countries have competitiveness, also on a firm basis; the acceded to the COMESA FTA are Djibouti, Egypt, integration of financial markets; and regional Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe. 112 dimensions of good governance concepts and practices. This overview has also indicated that the sub- region is attracting huge annual amounts of grant funding from bilateral and multilateral sources such as the EU and its constituent countries and USA, and to a lesser extent from the African Development Bank, the World Bank and sub- regional institutions such as the Development Bank of Southern Africa. In its ongoing regional work in ESA there is ample opportunity for partnerships with other donors and financiers to strengthen the collective support to regional integration in the ESA region. 113 114 REFERENCES Adams M., 2002. Tenure Security, Livelihoods and Sustainable Land Use in Southern Africa. 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Washington DC, 1998. 120 ATTACHMENT 1 TRADE AND / OR DEVELOPMENT ARRANGEMENTS IN SOUTHERN AFRICA AND BY SOUTHERN AFRICAN COUNTRIES 121 Attachment 1a Regional Cooperation / Integration Arrangements in Eastern and Southern Africa Box A.1.1 The Southern African Customs Union (SACU) The Southern African Customs Union (SACU) was created in 1910 between the newly established Union of South Africa and the separate protectorates of Botswana, Lesotho, and Swaziland. The agreement was renegotiated in 1969 and Namibia join ed this regional group in 1990. SACU currently comprises 5 member States: SA and the so-called `BLNS' countries, namely Botswana, Lesotho, Namibia, and Swaziland. A. Main Objectives The SACU had three main goals: · Encourage economic development and diversification of member countries; · Focus on the economic and social development of less-advanced member States; · Ensure that the benefits arising from intra-regional and international trade are equally shared among the member countries. B. Rules The 1969 SACU agr eement stated that member countries should apply the customs, excise, sales, antidumping and safeguard duties to goods imported from third countries non-SACU members. The treaty left some room of freedom: a SACU-member could join other trade agreements, provided the terms of such agreements did not conflict with the provisions of the SACU agreement (SACUA). Each SACU -member kept its own legislation on quantitative restrictions on goods imported from outside the group. Goods grown, produced or manufactured in the SACU area could be freed from any duty or quantitative restriction. Member countries could also not impose any duties on imports from any other member of goods which were imported from outside SACU. In order to protect infant industries of less-developed countries, SACU-members, other than SA were allowed to apply additional duties or increase duties. For a common regional development purpose, all customs, excise, sales, and additional duties collected by SACU members were pooled and distributed to members. The BLNS Countries benefited from the highest shares of collected revenues to compensate for losses they might have incurred resulting from their participation in SACU. A revenue distribution formula was designed to compensate the smaller economies for the drawbacks of being in a customs union with a much larger and more developed country whose own trade and industrial policy determines tariff levels. A formula was used to calculate revenue shares for the BLNS countries, with SA's share of the revenue being the residual after payments to the smaller member states had been determined. To compensate the BLNS countries for polarization, loss of fiscal and industrial policy sovereignty and trade diversion, the formula had an in-built multiplier that enhanced BLNS revenue receipts by a nominal 42%. However, it was soon found that what the BLNS countries received in this way tended to widely fluctuate from year to year. This problem was addressed by the introduction of a stabilized revenue rate, i.e. the rate of revenue earned on imports and excisable consumption. Since 1977 the revenue rate had been stabilized by means of an averaging formula that ensures that deviations around a target level of 20 percent are kept to a minimum and within the band of 17% as a minimum and 23% as the maximum. C. Negotiation of a New Agreement The operations of the 1969 SACUA have been criticized by all the SACU members, each from their own perspectives. In 1994 when the new South African Government came to power the re-negotiation of the SACUA were initiated. The terms of reference of the renegotiation included the following, which encapsulated the criticism of the respective members: · The lack of consultation and the democratization of SACU's decision-making procedures; · The establishment of a permanent SACU authority (a secretariat) to regulate and manage the affairs of the institution as well as the provision of dispute settlement and customs tariff consultation mechanisms; · Specific complaints of the BLNS economies, notably the price-raising effect of the South African tariff, delays in the disbursement of revenue and the perceived influence of SACU provisions and practices on the industrial development of the BLNS; · An appropriate industrial strategy and closer cooperation regarding industrial development policies, including infant industry protection and the development of industries that are of major importance to the members of the Customs Union; · The development of agriculture and agro-industries and the marketing of agricultural products in the CCA; and · The retention or exclusion of excise duties as part of the revenue pool. The renegotiation of the SACU Agreement was largely concluded in 2001, except for some institutional arrangements, and now requires ratification by the countries' parliaments. The new agreement envisages two major changes: Institutional: The SACU Council of Ministers will decide external tariff changes and recommendations on such tariff changes will be made by a new Tariff Board (composed of independent experts) or the SACU Commission (senior officials reporting to the Council). A new secretariat, responsible for SACU's administration, will be established either in Lesotho, Namibia or Swaziland. This decision is still outstanding. Revenue Sharing: Unlike the existing formula, the new one would be bound to the actual amount of customs and excise revenue collected. The new agreement simplifies the formula, eliminates the revenue floor and shortens the time lag between actual trade and distribution of tax receipts: According to this new formula, the total revenue accruing to each member state will be calculated as follows: · Customs revenue will be distributed in proportion to the value of imports from other SACU countries; · Excise revenue ­ 85% will be distributed on the basis of relative GDP of the five countries, and the remaining 15% will be distributed on the basis of per capita income, in the form of development assistance. 122 Box A.1.2 Multilateral Monetary Agreement (MMA) The Multilateral Monetary Agreement (MMA) creates a CMA (Common Monetary Area) with four countries as members, namely SA, Lesotho, Namibia and Swaziland. A. Major features are the following1 · The South African Rand serves as a de facto common currency that is widely used and accepted in the participating countries. In terms of the MMA, member states are entitled to issue their own national currency and all three smaller countries have made use of this provision. These currencies are de jure legal tender only in the issuin g country. · The currencies of these countries have been pegged to the South African Rand at par since their introduction and their banknotes are freely convertible into Rand, but are not legal tender in SA. Swaziland cancelled the legal requirement of a 1:1 linkage between the Rand and the Lilangeni in 1986, but has maintained parity to date. · Owing to the parity maintained against the South African Rand by currencies of the three other member states, all countries in the CMA have the same exchange rates against outside currencies. The smaller CMA members, with the exception of Swaziland, do not have the option of changing their exchange rates to attain or maintain external competitiveness. · The countries share a common pool of foreign exchange reserves primarily managed by the South African Reserve Bank. The other members nevertheless also have the right to hold foreign assets managed by them, which are adequate for their own immediate needs. In this regard, central banks and authorized foreign exchange dealers in these countries have access to the foreign exchange market in SA for permissible transactions and the South African Reserve Bank will, on request, make the required foreign exchange available. · The system of exchange control in force in SA, as amended from time to time, is in all material aspects substantially in agreement with rules applied by the other three member states relative to third countries. The contracting parties are obliged to enter into consultations on related matters, particularly where control provisions of another contracting party are evaded. · In terms of the provisions of the MMA, the government of SA must make compensatory payments to the other contracting parties. These payments represent an imputed return on the Rand currency circulating as legal tender in their areas. As Swaziland suspended the use of Rand as legal tender in 1986, it has since that time not been entitled to any payment in terms of this arrangement. · The contracting parties hold regular consultations to facilitate and ensure continued compliance with the MMA with the view of reconciling their different interests in the formulation and implementation of monetary and foreign exchange policies for the CMA. For this purpose and for any matter arising from the MMA, a Common Monetary Area Commission was established, consisting of a representative and some advisers from each member. · The MMA has a built-in flexibility to accommodate the changing needs of participants. Various bilateral agreements were entered into in the past, mostly between SA and one of the member states, to provide for greater autonomy for the other countries within the framework of continued monetary co-operation in the region. · There are no restrictions on the transfer of funds, whether for current or for capital transactions to or from the areas of any other contracting party. Some exceptions are allowed. A party may, for example, apply restrictions as part of the prudential investment or liquidity requirements prescribed for financial institutions, provided that such restrictions do not discriminate against any other contracting party and that proper notification is given. The free movement of capital within the CMA in terms of the MMA is a crucial aspect of this agreement and possibly one of the major benefits to the smaller member states. This implies that there is no restriction on cross border investments from SA to the other members, which, of course, contributes to economic integration. · Institutions in the public and private sector in the LNS countries, subject to relevant financial laws and policies applicable to counterparts in SA, have a right of access to the South African capital and money markets. B. Some Implications for its Member States · A relatively high level of monetary integration has been attained between the four members of the CMA and the agreement has proved to be relatively successful in its aims. · Although the required legal linkage between the currencies of SA and Swaziland was cancelled in 1986, Swaziland has not floated its currency against the rand, · The free movement of capital within the CMA could benefit the LNS countries in various ways. Foreign investors could for example channel their capital outlays through the stronger economy of SA. The free movement of goods in terms of the Customs Union Agreement between the four CMA members and Botswana is also partly facilitated by unrestricted capital flows within CMA. · The depreciating value of the rand over the long period has increased the cost of imports from the rest of the world for the LNS countries. Their exports to the rest of the world, however, could have benefited from the ongoing depreciation of their currencies. · The strict anti-inflation policy of the South African Reserve Bank during the past years has made itself felt throughout the CMA. Regional capital mobility has mostly ensured that interest rates within the region are determined simultaneously in the unified market. Source Brummerhoff W. 1999. Financial Integration in Southern Africa - A Perspective from the SA Reserve Bank. Unpublished paper delivered at a Seminar hosted jointly by WITS, RAU and London University, Johannesburg, SA 123 Box A.1.3 East African Community (EAC) Dating back to the 20th century, with another failed attempt to integrate between 1996 and 1997, the EAC was established by Treaty on July 7, 2000 and comprises three countries: Kenya, Uganda and Tanzania. A. Main Objectives The EAC seeks three priority objectives: · Equitable development among member States; · Establish a single marketand investment area in the region; and · Promote sustainable utilization of the region's natural resources and effective protection of the environment. B. Areas of Priority The EAC's programs and actions are aimed at: · Facilitating the free movement of people, goods, services and capital; · Providing adequate basic infrastructure; · Harmonizing standards, specifications, trade documentation and investment policies; · Harmonizing macroeconomic and sectoral policies; · Providing trade financing and other facilities to the growth of exports; · Achieving convertibility of the three East African currencies. C. Work Agenda The EAC's work agenda focuses on selected activities to accelerate the process of regional integration including: · Trade liberalization, with the establishment of a customs union by 2004, · Private Sector Development, · Regional Infrastructure Systems, · Natural Resource Development, · Strengthening the Organizational Structure of the Secretariat, · Institution Building, and · Human Resource Development. D. Achievements The EAC's main achievements, among others, are: (i) the realization of full convertibility of the three East African currencies as well as full liberalization of the external current account, and progress towards the opening of the capital account; (ii) the development of a macroeconomic framework for the region to guide countries towards economic convergence; (iii) the involvement of the private sector organizations to promote cross-border trade and investments through the formation of East African Business Council; and (iv) the implementation of tripartite agreements for the avoidance of double taxation, road transport, and inland waterways. 124 Box A.1.4 The Indian Ocean Commission (IOC) The IOC was created in 1984 by the General Agreement of Co-operation in Victoria (Seychelles) and comprises five members: Madagascar, Mauritius, Seychelles, Comoros and Reunion Island. A. Mission To contribute, through regional co-operation, to the permanent development of the Member States of the IOC. B. Ten-year Objectives · Strengthening of Political and Strategic Dialogue · Preparing the region and its economic actors to face the challenge of globalization. · Affirming and enhancing the Indian Ocean Identity · Representing the region's interests in regional and international fora · Promoting and facilitating sectoral co-operation C. Areas of Cooperation Areas of cooperation include: · Trade · Investment · Flexibility in the movement of people · Agriculture · Fishing and ecosystem conservation · Cultural, scientific, technical and educational areas The IOC has a strong focus on the development of trade as reflected in the implementation of an Integrated Regional Program for Development of Trade (PRIDE). PRIDE contains two components: · a general framework of actions aimed at liberalizing trade in goods and services, investment, capital movements, and the free circulation of people; and · a program aimed at facilitating business contact and partnerships through trade exhibitions and organizations of trade missions. The IOC members, being members of COMESA as well, also participate in the trade integration strategy of COMESA. Box A.1.5 Intergovernmental Authority on Development A. Creation and History The Intergovernmental Authority on Drought and Development (IGADD) was formed in 1986. Its mandate was confined to the issues of drought and desertification. In the 1990s, the founding member States decided to revitalize the organization. Its mandate was expanded to issues of politics, economics, development, trade and security. On March 21 1996, the Heads of State and Government, at the Second Extraordinary Summit in Nairobi, approved and adopted a new charter, structure and new name for the Authority, which then became the Intergovernmental Authority on Development (IGAD). The member States are: Eritrea, Ethiopia, Djibouti, Kenya, Uganda, Sudan, and Somalia. B. Three Areas of Cooperation Priority areas of co-operation include: · Conflict Prevention, Management and Resolution and Humanitarian Affairs; · Infrastructure Development (Transport and Communications); · Food Security and Environmental Protection. C. Activities The main recent activity is the establishment of two Sub-committees by the IGAD Council of Ministers. Their mission has been to deal with the civil war in Sudan as well as the conflict in Somalia. 125 Box A.1.6 Regional Integration Facility Forum (RIFF) The Regional Integration Facility Forum (RIFF) follows on the Cross-Border Initiative that was launched in the early nineties. The RIFF is a loose regional initiative aimed at helping faster reforming countries in Eastern and Southern Africa and the Indian Ocean to promote trade and investment. It currently comprises 14 countries: Burundi, Comoros, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Swaziland, Tanzania, Uganda, Zambia, and Zimbabwe. The initiative is co-sponsored by the World Bank, the IMF, the EU and the African Development Bank. A. Main Objectives The object and purpose of the RIFF is to facilitate participating countries to manage and implement outward-oriented economic policy reforms. The initiative enables countries to fast track their reform process in order to increase cross- border trade and payments. The RIFF also promotes the interaction between private and public sector and their involvement in the design and implementation of economic policy measures. B. Agenda The RIFF focuses on four key areas: 1. Trade liberalization, including through: (i) reduction of tariffs and elimination of non-tariff barriers such as export and import licensing, and quotas; and (ii) simplifying customs documentation and procedures to facilitate trade. In the context of the Trade Road Map adopted in March 1995, the following objectives were added-up: (iii) reduction of the trade weighted average of external tariffs to no more than 15 percent; (iv) simplification of the tariff structure to one having no more than three (non zero) rates with a maximum rate of 20-25 percent covering all import-specific taxes and charges; (v) elimination of tariffs on intra-regional trade by 1998; and (vi) reduction in customs duty exemptions to a minimum consistent with international treaty obligations. 2. Payments and Exchange Systems, with the main goal being to open up the financial and liberalize the payment system. Measures include: (i) increasing competition in the financial sector and facilitating cross-border activities by commercial banks and other financial institutions; (ii) relaxing exchange controls and other restrictions on current account transactions; and (iii) relaxing controls on the capital account. 3. Investment, with the major objective being to improve the investment environment by: (i) simplifying investment codes and procedures, including a maximum period for approvals and a one-stop investment facilitation centre; (ii) investment guarantees; and (iii) elimination of double taxation. 4. Labor Markets, with the objective to ease the movement of persons by simplifying visa requirements and regulations for processing of residence and employment permits. 5. Institutional Development, aimed at the development of capacity building among the public and private sector in formulating and analyzing economic policies. The National Technical Working Groups established by the RIFF have the responsibility to advise respective governments on regional integration issues. Subsequently, Regional Technical Working Groups have been formed to address the latter issue. C. Overall Effectiveness and Results Achieved · The implementation of the RIFF agenda has been remarkable, though uneven. Uganda and Zambia have implemented many of the RIFF-supported reforms contained in the Concept Paper, while for some other countries such as Malawi and Zambia the RIFF has served as an incentive in favor of the implementation of the economic reforms. However, the agenda is far from accomplished. · On the trade side, many countries have made progress in opening trade regimes. Five countries moved to open trade regimes compared to zero at the outset of the RIFF. As of January 2000, Kenya, Malawi, Rwanda, Tanzania, Uganda and Zambia have lowered their maximum tariffs to 25 percent or below while Madagascar has reduced its maximum rate to 30 percent. Five Countries (Comoros, Kenya, Rwanda, Uganda and Zambia) have met the RIFF target of no more than three non-zero rates. Seven countries (Kenya, Namibia, Rwanda, Swaziland, Tanzania, Uganda and Zambia) have reduced their trade weighted average tariff to 15 percent or less. However, progress towards the elimination of tariff exemptions remains modest. In most of the participating countries, government imports, parastatals and new investments still benefit from exemptions. The elimination of non-tariff barriers remains on the agenda. Many countries still apply import bans, quotas and import licensing. For instance, as of January 2000, bans and quotas were still required in Seychelles and import licensing in Namibia, Seychelles, Swaziland and Zimbabwe. Government owned monopolies exist in some countries: Comoros (petroleum), Mauritius (cement and petroleum), Namibia (food crops), Seychelles (a wide variety of goods), Swaziland (maize), Tanzania (petroleum) and Zambia (petroleum and maize). · On financial issues, almost all countries have liberalized the current account and have moved to market determined exchange rates. Nearly all RIFF countries implemented Article VIII Sections of the IMF Articles of Agreement. · In many countries the business environment has been substantially improved by the simplification of investment application and approval procedures. D. Arguments in Favor of RIFF Arguments for RIFF have included the following: · As a `virtual organization', it is a flexible regional structure that permits countries to join and or withdraw when they judge appropriate. · It provides a regional framework for participating countries to determine the reform agenda and implement economic reforms at their own speed. 126 economic reforms at their own speed. · It facilitates collaboration between the co-operating partners and members to discuss trade and investment issues. · It has addressed the missing `regional dimension' within the Bank-Fund structural adjustment packages. E. Arguments against RIFF Arguments against RIFF have included the following: · RIFF, a concerted liberalization effort for strengthening regional integrat ion by a group of countries, does not embed national / unilateral action within a coherent regional framework which is enforceable (although RIFF's predominant regional framework is that of COMESA). Thus it could be seen as a forum for information exchange and as a peer-pressure mechanism rather than a `useful' mechanism for regional integration. · The initiative is only a mechanism to accelerate Bank-Fund supported structural reforms. It has had limited success in crowding in additional funds from donors. · Swaziland and Namibia's ability to implement aspects of the RIFF agenda such as tariff reforms and relaxation of foreign exchange controls have been limited due to SA's non-participation in the initiative. Box A.1.7 The Common Market for Eastern andSouthern Africa (COMESA) The Treaty establishing the PTA was signed in Lusaka in December 1981 and came into force on 30th September 1982, after being ratified by more than seven signatory States. COMESA was created in November 1993, by Treaty, superseding the Preferential Trading Agreement (PTA) for Eastern and Southern African States that existed since 1981. The Treaty was then ratified in December 1994. The inception of COMESA was to take advantage of a larger market size, to share the region's common heritage and destiny and to allow greater social and economic co-operation with the ultimate objective of creating an economic community. COMESA currently comprises 20 member states: Angola, Burundi, Comoros, Democratic Republic of Congo, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Madagascar, Malawi, Mauritius, Namibia, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia, and Zimbabwe. A. Main Objectives The aims and objectives of COMESA, as defined in the Treaty and its Protocols, are to facilitate the removal of the structural and institutional weaknesses in member states, so that they are able to attain collective and sustained development. Specifically, the mandate of COMESA as envisaged in Article of 3 of the Treaty is: · To attain sustainable growth and development of the member States; · To promote joint development in all fields of economic activity and the joint adoption of macro-economic policies and programs; · To co-operate in the creation of an enabling environment for foreign, cross border anddomestic investment including the joint promoting of research and adaptation of science and technology for development; · To co-operate in the promotion of peace security and stability among the Member States; · To co-operate in strengthening the relations be tween the Common Market and the rest of the world, and the adoption of common positions in international fora; and · To contribute towards the establishment progress and realization of the objectives of the Africa Economic Community. B. Goals The Treaty and Protocols establishing COMESA define the main objectives and can be summarized as follows: · Setting-up of a full free trade area that ensures the free movement of goods and services produced within the COMESA region, and the removal of all non-tariff barriers; · Establishment of a customs union with a single tariff rate that will be applied to goods and services imported from non-COMESA countries by 2004; · The free movement of capital and investment. The adoption of common investment practices will facilitate capital and investment movement; · The free movement of persons supported by the adoption of common visa arrangements; · A progressive setting-up of a payments union based on the COMESA Clearing House; and · Establishment of a common monetary union by 2025. C . Areas of Priorities The COMESA strategy has so far been to emphasize the removal of trade and investment barriers and with specific focus on trade liberalization and facilitation; payments systems; monetary cooperation; competition policy; aspects of the investment environment to promote private sector activity; immigration and free movement of persons. Although good progress has been made using this approach, the progress in this agenda remains incomplete. The agenda is expected to broaden during the next decade, by giving increased prominence to targeting the supply side of integration, by focusing on e.g. investment in the productive sectors and infrastructure, and promotion of financial markets. In implementing its vision and strategy, the following key targeted areas of development form the core of COMESA's integration agenda: · Trade Development ­ moving towards a Customs Union and Monetary Union · Investment Development - Industrial co-operation and development, including competition policy and public procurement system, capacity building, implementation of the COMESA agricultural strategy and private sector support programs 127 support programs · Infrastructure Development - transport infrastructure development, transport facilitation, liberalization of air transport services, harmonization and development of communication and information facilities, energy development, and environment conservation. · Science and Technology Development ­ supportive policy environment, and adaptation and transfer of new and emerging technologies. D. Recent Developments The Free Trade Area: The COMESA Free Trade Area (FTA) has been effective since October 2000, when 9 countries became members of the FTA: Djibouti, Egypt, Kenya, Madagascar, Malawi, Mauritius, Sudan, Zambia and Zimbabwe. At the time, the other Member Countries of COMESA did not join but were applying tariff reductions from 0% to 80%. A customs union with a common external tariff (of 0 percent, 5 percent, 15 percent, and 30 percent on capital goods, raw materials, intermediat e goods and final goods respectively) is planned by the year 2004. The rules of origin indicate that to qualify as an `originating good' (i) the c.i.f. value of imported materials contained in such good shall not exceed 60% of the total cost of the materials used in the production of such good, or (ii) the value added resulting from the process of production accounts for at least 35% of the ex-factory cost of the goods1, or (iii) the goods are classified or become classifiable under a tariff heading other than the tariff heading under which they were imported. In order to promote free trade, the COMESA Secretariat is currently implementing a program aimed at improving the transport and communications systems of the region, including through the adoption of Harmonized Road Transit Charges, a Yellow Card (vehicle insurance) Scheme, Customs Bond Guarantee Scheme, and an Advance Cargo Information System. Three specialized institutions, a Trade and Development Bank, Reinsurance company, and the COMESA Clearing House have been created to develop the financial infrastructure. In the area of institutional support, a Court of Justice has been established in June 1998 and provides COMESA with rules, which can be enforced through a court of law. The protocol on a free movement of persons is gradually implemented. Other Activities, include: · Competitiveness and business environment: COMESA has commenced a study on the impact of the CET on the competitiveness of the private sector. · Telecommunications: the commissioning of a USAID-funded study on how to harmonize telecommunications policy and regulations; the COMTEL Project intended to create a regional terrestrial telecommunications interconnectivity; and the COMESA plans to foster E-Commerce in Southern Africa. · Transport: the design of an infrastructural master plan for the COMESA region. · Financial Sector Cross-Border Payments and Settlements Systems: the development of a cross-border or regional payment and settlement system (REPSS). Key issues that the region faces to establish a cross-border payment and settlement systems include: (i) the management and holding of regional currencies by central banks and the exposure risk; (ii) the issuance of letters of credit in local currencies; (iii) movement to market -determined exchange rates by all participants in the system. Relationship with other RIAs: At the Sixth COMESA Summit held in Cairo, Egypt, 22-23 May, 2001, SADC and COMESA agreed to establish a joint COMESA / SADC Task Force at Secretariat level to coordinate the programs and activities of both institutions and to report on progress through their relevant policy organs. Collaboration is ongoing in a number of areas such as customs procedures, statistical trainings and a study on the impact of the various trade regimes on the private sector. Recently, the COMESA and EAC Secretariats have also entered into an agreement to exchange information and cooperate on programs. 1Only Egypt has maintained a 45% value added criteria. 128 Box A.1.8 The Southern African Development Community (SADC) The Southern African Development Community was created in August 1992 to replace the former Southern African Development Coordination Conference (SADCC). SADC currently comprises 14 member states: Angola, Botswana, Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, SA, Swaziland, Tanzania, Zambia, and Zimbabwe. The Treaty principles (Article 4) commit SADC and its Member States to: · `Sovereign equality of all member States; · Human rights, democracy and the rule of law; · Equity, balance and mutual benefit; · Peaceful settlement of disputes.' A. Main Objectives 1. Economic · eradication of poverty · achieve development and economic growth, enhance the standard and quality of life of the peoples of Southern Africa and support the socially disadvantaged through regional integration · promote self-sustaining development on the basis of collective self-reliance, and the interdependence of Member States · promote and maximize productive employment and utilization of resources of the Region · achieve sustainable utilization of natural resources and effective protection of the environment · Combating and mitigating HIV/AIDS 2. Political and Security · evolve common political values, systems and institutions · promote anddefend peace and security 3. Others · achieve complementarities between national and regional strategies and programs · strengthen and consolidate the long standing historical, social and cultural affinities and links among the peoples of the Region B. Main Strategies · Cooperation among member states in 20 sectors, including transport, health, tourism, mining, and water, through legally binding protocols. · Establishment of a Free Trade Area within eight years after ratification as defined in the Protocol on Trade, signed in August 1996, and which commenced implementation on September 1, 2000. The agreement allows for tariff cuts on 12 000 defined product areas in the sub-region. By 2008, 85% of intra-SADC trade would be tariff free and from 2008 to 2012, sensitive products will be liberalized to create the FTA. Tariff and non-tariff barriers to trade will be phased out gradually and asymmetrically. The least developed countries in the group benefit from special treatment as embodied in the rules of origin and tariff reduction phasing. The so-called `sensitive products' (in agriculture, agro-industry, and manufacturing, i.e. dairy products, wheat, sugar, cotton, fabrics, leather footwear, and vehicles) receive special treatment in trade liberalization among the members of the group. C. New Structure, New Approach and New Priorities Due to the misalignment between its institutions and strategy as well as the unfocused nature of its regional strategy, SADC has embarked on a major institutional restructuring and strategy refocusing initiative since early 2001. It is moving from an approach based on decentralized activities under the responsibilities of each member state to the creation of a centralized Secretariat that will conduct the regional economic integration agenda. At the Extra-Ordinary Summit of Heads of State and Government, held in Windhoek, Namibia, on 9 March 2001, SADC member states have agreed to establish an Organ for Politics, Defense and Security, SADC National Committees (in member states) as well as four Directorates, the latter within the SADC Secretariat and under which all the existing sectors will be clustered. These Directorates will be: Trade, Industry, Finance and Investment; Infrastructure and Services; Food, Agriculture and Natural Resources (FANR); and Social and Human Development and Special Programs. The centralization of existing sectors and their institutions would be undertaken within two years and directorates would be established in accordance with the following time frame: · March ­August 2001: establishment of the Directorate on Trade, Industry, Finance and Investment; · August ­ December 2001: establishment of the Directorate on Food, Agriculture, and Natural Resources; · The remaining Directorates would be established in 2002 and 2003. Furthermore, SADC has introduced a new formula for membership contributions and has institutionalized a Troika management system for its major policy organs. A 10-year Regional Indicative Development Plan, with a rolling budget, will be developed to provide strategic direction to all components of its socio-economic integration agenda. 129 Attachment 1b SADC Bilateral Trade Agreements SADC BILATERAL TRADE AGREEMENTS, WTO REGIME AND SADC TREATY: CONFLICT OR COMPATIBILITY? Bilateral trade agreements are being phased out under the new WTO regime since they may be contradictory to the concept of `Most-favored nation (MFN)' treatment. Following the `MFN' principle, a country which grants `MFN' treatment to one WTO member is obliged to extend the same treatment to other WTO members. Bilateral trade agreements signed between SADC countries may therefore be incompatible with the `MFN' principle, corner stone of the GATT process under WTO. In addition, the WTO has not been notified of these agreements. However, within the context of article XXIV that allows regional arrangement, these bilateral agreements may become compatible with WTO agreements. The SADC Treaty does not prohibit Member States from concluding bilateral trade agreements with each other or with third countries. Article 8 of the Treaty permits Member States to enter into agreements with other States, regional and international organizations provided that their objectives do not conflict with the objectives of SADC and the provisions of the Treaty. Moreover, the enabling clause provided by GATT Agreement recognizes the granting of special and differential treatment in favor of developing countries by developed countries as a permanent feature of the world trading system. The following describes such possibility: Notwithstanding the provisions of article 1 of the general agreements, contracting parties may accord differential and more favorable treatment to developing countries, without according such treatment to other contracting parties. The provisions of paragraph 1 apply to the following: · Preferential treatment accorded to products originating in developing countries in accordance with the General System of Preferences (GSP); · Regional or global arrangements entered into amongst less developed contracting parties for the mutual reduction or elimination of tariffs and, in accordance with the criteria or conditions where contracting parties, for the mutual reduction or elimination of non-tariff measures, on products imported from one another. Since SA is considered as a developed country, paragraph 1 of the enabling clause allows its bilateral trade agreements with other SADC countries to be compatible with WTO principles. However, in terns of paragraph 2(2), SA is not allowed to grant special tariff preferences to developing countries such as Zimbabwe, Malawi and Mozambique, on selective (therefore discriminatory) basis to the exclusion of other developing countries that meet the same conditions. SA may therefore be obliged to grant similar preferential treatment to other developing countries. EXISTING BILATERAL TRADE AGREEMENTS BETWEEN SADC COUNTRIES A number of bilateral agreements have been signed between SADC countries, which are summarized in Table A.1.1. However, a description of these is limited to a few due to a lack of information. 130 Table A.1.1 Existing Bilateral Trade Agreements- SADC Member States Ang Bot DRC Les Mal Mau Moz Nam SA Swa Tan Zam Zim Ang T T T T T T Bot T T S S S T T DRC Les S T S S S Mal T T T T T T T Mau T Moz T T T T T T T T Nam T S S S T SA S S T T T S S T Swa S S T T S S T T T Tan T T T T T T Zam T T T T T T T T Zim T T T T T T T T T T Source: Adapted by authors based on DBSA, 1996. Bilateral Agreements on Trade Concluded by SADC Member States. Development Paper No. 111, January 1996. Midrand, DBSA. T= Trade agreement S= SACU members 1 Angola Angola has signed six bilateral agreements with other SADC countries, including Botswana, Mozambique, Namibia, Tanzania, Zambia and Zimbabwe. The Angola / Mozambique trade agreement is described below. 1.1 Angola/Mozambique a) Objective and trade facilities This trade agreement was signed in Luanda on September 5, 1978 and aims at strengthening the already existing trade and military relations between the two countries. b) Most-favored nation treatment and other trade facilities The MFN treatment is to apply to all aspects of trade between the two countries. However this treatment is not to apply to: (i) advantages that either country has or shall grant to neighboring countries to enhance cross-border trade and (ii) privileges and advantages that stem from the membership of either country to a regional organization, free-trade area of common market. Freedom of movement of goods from a third country destined to one of the contracting parties or from either contracting party destined to a third country shall be guaranteed. Re-exportation of imported goods from the other party destined to third countries shall be submitted to the prior written authorization of the responsible persons of the importing country. Article 8 provides categories of products that shall enjoy free customs duties, rates and other related fees. These include the following: (i) sample and advertising material, without any commercial value, imported into the territories of either party from the other party; and (ii) products and equipment imported or introduced into the territory of one party by the other party intended for trade fairs or exhibitions, subject to the condition that these shall not be sold without prior written authorization of the importing party. Table A.1.2. Traded Goods between Angola and Mozambique Exports from Mozambique to Angola Exports from Angola to Mozambique All types of men's ladies' and spacers for Zinc sheets Dried fish railway sleepers Beans Fish metal Welding electrodes Sugar Fish oil Coal flat -irons Tea Coffee Irrigation pipes Lemons Wheat bran Hoses Desiccated coconut Leather and fur Jute and raffia bags Fruit juice and jam Peanut and coconut husk Wooden furniture Children'sclothing Electric wires and cables -plaster Concrete lighting poles All styles of men's, ladies and children's Paper pulp Railway sleepers in wood or concrete footwear; Cardboard and paper Tiles Vehicle batteries Petrol and derivatives Matches Alarm clocks Ball-point pens Transformers for mercury vapor lamps Various types of ploughs Ballasts for fluorescent lamps 131 Welders Bicycles for men Hand rakes Bicycles for children Levelers Tricycles for children Cooking oil Refrigerators Condensed milk Bottles for beer and soft drink Preserved and tomato paste Household products in aluminum Pasta Items in hardened glass Margarine Textile Cashew nuts All types of ploughs Cassava and cassava flour Disk harrows Trailers under 40 tons Manual mills for cereals Trailers-tanks Hammer mills One, two orthree-axle trailers Square and pointed shovels Railway coaches Nails, metal fences, bolts and barbed wire Cranes Taps and valves Locks Metallic and hospital furniture Sheets and pipes in asbestos cement Source: Adapted by Authors based onDBSA, 1996, Bilateral agreements on trade concluded by SADC member States. Development Paper No. 111, January 1996. Midrand: DBSA. 2 Botswana. In addition to its membership of SACU, Botswana has trade agreements with Angola, Malawi, Zambia and Zimbabwe. The agreements with the last two mentioned countries are described below. 2.1 Botswana/Zambia a) Objective The main objective of this agreement, as emphasized in Article 1, is to promote the mutual import and export of products, goods and services between the two countries. b) Most-favored nation treatment and other trade facilities The MFN treatment is to apply in all matters related to trade. However, the two parties shall ensure that this provision is consistent with any customs union, free trade area, or other international trade agreement to which either party is or may become a member. Article 7 of the agreement indicates the categories of goods that shall be exempted from duties and charges. These include: (i) articles sent as samples; (ii) articles sent for exhibition, competition and fairs; (iii) tools and machines used in connection with the assembly and installation of equipment; and (iv) articles to be transformed or repaired or materials necessary for such equipment, provided that these articles or materials are not sold, leased or lent, and are re-exported on or before the date to be agreed upon with the importing country in each case. c) Rules of origin: Potential conflict with COMESA's rules? The agreement indicates that goods or products shall be accepted as originating in the country of a contracting party if: · they have been wholly produced in the country of the contracting party; or · they have been produced in the country of the contracting party and the value of the materials imported from a foreign country which have been used at any stage of the production of the goods does not exceed 70% of the ex-factory value of the goods, provided that the last process in the production or manufacture of those goods has taken place in the country of the contracting party. The import content rule may be contradictory to that of COMESA and hamper trade between these two countries. For instance, if Zambia (member of COMESA) produces a good with imported materials from a partner of COMESA (say Zimbabwe), it may be difficult to determine which rule should be applied for such a good to be qualified as originating in the country. Within the context of the above agreement, the value of the imported materials shall not exceed 70%; while the corresponding rule for COMESA is that the c.i.f. value of such materials may not exceed 60%. 132 2.2 Botswana/Zimbabwe a) Objective and preferential tariffs This trade agreement seeks to expand trade between the two countries and serves as a means for employment creation. Article 5 of this agreement indicates that goods originating from either contracting party shall be free of customs duty when entering the territory of the other party. However, a contracting party may apply anequivalent duty or tax where this is a countervailing duty or tax to: (i) sales or similar taxes levied and paid in the importing country; (ii) excise duties or other taxes levied and paid on goods produced in the importing country. b) Rules of origin The provisions of this agreement apply to goods grown, produced or manufactured in the territory of either contracting party. In addition goods must be exported directly to the territory of the other party. To qualify as originating from either contracting party, goods grown or wholly produced in the territory of either contracting party shall be: · mineral products extracted from its soil · vegetable products harvested or gathered therein · live animals born and raised therein · products obtained therein from live animals · products obtained therein by hunting or fishing · forest products harvested herein, and · goods obtained therein exclusively from products specified in the list above, inclusive of this paragraph goods manufactured wholly or partly from imported materials, parts or components in the territory of either contracting party shall be deemed to originate in the territory of either contracting party and shall be determined in accordance with the rules of origin contained in the Attachment. In terms of Article 6, the agreement leaves some room for the imposition of restrictions. After consultation with each other, either party may impose: (i) export restrictions temporarily applied to prevent critical shortages of foodstuffs; (ii) import and export restrictions necessary to the application of standards or regulations for the classification, grading or marketing of commodities; (iii) import restrictions that do not discriminate among exporting countries on agriculture and fisheries products necessary to the enforcement of government measures; (iv) import and export restrictions on wild animals; (v) import and export restrictions on arms, ammunition and implements of war; and (vi) import and export restrictions on gold and other precious metals in any form, currency, and rough uncut precious stones. The agreement prohibits dumping practices. Article 12 stipulates that goods exported to the territory of the other contracting party that are priced below the fair market value of such goods in the exporting territory of the other contracting party, as determined in accordance with GATT rules, and inflict material damage on the economy of that contracting party, will be subject to countervailing or antidumping duties. 3 Malawi Malawi has signed seven bilateral trade agreements with other SADC countries, including with Mozambique, SA, Zambia, Zimbabwe, Botswana, Swaziland and Tanzania. The first four agreements are described below. 3.1 Malawi/Mozambique. a) Objective This agreement signed in Blantyre on October 23, 1984, aims at expanding trade between the two countries with the ultimate goal of accelerating their economic development and diversifying their economies. 133 b) Most-favored nation treatment The `MFN' treatment shall be applied to imports and exports between the two countries. However, the agreement forbids the implementation of such provision to: (i) goods imported from the country of either contracting party which are wholly produced in the country of a third party, without prior written consent of the contracting party; and (ii) advantages, concessions and exemptions which either contracting party has or grant to adjacent countries to facilitate frontier traffic or to partners countries of a customs union or a free trade area or monetary zone already established; or to other countries with which it has entered into a specific trade agreement. Table A.1.3 Traded Goods between Malawi and Mozambique Goods to be exported by Malawi to Mozambique Goods to be exported by Mozambique to Malawi Fish-fresh, smoked or dried Staples, studs, spikes, etc. of iron or steel Salt Cassava, dried Water pumps Prawns Tea, packed Articles for sport Rasped coconut Rice, bulk and packed Fishing nets, twine Cooking coal Flour of cereals Polypropylene bags Steam coal Sunflower seeds Biscuits Cement Molasses Hoes Ropes and sisal thread Beer Animal-drawn agricultural implements Glassware Beverages Canned vegetables, fruits, juices and jams Radio Animal feeds Processed nuts Mosquito gauze Tobacco (processed and unprocessed) Nut butter Dry cells Electric current Carpets and rugs Fruits (fresh) Pharmaceuticals Blankets Harwood timber Paints and enamels Enamel hollowware Beans Cosmetic and toilet preparations Metal beds, furniture, doors and windows (or Polishes and waxes (including candles) steel) Sheets, strips, plastic Spices Piping and tubing (PVC) Plastic ware Articles of leather Liquors and spirits Veneers and sheets for plywood Zips Swan wood Bath towels and napkins Industrial plywood and backboard Matches (panga) and grass-cutters Boxes, cases, crates and any other wood - Toothpaste based products Spare parts Plastic crates Agricultural products (e.g. beans, peas, Ready-made garments (cotton, cotton maize, etc.) polyester) Seeds for planting Textile (cotton, cotton polyester) Electricity transmission poles Footwear Meat and meat products Sheets and plates, tinned, unworked, of Poultry and poultry products iron or steel Wire nails of iron or steel Source: Adapted by Authors based on DBSA, 1996, Bilateral Agreements on Trade Concluded by SADC Member States. Development Paper No. 111, January 1996. Midrand: DBSA. 3.2 Malawi/SA This trade agreement has been considered as the most successful. It has helped Malawi increase its exports so that 25 percent value-added Malawian products have had duty-free access to the South African market. a) Objective The trade agreement was concluded on June 19, 1990; is non-reciprocal and aims to decrease the huge trade imbalance between Malawi and South Africa; and provides for duty-free access into SA for Malawian goods except for those agricultural products that require a permit. b) Trade facilities The agreement authorizes all goods grown, produced or manufactured in Malawi to access SA's market free of customs duty. However, imports of coffee, tea and sugar are subject to control when entering SA. Goods grown, produced or manufactured in SA are to be imported into Malawi under a certain rate of duty, but exports of rough and uncut diamonds produced in SA shall be free of export duty for industrial use in Malawi. In addition, to facilitate exports to SA, the agreement stipulates that under normal trade and market conditions in any calendar year import permits shall be issued for 134 quantities not less than 300 000 kilograms of un-manufactured tobacco; 750 metric tons of groundnuts, shelled or with the shell; and 100 metric tons of processed groundnuts. Malawi also exports other agricultural products to SA, including coffee, tea, and sugar. c) Rules of origin Goods are qualified as being: · originating from SA if the last process of manufacture has been performed in SA, and such goods contain not less than the `specified country content'; or have been subjected in SA to a specified process of manufacture; · originating from Malawi if at least 25% of the production cost of those goods shall be represented by materials produced and labor performed in Malawi, and the last process in the production or manufacture of such goods shall have taken place in Malawi. 3.3 Malawi/Zambia a) Objective This trade agreement came into force on October 10, 1978 and simply aims at expanding trade between the two countries. b) The most favored nation treatment and trade facilities The MFN treatment shall apply to all imports and exports between the two countries, except to: (i) goods imported from the country of either contracting party which are wholly produced in the country of a third party, without prior written consent of the other contracting party; (ii) advantages, concessions and exemptions which either contracting party has granted or may grant to adjacent countries or to fellow member countries of a pre-existing CU or a FTA or a monetary zone and other countries with which it has entered into specific or technical cooperation. In addition, the agreement permits the two parties to grant each other licenses for the importation and exportation of goods specified in table 4 below. c) Rules of origin. Goods are considered as having been grown, produced or manufactured in the country of the contracting party that supply them if at least 25% of the production of such goods is represented by materials wholly produced in such country and the last process in the production or manufactured of such goods has been taken place in such country. Table A.1.4 Traded Goods between Malawi and Zambia Exports from Zambia Exports from Malawi Blankets Fishing nets Timber Radios and radiograms Explosives Fish-fresh, smoked or dried Rock drilling bits and other mining input Fertilizers Bone meal and fish meal Machine sewers and rivets Footwear Cane sugar, raw or refined Parquet-flooring fingers or assembled Cooper and cooper products Cottonseed cake and groundnut cake panels Lead Pipe tobacco Furniture-steel or otherwise Zinc Footwear Cement Bottled beer Tarpaulin PVC Lime Pharmaceutical products Hessian Talc Kapiri glass bottles Ploughs and cultivators Asbestos cement products Day-old chicks Metals beds, furniture, doors and windows Cups, saucers and other household Tobacco Clothing other than clothing made wholly crockery Groundnuts from cotton Lead acid batteries and dry cells Chrome ore Radios and radiograms Doors, window frames and metal beds Tin concentrates Bedspreads Blankets Metal cabinets Fishing-flies Clothing Rice Dry cell batteries Putty Toilet paper reels Handbags and suitcases Safety matches Source: Adapted by Authors based on DBSA, 1996, Bilateral Agreements on Trade Concluded by SADC Member States. Development Paper No. 111, January 1996. Midrand: DBSA. 135 3.4 Malawi/Zimbabwe a) Objective This bilateral trade agreement came into force on October 1st 1986 and aims at promoting, developing and facilitating trade and economic relations between the two countries. b) The most favored nation treatment and trade facilities The agreement allows each contracting party to grant to the other MFN treatment to goods originating from each country. However, this provision is not to be applied to advantages, concessions and exemptions either contracting party has granted or may grant to neighboring countries or under a FTA, a CU, a monetary zone or an economic community to which it participates. The following goods could be imported/exported free of customs duties, taxes and other similar levies or charges not related to the payment for the services: (i) samples of goods or commodities and publicity materials required for obtaining orders and for advertising; (ii) goods imported temporarily for trade fairs and exhibitions; (iii) goods or commodities imported temporarily for repair and re- exportation; (iv) goods from a third country and transported through the country of one of the contracting parties destined for the country of the other contracting party. Table A.1.5 Traded Goods between Malawi and Zimbabwe Exports from Malawi Exports from Zimbabwe Accounting machines, calculating machines and similar Compound lard machines incorporating a calculating device, statistical and Vermouth data-processing machines Parquet blocks Hardboard Veneer sheets Handicrafts Plywood and blackboard Fishing -flies Gramophone records Fishing -nets and sports nets Brushwork Candles Brushwork Source: Adapted by Authors based on DBSA, 1996, Bilateral Agreements on Trade Concluded by SADC Member States. Development Paper No. 111, January 1996. Midrand: DBSA. 3.5 Malawi/Botswana These two countries have shared a customs union agreement since 1965. However, most companies do not know about its existence. The agreement allows all goods grown or produced in Botswana to be exempted from import duty. 4 Mozambique Mozambique has signed eight bilateral trade agreements with other SADC countries, including SA, Tanzania, Zimbabwe, Swaziland, Angola, Lesotho, Malawi, and Zambia. The first four agreements are described below. 4.1 Mozambique/SA a) A non-reciprocal trade agreement This agreement signed in 1989 is a non-reciprocal tariff concession granted to a short list of specified goods of Mozambican origin by the SA to enter the country in the form of full rebate of the import surcharge or customs duty. The list of products is open-ended. b) Most-favored nation treatment MFN duties are charged on Mozambican goods coming into SA. If the duty is less than 3% it is lifted, but subject to quotas. Goods not included in the Attachment or imports in excess of the quotas do not qualify for the rebate of import surcharge or customs duty. SA grants tariff rebate to specified goods of Mozambican origin. This tariff concession takes the form of a full rebate of the import surcharge on customs duty. 136 c) Rules of Origin Goods are considered to originate from Mozambique if at least 35% of the production cost of such goods is represented by materials produced and labor performed in Mozambique. d) Re-export Goods imported from Mozambique under this preferential tariff arrangement are only for consumption in SA. For any export of goods of Mozambican origin from SA to the other SACU countries (Lesotho, Swaziland, and Namibia), the import surcharge and the difference in duty must be paid to the South African customs authorities before re-exporting again. Table A.1.6 List of Mozambique Quotas Description of products Quotas in tons or USA $ Fish, fresh or chilled, } Fish, frozen } 2000 tons Fish, dried } Crayfish 200 tons Shrimps and prawns 2500 tons Crabs, frozen 500 tons Langoustines 1000 tons Squid 100 tons Octopus 100 tons Clams, live, fresh, chilled 50 tons Clams, frozen, dried, salted 50 tons Cashew nuts 1000 tons Citrus fruit 5000 tons Coconut oil 5000 tons Cashew nuts, shell, liquid 500 tons Cottonseed oil cake 6000 tons Cigarettes USA $600 000 Cotton fabrics USA $500 000 Texlene/Trevira woven fabrics (70% polyester, 30% viscose) USA $835 000 Clothing USA $790 000 Blankets USA $250 000 Asbestos-cement roofing tiles USA $300 000 Wooden furniture USA $500 000 Handicrafts USA $300 000 Source: Adapted by Authors based on DBSA, 1996, Bilateral Agreements on Trade Concluded by SADC Member States. Development Paper No 111, January 1996. Midrand: DBSA. 4.2 Mozambique/Tanzania a) Objective This trade agreement aims at facilitating the increase of the volume of trade between the two countries. b) Most-favored nation treatment The MFN treatment applies to import, storage, transit of goods and their transportation and clearing from bond. It also applies to sample and advertising materials as well as materials forwarded for testing or experimental purposes or for display in fairs and exhibitions, including equipment materials and containers necessary for this purpose. The MFN does not apply to the following: (i) privileges and advantages granted by any of the two parties to neighboring states to facilitate cross-border trade; and (ii) privileges and advantages arising out of joining a regional organization, common market agreement, customs union or a free trade zone by the two contracting parties. c) Rules of Origin The country of origin is the country in which the products have been produced and manufactured or in which the final stages of the main processing have been carried out. In the case of unprocessed agricultural products it will be the country in which the production of such products is actually carried out. 137 4.3 Mozambique/Zimbabwe a) Objective The objective of this trade agreement is to increase the volume of trade between the two countries and contribute to their development. b) Preferential tariffs Article 1 of the agreement indicates that goods grown, produced or manufactured in the territory of either party may be imported into the territory of the other free of customs duty. Article 3 states that such goods shall also be exempt from the imposition of any quantitative import or export restrictions. However, a contracting party may impose an equivalent duty or tax where this is a countervailing duty or tax to: (i) sales or similar taxes levied and paid in the importing country; and (ii) excise duties or other taxes levied and paid on goods produced in the importing country. In addition, after consultation, either party may impose: (i) export restrictions temporarily applied to prevent or relieve critical shortages of foodstuffs or other products essential to the exporting contracting party; (ii) import and export restrictions necessary to the application of standards or regulations for the classification, granting or marketing of commodities; and (iii) import restrictions that do not discriminate among exporting countries, on agricultural and fisheries products necessary for the enforcement measures. c) Rules of Origin (Article 2) The following categories of goods are considered as grown or produced in the territory of a contracting party: · Mineral products extracted from its soil; · Vegetable products harvested or gathered therein; · Live animals born and raised therein; · Products obtain therein from live animals; · Forest products harvested therein; · Fish and other fish products gathered therein or from its marine economic zone; and · Manufactured goods if they qualify under the rules of origin contained in the Attachment. d) Complementary agreement of execution Article 5 indicates that the two countries agree to the importation and exportation, free of customs duties and other similar levies or charges, not related to the payment for services, of the following: · Samples of goods and publicity materials required only for obtaining orders and for advertising purposes, which are not for sale and are of no commercial value; · Goods imported temporarily for experiments and research activities; · Goods imported temporarily for the purpose of trade fairs and exhibitions; · Goods imported temporarily for effecting repairs and which are re-exported; · Goods originating in or from a third country and are transported through the country of one contracting party destined for the country of the other contracting party. 138 Table A.1.7 Traded Goods between Mozambique and Zimbabwe Exports from Zimbabwe to Mozambique Exports from Mozambique to Zimbabwe Cattle (bovine) Fish, fresh or frozen Beef and veal-fresh and frozen Prawns, frozen Cannedmeat Pineapples Dairy products Desiccated coconut Maize Salt (coarse) Wheat and bran Fuel Untreated tobacco Diesel Seeds Cut wood (non -coniferous) Medical and pharmaceutical products Railway sleepers Insecticides and disinfectants Ammonium sulfate Tires and rubber inner tubes (sizes that are not manufactured in Copra and copra oil Mozambique) Tires and inner tubes in rubber (sizes not manufact ured in Paper and printing cardboard as well as paper or cardboard Zimbabwe) including the containers Marble Agricultural machinery Textile Clothing Source: Adapted by Authors based on DBSA, 1996, Bilateral Agreements on Trade Concluded by SADC Member States. Development Paper No. 111, January 1996. Midrand: DBSA. 4.4 Mozambique/Swaziland a) Status and Objectives This trade agreement was signed in Maputo on October 22, 1977 and aims at promoting and developing economic, industrial and technical cooperation between both countries. b) Most-favored nation treatment The `MFN' treatment applies to all aspects of trade merchandise and products from both countries, and import and export licenses. However this provision does not apply to: · Benefits granted by a party to its neighboring countries to improve the border trade; · Advantages resulting from the membership of a customs union or from a free or preferential trade arrangement. · Goods originating from either party and imported by the other party will not be re-exported unless authorized by the exporting party. 5 Namibia Apart from its trade links with SACU countries, Namibia has signed only one bilateral agreement with one country in southern Africa, namely Zimbabwe. a) Status and Objectives This trade agreement was signed on August 17, 1992 and aims at improving the existing trade relationship between the two countries. b) Preferential tariffs As mentioned in article 1, goods of origin may be imported into the territories of the other party free of customs duty. The parties also agreed to the importation and exportation, free of customs duties, taxes and other similar levies or charges, not related to the payment for services, of the following products (Article 6): · Samples of goods and publicity materials required only for obtaining orders and for advertising purposes, which are not for sale and are of no commercial value; · Goods imported temporarily for the purpose of trade fairs and exhibitions; · Goods imported temporarily for experiments and research activities; · Goods imported temporarily for effecting repairs and which are re-exported; · Goods originating in or from a third country and are transported through the country of one of the contracting parties destined for the country of the other contracting party. 139 c) Rules of origin Article 2 provides categories of goods to be considered as grown or produced in the territory of a contracting party: · Mineral products extracted from its soil; · Vegetable products harvested or gathered therein; · Live animals born and raised therein; · Products obtained therein from live animals; · Forest products harvested therein; · Fish and other marine products gathered therein or from its marine economic zone; · Products obtained therein exclusively from products specified in the list above. The two countries also agreed to facilitate freedom of transit through their respective territories of goods origin ating from the countries of either of them and destined for a third country, or from the country of a third party and destined for the country of either of them. 6 Tanzania Tanzania has signed six bilateral agreements with other SADC countries, includin g Angola, Malawi, Mozambique, Swaziland, Zambia, and Zimbabwe. The agreement with Zambia is described below. 6.1 Tanzania/Zambia a) Objective The objective of this trade agreement is to encourage, expand and develop economic cooperation between both countries. b) Most-favored nation treatment The `MFN' treatment applies to goods and commodities of both countries in all questions regarding customs duties, fees and charges, the regulations and formalities relating to customs procedures on transit and the warehousing of goods (Article 3). The importation and exportation of the following will be free of customs duties, taxes and other similar duties not related to the payment for services: · Samples of goods and publicity material of no commercial value; · Objects and goods imported for the purpose of fairs and exhibitions on condition that they may not be sold; · Goods originating in or from a third country and transported through the country of one of the contracting parties and destined for the country of the other contracting party. In addition, re-exportation of goods exchanged between both countries is subject to the prior written consent of the country of origin of such goods. c) Rules of Origin Article 4 (ii) stipulates that goods will be considered to have originated from the country of either of the contracting parties if the finished goods were produced or manufactured in that country, or in the case of partly manufactured goods if the final operations took place in that country and have altered to an appreciable extent the character, composition and value of such goods imported into that country. 7 South Africa SA has signed bilateral trade agreements with three countries in Southern Africa: Zimbabwe, Mozambique and Malawi. 7.1 SA/Zimbabwe. This agreement has a long history and is dated prior to the foundation of GATT. It turned into a bone of contention between the two countries. While the 1964 agreement allowed Zimbabwean clothing and textiles to enter the South African market at a customs rate of 20%, in 1992 SA raised the tariffs on many Zimbabwean goods. This had huge ramifications for the Zimbabwean economy in terms of 140 industry closures and job losses. A new agreement on textiles and clothing was reached in August 1996. However, the growing negative trade balance between the two countries led SA to increase the quotas allocated to Zimbabwe producers in the clothing and textiles sector. Figure A.1.1 Zimbabwe/South Africa Trade Imbalance, 1993-98, Z$ (Unit=1000) 0 -2000 1993 1994 1995 1996 1997 1998 -4000 -6000 -8000 -10000 -12000 Source: By Authors, data from IMF, 2000. Direction of Trade Statistics. a) Preferential tariffs Article 5 of the agreement stipulates that goods produced in Zimbabwe will enter SA at the rate of duty specified for such goods in Attachment B of the Agreement. Goods produced in SA shall be admitted into Zimbabwe at a specified rate of duty. Rough and uncut diamonds produced in SA and exported to Zimbabwe must be free of export duty if certified as being for industrial use in Zimbabwe. b) Other facilities Quantitative import and export restrictions other than those in force in the agreement must not be imposed upon the movement between the countries or the parties of goods produced in those countries. c) Rules of Origin The provision of this agreement applies to goods produced in the country of either party and entered for consumption in the country of the other party. However, manufactured goods must not benefit from the terms of this agreement in the case of: (i) clothing manufactured in Zimbabwe and specified in Parts III and IV of Attachment B of the Agreement, unless the Zimbabwean content of such clothing is not less than 20%, and all the operations, such as cutting and sewing required to manufacture such clothing from piece goods, have been performed in Zimbabwe; (ii) other goods manufactured in Zimbabwe unless the last process in the manufacture of such goods has taken place in Zimbabwe and the Zimbabwean content of such goods is not less than 25%; (iii) in the case of goods manufactured in SA, unless the last process of manufacture has been performed in SA, and they must contain no less than such proportion of the material and labor of SA and they must have been subjected to such process of manufacture in SA. 141 Attachment 1c Eastern and Southern Africa's International trade and / development relations The African Growth and Opportunity Act 1 Objectives On May 18, 2000, the `Trade and Development Act of 2000' which included the Africa Growth and Opportunity Act (AGOA) was signed. It has the following five objectives: · Expand Africa's access to the USA markets and improve the ability of African nations to increase growth and ease poverty; · Increase trade between the US and SSA; · Expand the US assistance to regional integration efforts in SSA; · Reduce tariff barriers and non-tariff barriers to trade; · Negotiate trade agreements. 2 Eligibility Criteria1 Countries are eligible for AGOA benefits if they are determined to have established or are making continual progress toward establishing the following: · A market-based economy (that protects private property rights, incorporates an open-rules-based trading system, and minimize government interference in the economy); · The rule of law and political pluralism (political pluralism and equal protection under the law); · The elimination of barriers to US trade and investment (provision of national treatment and measures to create an environment conducive to domestic and foreign investment, protection of intellectual property, resolution of bilateral trade and investment); · A system to combat corruption (such as signing and implementing the Convention on Combating Bribery of Foreign Public Officials in International Business Transactions); · Economic policies to reduce poverty (increase the availability of health care and educational opportunities, expand physical infrastructure, etc.); · Protection of human rights and worker rights (the right of association, the right to organize and bargain collectively, etc.); · Elimination of certain child labor practices; · Countries must be GSP eligible in order to receive AGOA's trade benefits, but the reverse does not hold, i.e. GSP eligibility does not automatically translate into AGOA eligibility. · The country does not engage in activities that undermine US national security or foreign policy interests and does not engage in gross violation of internationally recognized human rights or provide support for acts of international terrorism and cooperates in international efforts to eliminate human rights violations and terrorist activities. Table A.1.8 AGOA Eligible Countries Countries and Date Declared AGOA Date Declared Eligible Date Declared Eligible for Membership Eligible for APPAREL SPECIAL RULE for PROVISION APPAREL SADC and COMESA Malawi October 2, 2000 October 2, 2000 Mauritius October 2, 2000 January 18, 2001 N/A Namibia (SACU) October 2, 2000 N/A Seychelles October 2, 2000 N/A Swaziland (SACU) January 17, 2001 January 17, 2001 Zambia October 2, 2000 October 2, 2000 SADC Non COMESA Botswana (SACU) October 2, 2000 N/A Lesotho (SACU) Mozambique October 2, 2000 October 2, 2000 1 Section 104 of the AGOA: Eligibility Requirements. 142 South Africa (SACU) October 2, 2000 March 7, 2001 N/A Tanzania October 2, 2000 October 2, 2000 COMESA Non SADC Djibouti October 2, 2000 October 2, 2000 Eritrea October 2, 2000 October 2, 2000 Ethiopia October 2, 2000 October 2, 2000 Kenya October 2, 2000 January 18, 2001 October 2, 2000 Madagascar October 2, 2000 March 6, 2001 October 2, 2000 Rwanda October 2, 2000 October 2, 2000 Uganda October 2, 2000 October 2, 2000 CEMAC Cameroon October 2, 2000 October 2, 2000 Central African Republic October 2, 2000 October 2, 2000 Chad October 2, 2000 October 2, 2000 Congo (Republic of) October 2, 2000 October 2, 2000 Gabon October 2, 2000 N/A WAEMU and ECOWAS Benin October 2, 2000 October 2, 2000 Guinea Bissau October 2, 2000 October 2, 2000 Mali October 2, 2000 October 2, 2000 Niger October 2, 2000 October 2, 2000 Senegal October 2, 2000 October 2, 2000 ECOWAS Non WAEMU Cape Verde October 2, 2000 October 2, 2000 Ghana October 2, 2000 October 2, 2000 Guinea October 2, 2000 October 2, 2000 Nigeria October 2, 2000 October 2, 2000 Sierra Leone* October 2, 2000 October 2, 2000 Others Mauritania October 2, 2000 October 2, 2000 Sao Tome and Principe October 2, 2000 October 2, 2000 Source: Adapted by authors from US Treasury Report, 2001, http://www.agoa.gov. Note: *Effective date of designation of the Republic of Sierra Leone as an AGOA beneficiary country to be determined by the USA Trade Representative. 3 Trade Benefits · Preferential Tariff Treatment for Certain Articles: In general, the President of US may provide duty-free treatment for any article described in section 503(b)(1)(B) through (G), if, after receiving the advice of the International Trade Commission, the President determines that such article is not import-sensitive in the context of imports from beneficiary SSA countries. · Rules of Origin. The duty-free treatment shall apply to any article (described in section 503(b)(1)(B) through (G) of AGOA) that meets the requirements, except: o If the cost or value of materials produced in the customs territory of the USA is included with respect to that article, an amount not to exceed 15% of the appraised value of the article at the time it is entered that is attributed to such US cost or value may be applied toward determining the required percentage; and o The cost or value of the materials included with respect to that article that are produced in one or more beneficiary SSA countries shall be applied in determining such percentage. · Duty-Free / Quota-Free Treatment of Certain Textiles and Apparel. The following types of textiles and apparel products imported from eligible SSA countries can enter the USA duty-free and quota-free: o Apparel articles assembled in SSA countries from fabrics wholly formed and cut in the USA, from yarns wholly formed in the USA; o Apparel articles cut and assembled in beneficiary SSA countries using USA thread, from fabrics wholly formed in the USA from yarns wholly form in the USA; o Sweater knit to shape from cashmere or certain wool. o Apparel cut or knit to shape and assemble in SSA third-country yarn or fabric in short supply; o Hand loomed, handmade and folklore articles; 143 o Certain other apparel products will be duty-free and quota-free up to a specified cap that is based on USA total apparel imports in a previous 12-month period. The specific products covered under the cap are: o Apparel assembled in SSA from fabric wholly formed in SSA from US or SSA yarn; o Apparel articles assembled in SSA from non-US, non-SSA fabric. Limitations on Benefits for these two categories of apparel are as follows: Based on the share of total USA apparel imports, measured in square meter equivalents, in previous 12-month period for which data are available. October 1, 2000-September 30, 2001: 1.5% October 1, 2001-September 30, 2002: 1.78% October 1, 2002-September 30, 2003: 2.06% October 1, 2003-September 30, 2004: 2.34% October 1, 2004-September 30, 2005: 2.62% October 1, 2005-September 30, 2006: 2.90% October 1, 2006-September 30, 2007: 3.18% October 1, 2007-September 30, 2008: 3.50% · Quotas on Imports from Kenya and Mauritius: Existing USA quotas on textile and apparel products imported into the USA from Kenya and Mauritius will be terminated within 30 days after the US Government has determined that each country has adopted an effective visa system to prevent the transshipment of textile and apparel articles and the use of counterfeit importation documents. · Special Rule for Apparel applying to Lesser Developed AGOA Eligible Countries: o Definition of LDCs: countries that have a per capita GNP of less than $1,500 a year in 1998 (World Bank's measure). o Special Treatment: they may export apparel wholly assembled in their countries, regardless of the origin of the fabric (`third country' fabric rule), through September 30, 2004. o Eligible countries: All SSA countries except Botswana, Equatorial Guinea, Gabon, Mauritius, Namibia, Seychelles, and SA. 4 AGOA Implementation Status Report: Country Eligibility Determinations · The visa systems of Botswana, Ethiopia, and Malawi were approved. · So far nine AGOA beneficiaries (all belong to SADC and/or COMESA) have their visa systems approved: Kenya, Lesotho, Madagascar, Mauritius, SA, Swaziland, Botswana, Ethiopia, and Malawi; · Eight other countries have submitted their visa applications: Uganda, Mozambique, Zambia, Ghana, Nigeria, Namibia, and Tanzania (in chronological order); The nine countries approved account for 94% of current exports from SSAto the United States. Box A.1.9 AGOA II: Terms The terms for AGOA II being considered include: · Confirming the duty-free status of knit to shape apparel if this has not been resolved by administrative action in the interim; · Correcting the mistake in the AGOA provision concerning sweaters made of merino wool of 18.5 microns or finer; · Removing from the tariff rate quota (TRQ) apparel made in SSA from African-origin yarn/fabric as a way to de facto increase the size of the TRQ and at the same time provide incentives for use of African yarn/fabric; 144 · Expanding the folkloric and handmade provisions of AGOA to include textiles and apparel made in traditional designs or where handmade elements contribute a significant portion of value; · Modifying the de minimis exception so that it would apply to 7% of either the value or weight of apparel that otherwise is eligible for duty-free; · Creating a new short supply procedure that would permit duty-free access for African yarns and fabrics that are not made in the USA; and · Raising the $1,500 per capita cut-off between LDCs and non-LDCs so that more countries (probably just Botswana and Namibia) would be eligible to use third-country fabric. Source: Adapted by authors based on information collected from The African Coalition for Trade (ACT), Tr ade Report August 31, 2001. 5 USA Trade Links with SSA and AGOA Beneficiary Countries SSA accounts for less than 1% of US merchandises exports, and less than 2% of US merchandise imports. In comparison, the region accounts for 3.6% of global exports and 3.7% of total imports for the EU. However, the USA is SSA's largest single market, purchasing 19% of the region's exports in 1999. The United Kingdom was second at 6.8%, and France third at 6.4%. The EU absorbed 40% of SSA's exports. Two-way trade betw een the US and SSA recovered strongly in 2000. Total trade (imports plus exports) soared 50% to $29.4 billion. Table A.1.9 US Trade with SSA (US$ Million) 1997 1998 1999 2000 Change1999-2000 USA Exports 6,174.9 6,694.0 5,568.5 5,925.8 6.4% USA Imports 16,418.7 13,139.6 14,042.9 23,480.4 67.2% Source: USA Trade and Investment Policy toward Sub -Saharan Africa and Implementation of the African Growth and Opportunity Act. The First of Eight Annual Reports, May 2001. USA exports to SSA grew 6.4% to $5.9 billion, although sales did not recover all the ground lost in 1999 from the record 1998 total. The increase was led by sales of aircraft to SA and Kenya, and oil field equipment to Nigeria. The top four markets - SA, Nigeria, Kenya, and Angola - accounted for 72% of US sales in 2000, with SA accounting for 52%, Nigeria for 12%, Kenya for 4%, and Angola for 3.8%. The major US merchandise exports included the following product categories: aircraft and parts; oil and gas field equipment; motor vehicles and parts; industrial chemicals; computers and peripherals; construction machinery and parts; telecommunications equipment; and agricultural machinery. In 2000, USA exports to the AGOA group of countries were $5.3 billion, or 90% of USA exports to SSA. Principal export items were: Aircraft and parts, oil and gas field equipment, wheat and meslin, ADP equipment, and motor vehicle parts. Table A.1.10 Leading USA Exports Markets in SSA Country 2000 Export Value ($ Millions) SA 3,084.7 Nigeria 718.5 Kenya 238.0 Angola 226.0 Ghana 190.8 Ethiopia 165.2 Equatorial Guinea 94.9 Cote d'Ivoire 94.9 Source: USA Trade and Investment Policy toward Sub -Saharan Africa and Implementation of the African Growth and Opportunity Act. The First of Eight Annual Reports, May 2001. 145 Table A.1.11 Leading USA Exports to SSA Item 2000 Export Value ($ Millions) Aircraft and parts 780.5 Oil and gas field equipment 343.0 Wheat 309.8 Motor vehicles and parts 257.5 Industrial chemicals 231.9 Computers, peripherals, and software 219.3 Construction machinery and parts 189.3 Telecommunications equipment 139.5 Agricultural machinery 68.5 Used clothing and textiles 60.7 Source: USA Trade and Investment Policy toward Sub -Saharan Africa and Implementation of the African Growth and Opportunity Act. The First of Eight Annual Reports, May 2001. USA imports from SSA surged by two-thirds to nearly $23.5 billion, due to soaring prices for crude oil. The major imports from SSA are: crude oil ($16.3 billion, or 69% of USA imports from the region), platinum group metals, and partially refined petroleum products. Table A.1.12 Leading USA Imports from SSA Item 2000 Export Value ($ Millions) Crude oil 16,289.8 Platinum group metals 1,528.8 Partially refined petroleum products 969.4 Woven or knit apparel 748.1 Iron and steel products 494.9 Diamonds 433.4 Ferro- and nonferrous ores 399.1 Cocoa beans and products 311.0 Source: USA Trade and Investment Policy toward Sub -Saharan Africa and Implementation of the African Growth and Opportunity Act. The First of Eight Annual Reports, May 2001. USA imports from the AGOA-eligible countries totaled $19 billion, or about 81% of total imports from SSA in 2000, with the leading import items being crude oil, platinum, diamonds, and ferro- alloys. After crude oil, platinum, and diamonds, imports of woven and knit apparel experienced the strongest expansion in 2000, growing by 28%. The USA merchandise trade deficit with SSA doubled in 2000 to $17.6 billion. The cumulative imbalance over the last five years is nearly $52 billion in Africa's favor. However, the associated transfer of financial resources benefits only a handful of African countries, particularly those that supply substantial amounts of crude oil or strategic minerals to the United States. Nigeria, Angola, Gabon, and SA accounted for nearly 94% of the USA trade deficit with SSA in 2000. The first three were major oil suppliers, while SA provided platinum and diamonds. Although this increase in trade with the AGOA beneficiaries might have occurred in anticipation of the AGOA benefits, 2001 data (up till September 2001) indicates that AGOA seems to have led to substantial increases in trade values and volumes as well as new investment and job opportunities. The benefits have not been equally distributed among the eligible countries, though, with the main beneficiaries being Ghana, Kenya, Lesotho, Madagascar, Malawi, Mauritius, SA, Senegal, Tanzania, Uganda and Zambia. 146 The Cotonou Agreement A New Partnership between the EU and the ACP Countries 1 Broad Overview The new EU-ACP agreement, the so-called Cotonou Agreement, follows a 25 year-period of Lomé Conventions. It was signed in Cotonou (Benin) on June 23, 2000 and defines three areas of cooperation namely politics, economics and trade , and finance. Box A.1.10 The Cotonou Agreement Objectives The Cotonou Agreement seeks to promote and expedite the economic, cultural and social development of the ACP States, with a view to contributing to peace and security and to promoting a stable and democratic political environment. The ultimate goal of this partnership is to reduce and eventually eradicate poverty through the objectives of sustainable development and gradual integration of the ACP countries into the world economy. Sustainable economic growth, developing the private sector, increasing employment and improving access to productive resources are therefore major objectives of this partnership. To achieve these objectives, an integrated approach taking into account at the same time political, economic, social, cultural and environmental aspects of development will guide development strategies that the EU will initiate in each ACP country. The agreement also encourages regional and sub-regional integration processes, which foster the integration of the ACP countries into the world economy in terms of trade and private investment. Five pillars underpin the new EU-ACP Agreement 1 AComprehensive Political Dimension: The Agreement strongly emphasizes the role of political dialogue between ACP and EC to address all issues of mutual concern and ensure increased impact of development cooperation. It also focuses on peace-building policies to prevent and solve conflict. For this objective to be effective, the Agreement will focus in particular on regional initiatives and the strengthening of local capacities. The partnership also addresses the issue of good governance. A new specific procedure will be launched and will be applied in cases of corruption involving EDF money or in any country that benefits from EC's financial support where corruption appears to be an impediment to development. 2 Participatory Approach: The new agreement contains innovative provisions to promote participatory approaches. The objective is to ensure that civil society and economic and social players take part in the design and implementation of economic policies and programs. 3 Strengthened Focus on Poverty Reduction: Poverty reduction is a central objective of the new Agreement. The Agreement proposes a global strategy for development. ACP Member States and the EC will work together to establish a consolidated and effective strategic framework for poverty reduction and measure progress according to results. An integrated approach to poverty reduction strategies is to be developed to ensure complementarity and interaction between the economic, social, cultural, gender, institutional and environmental dimensions of policies and strategies. It focuses on three areas: · economic development with particular emphasis on private sector development and investment; macroeconomic and structural policies and reforms; and sectoral policies. · social and human development focusing on social sector policies; youth issues; and cultural development. · regional cooperation and integration. In addition, cooperation also includes additional themes such as gender equality, environmental sustainability, and institutional development and capacity building. 4 New Framework for Economic and Trade Cooperation: It aims to strengthen the mutual effects of trade cooperation and development aid. 5 Reform of Financial Cooperation: Reforms include the evolution in the nature of aid towards budgetary assistance/sector programs, rationalization of the instruments of cooperation and programming reform. 2 Cooperation Strategies Cooperation strategies will focus on four areas, namely economic development, social and human development, regional cooperation and integration, economic and trade cooperation and some cross- cutting issues (gender, environment and natural resources, and institutional development and capacity building). 2.1 Economic development In this area, the partnership will support: · Investment and private sector development by creating a favorable environment for private sector investment; and the development of a dynamic, viable and competitive private sector; 147 · Macroeconomic and structural reforms and policies by supporting ACP efforts to implement (i) macroeconomic growth and stabilization through disciplined fiscal and monetary policies that result in the reduction of inflation, and improve external and fiscal balances, by strengthening fiscal discipline, enhancing budgetary transparency and efficiency, improving the quality, the equity and composition of fiscal policy; and (ii) structural policies designed to reinforce the role of the different actors, especially the private sector by improving the environment for increases in business, investment and employment. In addition, ACP countries are encouraged to liberalize trade and foreign exchange regimes and current account convertibility; strengthen labor and product-market reforms; encourage financial systems reforms to help develop viable banking and non-banking systems, capital markets and financial services, including micro-finance; improve the quality of private and public services; and encourage regional cooperation and progressive integration of macroeconomic and monetary policies; · Economic sector development through the support to sustainable policy and institutional reforms and the investments necessary for equitable access to economic activities and productive resources; · Tourism by promoting the development of the tourism industry in ACP countries and sub-regions. 2.2 Social and Human Development In this area, cooperation will focus on: · Social sector development:. The objective will be to support ACP States' efforts to develop general and sectoral policies and reforms which improve the coverage, quality of and access to basic social infrastructure and take account of local needs and specific demands of the most vulnerable and disadvantaged, thus reducing the inequalities of access to these services. · Youth Issues: Cooperation will support the establishment of a coherent and comprehensive policy for realizing the potential of youth so that they are better integrated into society. · Cultural development: The objective will be to preserve, promote cultural values and identities to enable inter-cultural dialogue. 2.3 Regional Cooperation and Integration Cooperation will support: · developing and strengthening the capacities of regional integration institutions and organizations set up by the ACP States to promote regional cooperation and integration; · fostering participation of LDC ACP States in the establishment of regional markets and sharing in resultant benefits; · implementation of sectoral reform policies at regional level; · liberalization of trade and payments; · promoting cross-border investments both foreign and domestic, and other regional or sub-regional economic integration initiatives; and · taking account of the effects of net transitional costs of regional integration on budget revenue and balance of payments. Cooperation will also address common problems, including: infrastructure, particularly transport and communications; the environment; water resource management and energy; health, education and training; research and technological development; regional initiatives for disaster preparedness and mitigation; and other areas, including arms control, actions against drugs, organized crimes, money laundering, bribery and corruption. 2.3 Thematic and Cross-Cutting Issues Three main issues will be addressed: · Gender issues: The objective will be to help ACP countries strengthen policies andprograms that improve, ensure and broaden the equal participation of men and women in all spheres of political, economic, social and cultural life; · Environment and natural resource: In this area, the partnerships aim at: (i) mainstreaming environmental sustainability into all aspects of development cooperation and support programs 148 and projects implemented by the various actors; (ii) building and/or strengthening the scientific and technical unit human and institutional capacity for environmental management for all environmental stakeholders; and (iii) supporting specific measures and schemes aimed at addressing critical sustainable management. · Institutional development and capacity building: The partnership will support the efforts of ACP States to develop and strengthen structures, institutions and procedures that help to: (i) promote democracy, human dignity, social justice and pluralism; (ii) promote universal and full respect for and observance and protection of all human rights and fundamental freedoms; (iii) develop and strengthen the rule of law; and improve access to justice; (iv) ensure transparent and accountable governance and administration in all public institutions. 3 New Framework for Economic and Trade Cooperation Economic and trade cooperation will rely on three main principles: · Full conformity with the provisions of the WTO; · Building on regional integration initiatives of ACP States; · Ensuring special and differential treatment for all ACP countries, maintain special treatment for ACP LDCs and take into account the vulnerability of small, landlocked and island countries. 3.1 General aspects The new agreement has developed a framework to strengthen the mutual effects of trade cooperation and development aid. ACP countries and the EC will establish new trade arrangements with the purpose of accelerating trade liberalization between the parties. Economic and trade cooperation has four main objectives: · promoting smooth and gradual integration of ACP economies into the world economy; · enhancing production, supply and trading capacities; · creating new trade dynamics and foster investment; and · ensuring full conformity with WTO provisions. To fulfill these objectives, a new trading arrangement will be introduced after a preparatory period. It will enter into force by 1st January 2008 at the latest when liberalization of the trade process will start and which is to last for a transitional period of at least 12 years. The present regime will be maintained during the preparatory period (2000-2008). The EC will facilitate access to the EU's market to all imports from LDCs on the basis of GSP. Protocols on sugar, and on beef and veal will be maintained but will be reviewed in the framework of negotiations for new trading arrangements. In 2004, the situation of non-LDC ACP countries not in a position to enter into economic partnership agreements (EPAs) will be assessed and alternative possibilities will be examined. In 2006, the Community will assess progress in negotiation of the EPAs. 149 BOX A.1.11 Summary of the Timetable for Trade Negotiations and Liberalization Process 2000: Start liberalization of almost all imports from all LDCs on the basis of GSP. 2000-2002: Preparatory period to strengthen regional integration processes and the ACP countries' capacity to conduct trade negotiations. 2002-2008: Negotiations for a new trading arrangement. 2004: Assess situation of non-LDC ACP countries not in a position to enter into EPAs and examine alternative possibilities. 2005: By 2005, LDCs' exporters will have free access for essentially all their products on the EU market. 2006: Assess progress in negotiation of EPAs. 2008: (i) New trading arrangements to enter into force by 1st January 2008 at the latest; (ii) Start liberalization of trade by 2008, at the latest, during a transitional period of at least 12 years. For the purpose of strengthening trade cooperation, a Joint ACP-EC Ministerial Trade Committee will be established. It will mainly focus on current multilateral trade negotiations and will examine the impact of the wider liberalization initiatives on ACP-EC trade and the development of ACP economies. 3.2 Cooperation in trade -related areas · Cooperation in international fora: ACP countries and the EU will cooperate closely to defend their common interest in international economic and trade cooperation in particular in the WTO, including participation in setting and conducting the agenda in future multilateral trade negotiations. In addition the EU will provide ACP countries with technical assistance to enable them implement their commitments. · Trade in services: The EU and ACP countries agreed on the objective of extending, after they have acquired some experience in applying the MFN treatment under GATS, their partnership to encompass the liberalization of services in accordance with the provision of GATS. The EU will support the ACP States' efforts to strengthen their capacity in the supply of services, in particular services related to labor, business, distribution, finance, tourism, culture and construction and related engineering services. · Competition Policy: The EU and ACP countries undertake to implement national or regional rules and policies including the control and the prohibition of agreements between undertakings, decisions by associations of undertakings which prevent, restrict or distort competition. · Protection of Intellectual Property Rights: The agreement underlines the importance of adherence to the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) to the WTO. The Community, its Member States and the ACP States may consider the conclusion of agreements aimed at protecting trademarks and geographical indications for products of particular interest of either Party. · Standardization and Certification: The objective will be to remove unnecessary technical barriers and to reduce differences between ACP countries and EU member states in those areas, so as to facilitate trade. The agreement reaffirms the commitment of both parties under the Agreement on Technical Barriers to trade, annexed to the WTO Agreement (TBT Agreement). · Sanitary and Phytosanitary Measures: The Cotonou Agreement recognizes the right of each Party to adopt or to enforce sanitary and phytosanitary measures necessary to protect human, animal or plant life or health. To this end, both parties reaffirm their commitments under the 150 Agreement on the Application of Sanitary and Phytosanitary Measures, annexed to the WTO Agreements (SPS-Agreement). · Trade and Environment: The development of international trade should ensure sustainable and sound management of the environment, in accordance with the international conventions. The objectives of the cooperation will be to establish coherent national, regional and international policies and reinforce quality controls of goods and services related to the environment. · Trade and Labor Standards: The EU and ACP countries reaffirm their commitment to the internationally recognized core labor standards, as defined by the relevant International Labor Organization (ILO) Conventions. Cooperation should be enhanced in the following fields: (i) exchange of information on the respective legislation and work regulation; (ii) the formulation of national labor legislation and strengthening of existing legislation; (iii) educational and awareness-raising programs; and (iv) enforcement of adherence to national legislation and work regulation. · Consumer Policy and Protection of Consumer Health: Cooperation will aim at improving the institutional and technical capacity, establishing rapid-alert systems of mutual information on dangerous products, and exchanging information and experiences on the establishment and operation of post market surveillance of products and product safety. · Tax Carve-out Clause: The MFN treatment granted in accordance with the provisions of this agreement, or any arrangement adopted under this Agreement, does not apply to tax advantages which the Parties are providing or may provide in the future on the basis of agreements to avoid double taxation or other tax arrangements, or domestic fiscal legislation. 4 Trade Regime Applicable during the Preparatory Period (2000-2008) 4.1 General Trade Arrangements · Products originating in the ACP States will be imported into the Community free of customs duties and charges having equivalent effect. The list of products is elaborated in the Report to Attachment I to the Treaty. · The Community will not apply any quantitative restrictions or measures having equivalent effect to imports of products originating in the ACP States. Exception: prohibitions and restrictions on imports or exports or goods in transit justified on grounds of public morality, public security, etc. · The EU shall take necessary measures to ensure more favorable treatment than that granted to third countries benefiting from the MFN clause for the same products. 4.2 Concept of `Originating Products' Products considered as originating in the ACP States are: · products wholly obtained in the ACP States (mineral products extracted from their soil or from their seabed; vegetable products harvested there; live animals born and raised there; etc.); · products obtained in the ACP States incorporating materials which have not been wholly obtained in the ACP countries, provided that such materials have undergone sufficient working or processing in the ACP States. · Cumulation of origin: materials originating in the Community or SA or in a neighboring country shall be considered as materials originating in the ACP States when incorporated into a product obtained there. There is no need for such material to undergo sufficient working or processing. · Non-originating materials can be used in the manufacture of a given product provided that: (i) their total value does not exceed 15% of the ex-work price of the product; and (ii) any of the percentages given in the list for the maximum value of non-originating materials are not exceeded through the application of this paragraph. 4.3 Special Undertaking on Sugar The EU has undertaken for an indefinite period to purchase and import, at guaranteed prices, specific quantities of canesugar (raw or white), which originate in the ACP States. 151 `Agreed quantities' for delivery in each 12-month period (expressed in metric tons of white sugar) for some Eastern and Southern African States are: Kenya: 5000; Madagascar: 10000; Malawi: 20000; Mauritius: 487200; Swaziland: 116400; Tanzania: 10000; and Uganda: 5000. 4.4 Protocol on beef and veal Customs duties other than ad valorem duties applicable to beef and veal originating in the ACP States shall be reduced by 92%. Reduction applies to the following quantities (expressed in boneless meat per calendar year and per country) are for: Botswana: 18916 tons; Kenya: 142 tons; Madagascar: 7579 tons; Swaziland: 3363 tons; Zimbabwe: 9100 tons; and Namibia: 13000 tons. 4.5 The Second Banana Protocol The Community will examine and where necessary take measures aimed at ensuring the continued viability of the ACP countries' banana export industries and the continuing outlet for their bananas on the Community market. 4.6 Potential Benefits of the New Trade Framework · The agreement puts a particular emphasis on the interaction between trade reforms and human and social development policies. The new trade agreement may therefore support and complement pro-poor policies. · A central point of the agreement is to make the trade regime between ACP countries and EU fully compatible to the WTO regime. This should enhance the trade environment and facilitate foreign investment. In addition, a key task of the agreement is to strengthen ACP countries' capacity to negotiate WTO arrangements to best serve their needs. · The agreement with the EC, by locking-in the economic reforms, will act as an anchor. The credibility effect would lead to more investment, strengthen economic growth and alleviate poverty. LDCs (39 of them being in the ACP group) are granted a special treatment. By 2005, LDCs' exporters will have free access for essentially all their products to the EU market. 5 Financial Cooperation 5.1 Principles and Guidelines · Coherence and flexibility: Development finance cooperation will be consistent with the objective, strategies and priorities established by the ACP States, at both national and regional levels. One programming exercise per country/region, re-grouping of the EDF instruments. · Evolution in the nature of aid towards budgetary assistance/sector program: The ACP country must be responsible for its own policies and programs, including choosing projects and programs; implementing and managing projects and programs, maintaining projects and programs, etc. · Indications, not entitlement: Allocations are no longer automatic and will be subject to revision in the light of developments in need and performance. Performance will be rewarded. 5.2 Eligibility Criteria Entities or bodies eligible are: (i) ACP States; (ii) Regional or inter-State bodies to which one or more ACP States belong and which are authorized by those States; and (iii) joint bodies set up by the ACP States and the Community to pursue certain specific objectives. 5.3 Financial Instruments The Agreement stipulates two instruments: · The grant envelope for support to long-term development(10 bn from the 9th EDF + 1.3 bn for regional programs): Each country will be allocated a lump sum, from which a range of different types of operations can be financed. The most important difference is that no resources 152 are locked into a specific purpose, which allows for flexibility and the re-deployment of resources as necessary. · The Investment Facility (IF) to replace the Lomé IV risk capital and interest-rate subsidy facilities: The European Investment Bank will manage the IF. It will function as a revolving fund and the returns accruing from its operations will flow back to the Facility. It is aimed at developing businesses in ACP countries and will finance income earning, commercially and economically viable private businesses and if they meet these requirements, public enterprise. It will participate in privatizations and aim to stimulate the investment of internal and external savings. The Facility will thus guarantee ACP countries a certain level of resources available for private sector development. Resource allocation from the grant facility will be allocated on the basis of an evaluation of needs and performance. · Needs criteria include: per capita income, population size, economic and social development indicators (HDI), level of indebtedness and dependence on export earnings. · Performance criteria: progress in implementing institutional reforms; country performance in the use of resources (transparency and accountability in the management of resources and quality of budget management); effective implementation of current operations; poverty alleviation or reduction; sustainable development measures; macroeconomic and sectoral policy performance. The allocation to each country will be divided into two elements: (i) A Base Case to cover the forecasted, regular support the Community will provide; (ii) A High Case to cover unforeseen needs, debt relief and additional support in case of fluctuations in export earnings. Programming of resource allocation will be based on a single Country Support Strategy (CSS), which will cover implementation of all operations financed from the grant envelope. The CSS will include an analysis of the political, economic and social context of the country and outline the country's own development strategies. This analysis will serve as a basis for a suitable orientation of the use of Community aid. An Operational Indicative Program will complement the CSS. The agreed system does not imply a carry-over of the current Stabex and Sysmin Instruments, but it does allow for additional support in the case of fluctuations in export earnings. However, no set amount has been earmarked for this purpose; eligibility for the support has been linked to whether the loss jeopardizes overall macroeconomic stability; and entitlement to additional support limited to 4 successive years. Eligibility criteria for additional support are: · a 10% (2% in the case of least-developed countries) loss of export earnings from goods compared to the arithmetical average of the earnings in the first three years of the first four years preceding the application year; or · a 10% (2% in the case of LDCs) loss of export earnings from the total of agricultural or mineral products compared with the arithmetical average of the earnings in the first three years of the first four years preceding the application year for countries where the agricultural or mineral export revenues represent more than 40% of total export revenues from goods; and · a 10% worsening in the programmed public deficit for the year in question or forecast for the following year. Investment and Private Sector Development Support is aimed at promoting sound policies and strategies for investment and private sector development through financial and technical assistance. Investment will be encouraged through investment promotion, investment guarantees (use of risk insurance as a risk-mitigating mechanism, guarantee funds covering risks for qualified investment), and investment protection (Articles 74, 77 and 78). Other Areas of Financial Support include: · Debt and Structural Adjustment Support: Resources provided in the Agreement will be used to contribute to debt relief initiatives approved at international level for the benefit of ACP countries. 153 · Support for Sectoral Policies: This support will be provided through sectoral programs, investments, rehabilitation , technical assistance, etc. · Microprojects and decentralized cooperation: Cooperation will also support micro-projects at local level that have an economic and social impact on the life of the people. · Humanitarian and emergency assistance: Humanitarian and emergency assistance will be accorded to the population in ACP States faced with serious economic and social difficulties of an exceptional nature stemming from natural disasters, wars, etc. Technical Cooperation: The EU will assist the ACP States in the development of national and regional manpower resources, the sustained development of the institutions critical for development success. Objectives include: strengthening ACP consulting firms and organizations, exchange arrangements involving consultants from both ACP and EU firms, transfer of know-how, increase national and regional capabilities, etc. Financial Resources: Under the 9th EDF 13.5 billion would be made available, which are to be allocated for: · Long term allowance: 10 billion · Regional allowance: 1.3 billion · Investment Facility: 2.2 billion 6 Regional Cooperation The Regional Programs: · should correspond to programs of existing regional organizations with a mandate for economic integration. In case the membership of several relevant regional organizations overlaps, the regional integration should correspond to the combined membership of this organization (Article 7). · will be subject to a system of rolling programming. A Regional Support Strategy (RSS) and an operational indicative program will be established by region and subject to regular review. The performance will be measured according to the progress and prospects of regional cooperation and integration. There will be no annual review of these programs, but only a mid-term and end- of-term review. Regional Programming: Programming will take place at the level of each region. It means: (i) preparation and development of a Regional Support Strategy (RSS) based on the region's own medium-term development objectives and strategies; (ii) a clear indication from the Community of the indicative resource allocation from which the region may benefit during the 5 year period as well as other relevant information; (iii) preparation and adoption of a Regional Indicative Program (RIP); and (iv) a review process covering the RSS, the RIP and the volume of resources allocated to each region (Article 8). SADC and COMESA agreed in Cairo (Egypt) in May 2001 to have a joint RSS. However, there will be two regional programs: (i) COMESA, the EAC, IOC and IGAD for an amount of 223 million, and (ii) SADC for 101 million. In addition about 30 million will be allocated to South Africa. At the beginning of the period covered by the Financial Protocol, each must receive from the Community an indication of the volume of resources from which it may benefit during a 5-year period. Determinants of this allocation are: needs and progress and prospects of regional cooperation and integration (Article 9). 154 7 General Provisions for the Least-developed, Landlocked and Island ACP States (LDLICs). · Least-Developed ACP States: The Agreement provides for their special treatment in order to enable them to overcome the economic and social difficulties hindering their development (Article 85). · Landlocked ACP States: The Agreement allows for specific provisions and measures to support landlocked ACP States in their effort to overcome the geographical difficulties and other obstacles hampering their development. · Island ACP States: The Agreement also allows for specific provisions and measures to support island ACP States in their efforts to overcome the natural and geographical difficulties and other obstacles hampering their development. Box A.1.12 Everything -but-Arms Initiative On February 26 2001 the European General Affairs Council adopted an amendment to the EU's Generalized Scheme of Preference, the so-called `Everything-but-Arms' Initiative (EBA). This initiative extends duty and quota free access to all products originating in LDCs, except arms and ammunition. To the exception of fresh bananas, rice and sugar, all agricultural products are included. The three sensitive products will be liberalized gradually: · Fresh bananas: full liberalization will take place between January 1, 2002 and January 1, 2006. The EU will gradually reduce the full EU tariff by 20% every year. · Rice: EBA provides for full liberalization between September 1, 2006 and September 1, 2009 by gradually reducing the full EU tariff to zero. In the meantime, LDC rice can enter the EU market duty free within the limits of a tariff quota. This quota will increase annually. · Sugar: full liberalization will be phased in between July 1, 2006 and July 1, 2009 by gradually reducing the full EU tariff to zero. In the meantime, as for rice, LDC sugar can access the EU's market duty free within the limits of a tariff quota, which will increase annually. In order to protect EU producers against difficulties, the EU will monitor imports of these three sensitive pro ducts and apply safeguard measures if necessary. The Commission will report to the Council in 2005 on the extent to which LDCs are really benefiting from EBA, and whether the EU's provisions on rules of origin, anti-fraud and safeguards are adequate. The EBA regulations foresees that the special arrangement for LDCs should be maintained for an unlimited period of time and not be subject to the periodic renewal of the EU's scheme of generalized preferences. 155 Box A.1.13 The World Trade Organization (WTO) and Regional Trade Arrangements Conflict or Compatibility? Background When the international community embarked on the Uruguay Round (UR) negotiations, the need to create an institutional structure to oversee the world trading system became increasingly evident. The result was the WTO aiming to oversee and coordinate the functioning of the multilateral trading system. It provides the institutional and legal foundation for the multilateral trading system and entered into force on January 1, 1995. The WTO is headed by a Ministerial Conference, composed of all WTO members, which meets once every two years. However it is the General Council that is in charge of the management of the organization. The General Council has also two specific tasks: it acts as the Dispute Settlement Body and serves as the Trade Policy Review Body. The WTO Agreement has five functions (Article III), namely: · to facilitate the implementation, administration and operation and further the objectives of the multilateral and plurilateral trade agreements; · to provide a forum for multilateral and plurilateral trade negotiations; · to settle disputes that may arise between members; · to conduct trade policy reviews; and · to cooperate with the World Bank and the IMF aimed at achieving coherence in global economic policy making. WTO and Regional Trade Arrangements The fundamental principle of the GATT/WTO is non-discrimination incorporated in the most-favored-nation (MFN) rule. This rule requires a signatory (member) country to extend to all other contracting parties any advantage, favor, privilege and immunity affecting trade charges that it grants to another contracting party. This principle may seem to contradict the establishment of regional trade arrangements (RTAs) between signatory countries to the GATT/WTO. However, GATT/WTO explicitly allows the creation of RTAs provided that these arrangements respect certain rules. This constitutes the most important exception to the principle of non-discrimination. Article XXIV of GATT/WTO provides a number of rules governing such trade agreements including: · Parties to a RTA must eliminate duties and other restrictive regulations of commerce with respect to `substantially all' trade between the constituents customs territories (paragraph 8). · The level of external protection applied to third countries by signatories to an RTA, must not `on the whole' be higher or more restrictive after the formation of the RTA compared to the level prevailing in each of constituent territories prior to the formation of the RTA (paragraph 5). · All RTA agreements are to be promptly reported to the WTO for examination by WTO members, which then may make recommendations (paragraph 7). · Member States of a RTA must adopt rules that minimize any possible harmful impact of such RTA. 156 ATTACHMENT 2 SOCIO-ECONOMIC AND POLITICAL INFORMATION 157 ATTACHMENT 2a POLITICAL SITUATION IN SOUTHERN AFRICA Similar to their uneven levels of socio-economic development and performance, the countries in southern Africa are diverse in their political systems and the prevailing levels of political stability, which are posing particular challenges for cooperation and integration in the region. Political systems range from a traditional monarchy to constitutional democracies on a continuum from de facto one- party rule, unclear division between legislative, administrative and judicial functions and state-control of the media to decentralized political, fiscal and administrative functions, widespread participation by civil society and media independence. In general, democracies are young and fragile, with many of the countries in a stage of democratic nation building, with the occasional set-back as witnessed by constitutional amendments and clamp-downs on freedom of speech. Over the past few years some countries in the sub-region have indeed witnessed consolidation of a democratic culture, good governance, the rule of law and respect for human rights. This is reflected in a number of positive developments, such as the holding of `free and fair' national and / or sub- national elections and the smooth transfer of power between ruling parties such as in Mauritius and changes in leadership, such as in Botswana and South Africa. Notwithstanding these positive developments, international political risk perceptions of the sub-region have deteriorated due to a number of factors. · In Angola, the long-running civil war is no nearer to a military solution, as UNITA still has the financial capability to sustain the conflict in the foreseeable future. However, after long refusing to speak with armed UNITA again, the prospects for some form of dialogue between the government and UNITA have improved since the death of the UNITA leader, Jonas Savimbi, and his second-in-command. Currently, large swathes of the country, dislocated by decades of war, are under no effective administrative control, while there is growing disquiet among the urban poor about the government's inability to address the deepening socio-economic crisis. Donors and International Finance Institutions, including the World Bank, are increasingly involved in post- conflict reconstruction. Apart from the civil strife within Angola, over the past three years, the country has also been drawn into conflicts in Congo-Brazzaville and the DRC. The deterioration in relations between Angola and Zambia may see further clashes along the Angola -Zambia border, although a formal war with Zambia seems unlikely. · The internecine war in the DRC, which has drawn in countries in southern Africa and as far away as Chad and Libya. The DRC has enjoyed very little by way of a meaningful constitutional environment since its independence in 1960. The country was governed under a one-party system for most of the time from 1965 to 2001. Integration of this vast territory has been incomplete even under colonial rule and the society is organized around local and regional nodes rather than being a nation state. To all intents and purposes there is no government or administrative system in the generally accepted sense of the term. The inadequacy of transport and communications infrastructure makes the establishment of centralized or provincial administration beyond the major centers problematic, leaving such governance and administration to traditional leaders and their control structures. Due to the war, the DRC government administers roughly half of the country, i.e. the triangle between Kinshasa, Mbandaka and Lubumbashi, with the rest of the territory under control of various sub-national movements along ethnic or socio-economic fault lines. The DRC war has actually been five wars and linked-zones of conflict, each with its own logic, involving Angola, Burundi, Rwanda, Uganda and Sudan. In addition, at times the wars have drawn in countries such as Chad and Libya, while some SADC member States, notably Zimbabwe and Namibia, apart from Angola, have provided troops and other military assistance to the DRC Government on a bilateral basis. Since the end of January 2001, when Joseph Kabila was sworn in as president, the prospects for implementing the Lusaka peace accord have improved considerably. He has been taking a vastly 158 different tone than his late father in favoring dialogue with the DRC's neighbors, countries such as France, Belgium and the USA, and the UN in order to bring the peace process back on track. This is auguring well for regional and international initiatives to find a diplomatic solution to the conflict. The record of the DRC's new government particularly within the first few months has been one of delivering on most of its commitments. Political activity has been freed, the diamond sector was liberalized, restrictions were lifted on the use and circulation of foreign exchange, new mining and investment codes are being prepared, respected technocrats have been put in place in the main economic posts in cabinet and dialogue has been opened with the IMF and World Bank. Without a political solution to the war in the DRC, and others linked to it, there is a real danger that this conflict(s) will cause immeasurable damage to the economies of the central and southern African regions. Regional efforts to find political solution to the DRC's problems are ongoing and countries such as Botswana and SA have been particularly prominent in these efforts. · The political and economic crisis in Zimbabwe is closely linked to the 20-year one-party rule and persona of its current President. Although being a constitutional democracy, Zimbabwe has been, de facto, a one-party rule since independence in 1980. The presidency has wide-ranging powers in terms of the 1980, including intervening in the electoral process. What has resulted is the mind-set of a one-party state, with all the institutions applicable to that. Over the past three years, a range of erratic political and economic decisions has brought about a realignment of political forces, growing economic hardship that is assuming regional and ethnic dimensions, and mounting public dissatisfaction. Although attempts to strengthen the presidency by way of further amendment to the constitution were frustrated in a referendum at the beginning of 2000, the head of state still enjoys massive powers. President Mugabe's candidacy for the March 2002 Presidential election seemed to have been at the heart of the political and economic turmoil afflicting Zimbabwe. The run-up period to the Presidential election saw heavy-handed clampdowns on incidents of `public disorder' or dissidents from the ruling party, `fast-tracking' of land resettlement initiatives, and political expediency in the economic management process. These forces are still contributing to a delay in Zimbabwe's economic recovery. · Other incidents which have contributed to the deteriorating political risk perceptions of the sub- region, include the following: o The constitutional and political turmoil between 1993 and 1998 in the Kingdom of Lesotho which culminated in an appeal to other southern African states for assistance, leading to military involvement of SADC (by SA and Botswana) in Lesotho during September 1998. This incident has set a precedent in regional peacekeeping efforts, which raised the question of how similar requests would be handled in future. In Lesotho, the constitutional dispensation is now under review. An Interim Political Authority ­ a multiparty organ ­ has been set up in 1998 to assist in electoral reform and preparations for the June 2002 elections. o The amendment to Namibia's constitution to allow President Nujoma to stand for a third term in office (the ruling party has stated that Mr. Nujoma would not seek a fourth term as President though). This amendment was seen by inter alia the investor and donor community as a serious abrogation of Namibia's commitment to the principles of constitutional democracy. These perceptions were exacerbated by the subsequent parliamentary discussion about the removal from the constitution of provisions for the payment of compensation for land acquired for redistribution. The current favorable prospects for implementation of the Lusaka Peace Accord in the DRC augur well for the withdrawal of Namibian troops from that country. o In Zambia, since 1998, the controversial amendments that have been made to the constitution of this young democratic system and political actions against political opponents, which have pointed to a slide back towards authoritarianism. However, President Chiluba, under pressure from domestic, regional and international role-players, did not seek a third term as President and leadership changed hands peacefully towards the end of 2001. o Pressures to modernize Swaziland's political system, in a milieu characterized by restrictions on trade union and political party activity. Swaziland has been without a constitution since 159 1973. Its absolute monarch, King Mswati III has appointed a constitutional commission to investigate and recommend on the democratic modernization of the traditional monarchy, but proceedings have been protracted, while its contents seem to call for a permanent ban on opposition politics and an expansion of royal powers. The royal house is increasingly being tested through occasional incidents of civil discontent with the slow pace and direction of political transformation. On the sub-regional level, the intervention of some SADC members in Lesotho, on the appeal of this country, to re-establish law and order in its territory, together with the SADC diplomatic initiatives to resolve the conflict in the DRC, indicates that regional security has become an important part of the SADC cooperation arrangement. In contrast, regional security matters have also been serving as a disintegrating force and source of regional tension, with the military interventions by Angola, Zimbabwe and Namibia in the DRC. These were seen from within the regional context as bilateral decisions, rooted in the then unresolved conflict over the autonomy of the SADC Organ for Politics, Defense and Security. From 1994, when SA acceded to SADC till the beginning of 2001, the regional institutional structuring of political, defense and security issues turned into a long and acrimonious disagreement between: · those (mainly Zimbabwe, whose Head of Government was the Chair of the Frontline States) arguing that an institutional mechanism to deal with such issues should function under separate chairmanship from SADC and on the same flexible and informal basis as the Frontline States operated prior to the end of apartheid rule in South Africa. This implies that such an institutional mechanism would, in fact operate parallel to SADC, but would be a nominal part of SADC; and · those (mainly South Africa) arguing that the SADC Treaty does not provide for an institutional mechanism on politics, defense and security to be separately constituted under a separate chair and with a mandate separate from that of SADC. Thus, the 1996 effort to formalize these issues within a SADC Organ for Politics, Defense and Security, was again abandoned in 1997 in order to avoid ongoing negative fall-outs from the dispute on the Organ. However, the March 2001 Extraordinary Summit on the Rationalization and Review of SADC has decided to bring the political arm of SADC within the folds of the Treaty institutions, thereby renewing the efforts and resolve to attend to matters of regional security and politics. The Organ will deal with issues such as the following: military, peacemaking, peacekeeping and peace enforcement; conflict prevention, management and resolution; crime prevention; intelligence; foreign policy; disaster management; disaster management and human rights, indicating the depth and breadth of regional cooperation on these matters. In August 2001, all but one member signed the long- awaited Protocol on Politics, Defense and Security Cooperation. Related Protocols signed at the time are those on: Control of Firearms, Ammunition and other Related Materials, and on Corruption, while that on Combating Illicit Drug Trafficking were signed already in 1996. Box A.2.1: Objectives of the SADC Protocol on Politics, Defense and Security Cooperation · Protect the people and safeguard the development of the Region against instability arising from the breakdown of law and order, intra-state conflict, inter-state conflict and aggression; · Promote political cooperation among State Parties and the evolution of common political values and institutions; · Develop common foreign policy approaches on issues of mutual concern and advance such policy collectively in international fora; · Promote regional coordination and cooperation on matters related to security and defense and establish appropriate mechanisms to this end; · Prevent, contain and resolve inter -and intra-state conflict by peaceful means; · Consider enforcement action in accordance with international law and as a matter of last resort where peaceful means have failed; · Promote the development of democratic institutions and practices within the territories of State parties and encourage the observance of universal human rights as provided for in the Charters and Conventions of the organization of African Unity and United Nations respectively; · Consider the development of a collective security capacity and conclude a Mutual Defense pact to respond to external military threats; · Develop close cooperation between the police and state security services in order to address cross border crime and promote a community based approach to domestic security; · Observe, and encourage State parties to implement United nations, African Union and other international Conventions and treaties on arms control, disarmament and peaceful relations between states; · Develop peacekeeping capacity of national defense forces and coordinate the participation of State parties in international and regional peacekeeping operations; and · Enhance regional capacity in respect of disaster management and coordination of international humanitarian assistance. 160 ATTACHMENT 2b MACROECONOMIC, FINANCIAL, TRADE & SOCIAL INFORMATION Table A.2.1: SADC Countries: Population and Basic Economic Indicators, 1970-2000 Countries Population Income, ECONOMY (million) GNP per Nominal Real GDP / Investment/ Savings/GDP Exports capita ($U.S.), GDP capita (1995 GDP (%) (%) +Imports/GDP Atlas Method (million $U.S.) (%) $U.S.) Angola 1970 5.59 NA NA NA NA NA NA 1980 7.02 NA NA 723 NA NA NA 2000 12.72 270 (a) 8600 521 33 NA 101* Botswana 1970 0.64 160 100 590 42 18 80* 1980 0.91 1230 1100 1678 37 34 101 2000 1.60 3630 5600 3896 22 16 49* Congo, Dem. Rep. 1970 20.27 240 4900 400 15 12 24 1980 27.01 630 14400 313 10 10 26 2000 51.39 110 (b) 8700 139 12 12 40* Lesotho 1970 1.06 110 100 226 10 -28 NA 1980 1.35 490 400 364 37 -52 112 2000 2.15 550 (a) 900 514 78 -19 107* Malawi 1970 4.52 60 300 121 26 11 48 1980 6.18 190 1200 160 25 11 47 2000 11.04 170 1900 158 17 3 60* Mauritius 1970 0.83 280 200 1190 10 11 61 1980 0.97 1240 1100 1802 21 10 84 2000 1.18 3900 4800 4419 25 23 84* Mozambique 1970 9.40 NA NA NA NA NA NA 1980 12.10 280 (c) 3500 166 6 -11 28 2000 17.58 220 (a) 3900 202 31 6 35* Namibia 1970 0.79 NA NA NA NA NA NA 1980 1.03 NA 2200 2214 31 38 121 2000 1.74 1890 (a) 3200 2130 27 14 90* Seychelles 1970 0.05 370 20 2852 NA NA 65 1980 0.06 2110 150 4882 38 27 61 2000 0.08 9920 460 7313 34 14 74* South Africa 1970 22.09 790 17900 4100 23 19 38 1980 27.58 2540 80500 4620 23 31 54 2000 42.80 3090 128800 3925 16 19 40* Swaziland 1970 0.42 240 100 784 23 32 NA 1980 0.57 970 600 1046 30 6 156 2000 1.05 1400 1200 1401 13 25 201* Tanzania 1970 13.69 NA NA NA NA NA NA 1980 18.58 NA NA NA NA NA NA 2000 33.70 260 9000 193.4 18 5 25* Zambia 1970 4.19 440 1800 699 28 45 80 1980 5.74 630 3900 584 23 19 66 2000 10.09 320 3400 396 19 8 51* Zimbabwe 1970 5.26 390 1900 607 18 18 38 1980 7.01 950 6700 620 17 14 9 2000 12.11 690 7200 653 2 5 64* Source: World Bank SIMA Database Notes: (a) stands for 1999, (b) stands for 1998 and (c) stands for 1982. * means data for 1999. 161 Attachment 2b.1 SADC Countries: Economic Structure and Growth Performance Box A.2.2: Economic Structure Contribution of agriculture to GDP In the 1960s, agriculture was the main source of output in many SADC countries. Agriculture's value added represented more than one - third of GDP in Lesotho and Swaziland, almost 30% of GDP in Botswana, and more than 40% of output in Malawi (See Table 3). Since the mid­1970s, the output structure has changed drastically in most of the countries. Agriculture's contribution shrunk in favour of industry and services. Botswana, Lesotho, Mauritius, and Swaziland represent the most striking examples of this evolution. The discovery of diamonds and the development of a diamond-based industry in Botswana have resulted in an increase in the share of industry in GDP to 46% in the late 1990s compared with 31% in 1970. In the meantime, agriculture contribution to GDP fell from 28% in 1970 to 4% in 1998. In Lesotho and Swaziland where the formation of output is derived in large part from industry and services, the formation of important agro-industry and tourism sectors are the underlying factors explaining the changing pattern. In the particular case of Mauritius, an important tourism­ based industry, along with the export processing zone, has changed the economic structure from a sugar based­economy to a manufacturing economy. It is important to note that, with the exception of SA, Mauritius is the only SADC country that has developed a significant manufacturing sector. In 1998, one quarter of its output stemmed from manufacturing value added. Contribution of Mining to GDP SADC countries produce and export a number of mining commodities, including chromite, cobalt, diamonds, gold, manganese, copper, platinum, uranium and other industrial minerals and mining is the backbone of most national economies. Angola produces petroleum, diamonds, iron ore, phosphates, copper, gold, bauxite, and uranium. Botswana exports diamonds, copper, iron ore, and silver. Malawi is endowed with unexploited deposits of uranium and produces coal and bauxite while Mozambique's natural resources include coal, titanium, and natural gas. Namibia is the fourth-largest exporter of non -fuel minerals in Africa and the fifth -largest producer of uranium in the world. Namibia is also rich in gems and minerals and produces high quality diamonds and gold mines, while exporting copper, zinc, and lead. SA is a producer of a variety of natural resources, including gold, gem diamonds, coal, iron ore, uranium, platinum, and natural gas. Tanzania exports tin phosphates, iron ore, coal, diamonds, gemstones, gold, natural gas, and nickel. Zambia's sub-soil is rich in copper, cobalt, zinc, lead, coal, emeralds, gold, silver and uranium; the country also has hydropower potential as do both Tanzania and Zambia. Like Tanzania, Zimbabwe produces iron ore, coal, and gold and is rich in chromium ore, asbestos, nickel, vanadium, lithium, tin, and metals. The DRC is exceptionally endowed with mineral resources including copper, cadmium, petroleum, and diamonds. Overall, mining represents an important source of foreign exchange earnings, output formation and employment within the region. In 2000, it accounted for nearly 60% of the region's foreign exchange earnings equivalent to 10% of GDP and about five percent of formal employment. With regard to mining commodities' exports, SADC countries' shares of the international market are relatively import ant and vary between 10 to 45%.1 Contribution of manufacturing to GDP The contribution of manufacturing sector to GDP is still insignificant in many countries with the exception of South Africa and Mauritius. This situation reflects the number of constrai nts that the sector faces. The production costs are relatively high due to the prices of working and investment capital, high lending rates and high utility tariffs. Also, the shortage of skilled and qualified workers explains the weak competitiveness of many countries and the slow growth of the manufacturing sector. In particularly the land-locked countries, high transaction costs associated with transport and, often compounded by poor economic infrastructure, also explain the poor performance of the manufacturing sector. Table A.2.2: Share of Manufacturing Sector to GDP (In percent) Country 1992 1993 1994 1995 1996 1997 1998 1999 Angola 12.5 5.7 4.9 4.0 3.4 4.4 6.5 NS Botswana 4.0 4.9 4.5 4.9 5.0 4.9 4.8 NS Lesotho 12.5 14.6 13.8 15.2 15.3 15.7 17 16.6 Malawi 15.0 11.8 17.4 16.1 14.2 13.6 13.2 NS Mauritius 12.5 23.2 23.3 23.7 24.2 24.4 24.7 25.0 Mozambique 11.3 15.5 11.2 13.3 14.5 15.4 14.7 9.8 Namibia 7.4 13.2 12.5 12.4 10.1 14.2 NA 16.5 South Africa 25.0 23.5 23.4 24.3 23.7 23.9 23.7 18.2 Swaziland NS 27.4 27.6 27.8 25.8 25.9 NA NS Tanzania 8.1 7.5 7.4 7.2 7.4 6.9 NA 8.3 Zambia 36.0 26.4 24.7 9.9 11.8 11.8 12 10.7 Zimbabwe 20.1 21.0 19.1 19.2 15.7 15.4 15.2 NS Source: Official SADC Trade, Industry and Investment Review, 1997-2001. Note: NA: Data not Available; NS: Share insignificant between 0 and ±0.5 Contribution of tourism to GDP The southern African region is endowed with abundant natural resources, cultural diversity, and eco -tourism that make it potentially attractive destination for tourists. The countries in the sub-region have acknowledged that the promotion of travel and tourism (T&T) could be an important contributor to economic growth, job creation, export earnings and FDI. According to the World Tourism Organization (WTO), the sub-region was one of the most popular international tourist destinations in Sub-Saharan Africa in 1999. Three countries - Zambia, Zimbabwe, and SA - were among the four top African countries that recorded the highest increase in tourist arrivals in 19 99.1 Tourism arrivals increased by 26% in Zambia and 17% in Zimbabwe while SA's record was relatively smaller, 3.2%. 162 Travel and tourism is a major contributor to economic development in most countries in the sub-region. It is estimated that the sub-region's T&T Industry contributed to nearly 4% of GDP in 1999. It accounted for nearly one-third of Mauritius's aggregate GDP and one-fifth of that of Namibia and Seychelles. The sub-region's capital investment in T&T amounted to US$3.5 billion in 1999, almost 11% of total investment. This sector is also an important source of employment. A World Travel and Tourism Council (WTTC) report estimated that employment in the sub-region's tourism sector was nearly 1.3 million directly and about 3.4 million indirectly in 1999. The contribution of this sector to job creation is particularly appreciable in Mozambique, South Africa, and Tanzania (See Table below). According to the WTTC, in SA, one job is created for every eight visitors in the T&T Economy, and one job for every 20 visitors in the T&T Industry. However, SA's tourism potential is far for being fully exploited. Tourism employment as a percentage of total employment is relatively low and accounted for 6% in the T&T Economy in 1999. In addition, expansion of the tourism industry is limited by the capacity of the enterprises, which provide transport, accommodation, entertainment and travel services. Most of them are small and medium enterprises staffed by less than 50 employees. In absolute terms, SA's capital investment was the highest in the SADC region and equaled US$2.4 billion, followed by Mauritius (US$0.2 billion) and Tanzania (US$0.2 billion). However, SA's capital investment in T&T was low and represented 12.1%t compared to that of Mauritius's 20.1%. Although the SA's expenditure on T&T in 1999- US$137.2 million-was the highest in the region, the contribution of this sector to GDP was relatively low, less than 9%. Table A.2.3: Travel and Tourism Economy figures. 1999 Estimates T&T Economy GDP T&T Economy Employment in T&T Capital investment in (US$ million) * as % of total GDP (`000) T&T (US$ million) Angola 352.5 5.2 127.5 62.9 Botswana 585.7 12.0 35.8 113.3 DRC 545.4 6.2 389.4 75.6 Lesotho 36.6 4.9 28.2 40.4 Malawi 117.8 3.9 96.6 15.6 Mauritius 1200.3 27.9 55.5 266.9 Mozambique 217.3 9.4 677.8 81.3 Namibia 560.8 20.9 58.3 65.4 Seychelles 232.2 20.7 36.8 31.2 South Africa 9086.2 8.2 648.2 2431.7 Swaziland 133.7 8.8 19.4 27.0 Tanzania 738.2 11.4 817.7 195.6 Zambia 395.6 7.0 197.2 60.1 Zimbabwe 466.7 12.4 228.8 59.7 Total SADC 14 669.0 9.0 3417.2 3526.7 Source: SADC's T&T-Economic Driver for the 21st Century, WTTC, July 1999. Note: *Goods and services produced for visitors, etc., strongly dependent on T&T spending. SA receives most international tourists and is the main beneficiary international tourism receipts in the sub-region. In 1998, the World Tourism Organization ranked SA 25th out of the 40 most popular tourist destinations in the world and the only SSA country on the top 40 list. Table A.2.4: SADC Tourists arrivals and receipts -1998 International tourist arrivals (`000) International tourism receipts (US$ Average receipts per tourist (US$) millions) Angola 50 9 180 Botswana 740 185 250 DRC 32 2 63 Lesotho 115 20 174 Malawi 215 8 37 Mauritius 570 502 881 Mozambique NA NA NA Namibia 510 339 665 Seychelles 131 120 916 South Africa 5981 2 366 396 Swaziland 325 40 123 Tanzania 447 431 964 Zambia 382 90 236 Zimbabwe 1 600 246 154 Total SADC 11 098 4 358 393 Total Africa 24 903 9 551 384 Source: Tourism Market Trends, World Tourism Organization, 1999. Development of the tourism industry in the sub-region suffers from a number of constraints: First, transport costs are generally high and the quality of transport and telecommunications infrastructure is poor. This results in additional constraint to tourism performance. For example, protection of national airways inhibits competition and competitive price setting of airfares. Intra-regional flight connections manifest a hub-and- spoke pattern with Johannesburg International as the hub, adding to the cost of travelling in the sub-region. Second, cross-border movement is inhibited by the lack of a tourism univisa, adding to transaction costs for travellers both in time and money. Third, hazardous factors such as road accidents and diseases (malaria and HIV/AIDS) are raising risk perceptions of potential tourists. Fourth, political factors such as regional conflicts, crime, social unrest, urban terrorism, and wars are compounding these negative perceptions. 163 Table A.2.5: Trends in Economic Growth over the Last Three Decades First Second Eight Years of SADC Existence Decade pre- Decade pre- SADC SADC Countries Average Average Average 1992 1993 1994 1995 1996 1997 1998 1999 2000(b) over over 1980- over 1992- 1970-79 90 2000 SADC 3.2 2.2 2.2 -2.4 0.2 2.7 3.2 4.6 2.7 1.3 1.8 2.5 Angola NA 2.3 (a) 0.4 -5.1 -23.8 1.4 10.3 10.0 6.2 3.2 2.7 3.2 Botswana 15.5 10.3 4.3 3.0 2.0 3.6 5.1 6.9 4.0 3.5 4.5 5.9 Congo, Dem. 0.2 1.0 -1.8 -10.5 -13.5 -3.9 0.7 -0.9 -5.7 3.0 8.0 8.5 Rep. Lesotho 7.9 3.8 3.7 4.8 3.8 3.4 4.5 10.0 8.0 -5.0 2.5 2.5 Malawi 6.2 2.0 2.9 -7.3 9.7 -10.2 16.7 7.3 3.8 2.0 4.0 3.2 Mauritius 7.0 4.4 5.4 6.2 5.4 4.1 4.7 5.7 5.5 5.6 3.4 7.7 Mozambique NA 0.1(a) 5.7 -8.1 8.7 7.5 4.3 7.1 11.1 11.9 7.3 3.8 Namibia NA 1.2 (a) 3.2 7.1 -1.7 6.4 3.7 2.1 2.6 2.4 3.1 3.9 Seychelles 8.9 2.7 2.9 7.2 6.2 -0.8 -0.6 4.7 4.3 2.0 1.5 2.5 South Africa 3.3 2.0 1.8 -2.1 1.2 3.2 3.1 4.2 2.5 0.6 1.2 2.2 Swaziland 5.5 6.9 2.8 1.3 3.3 3.5 2.7 3.9 3.7 2.0 2.0 3.0 Tanzania NA NA 3.2 0.6 1.2 1.6 3.6 4.5 3.5 4.0 4.7 5.2 Zambia 1.5 1.2 0.8 -1.7 6.8 -8.7 -2.5 6.6 3.3 -1.9 2.4 4.0 Zimbabwe 3.8 5.3 1.1 -8.4 2.4 5.4 0.3 10.2 2.8 3.7 0.1 -5.5 Source: World Bank, SIMA, Regional Database and Author's Calculations. Note: Average over period 1981-90. Data for 2000 are estimates. Box A.2.3: Growth Performance of SADC Countries, 1995-2000 At the onset of the 1990s, economic activity deteriorated significantly in a number of SADC countries. Angola recorded a sharp decline of nearly 24% in real GDP growth in 1993, while the DRC entered into six consecutive years of economic downturn in which real GDP growth fell sharply by more than seven percent annual average throughout 1989 -94. Output growth shrunk drastically in Malawi in 1992 (-7.3%) following five consecutive years of economic growth. In 1994, real GDP plunged in Zambia (-8.7%) and contracted in the Seychelles (-0.8%). The continued rapid growth observed in Botswana at the end of 1980s and early 1990s, ceased in 1992-93, with real GDP growth averaging slightly more than two percent compared with seven percent in 1990 -91 The mid-1990s witnessed economic recovery in SADC. The pace of economic activity regained momentum, reflecting gains stemming from the implementation of stabilization programs combined with structural reforms in various areas, including the liberalization of trade and exchange systems; civil service and tax administration reforms; and privatization of state-owned enterprises. However, this economic upturn differs among countries and varies from year to year. In 1995 and 1996, Botswana and, to a lesser extent, South Africa experienced relatively rapid growth. Real GDP grew in both countries by an annual average of six percent and slightly higher than three percent, respectively. While the main sources of growth in Botswana were the dynamics of diamond output and the strong demand for diamonds in the mid-1990s, economic expansion in South Africa resulted from a combination of manufacturing sector performances and buoyant activity in the financial markets1. The electricity, water, and gas sectors also contributed to growth as these sectors benefited from rising demand in neighboring countries and the program of providing the less developed regions of the country with electricity and water. In 1998 and 1999, growth slowed as a result of a contraction in the manufacturing sector, the termination of the export incentive program, the consequences of the financial crisis in East Asia, and movements in the real effective exchange rate. Nevertheless, Botswana's growth continued its solid path, averaging four percent between 1997 and 1999. The main factors accounting for Botswana's record were the performance of finance, transport, and construction sectors, which recorded double-digit growth rates in 1998 ­99. Real domestic demand also grew reflecting an increase in private consumption. Public investment rose as a result of the implementation of development projects under the Eighth National Development Plan (NDP8). In 2000, economic activity remained strong in Botswana­where GDP grew at approximately six percent­ and recovered modestly in South Africa. Real GDP grew by 2.2% and is estimated to rise further between 3.5% and 4% in 2001 based on IMF Staff estimates. Malawi's economy recovered from a sharp fall of -10.2% in real growth in 1994, which stemmed from severe droughts. Real GDP expanded by almost 12% on average in 1995­96. Favorable weather conditions along with the liberalization in the agricultural sector, boosted agriculture production. Yet, growth subsequently lost its pace, expanding by only 3.2% in 2000. Like most of SADC's countries, growth rose in Zambia in 1996 by 6.6% compared with a cumulative drop of -5.7% on average in the two previous years. This economic turnaround was stimulated by favorable weather conditions that increased agriculture production during 1995 and 1996. Particularly, the production of maize, Zambia's major staple food, almost doubled. The Production of other crops, including sunflower seeds, seed cotton, and soybeans, rose by more than 100% . The Mining sector was also a source of growth, 1 In Botswana, diamond production averaged about 16 million carats during 1990-94 and increased to 17 million during 1995-96. Following the ORAPA 2000 project that was expected to increase mining output to about 26 million carats by the year 2000, demand for diamonds rose significantly. 164 increasing by 12%. It featured copper and cobalt production that rose by two percent and 70%, respectively. Other sectors that added to economic growth were wholesale and retail trade (13%) and restaurant and hotels (18%). Growth slowed, halving in 1997 (to 3.3%) and declining further in 1998 (by about two percent). However, in 2000, real GDP expanded by four percent above the population growth rate. Mauritius, Mozambique, Swaziland and Tanzania have recorded a long­lasting period of growth. Particularly, Mauritius's GDP has been growing solidly since 1981. Apart from 1983 and 1999, real GDP growth has regularly exceeded 4%, an average greater than the population growth. In 2000, real GDP is estimated to hav e grown by more than seven percent, a level comparable to many of the fastest- growing Asian countries. Since 1993, real GDP growth has been strong in Mozambique increasing by almost six percent on average during the period 1992 -2000 and more than nine percent in the period 1996 -99. However, economic performance remains fragile and exposed to adverse external shocks. In 2000, economic growth fell drastically to 3.8% as a result of the devastating floods that hit the southern and central regions of the country in February and March of 2000. Agricultural production as well as small manufacturing and services were most affected by the floods. Swaziland has also enjoyed a long path of growth since 1980. However, since 1991, growth has been modest ranging between two to three percent on average. Tanzania has moved from its disappointing growth rates of the early 1990s to remarkable performances in the mid-1990s. This situation particularly reflects the improvement of the macroeconomic stance since 1995. Indeed, the newly appointed government has reinforced macroeconomic and structural adjustment policies, restraining fiscal position and reforming tax administration in order to increase revenue. Agriculture and manufacturing production rose in response to these reforms. In 1998 -2000, real GDP grew at an annual average of more than four percent, exceeding the population growth rate estimated at less than three percent. Lesotho, Malawi, Namibia and the Seychelles also experienced increases in real GDP throughout the 1990s. However, their records remain fragile and subject to weather conditions and terms of trade fluctuations. In the specific case of the Seychelles, real growth slowed in the late 1990s, stemming from the contraction in the tourism activity and its spillover effects through the rest of the economy. Angola enjoyed strong growth in the mid-1990s with real GDP growth increasing on average by 10% in 1995 -96 from a low level in previous years. Yet economic growth fell drastically to 2.7% in 1999 as a result of the resumption of civil war in late 1998. Economic activity in the non-oil sector was particularly affected by the instability of the business environment. However, in 2000 growth recovered slightly. Zimbabwe is the only SADC member state to record negative growth in 2000, reflecting mainly the devastating effects of Cyclone Elaine on crops and infrastructure as well as the economic impact of the current political situation. Attachment 2b.2 SADC Countries: Fiscal Performance Table A.2.6: Trends in Budget Deficit/Surplus (including & excluding all grants (a), Annual Average in % of GDP) Pre-SADC During Eight Years of SADC Existence SADC Existence Countries Average Average Average 1992 1993 1994 1995 1996 1997 1998 1999 2000(f) over over over 1996- 1985-90 1991-95 99 Angola -13.7 -29.4 -15.8 -56.9 -21.7 -20.1 -26.6 -20.4 12.4 -13.9 -18.1 13.0 -13.7 -29.4 -15.8 -56.9 -21.7 -20.1 -26.6 -15.8 -17.9 -15.1 -20.4 12.4 Botswana 13.8 6.5 0.9 9.5 8.7 3.1 1.8 6.4 3.8 4.0 2.6 2.0 12.0 5.5 0.7 8.5 7.1 2.2 1.5 6.0 3.7 -4.1 -2.7 2.0 DRC NA NA -8.0 NA NA NA NA NA NA -9.2 -6.8 -5.1 NA NA -10.0 NA NA NA NA NA NA -11.1 -9.0 -5.7 Lesotho -5.2 3.3 1.0 2.5 4.9 5.3 4.5 3.5 3.4 0.5 -3.5 -8.4 -11.6 -2.4 -2.5 -3.6 -0.3 0.6 0.1 -0.8 -0.8 -2.8 -5.8 -11.0 Malawi -5.7 -9.8 -6.2 -11.1 -6.9 -20.0 -7.6 -8.8 -9.5 -2.3 -4.0 -4.2 -9.5 -15.5 -12.2 -13.9 -9.7 -31.6 -16.1 -13.6 -13.3 -10.7 -11.1 -10.1 Mauritius -2.4 -3.0 -4.6 -2.3 -2.2 -3.0 -5.5 -7.4 -5.7 -3.1 -2.2 -1.6 -3.1 -3.2 -4.8 -2.4 -2.4 -3.3 -5.8 -7.6 -5.9 -3.2 -2.5 -1.9 Mozambique -7.7 -3.6 -2.3 -2.7 -3.6 -5.3 -3.2 -2.9 -2.5 -2.4 -1.5 -6.0 -13.8 -15.7 -11.3 -16.5 -15.5 -19.2 -13.0 -9.9 -11.7 -10.6 -12.9 -11.8 Namibia NA NA -4.3 NA NA NA NA -5.9 -3.9 -3.7 -3.8 -3.7 NA NA -4.6 NA NA NA NA -6.2 -4.2 -3.9 -4.2 -4.1 Seychelles NA -11.0 -15.9 -5.8 -11.4 -16.5 -16.1 -10.7 -13.4 -25.0 -14.4 -8.4 NA -10.4 -16.4 -7.1 -13.0 -17.2 -16.7 -11.3 -13.8 -25.5 -15.0 -9.3 South Africa -4.1 -6.3 -4.9 -7.4 -8.9 -6.2 -5.2 -5.4 -4.5 -5.1 -4.7 -3.7 -4.2 -6.5 -4.9 -7.8 -9.0 -6.2 -5.2 -5.4 -4.5 -5.1 -4.7 -3.7 Swaziland NA -0.9 -2.4 -0.1 -3.6 -3.6 -2.5 -2.4 -2.6 -2.4 -2.1 -1.9 NA -1.9 -3.2 -1.5 -4.7 -4.6 -3.3 -3.2 -3.4 -3.3 -3.0 -1.9 Tanzania -2.6 0.5 0.1 3.2 -1.4 1.6 -3.4 -1.9 1.8 0.2 0.4 -1.6 -5.7 -2.1 -2.8 0.8 -4.8 -1.7 -5.2 -3.9 -1.4 -2.6 -3.3 -5.4 Zambia -10.4 -5.2 -1.5 -2.5 -5.6 -6.5 -4.3 -0.5 -0.2 -3.2 -2.0 -3.8 -12.1 -12.7 -7.9 -12.6 -13.6 -11.8 -9.5 -6.6 -5.3 -9.8 -10.0 -13.1 Zimbabwe -7.7 -7.0 -6.8 -6.8 -6.1 -6.7 -10.1 -7.7 -7.5 -2.4 -9.4 -15.5 -8.7 -8.7 -8.0 -8.4 -8.1 -8.6 -11.9 -9.0 -8.5 -4.0 -10.4 -19.4 Source: World Bank, SIMA, Regional Database and Author's Calculations. Note: (a) First numbers represent fiscal deficit, including all grants while the second ones represent fiscal deficits, excluding all grants. 165 Table A.2.7: Government revenue (In % of GDP) Government revenue, incl. all grants as % of GDP Government revenues, excl. all grants as % of GDP (%) 1980 1990 2000 1980 1990 2000 SADC NA NA NA NA NA NA Angola NA 25.6 46.6 NA 25.6 46.0 Botswana NA 49.9 46.6 NA 48.5 46.5 DRC NA NA 16.8 NA NA 14.2 Lesotho NA 48.5 42.7 NA 37.4 40.1 Malawi 24.1 23.7 21.5 19.8 21.0 15.6 Mauritius NA 23.1 22.5 NA 22.8 22.2 Mozambique 15.3 22.5 23.4 13.5 12.8 14.4 Namibia 0 33.1 36.7 0 31.9 36.3 Seychelles NA 49.6 53.3 NA 47.7 52.4 South Africa 6.0 26.3 27.5 6.0 26.1 27.5 Swaziland NA .. 29.8 NA NA 29.0 Tanzania NA 18.1 14.4 NA 14.7 10.6 Zambia NA 24.6 28.1 NA 20.3 18.8 Zimbabwe 11.8 27.8 35.3 11.1 27.0 31.4 Attachment 2b.3 Inflation, interest rates and exchange rates Table A.2.8: Trends in Inflation (Changes in CPI, Annual Average in %), 1970-2000 First Second Eight Years of SADC Existence decade decade pre- pre- SADC SADC Countries Average Average Average 1992 1993 1994 1995 1996 1997 1998 1999 2000 1970-80 1981-90 1992- (f) 2000 SADC 16.3 10.7 14.3 21.2 18.2 17.7 17.2 15.7 15.4 10.0 6.5 8.0 Angola NA NA 646.4 495.8 1837.9 366.3 2672.0 4146.0 111.0 107.0 248.0 312.0 Botswana 11.9(a) 10.6 11.7 16.1 11.4 10.6 10.5 10.1 11.7 13.2 10.3 3.6 DRC. 37.8 58.6 689.5 4129.2 1986.9 23773.1 541.9 658.8 13.7 15.3 12.1 8.3 Lesotho 14.4(b) 13.4 9.8 17.2 13.1 8.2 9.3 9.3 7.3 7.3 7.3 8.3 Malawi NA 16.1 33.5 22.7 19.7 34.7 83.3 37.6 9.1 27.4 45.3 26.4 Mauritius 13.2 8.2 7.0 4.7 10.5 7.3 6.0 6.5 6.9 4.9 8.7 6.0 Mozambique NA 41.5 30.3 45.1 42.3 63.1 54.4 44.6 6.4 0.6 3.1 12.3 Namibia NA 13.0 9.7 17.7 8.6 10.8 10.0 8.0 8.8 6.2 7.6 6.5 Seychelles 16.4(c) 3.0 0.6 3.2 1.3 1.8 -0.3 -1.1 0.6 -3.2 2.7 9.5 SA 10.0 14.6 8.6 13.9 9.7 9.0 8.6 7.4 8.6 6.9 5.2 5.4 Swaziland 10.7 13.4 9.4 8.2 11.2 13.8 12.3 6.4 7.2 8.5 8.0 7.3 Tanzania 12.4 30.6 22.2 21.8 25.3 33.1 29.8 28.0 21.0 12.8 7.9 5.6 Zambia 13.4(d) 45.4 61.1 169.0 188.1 53.6 34.9 43.1 24.5 24.4 26.8 25.9 Zimbabwe NA 14.1(e) 29.8 42.1 27.6 22.2 22.6 21.4 18.8 31.8 56.2 80.3 Source: World Bank, SIMA, Regional Database and Author's Calculations. Note: Average over period 1975-80; (b) Average over period 1976-80; (c) Average over period 1971-80; (d) Average over period 1974-80; (e) Average over period 1982-90. (f)Data for 2000 are estimates. 166 Table A.2.9: Three-Month Real Interest Rates, 1995-20001 (Treasury bill rates) Countries 1995 1996 1997 1998 1999 2000 Average 1995- 2000 Angola NA NA NA NA NA NA NA Botswana NA NA NA NA NA NA NA DRC NA NA NA NA NA NA NA Lesotho 2.5 4.8 6.3 7.7 3.8 3.1 4.7 Malawi -36.8 -6.9 9.2 3.2 -1.9 9.9 -3.9 Mauritius 4.1 3.5 1.9 3.3 3.2 6.6 3.8 Mozambique NA NA NA NA NA 4.3 4.3 Namibia 3.9 7.2 6.9 11.0 4.7 5.8 6.6 Seychelles 12.4 12.6 9.9 5.3 -1.8 -2.2 6.0 South Africa 4.8 7.7 6.6 9.7 7.6 4.7 6.9 Swaziland -1.4 7.2 6.4 5.6 5.3 -1.6 3.6 Tanzania 13.9 -5.8 -6.5 -0.7 3.8 3.6 1.4 Zambia 4.9 9.7 5.1 0.5 9.4 5.3 5.8 Zimbabwe 5.4 3.1 3.2 0.5 -7.7 9.1 2.3 Source: WETA (August 15, 2001) Note: 1 Three-month interest rate less twelve-month CPI inflation rate. Table A.2.10: Real Effective Exchange Rates Real Effective Exchange Rate Index (1990=100) 1980 1991 2000 SADC 124 98 109.8 Angola NA NA NA Botswana 117 98 99 DRC 332 96 NA Lesotho 118 66 74 Malawi 111 104 129 Mauritius NA NA NA Mozambique 118 85 NA Namibia 129 98 83 Seychelles 91 99 122 South Africa 134 104 88 Swaziland NA NA NA Tanzania NA 99 121 Zambia 135 93 138 Zimbabwe 165 66 NA Attachment 2b.4 SADC Countries: Financial Systems Box A.2.4: Some Aspects of the Financial Systems in SADC Countries Angola Following Angola's independence in 1975, foreign banks were nationalized. In 1991 the financial system was reformed. The Banco Nacional de Angola (BNA, which functioned as the central bank and a commercial bank) was restricted to central banking activities. The Banco Popular de Angola (BPA) remained in state hands, but changed its name to the Banco de Poupanco e Credito (BPC). A new state bank, the Banco de Comércio e Industria (BCI), also came into being. The Caixa de Crédito Agropecuaria e Pescas (CAP) was formed to support agricultural activities, but it developed into a slush fund with a large portfolio of bad loans. Insurance was limited to one state- owned company, the Empresa Nacional de Seguros e Resseguros de Angola (Ensa), formed in 1978. Local and foreign private banks also began operating in Angola after the 1991 reforms. In 2000 there were six commercial banks of which two were state-owned. Banking system reforms are underway; however, the money and capital markets remain undeveloped with informal money markets filling the vacuum. Botswana Botswana has a small but efficient banking sector. The central bank (Bank of Botswana) is conducting the traditional central bank role in an autonomous and efficient manner. Botswana has four commercial banks carrying out normal retail and commercial banking activities, leasing, property finance and merchant banking. The capital market in Botswana is not broadly based, having a small equity market and no debt market. The stock exchange, established in 1990 (with 9 listed companies and market capitalization of US$261 million), had 15 listed companies with a market capitalization of US$1 042 million in 2000, but its turnover ratio, measured in terms of value traded in dollar terms as a percentage of average market capitalization, has remained below 10%. The capital market is quite free. There is no capital-gains tax on the sale of publicly traded company shares, and dividends are not taxable. Foreign investors can trade freely in the stock market without bureaucratic controls. Botswana has two DFIs offering longer-term financing and specialized services targeted at specific sectors. DRC The financial sector in the DRC is underdeveloped and has functioned unreliably due tothe impact of hyperinflation and extreme currency depreciation on transactions. The commercial banks are mostly subsidiaries and associates of Western banks. The largest is the Banque 167 depreciation on transactions. The commercial banks are mostly subsidiaries and associates of Western banks. The largest is the Banque commerciale congolaise(formerly Banque commerciale zairoise), in which Societe Generale de Belgique has a 25% stake through its subsidiary Belgolaise. The 13 largest banks are grouped in the Association congolaise des banques. There is also a 40% state-owned investment bank, the Societe financiere de developpement (Sofide), which lends mainly to the manufacturing and agricultural sectors. With funding from the World Bank, the Banque Centrale du Congo (BCC) has undertaken an extensive audit of financial institutions in Kinshasa, which resulted in a decision to close or restructure insolvent operations. In an attempt to re-establish the credibility of checks, the government has passed a law that requires all government payments to be made by check. The BCC is benefiting from the SADC programs to strengthen the central banks' information technology system and to align the country's payments system with that of its neighbors. Lesotho The financial sector in Lesotho is limited. The Central Bank (created in 1982) acts as regulatory body and its functions include the implementation and control of monetary policy (including administering of exchange controls) as set out in the Banking Act and under the Multilateral Monetary Agreement (MMA) to which Lesotho subscribes, along with SA, Namibia and Swaziland. The rest of the formal financial sector in Lesotho consists of three commercial banks, namely Lesotho Bank, Standard Bank Lesotho Ltd and Nedbank Lesotho Ltd and insurance companies. The commercial banks have 16 branches, but have increased the number of agencies from 18 to 20. Apart from these financial institutions, the Lesotho National Development Corporation (LNDC) and the Co-operative Credit Unions, which operate under the Lesotho Credit Union League, also play an important role in providing specialized financing services. The Co-operative Credit Unions provide equity finance, financing for the acquisition of fixed assets and long-term loans. A review of the legal framework of the financial sector and the amendment of the Financial Institutions Act and the Central Bank of Lesotho Act commenced during 1997. A specialized bank, the Lesotho Agricultural Development Bank, was closed down in 1998. The Government will complete the financial restructuring of Lesotho Bank (which was government owned and experienced serious financial stress) with a view to privatization. Insurance services are provided by a number of brokers and South -African based insurance companies, with the strongest emphasis on life policies. The Lesotho National Insurance Company provides the widest range of services. The government divested half the shares in this company to private shareholders in 1995 and split the general and life assurance businesses into two separate subsidiaries. Malawi Malawi'sgovernment embarked on a program to liberalize its financial system in 1995-96. It aimed to move to market-determined interest rates, no direct controls over credit, and unrestricted access to domestic financing facilities for local and foreign investors. The Reserve Bank of Malawi (RMB) is relatively independent in setting monetary policy and issuing local currency. It also administers the Exchange Control Act and operates the fledgling market in government stock. The RBM has been struggling to oversee the financial sector. The Malawi Savings Bank (MSB) deteriorated to such an extent that the government provided financial support equal to 0.5% of GDP, strengthened its management and placed in under close prudential supervision. Malawi has six commercial banks, with the National Bank of Malawi and the Commercial Bank of Malawi operating countrywide. These banks offer all the conventional banking services including check accounts, registration of foreign capital with the Reserve Bank, short- and medium-term credit facilities, trade financing, export credit guarantees, foreign remittances and repatriation of capital. The capital market is in its infancy with 2 companies listed and only one stockbroker operating on the Malawi Stock Exchange. There are good prospects for further listings with the implementation of the privatization program. As recently as 1998, Malawi had still six DFIs, which are probably far too many for the size of its economy. Mauritius Mauritius has a highly sophisticated financial structure and has next to South Africa, perhaps the most developed financial system in SADC. There are a number of public and private commercial banks, both domestic and offshore, that extend short- and long-term credit to the industrial sector. Other financial institutions operating in Mauritius include insurance companies, mutual funds, pension funds, mortgage companies, leasing companies, investment companies and trusts, and the Stock Exchange of Mauritius The central bank, the Bank of Mauritius, was established in 1967. Among other functions, the Bank administers the Banking Act of 1988, which provides the legal framework for the domestic and offshore banking sectors, laying great emphasis on the central bank's supervisory responsibilities and provides for annual meetings between the Bank of Mauritius, commercial banks and their external auditors. The operations of moneychangers and foreign exchange dealers fall under the provisions of the Foreign Exchange Dealers Act of 1995. In 2000, the financial sector comprised ten commercial banks, ten offshore banks and seven other non-bank financial institutions authorized to transact deposit-taking business. The three largest commercial banks are the government-owned State Bank of Mauritius, Barclays Bank and the Mauritius Commercial Bank. The major banks operate a well-developed branch network. Offshore banking was launched in 1989. Other important financial institutions include the Development Bank of Mauritius, the Mauritius Commercial Bank Finance Corporation, the State Finance Corporation, the Mauritius Housing Corporation and the Post Office Savings Bank. The money market involves inter-bank transactions and the trading of short-term Government/BoM bills. The capital market revolves around the securities exchange, which is the only organized market for shares and alimited number of bonds. The Stock Exchange of Mauritius was established in Port Louis in 1989 with 13 listed companies and market capitalization valued at US$268 million. In 2000, there were 41 listed companies with a total market capitalization of US$1 485 million, but turnover remained below 10%. Mozambique The development of the financial sector in Mozambique was dealt a heavy blow when all private banks were nationalized in 1978. They were merged into two state institutions, the Banco de Mozambique (the central bank) and the Banco Popular de Desenvolvimento (BPD). During the 1980s and early 1990s the banking system operated virtually as an extension of the national budget. Most credit was directed to loss-making state enterprises, real interest rates were negative, savings dropped sharply and the banks accumulated large bad debts. The reform of the financial sector began in 1992. In a first phase foreign banks were granted permission to invest in Mozambique, interest rates were deregulated, and the commercial activities of the central bank were transferred to a new state institution Banco Comercial de Mozambique (BCM). The BPD was privatized in 1996 and the BCM in 1997. The reform efforts significantly boosted the scope of the Banco de Mozambiqu e to operate more independently and to expand its capacity to oversee the financial sector. The liberalization of the financial sector has attracted new entrants such that Mozambique has had 6/7 commercial banks, a credit union, a leasing company and an investment bank in 2000. The branch network has been expanded and banks have diversified their products and services. However, the informal money market that emerged in earlier mono-banking days is still being used extensively. An interbank money market was created in October 1997, but money and capital markets remain underdeveloped. In December 1991 legislation was approved which terminated the state monopoly of insurance and reinsurance activities. However, in 2000 there were no long-term insurers in Moz ambique and the legislation regarding the insurance sector has been in need of updating. A stock market, the Bolsa de Valores de Mozambique has commenced operation in October 1999, trading largely in treasury bills. Listing among the fair number of candidates has been constrained by only a few having adequate accounting standards and management to bring confidence to the newly established market. 168 Namibia The (central) Bank of Namibia was established in 1990 to take over functions previously performed by the South African Reserve Bank. The Central Bank, the Ministry of Finance and financial institutions are pursuing the development of new financial instruments and markets including parastatal bills, debentures and bonds, government treasury bills and negotiable certificates of deposit. The domestic money and forex markets are nascent but developing. Local inter-bank lending is limited due to the small size of the market with Namibian banks participating more in the SA inter-bank market. In 2000, Namibia had five commercial banks, two building societies, five insurance companies and nine public financial institutions, including four DFIs. Both the commercial banks and life insurance offices in Namibia were subsidiaries of South African organizations. All banks provide comprehensive domestic and international banking services. Short-term insurance and life insurance broking, estate planning and factoring are some of the ancillary services provided by banks. Several major SA companies have registered local entities in Namibia. The Namibian Stock Exchange (NSX) commenced operations in October 1992 with 3 listed companies and market capitalization valued at US$21 million. By 2000, it had 21 listed companies and a market capitalization of US$410 million, with a turnover ratio of less than 10%. The Stock Exchange has established an Unlisted Securities Market Authority to manage a separate trading system for shares of companies that do not meet the stringent requirements for a full board listing on the stock exchange. Seychelles The financial sector of Seychelles functions well, but markets are thin due to the small size of the economy. The Central Bank of Seychelles (CBS) is regarded as fairly efficient administratively, but it does not function independently from the government. Four international commercial banks operate in Seychelles: Barclays Bank (UK), Banque Francaise Commerciale-Océan Indien (France), Bank of Baroda (India) and Habib Bank (Pakistan). In addition, three state-owned national banks are also active: the Development Bank of Seychelles (which extends soft loans to companies in priority development areas with majority Seychelles shareholdings), the Seychelles International Mercantile Banking Corporation and the Seychelles Savings Bank. South Africa SA has a highly sophisticated financial system. The Reserve Bank of South Africa was established in 1920, and functions autonomously in the conduct of its main responsibility of formulating and implementing monetary policy to attain its mission. In 2000 there were 44 registered banks and mutual banks, 15 local bank branches of foreign banks and 61 foreign banks had approved local representative offices in SA. Other financial institutions include finance companies, participation mortgage bonds, unit trusts, insurance companies, pension funds, etc. The Johannesburg Stock Exchange (JSE) was established in 1887, and in 2000 it represented 649 listed companies with a market capitalization value of US$213 billion and a turnover ratio of 34%. The JSE accounted for 89% of the African regional market capitalization in 2000. SA has also a formalized exchange for futures and options contracts, SAFEX, and an exchange for debt instruments (gilts and semi-gilts), BESA ­ the Bond Exchange of SA. These financi al structures are also complemented by a development finance system of 5 sectorally delineated DFIs, the largest of which are the Industrial Development Corporation and the Development Bank of Southern Africa, both of which operate also in the rest of Afri ca. Swaziland 2 The Central Bank of Swaziland was established as the country's monetary authority in April 1974 and took on other central banking functions in 1979. The present mandate of the Bank includes: issuance, service and redemption of domestic debt; external debt management; administration of exchange control, and formulation/implementation of monetary policy. The Central Bank also operates three lending schemes, namely the Export Credit Guarantee Scheme, the Small Scale Enterprise Loan Guarantee Scheme and the Public Enterprise Loan Guarantee Fund. There are four commercial banks and a building society operating in Swaziland. Instruments used in the money market include: stocks and treasury bills, bank acceptances and negotiable certificates of deposits. Swaziland has a well-developed commercial banking system that is served by SA's Nedbank, Standard Bank, First National Bank and the parastatal Swaziland Development and Savings Bank. The Swaziland Building Society provides long-term mortgage lending to all income groups. The Swaziland Royal Insurance Corporation, a `private' enterprise of which 41% is government -owned, has an industry monopoly. The Insurance and Pensions Bill of 1993 has still not been passed, owing to a lack of political will,but if passed it would increase competition and efficiency. Several SA companies have indicated that they will enter the market if it is liberalized. The Swaziland Stock Exchange was opened in 1990 but ten years on only 17 companies with a market capitalization value of US$95 million are listed and trading levels remain small. According the Governor of the CBS, a very small proportion of the market capitalization can be ascribed to investments by indigenous small savers. Swaziland has two DFIs: and two other institutions involved in development finance, one of which is the Tibiyo Taka Ngwane, a national (royal) trust. Tanzania The Bank of Tanzania was established in 1966 with its objective being revamped in the new Bank of Tanzania Act of 1995 to maintai n price stability with balanced, sustainable economic growth. In 1991, the financial sector was opened to private and foreign capital and forex and T-bill markets were liberalized. Steps are being taken to encourage the development of interbank and secondary markets for treasury bills and other securities. One of the aims is to provide liquidity for Tanzania's nascent capital market. The BoT has started to use repurchase transactions in government paper for monetary policy purposes and has introduced a sp ecial facility for seasonal lending to banks against collateral. The market, guided by the central bank's discount rate, determines interest rates. The BoT's regulatory and supervisory capabilities are being enhanced to meet the challenges created by the reforms and the expanding number of financial institutions. An electronic payments system was scheduled to be established in 2000/01. Sixteen foreign banks and nine non -bank financial institutions have been licensed to do business in Tanzania. More than 80 bureaux de change are in operation. The government decided in 1997 to privatize the state-owned National Bank of Commerce (NBC), which accounted for over half the banking deposits. In September of that year the Bank was divided into NBC (1997) and the National Microfinance Bank (NMB) and preparations began to privatize the two new institutions. A 70% stake was sold to ABSA, a SA commercial bank, in 2000, while the NMB was also placed under private management. The 2 It should be noted that Swaziland's close association with South Africa in SACU and the CMA, limits autonomy in trade, monetary and fiscal policy. Interest rates in Swaziland cannot diverge significantly from those prevailing in SA because of the free movement of funds in the CMA, while the lilangeni remains at parity with the SA rand. Swazi banks have indeed placed their surplus funds in SA, in pursuit of higher returns. Although the renegotiated monetary agreement of 1986 gave Swaziland the legal right to break the parity condition, this is unlikely to occur. The Governor of the CBS, in his 2000 Annual Policy Statement noted that the currency relation with the rand has benefited Swaziland and expressed the opinion that this relation should be sustained. 169 privatization and restructuring of state-owned financial institutions also included that of the Tanzania Investment Bank, the Tanzania Postal Bank and the People's Bank of Zanzibar .A liberalized insurance regime took effect in May 1998 and a number of private insurance companies were licensed. Four DFIs have been operating in Tanzania, and a policy framework for microfinance regulation was submitted for government approval in 2000. A Capital Market Authority was established in 1994 to regulate the Dar es Salaam Stock Exchange, which has become operational in 1998. For this purpose, five broking companies were licensed in 1997. Two companies were listed by 1999, with their market capitalization value amounting to US$181 million. Financial sector reform is continuing, with the aim of fosterin g competition and efficiency in the supply of financial services, narrowing the spread between lending and deposit interest rates, and strengthening the mobilization and allocation of financial resources. Zambia Since independence, the Government of Zambia has played an active role in the banking sector, but under the pressures of structural adjustment, Zambia has been liberalizing its financial system. The Banking and Financial Services Act of 1994 was designed to provide an appropriate regulatory framework for the financial system. Under that Act the Bank of Zambia continues to exercise supervisory authority over the banking system. Its main responsibility is to protect the value of the country's currency and reducing inflation to single digit levels. Monetary control is exercised through indirect instruments such as open market operations. In 2000, Zambia had about 16 commercial banks both local and international. Many of these banks offer merchant and investment banking services. The Inter-market Discount House (IDHZ) of Zambia was established to help develop a local money market. IFC has made an equity investment of US$500 000 for a 20% stake in IDHZ. The number of building societies has been growing, catering for small depositors and concentrating on long-term mortgage loans. The emergence of a formal capital market in Zambia has had a positive impact on the economic and financial sectors. The Lusaka Stock Exchange (LuSE) began operations in February 1994 and by 2000 it had 4 listed companies with a market capitalization value of US$291 million. In addition to these developments, Zambia Enterprise Financing (ZEF) has been established to channel financial resources from the World Bank to the private sector through the domestic banking system. Finance Bank Zambia, the largest local private bank, has obtained a loan of US$6.5 million from the IFC for the same purpose. A venture capital fund has been set up with an initial capital base of US$15 million provided by a parastatal, the CDC and a number of European banks. One DFI, the Development Bank of Zambia (DBZ), has been re-organized as part of the financial sector restructuring program. Zimbabwe In Zimbabwe, the Reserve Bank (RZB) till recently enjoyed a large measure of autonomy in setting monetary and exchange rate policy with the aim of maintaining the internal and external value of the currency. On the back of high inflation and the collapse of the United Merchant Bank in 1998, the RZB introduced a number of changes for the banking sector and to remove some of the rigidities in the market brought about by the relatively fixed rediscount rate. They were to create a situation in which the market, instead of decisions by the central bank, would determine the cost of accommodation. Those regarding the money market included: the replacement of the rediscount rate and the overnight rate with a Reserve Bank rate, to enable the central bank to influence short-term interest rates, depending on market conditions; the introduction of anticipatory repurchase agreements to encourage banks to manage liquidity effectively; the replacement of end-of-week deposit figures as a basis for determining the 25% statutory reserve amount with a method that uses a weekly average liability position; and the introduction of a Treasury bill issue program of one-week periods to avoid untimely issues - the amount on offer to be determined by government's short -term funding requirements. As far as the banking sector was concerned, statutory deposits for commercial and merchant banks at the Reserve Bank of Zimbabwe were increased; any new entrants into the banking sector would have had to find twice as much capital than before to be considered for a banking license, while reporting procedures were tightened. In 2000, Zimbabwe had a relatively sophisticated and rapidly growing financial sector comprising commercial and merchant banks, discount houses, building societies, accepting houses, a Post Office Savings Bank, insurance companies, pension funds, registered representative offices of foreign banks, a Credit Insurance Corporation which underwrote political and commercial risk, and three DFIs. Most restrictions on the sector were removed and banking regulations had been reviewed to make them more responsive to a market-ledeconomy. The Zimbabwe Stock Exchange (ZSE) was established in 1974 and had 69 listed companies with a market capitalization value of US$ 2 751 million in 2000. The ZSE is open to foreign investors, within certain limitations. Attachment 2b.5 Eastern and Southern African Countries: Foreign Debt, External accounts and Restrictions Table A.2.11: Current Account Position (In % of GDP) Pre-SADC Eight Years of SADC Existence Countries Average over Average over 1992 1993 1994 1995 1996 1997 1998 1999 2000(b) 1980-90 1992-99 Angola -1.9 (a) -34.2 -24.9 -26.2 -29.0 -40.9 -6.2 -19.7 -66.0 -60.8 NA Botswana 1.7 6.6 5.7 11.3 5.7 6.9 13.6 11.3 2.9 -4.8 -6.3 DRC -5.7 -8.5 -10.6 -6.3 -8.4 -8.5 -6.8 -12.4 -9.4 -6.0 NA Lesotho -37.1 -22.8 -33.3 -30.4 -17.4 -21.4 -20.7 -19.0 -20.2 -20.3 -18.9 Malawi -11.0 -15.9 -21.1 -16.8 -23.8 -12.8 -11.4 -12.7 -17.3 -11.5 -15.6 Mauritius -3.9 -1.7 -0.2 -3.2 -6.6 -0.4 1.2 -1.5 0.9 -4.1 -0.8 Mozambique -21.5 -31.5 -41.7 -42.9 -41.9 -30.7 -23.7 -18.3 -20.3 -32.3 NA Namibia 1.7 3.7 1.8 4.1 2.8 5.2 3.6 2.7 5.3 4.3 1.7 Seychelles -5.2 -10.7 -1.8 -9.2 -4.5 -9.0 -11.1 -12.9 -18.4 -19.0 -23.3 SA 1.1 -0.4 1.5 1.2 0.1 -1.5 -1.3 -1.6 -1.6 -0.4 -0.7 Swaziland -3.6 1.3 0.1 -6.1 3.3 2.2 -2.3 -3.4 20.9 -4.5 -2.9 Tanzania -13.3 -19.0 -24.2 -27.2 -24.7 -20.4 -14.8 -11.1 -14.5 -14.8 NA Zambia -14.8 -16.5 -25.9 -15.5 -12.8 -14.4 -13.9 -13.7 -19.0 -16.7 -17.1 Zimbabwe -3.6 -5.7 -13.0 -4.9 -4.8 -5.4 -2.2 -10.0 -5.6 0.5 -2.1 170 Source: World Bank, SIMA, Regional Database and Author's Calculations. Note: (a) 1985-90. (b) Estimates. Table A.2.12: Total External Debt to GDP Ratio (%) Pre-SADC Eight Years of SADC Existence Countries Average over Average over 1992-2000 1992 1993 1994 1995 1996 1997 1998 1999 2000(b) 1980-90 Angola 69.4(1) 173.3 174.2 200.3 275.2 219.4 138.6 127.9 174.0 127.7 121.9 Botswana 20.3 13.2 14.8 15.8 15.6 14.4 12.5 11.1 10.6 10.8 13.3 DRC. 75.0 175.5 133.8 125.7 172.3 209.1 218.8 202.3 189.3 172.3 155.5 Lesotho 45.3 71.7 59.8 66.1 74.0 72.6 71.3 64.5 78.8 81.5 76.6 Malawi 85.4 124.5 95.0 88.2 171.3 157.0 95.2 88.0 140.7 143.3 142.1 Mauritius 46.5 47.6 32.9 31.5 39.5 44.2 42.3 60.6 60.9 56.4 60.5 Mozambique 94.0(2) 238.3 262.4 247.8 320.8 311.8 261.2 217.4 212.7 152.6 157.7 Namibia NA 5.6(3) NA NA NA NA NA NA 4.0 5.8 6.8 Seychelles 48.7 33.4 37.8 33.4 35.4 31.3 29.2 27.7 34.9 30.9 40.1 South Africa NA 18.2(4) NA NA 16.0 16.8 18.1 17.0 18.4 19.0 22.4 Swaziland 43.3 24.5 22.9 21.0 20.7 18.5 18.1 28.0 20.5 35.7 35.0 Tanzania 132.2 116.6 145.1 159.5 160.4 140.9 113.3 92.8 88.8 72.9 75.7 Zambia 172.7 202.5 210.8 198.1 203.3 200.3 215.7 170.1 211.9 213.2 198.7 Zimbabwe 31.3 66.0 60.1 65.3 65.6 70.3 57.6 56.7 69.5 81.4 67.3 Source: World Bank, SIMA, Regional Database and Author's Calculations. Note: (b): 2000 data are estimates. (1): period 1985-90; (2): period 1981-90; (3): period 1998-2000; (4): period 1994-2000. Table A.2.13: Total External Debt to Export Ratio (%) Pre-SADC Eight Years of SADC Existence Countries Average Average 1992 1993 1994 1995 1996 1997 1998 1999 2000(b) over over 1992- 1980-90 2000 SADC 78.3 132.5 101.5 106.3 154.2 144.1 136.2 130.0 147.0 138.8 134.5 Angola 155.3(1) 244.5 247.3 342.5 342.7 286.9 186.3 183.1 291.3 193.1 127.3 Botswana 29.6 24.9 24.7 26.7 30.1 24.2 21.1 19.6 20.1 28.1 29.3 DRC 315.8 775.3 794.7 871.3 933.2 748.8 716.1 846.2 792.7 683.4 591.5 Lesotho 26.3 94.6 44.9 53.2 71.2 107.4 105.3 93.5 109.5 132.2 134.1 Malawi 352.3 477.8 403.2 537.1 569.1 525.7 440.9 355.2 465.5 453.9 549.7 Mauritius 83.7 71.4 50.5 48.7 63.4 71.8 65.1 90.6 81.0 81.3 90.0 Mozambique 1071.0(2) 1363.7 1417.2 1402.2 1774.0 1600.5 1400.3 1334.6 1440.8 1012.7 891.0 Namibia NA 9.1(3) NA NA NA NA NA NA 6.6 9.6 11.0 Seychelles 74.2 52.7 66.7 60.2 67.5 57.3 45.8 40.2 48.5 43.1 44.9 South Africa NA 71.1(4) NA NA NA 69.8 70.8 71.6 66.6 69.2 71.7 Swaziland 52.0 22.7 23.8 20.5 19.4 18.4 17.8 27.4 21.0 29.3 26.4 Tanzania 1243.0 745.5 1202.6 1100.3 846.5 670.8 630.4 542.8 667.5 526.4 521.8 Zambia 454.9 614.0 552.6 589.1 571.6 519.6 621.0 494.0 716.6 771.2 690.4 Zimbabwe 186.5 187.4 218.3 213.1 189.3 181.5 158.4 157.7 182.1 169.4 216.8 Source: World Bank SIMA Database 171 Table A.2.14: Southern and Eastern Africa - External Financial Liberalization Indicators Controls of current account transfers Foreign exchange accounts permitted Controls on capital Accounts in domestic Export proceeds On trade related On investment related and money market Controls on liquidation currency convertible into repatriation Countries payments payments instruments of direct investments To residents To non residents foreign currency requirements SADC Countries Angola Yes Yes Yes Prior approval is needed Yes Yes No Yes from the MoF Botswana Yes Yes, within quantitative No Yes Yes No All exchange limits controls abolished on Feb. 99 Burundi All transfers above Joint-stocks companies may Capital transfers abroad Transfers of foreign Yes Yes yes Since Nov, 99, only 5,000$ require transfer 100% of the return by residents require capital on which a exports proceeds of approval of foreign capital and of the individual authorization repatriation guarantee coffee, cotton and shares allocated to foreign has been granted do not tea. directors after payment of require individual taxes. Transfer of rental authorization income is permitted. Comoros Yes Repatriation of dividends Yes, except capital n.a. Yes, with previous Yes, with previous No Yes and other earnings from flows between Comoros approval approval non-resident investments is and France, Monaco, authorized and guaranteed. WAEMU and CAEMC DRC Yes Yes Yes Yes Yes Yes, but since June Yes Yes 1999, these accounts cannot be in debit position Djibouti No No No No Yes Yes Yes No Egypt No No No No Yes Yes Balances may be converted No through the foreign exchange market Eritrea Since January 1, 2000, yes Yes No, for investments Yes Yes Yes Yes all restrictions on certified under the payments for current Investment account are abolished Proclamation Law Ethiopia Yes, approval is Yes Yes Yes, authorization is Exporters of Yes, with previous No Yes needed required services may open Central Bank's foreign exchange approval accounts with the Central Bank's approval Kenya No No Yes No Yes Yes Yes No Lesotho No No Yes No Yes Yes, with restrictions Approval is required Yes Madagascar No No Yes Yes Yes Yes No Yes Malawi No with some limits No, provided the investment Yes Repatriationof Yes Yes, previous No Yes is approved and registered investments permitted approval by the RBM when foreign capital 172 Controls of current account transfers Foreign exchange accounts permitted Controls on capital Accounts in domestic Export proceeds On trade related On investment related and money market Controls on liquidation currency convertible into repatriation Countries payments payments instruments of direct investments To residents To non residents foreign currency requirements by the RBM when foreign capital funded the original investment Mauritius No No Yes No Yes Yes Yes No COMESA Non-SADC Countries Mozambique Yes Yes Yes Yes Yes Yes No Yes Namibia No, up to established Yes Yes Yes Yes Yes, under certain No, Yes limits conditions and previous approval Rwanda Yes Yes Yes Yes Yes, but since Sept. No Yes 99, foreign currency withdrawals exceeding certain amounts require supporting documentation Seychelles No No No No Yes, but approval Yes N.a. Yes required South Africa No No, but prior approval is Yes No Yes Yes No Yes required for the payment of amortization of loans or depreciation of direct investments Sudan No, except insurance No, except for amortization No No Yes Yes, with restrictions Yes Yes for imports must of payments on foreign normally be taken out loans to residents, that with local companies require certification from the Central Bank Swaziland Yes, Approval required for Yes No Yes Yes, subject to Yes, subject to approval Yes, except for interest payments and approval exports to the remittances of projects and SACU countries dividends. Tanzania Yes No, provided that all tax Yes Yes Yes Yes No, only for UN-related Yes obligations have been met. organizations Uganda No No No No Yes Yes Yes No Zambia No, except for the No, except for the No No Yes Yes Yes No requirement that no requirement that no taxes are taxes are due due Zimbabwe Yes Yes Yes, inward capital No, with few exceptions Yes Yes No, except when Yes transfers not controlled, and for all cases purchasing travelers check but outward capital application must be for holiday travel payment transfers are. submitted. Sources: IMF, Annual Report on Exchange Arrangements & Restrictions, 2000 173 Attachment 2b.6 Eastern and Southern African Countries: Trade Restrictions and Restrictiveness Table A.2.15: Non-tariff Barriers to Imports in ESA Countries (As of December 1998) Quantitative restrictions Restrictive Licensing Import State Trading Other (a) Requirements Monopolies Bans Quotas For all For some products products COMESA Countries Angola No No Yes Yes No No Burundi No No No No No Yes Comoros No No No No Yes No Ethiopia No No No Yes Yes No Kenya No No No No No No Madagascar No No No No No No Malawi No No No No No No Mauritius No No No No Yes No Namibia No Yes No Yes Yes No Rwanda No No No No No No Seychelles No Yes Yes ... Yes No Swaziland No No No No Yes No Tanzania No No No No Yes No Uganda Yes No No No No No Zambia No No No No No No Zimbabwe No No No Yes Yes No Non-COMESA SADC Countries Botswana No Yes No Yes No No Lesotho No No No No No No Mozambique No No No No No Yes South Africa No No No No No Yes Sources: World Bank and IMF staff reports. (a) Includes countervailing duties, dumping, etc. Table A.2.16: Non-tariff barriers to Exports in ESA countries (As of December 1998) Quantitative restrictions Licensing (1) Duties Marketing Monopolies Bans Quotas COMESA Countries Angola No No Yes Yes No Burundi No No No Yes Yes Comoros No No No Yes No Ethiopia No No Yes Yes No Kenya No No Yes No Yes Madagascar No No No No No Malawi No No No No No Mauritius No No No No No Namibia No No(2) Yes(3) No Rwanda No No No Yes No Seychelles No No No No No Swaziland No No No Yes No Tanzania No No No No No Uganda Yes No No No No Zambia Yes No No No No Zimbabwe No Yes Yes No Yes Non-COMESA SADC Countries Botswana No No(2) Yes(3) No No Lesotho No No No (2) No No Mozambique No No No Yes No South Africa No No No Yes No Sources: World Bank and IMF staff reports. Notes: (1) Only for restrictive (and not for statistics) purposes. (2) Except for diamonds. (3) All exports, except to SACU member countries, require a license. Within SACU, textiles and meat products require a license. 174 Table A.2.17: Sachs -Warner Classification of Trade Policy, 1980s and 1990s. 1980s Overall Late 1990s Overall COMESA Countries Angola Open Closed Burundi Closed Closed Comoros ... Closed Congo Dem. Rep. Closed Open Ethiopia Closed Open Kenya Closed Open Madagascar ... Open Malawi Closed Open Mauritius Open Open Namibia ... Open Rwanda ... Open Seychelles ... Closed Swaziland ... Open Tanzania Closed Open Uganda Closed Open Zambia Closed Open Zimbabwe Closed Closed Non-COMESA SADC Countries Botswana ... Open Lesotho ... Open Mozambique Closed Open South Africa Closed Open Source: IMF staff's calculations applying the Sachs-Warner Criterion for tariffs and nontariff barriers. According to this criterion, a country is classified as closed if its NTBs covered 40% or more of the value of trade or its average tariff exceeded 40%. Attachment 2b.7 Eastern and Southern Africa Countries: Foreign Investment Flows and Investment Frameworks Table A.2.18: Foreign Direct Investment Inflows (US$ million) Groups Average over 1991-95 Average over 1995-98 SADC 691 3061 South Africa 124 1528 COMESA(1) 658 1494 ECOWAS 887 1631 CFA Zone 269 1155 Sub-Saharan Africa 1807 5583 Sources: IMF and World Bank Staff Estimates. (1): Egypt Excluded. Table A.2.19: Foreign Direct Investment Inflows - The 10 Top Recipient Countries1 Countries FDI (Average 1991-94) Countries FDI (Average 1995-98) US$ million US$ million Nigeria 618 South Africa 1528 Angola 395 Nigeria 984 Cameroon 148 Angola 570 DRC 131 Congo, Rep. Of 361 South Africa 124 Equatorial Guinea 314 Ghana 100 Cote d'Ivoire 255 Namibia 85 Zambia 160 Guinea 70 Lesotho 148 Zimbabwe 44 Tanzania 138 Swaziland 38 Namibia 127 Sources: IMF and World Bank Staff Estimates. Note: Egypt Excluded. 1 175 Table A.2.20: Foreign Direct Investment to GDP Ratio (In percent) Pre-SADC Eight Years of SADC Existence Countries Average over Average over 1992 1993 1994 1995 1996 1997 1998 1999 2000(b) 1980-90 1992-99 Angola 1.7(1) 10.7 5.0 5.7 8.1 5.8 7.8 6.4 17.3 29.5 1.8 Botswana 4.2 0.0 -0.3 -7.1 -0.5 0.6 1.8 2.0 2.1 1.7 NA DRC 0.5 0.2 0 0 0 0 0 0 0.3 1.3 13.5 Lesotho 1.6 23.1 0.3 22.7 29.7 31.6 29.5 28.4 21.9 20.6 3.0 Malawi 0.1 0.8 0 0 0 0 1.2 0.9 1.9 2.2 0.6 Mauritius 0.6 0.2 -0.5 -0.6 0.3 0.7 0.4 0.6 0.0 0.6 NA Mozambique 0.1 3.2 1.3 1.5 1.5 1.9 2.5 1.8 5.4 9.2 NA Namibia NA 3.5 4.2 1.8 3.5 4.9 4.8 2.8 3.3 3.1 4.3 Seychelles 3.7 3.7 -0.7 1.4 3.4 5.2 3.3 8.3 5.2 3.7 0.3 South Africa -0.2 -0.4 -1.5 -0.2 -0.6 -0.8 -0.2 1.0 -0.9 0.2 2.7 Swaziland 3.5 2.2 5.1 4.5 -0.1 0.8 1.9 2.6 0.8 2.5 NA Tanzania NA 1.7 0.3 1.4 1.4 2.0 2.1 2.0 2.0 2.1 4.4 Zambia NA 3.0 0 0.1 1.2 2.8 3.6 5.3 6.1 5.2 0.2 Zimbabwe -0.2 1.4 0.2 0.5 0.4 1.4 0.4 1.2 6.4 0.9 NA Source: World Bank, SIMA, Regional Database and Author's Calculations. Note: (b): data for 2000 are estimates. (1): period 1985 -90. Box A.2.5: Intra-regional Investment Currently, intra-regional investments in SADC are concentrated in the following sectors: · Mining: strong South African presence in Zimbabwe (gold), Zambia (copper and cobalt), Botswana (diamonds), and Namibia (diamonds) and to a lesser extent also in Angola (diamonds); the major South African companies in this field are Anglo American and de Beers (also a subsidiary of Anglo American); · Tourism: strong South African presence in Zimbabwe, Zambia, Swaziland, Namibia, Lesotho, Mozambique, Botswana and to a lesser extent also in Malawi, Mauritius and Tanzania; the major companies involved in cross-border investments are Southern Sunand Protea Hotels; there is also a Mauritian presence in Zimbabwe; · Transport: strong South African presence in Mozambique (Maputo Development Corridor); · Finance: strong South African presence in Botswana, Lesotho, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe in the banking sector; the same pattern can be discerned in the insurance market, where again South African companies (such as Old Mutual) play a decisive role in the region; Zimbabwean banks (Standard Chartered [Zim], Barclays Bank [Zim] and First Banking Corporation of Zimbabwe) are present in Zambia, Tanzania, Botswana, and some other SADC countries; · Manufacturing: strong South African presence in Malawi (textiles), Mozambique (cashew processing, aluminum smelter), Namibia (fisheries), Swaziland (sugar refining), Zambia (breweries) and Zimbabwe (through shares in major holding companies such as Delta Corporation); · Retail: strong South African presence in Botswana, Lesotho, Mozambique, Namibia, Swaziland, Zambia and Zimbabwe; · Telecommunications: South African presence in Mozambique, Namibia, Lesotho and Swaziland; Zimbabwean presence in Botswana and Zambia; · Agriculture and fisheries : strong South African presence at large-scale level in Namibia (fisheries), Swaziland (sugar) and Zimbabwe (cattle and crop farming) and at small-scale level also in Mozambique and Zambia. Mauritian companies have invested recently in sugar- mills in Tanzania and Mozambique. 176 Table A.2.21: Investment regime in Selected SADC Countries Investment Promotion Agencies Name When and how established Status and funding Role in investment process Angola Foreign Investment Institute 1996; Foreign Investment Law Government created and funded (Instituto de Investimento Estrangeiro ­ IIE) Botswana Trade and Investment Promotion 1984 Under the Ministry of Commerce and Industry; A specialized agency, soon to be transformed into an independent Agency (TIPA) government funded; soon to become an parastatal; to provide information and assistance to investors and independent statutory body with full autonomy traders DRC Lesotho Lesotho Investment Promotion 1967 Division ofLesotho National Development Assistance to potential investors in fulfilling requirements for Centre (LIPC) Corporation (LNDC, 90% government owned) starting a business Malawi Malawi Investment Promotion 1991; Investment Promotion Act Independent statutory body funded by Main purpose is to provide a one-stop window facility for investors; Agency (MIPA) government; board consists of representatives of sectoral priorities; assists in granting incentives and EPZ status government and private sectors Mauritius Mauritius Export Development 1984; Mauritius Export Development Autonomous; government-funded, but and Investment Authority and Investment Authority Act increasingly raises own funds (e.g. by charging (MEDIA) user fees) Mozambique Investment Promotion Centre 1984; Act of Parliament Government created and funded (Centro de Promoçao de Investimentos - CPI) Namibia Namibia Investment Centre 1990; Foreign Investment Act Located in the Ministry of Trade and Industry; Services all investors - domestic and foreign: one stop centre (NIC) government funded Seychelles Seychelles International Business Authority (SIBA) Swaziland Swaziland Investment Promotion End 1997 Actively seeks partners for new business; assists foreign investors; Agency (SIPA) provides fiscal incentives; antenna for European Union's CDI; development incentives determined by the Minister of Finance Tanzania Tanzania Investment Centre TIC: Tanzania Investment Act, 1997 Independent statutory body funded by TIC promotes, coordinates and monitors foreign and local investors; (TIC); Zanzibar Investment (replaced Investment Promotion Centre government and donors to be a one stop centre Promotion Agency (ZIPA) in 1998); ZIPA: operational since 1989 Zambia Zambia Investment Centre (ZIC) 1993 (Foreign Investment Act) Independent statutory body; funded by Promotes, implements, coordinates and facilitates investment government, donors and own revenue programs and policies; provides information on investment climate; identifies and promotes investment opportunities Zimbabwe Zimbabwe Investment Centre 1993; Act of Parliament Independent statutory body; government funded Approves investments and assists investors in negotiations with (ZIC) Department of Immigration and other agencies 177 Investment regime (continued) Country Other investment institutions Investment incentives Investment licensing Institutions involved Arrangements Angola 5-10 years profit and dividend tax holiday for new investments in interior or in Council of Ministers Investment below US$5 million automatic priority zones; exemption from industrial contributions or State taxes for acquisition of industrial sites for a period of up to 2 years if national inputs exceed 60% Botswana Botswana Confederation of Financial Assistance Policy (FAP): capital grants for jobs created, unskilled Ministry of Industry and Licensing required for manufacturing and Commerce, Industry and labor cost reimbursement, training grants, regional location benefits, assistance Commerce, Department of trading and mineral prospecting Manpower; Botswana Development for indigenous investors, especially women Geological Survey Corporation DRC Ad hoc arrangements with President Lesotho Skills training grant; serviced plots and premises; equity, loans or loan Registrar of Companies Registration within one month and after guarantees to LNDC clients receipt of Certificate of Registration of Investment Malawi New investments US$5-10m: 5 year tax holiday or 15% corporate tax, up to 10 Registrar of Companies Registration with Registrar of Companies years for large projects; duty-free equipment for horticulture; expenses for 24 only (unless industry involves health months before start -up allowed; 40% investment allowance on new capital hazards or explosives) expenditure, 20% for used, full rebate on heavy commercial vehicles Mauritius Ministerial Committee chaired by 4 categories of special companies (strategic local, modernization and Minister of Industry and Commerce expansion, ind ustrial building, pioneer) paying lower corporate tax rates (e.g. issue incentive certificates when 15%), no dividends tax for 10-20 years, lower indirect taxes required Mozambiqu Exemption from indirect taxes on equipment, cars and raw materials for first All activities in Mozambique are subject to e production cycle; significant reducti ons in corporate and indirect taxes for up licensing by, depending on the sector, the to 10 years for new entities; regional tax allowances CPI, Ministry of Finance, Central Bank, Ministry of Justice; or other government agencies and ministries Namibia Registrar of Companies; Ministry of 50% tax abatement for 5 years, new investment relocation package, No license required Trade and Commerce concessional loans for industrial projects, grants for prior studies Seychelles Swaziland Swaziland Industrial Development Main incentives are fiscal in nature; 5-year tax exemption for new firms Ministry of Commerce and Application for approval at Ministry; Corporation (first port of call for manufacturing for export Industry; Registrar of Companies registration with Registrar potential investors); Tibiyo Taka Ngwane; Trade Promotion Unit Tanzania First-time investors: 5-year tax holiday, then up to 5% reduction on rate, TIC has powers to authorize foreign similarly for withholding taxes; discretionary waiving of indirect taxes investments Zambia Zambia Privatization Agency Rural enterprises: 14,3% tax for first 5 years; agriculture: full allowance for Licensing by relevant authorities before land development; other capital: 20% per year or accelerated depr eciation; issuance of Investment Certificate; special crop allowances assistance from ZIC Zimbabwe Export Processing Zone Authority No border taxes on productive capital equipment; permanent residency or f ZIC Committee (ZIC and government (ZIMTRADE) personal investments above certain thresholds; additional incentives for rural ministries), except for large projects growth point projects (Ministry of Finance) 178 Investment regime (continued) Country Restrictions on foreign investment International investment agreements and International double taxation agreements Foreign investor access to local loans institutions Angola Some areas reserved for nationals MIGA, ICSID None Access for investments in oil and mineral sectors only Botswana Joint ventures with Botswana Development Corporation MIGA, NY, Paris, WTO, OPIC, bilateral South Africa, Zambia, UK, Sweden Access with prior permission of the Bank (BDC) encouraged; permission needed for foreign direct investment treaty (USA) of Botswana investment in locally incorporated companies DRC Uncertain Lesotho None on foreign direct investment MIGA, ICSID, NY, Paris, WTO, BITs Mauritius, South Africa, UK, USA Available, but remittances may be (Germany, UK) curtailed if local borrowings are excessive Malawi None on foreign direct investment MIGA, ICSID, Paris, WTO, OPIC, BITs South Africa, Denmark, France, Kenya, No access at all (Denmark) Netherlands, Norway, Switzerland, UK Mauritius None on foreign direct investment MIGA, ICSID, Paris, WTO, BITs, Article VII Botswana, Mozambique, Namibia, South Unrestricted access of IMF Africa, Swaziland, Zimbabwe and 20 others Mozambique Areas reserved for nationals; contradiction between MIGA; ICSID; OPIC; WTO; ICC Mauritius No restrictions, but credit and financing general law and investment so that 25% local share is systems do not correspond to investor often stipulated as a requirement needs Namibia None MIGA, ICSID, WTO, OPIC, BITs Mauritius, South Africa, United Kingdom Yes, but remittances may be curtailed if local borrowings are "excessive" Seychelles Foreign investment is encouraged, but the Seychelles MIGA, WTO South Africa, Zimbabwe, negotiations under government prefers joint ventures with foreign investors way with various other countries Swaziland None on foreign direct investment MIGA, Paris, WTO, ICSID, BITs (Germany, Mauritius, South Africa, UK Yes, but remittances may be curtailed if UK) local borrowing is `excessive' Tanzania MIGA, ICSID, NY, Paris, WTO, BITs Zambia, Canada, Denmark, Finland, India, Borrowing of funds from domestic banks (Germany, UK, Netherlands, Switzerland) Italy, United Kingdom, Norway, Sweden; a by non-residents allowed further 9 treaties being negotiated Zambia No restrictions on foreign exchange dealing and no MIGA, Paris, WTO, ICSID, bilateral Botswana, South Africa, Tanzania and 18 limitations on the import or export of foreign exchange in investment treaties with Germany and others Zambia Switzerland Zimbabwe In reserved areas (mainly services) up to 25% allowed in MIGA, NY, Paris, WTO, UNCITRAL, OPIC, South Africa, Mauritius and 9 others Restrictions on local borrowing by foreign joint ventures with local firms BITs (Germany, Portugal, United Kingdom) investors removed in 1995 179 Investment regime continued Country Main Investment and Business Legislation and/or Policy Statements Enforcement of contracts and property rights Angola Foreign Investment Law 15/94 (excludes petroleum sector investment, which has separate provisions) Code Civil; "law habit" is absent Botswana Financial Assistance Policy 1992; Companies Act; Factories Act; Stock Exchange Act 1994; Stock Roman Dutch legal system Market Act 1995; Export Credit Re-Insurance Act 1996; Collective Investments Units Bill DRC Code des Investissements, Act 88-028 of 1986, partly replaced by new stringent guidelines for foreign Uncertain legal system based on Belgian civil law and tribal law;: lack of 'law habit', investment problems with property rights and enforcement of contracts Lesotho Pioneer Industries Encouragement Order 1987 and Regulations; Banking Act 1989; Industrial Licensing Roman Dutch legal system Act 1969; Trading Enterprises Order 1987 and Regulations; Companies Act 1984 Malawi Companies Act 1984; Banking Act 1989; Industrial Development Act 1967; Investment Promotion Act English Common Law 1991; Capital Market Development Act 1990 Mauritius Offshore Business Activities Act (1992), Freeport Act (1992), Offshore Trust (1992), Industrial Procedural and commercial purposes: English Common Law; substantive issues: Expansion Act (1993), International Companies Act (1993) Code Civil Mozambique Law of Investment 3/1993; Mines Law 2/1986; Code of Fiscal Benefits for Investment 12/1993; Code Civil: lack of 'law habit', problems with property rights and enforcement of Petroleum Law 3/1981; Law 15/1991 (Privatization); Decree 27/1991 (Enterprise restructuring) contracts Namibia Foreign Investment Act 1990; EPZ Act 1995; Stock Exchange Control Act 1985; Special Incentives for Roman Dutch legal system Manufacturers and Exporters 1995; Export Incentives 1994; Companies Act 1973; Close Corporation Act 1988 Seychelles National Development Plan (1985), Second National Development Plan (1990), Environmental English common law, Napoleonic Code Management Plan (1990), Investment Promotion Act (1994), Seychelles International Business Authority (1995), Economic Development Act (1995), Economic Citizenship Program (1996) Swaziland Investment Code (1997), Companies Act, Financial Institutions Order (1975), Stock Exchange Act Roman Dutch legal system Tanzania Tanzania Investment Act 1997; Zanzibar Investment Protection Act 1986; Petroleum (Exploration and English common law; only leasehold title to land and problems with "law habit" Production) Act 1980; Banking and Financial Institutions Act 1991; Mining Act 1979; National Environment Act 1983; Income Tax Act 1973; Patent Act 1987; Trade and Services Marks Act 1987 Zambia Investment Act 1993; Privatization Act 1992; Companies Act 1994; Mines and Minerals Act 1995; English Common Law Lands Act 1995; Banking and Financial Services Act Zimbabwe Promotion of Investment: Policy and Regulations 1989; Zimbabwe EPZ Act 1994; Ministry of Finance Roman Dutch legal system Measures 1993; Companies Act 1981 180 Investment Regime (continued) Country Export Provisions (customs, financing etc) EPZ incentives Export incentives outside EPZ Angola Export licenses & restrictions No EPZ Exemption from customs duties for export products in automatic exemption list; 50% exemption from customs duty on certain equipment and primary products; full exemption for certain products destined for development priority areas Botswana Duty drawback, export credit guarantee No EPZ No surcharge on machinery used for export production DRC No EPZ Lesotho Manufacturers' rebate, comprehensive trade No EPZ Central Export Development Fund financing facilities Malawi Duty drawback, manufacturing in bond, EPZs Low corporate tax (15%); no withholding tax on Manufacturing in bond; 12% of export revenues as tax allowance; transport tax dividends; no duty, excise tax or VAT on inputs; transport allowance (25% of costs); no duties, surtax or VAT tax allowance (25% of international costs); duty drawback on imports of raw materials, etc for manufacturing in bond Mauritius EPZ, ESZ, offshore business, freeport, 4 special Low corporate tax (15%), dividends exempted from Not applicable enterprise categories taxation for 20 years, no indirect taxes, preferential rates on power and financing, complete exemption from taxes for offshore business and at freeport Mozambique Open environment in industrial free zones Full indirect tax exemption; no dividend tax for 10 years Exemption from indirect taxes on inputs until recovery of investment value (IFZs); elsewhere 35% of export receipts must (maximum 5 years) be surrendered Namibia EPZs Exemption from corporate tax and indirect taxes; liberal Tax exemption on 80% of profits from manufactured exports; export promotion labor and customs provisions; reimbursement of 75% of grants (50% of direct costs); full retention of export receipts from "status" training costs; guaranteed convertibility investments Seychelles International Trade Zone licenses for freeport & International Trade Zone (ITZ) incentives: exemption from Exemption from trade taxes; business tax rebate; business tax deductions for manufacturing operations business tax, social security tax, pension contributions, expenses in research, mark eting, export promotion, traveling and entertainment; withholding tax and trade and exchange controls accelerated depreciation of capital investments Swaziland Export financing and credit guarantees available Not applicable Tanzania Duty drawback (since 1986); EPZ in Zanzibar 10 years corporate tax holiday; duty exemptions 100% retention of foreign exchange proceeds Zambia No EPZ Special incentives to non-traditional exports, tourism (foreign exchange earnings 25%+ of turnover) and agro-based exports Zimbabwe Duty drawback, manufacture in bond, EPZs 5-year tax holiday, 15% corporate tax thereafter; Double deductions of export market development costs; right to borrow abroad exemption from indirect taxes (including fringe taxes for employees of EPZ companies); new companies which will export >80% can apply for EPZ status 181 182 ATTACHMENT 3 REGIONAL INITIATIVES AND PROGRESS IN REGIONAL INTEGRATION 183 Attachment 3a SADC PROTOCOLS: IMPLEMENTATION STATUS AND ACHIEVEMENTS (As at August 2001) Accession to the SADC Treaty commits member states to accepting a series of principles, objectives and strategies on mutually beneficial and equitable cooperation and integration; to participating in the structures and institutions of SADC; and to negotiating a series of protocols to give practical effect to its aims. Therefore, specific obligations, including that in the economic field, are to be contained in the respective protocols, which will `spell out the objectives and scope of, and the institutional mechanisms for cooperation and integration' [Art. 22(1)]. These protocols are to be negotiated by the member states and, after approval by the Summit, become an integral part of the Treaty. Article 21(3) identifies the following areas in which cooperation toward integration would be pursued - additional areas of cooperation are also permitted under Article 21(4) though: food security, land and agriculture; infrastructure and services; industry, trade, investment and finance; human resources development; science and technology; natural resources and environment; social welfare, information and culture; and politics. Protocols thus represent the agreement by Member States on how to proceed in the implementation of certain agreed strategies for regional integration. The protocols define the areas, objectives, broad strategies and timeframes of sectoral co-operation and integration and often through their Attachment spell out the various steps necessary to implement such strategies. SADC has also agreed on how to ensure the implementation of the protocols: · the protocol negotiation processes culminate in Summit signing the respective protocols. By signing these protocols, SADC Member States are committing themselves to principles and policies that will guide and bind them in specific areas; · the ratification of the protocols by national parliaments in accordance with the respective constitutions; · the deposition of the nationally ratified protocols with the SADC Secretariat; it requires the ratification and deposition of two thirds of the signatories to the protocol to let it enter into force; · the elaboration of clear Attachment by panels of stakeholders and experts to determine the implementation strategies, if this has not been done as part of the protocol development process; · the actual implementation of the agreed sectoral strategy for cooperation and integration within the agreed timeframe after the protocol has entered into force. This may require a deposition of instrument of implementation with the SADC Secretariat such as in the case of the Trade Protocol. (In order to honor their commitments, national laws, regulations, policies and procedures have to be brought in line with the provisions and intent of the respective protocols.) The following indicates the status of protocols in SADC as at the end of August 2001: · 10 Protocols and Instruments have entered into force. They are : 1. Declaration and Treaty of SADC & Protocol on Immunities and Privileges 2. Protocol on Shared Watercourse Systems (to be replaced by the revised version) 3. The Protocol on Energy 4. The Protocol on Transport, Communications and Meteorology 5. The Protocol on Combating Illicit Drug Trafficking 6. The Protocol on Trade and the Amendment Protocol on Trade 7. The Protocol on Mining 8. The Protocol of Education and Training 184 9. The Protocol on Development of Tourism 10. The Charter of the Regional Tourism Organization of Southern Africa (Retosa) 11. The Memorandum of Understanding on Cooperation in Standardization, Quality Assurance, Accreditation and Metrology in SADC (SQAM). · 10 Protocols have been signed but not entered into force due to insufficient numbers of signature or ratification are: 1. The Protocol on Health 2. The Protocol on Wildlife Conservation and Law Enforcement 3. The Protocol on Shared Watercourses (revised version) 4. The Protocol on Inland Fisheries and Marine Fisheries and Resources 5. The Protocol on Legal Affairs 6. The Protocol on the Tribunal and the Rules of Procedures Thereof 7. The Protocol on Politics, Defense & Security 8. The Protocol on Control of Firearms, Ammunition and Other Related Materials 9. The Protocol on Corruption 10. The Protocol on Culture, Information and Sport Protocols which are in the process of development / under preparation include those on: 1. Forestry; 2. Food Security, Crops, Livestock production and Animal Disease Control and Agricultural Research and Training; 3. Facilitation of the Movement of Persons; 4. Environment and Land Management; and 5. Finance and Investment. It should be noted that the Finance and Investment Sector is following an approach of simultaneously developing a broad principles framework for its protocol, while concluding a set of Memoranda of Understanding on functional cooperation in various areas within the Sector. It is believed, that through such a pragmatic approach the pitfalls of many other SADC protocol processes will be avoided and that SADC-wide `ownership' will be achieved over the short term, thereby enabling broad-based acceptance and ratification by the time that the protocol would be tabled for signature. Furthermore, over the long- term, it will facilitate the necessary degree of SADC-wide and Member State political and budgetary commitments to greater regional economic and monetary integration. 185 Table A.3.1: Protocols & Instruments which went into force Countries Treaty & Shared Energy Transport, Combating Trade Mining Retosa Standards, Quality Declaration Water- Communi- Illicit Drug Assurance, courses cations & Trafficking Accreditation & Meteorology Metrology Signed: Signed: Signed: Signed: Signed: Protocol Implemen- Signed: Signed & Signed: 09/11/99 17/08/92 28/08/95 24/08/96 24/08/96 24/08/96 Signed: tation 08/09/97 In force: In force: In force: In force: In force: In force: In force: 24/08/96 instrument In force: 08/09/97 16/07/00 30/9/93 28/09/98 17/04/98 06/07/98 20/03/99 In force: 08/02/00 25/1/00 Angola ü ü ü ü ü ü ü (18/8/99) Botswana ü ü ü ü ü ü ü ü ü ü DRC ü (28/02/98) Lesotho ü ü ü ü ü ü ü ü ü ü Malawi ü ü ü ü ü ü ü ü ü ü Mauritius ü ü ü ü ü ü ü ü ü ü (28/09/95) Mozambique ü ü ü ü ü ü ü ü ü ü Namibia ü ü ü ü ü ü ü ü ü Seychelles ü (24/06/98) South Africa ü ü ü ü ü ü ü ü ü ü (29/08/94) Swaziland ü ü ü ü ü ü ü ü ü Tanzania ü ü ü ü ü ü ü ü ü ü Zambia ü ü ü ü ü ü ü ü ü ü Zimbabwe ü ü ü ü ü ü ü ü ü ü Source: By Authors based on SADC Report, Record of the Council of Ministers, Johannesburg, South Africa, 22-23 February, 2001. Note: Subsequently, the Protocol on Development of Tourism was ratified. Detailed information on the signatories to various Protocols was not available, apart from the following: Protocol on Energy: DRC, Mozambique and Seychelles are required to ratify the Protocol. Protocol on Transports, Communications and Meteorology: DRC, Seychelles and Zambia are required to ratify the Protocol. Protocol on Combating Illicit Drugs: Angola, DRC and Seychelles are required to ratify the Protocol. Protocol on Trade: Angola, DRC, Seychelles are required to ratify the Protocol. Protocol on Mining: Angola, DRC, Seychelles and Swaziland are required to ratify the Protocol. Charter of the Regional Tourism Organization of Southern Africa (RETOSA): DRC and Seychelles are required to sign and ratify the Charter. MOU on Cooperation in Standardization, Quality Assurance, Accreditation and Meteorology: Angola, DRC, Seychelles, and Swaziland are required to sign the MOU. 186 Table A. 3.2: Protocols signed but insufficient numbers of signature or ratification Countries Education & Health Wildlife Conservation & Shared Watercourses Tourism Legal Affairs Tribunal & its Training Law Enforcement (Revision) Rules & Procedure Tabled: 08/09/97 Tabled: Tabled: 18/08/99 Tabled: 7/10/00 Tabled: 14/09/98 Tabled: 07/08/00 Tabled: 07/08/00 Ratified by: 18/08/99 Ratified by: Signed Not signed &/or Not signed & / or Not signed & / or Ratified by: ratified by ratified by ratified by Angola ü üû üû Botswana ü ü ü ü üü DRC Lesotho ü ü üü üû üû Malawi ü ü ü üû üû üû Mauritius ü ü ü ü üü üû üû Mozambique ü üü üû üû Namibia ü ü ü ü üü üû üû Seychelles ü üû üû üû South Africa ü ü ü üû üû üû Swaziland ü ü üü üû üû Tanzania ü ü üû üû üû Zambia ü üû üû üû Zimbabwe ü ü üü üû üû Source: By Authors based on SADC Report, Record of the Council of Ministers, Johannesburg, South Africa, 22-23 February, 2001. Note: Protocol of Education and Training:Angola, DRC, Mozambique, Seychelles and Zambia are required to ratify the Protocol. Protocol on Health: Angola, DRC, Lesotho, Mozambique, Seychelles, Swaziland, Tanzania, Zambia and Zimbabwe are required to ratify the Protocol. Protocol on Wildlife Conservation and Law Enforcement:All countries except for Botswana, Mauritius and Namibia are required to ratify the Protocol. Revised Protocol on Shared Watercourses: DRCis required to sign the Protocol, while all countries except Botswana and Mozambique are required toratify the Protocol. Protocol on Legal Affairs: Botswana and DRC are required to sign the Protocol. All the SADC members States are required to ratify the Protocol. Protocol on Tribunal and the Rules of Procedure:Botswana and DRC are required to sign the Protocol. All the SADC members States are required to ratify the Protocol. Table A.3.3. Protocol on Immunities and Privileges Country Date of Signature Date of Ratification Angola 17/8/92 20/8/93 Botswana 17/8/92 7/1/98 DRC Lesotho 17/8/92 26/8/93 Malawi 17/8/92 5/5/93 Mauritius Mozambique 17/8/92 30/8/93 Namibia 17/8/92 14/12/92 Seychelles South Africa Swaziland 17/8/92 2/9/93 Tanzania 17/8/92 27/8/93 Zambia 17/8/92 16/4/92 Zimbabwe 17/8/92 17/11/92 Source: SADC, Record of the Council of Ministers held in Johannesburg, Johannesburg, Republic of South Africa, 22-23 February 2001. Note:The Protocol entered into force on 30th September 1993. 187 Attachment 3b Cooperation on Finance and Investment After South Africa was allocated the responsibility for SADC Finance and Investment in 1995, the SADC Ministers of Finance adopted the following broad sector objectives: · to encourage movement towards regional macroeconomic stability through prudent fiscal and monetary policies; · to provide a framework for cooperation in the area of finance in collaboration with central bankers, other regulatory and supervisory authorities, commercial banks and other financial intermediaries to mobilize resources for investment; · to promote the coordination of national structural adjustment programs; and · to promote the development of sound investment policies of member states in order to establish an enabling environment for investment in the region. These objectives provides for a rich agenda of regional cooperation and integration. On the macroeconomic level, it was interpreted to suggest the following: · The need for coordination (initially), harmonization (in medium term) and eventual convergence (long-term) of key monetary and fiscal policies, · Stability and convergence over time of exchange rates leading eventually to some degree of fixity across exchange rates for the currencies in the region; · The importance of coordinating macro-financial policies with trade policies; · The need to develop capacity to cope with the effects and consequences of financial market globalization; · the need to achieve liberalization and gradual integration of the financial markets in the region; · the need to achieve an integrated regulatory framework; These areas would require cooperation on: · monetary policies (inflation, interest rate and exchange rate) through an agenda pursued by central banks; · fiscal policies (direct and indirect taxation, expenditure and subsidies and debt management policies) through an agenda pursued by ministries of finance; · financial markets and systems, i.e. cooperation and among the banking sector: by closer co-operation among the region's commercial banks; development finance institutions; capital markets (stock, bond and derivative exchanges); investment banks; asset management companies, pension and mutual funds; insurance companies; non-bank financial companies (e.g. building societies) at retail levels; specialist mortgage lending finance companies · regulatory frameworks, i.e. the development and extension of regional regulatory capacity over the financial system involving all financial market regulators, for example: by central banks (over banks, building societies, investment banks, etc.) and by securities and exchange commissions over capital markets. As far as investment is concerned, the objectives were interpreted to include the following objectives: · Harmonized improvements in basic investment regimes across SADC (e.g. in fiscal systems, direct and indirect tax regimes, in the stability of monetary policy etc.) and in particular with respect to opening up privatizations to investors on a regional basis; · Promotion of increased domestic (public and private) investment, ensuring that private domestic investment is not discriminated against; · Increasing foreign investment through developing common approaches to attracting foreign investment, and guarding against counter-productive intra-regional competition through incentives; 188 · Standardization and harmonization of general commercial legal environment (companies, tax, competition, trade, customs and excise and transit regimes) to establish a level playing field across the region with no direct or indirect barriers to cross-border investment whether direct or portfolio in nature; · Ensuring equal access to domestic capital resources (whether equity or debt) and to domestic banking and capital markets to all investors (domestic, regional or foreign) on an equal basis; · Establish safeguard measures to counteract destabilizing effects of FPI; · Development of channels and safeguards to ensure flows of capital investment in parts of the region which, left to the market, would be denied such flows; · Establishing foundations for regional investments (projects having cross-border multipliers) in infrastructure and large-scale regionally and globally competitive industry; Cooperating mechanism To achieve these objectives, the Finance and Investment Sector established a Finance and Investment Sector Coordinating Unit, FISCU1, to coordinate the sector's work and serving as a secretariat and clearing house, facilitator, catalyst and mechanism to encourage intra- and inter-sectoral cooperation in the sub-region, and two main committees, namely the Committee of Central Bank Governors to focus on monetary policy and issues, and the Committee of SADC Senior Treasury Officials to focus on fiscal policies and issues: Committee for Central Bank Governors: Approach, ToR & Projects At the outset of their work, the Committee for Central Bank Governors established a pragmatic approach and framework for regional financial cooperation. This Committee's approach to closer regional financial cooperation is informed by the following2: Financial activities in countries with more advanced financial systems are conducted at three distinctly different levels: · At the top, the monetary authorities govern the system through their monetary policy action. The monetary authorities will normally include the Finance Department of Government, the central bank and supportive regulatory and supervisory authorities. · In the middle, financial markets serve the function of price determination and resource allocation. The financial markets usually include a capital market, a money market and a foreign exchange market. These market are often further divided in specialized sub-markets such as an equity market, a bond market and a market for derivatives to provide more specialized services in the capital market. · At the third tier there are the individual specialized institutions such as banks, insurers, finance houses and securities dealers to provide financial services to governments, businesses and the general public. Cross-border financial cooperation amongst more advanced economies, for example within the EU, will proceed simultaneously at all three levels. However, major divergences in the stage of development at all three levels in the different participating members of any multi-national association can create serious difficulties in the process of economic integration. Even within the EU there is continuous pressure for a more differentiated approach, or a multi-speed approach, in which the more advanced members can reach the ultimate objectives of economic integration much quicker than others that may need more time to 1 Subsequently, FISCU was abolished at the beginning of August 2001 when its functions were centralized within the new SADC Secretariat Directorate for Trade, Industry, Finance and Investment. 2 Stals CL, 1995. The functions of the South African Reserve Bank and Closer Financial Cooperation in Southern Africa. Address at the Annual Award Dinner of the Botswana Institute of Bankers, Gaborone. 189 bring particularly the second and third tiers of their financial systems to a more competitive level before moving into the integration phase. In the 14 member countries of SADC, there are major differences in the structure of the overall financial system. These differences apply to all three levels of the system, i.e. the monetary authorities, the markets and the financial institutions operating in each one of these countries. Monetary authorities do not always have the same objectives; financial markets do not even exist in some of the members, and independent and competitive financial institutions must still be established, nurtured and developed in some countries. Thus in the initial stages, financial cooperation in SADC has to follow a bottom-up approach, with the attention first on the establishment, development and improvement of financial institutions that can provide the basic financial services required for real sector economic activities, rather than at the more ambitious level of macroeconomic integration. The Terms of Reference of the Committee of Central Bank Governors reflect this approach, and indicate the following activities for its consideration · Discuss the structures, philosophies and objectives of central banking; · Exchange views on the main objectives of monetary policy and the monetary policy model applied in each country; · Consult on the accounting and internal financial management practices of Central Banks; · Review the participation of Central Banks in areas such as commercial banking, export promotion and development financing; · Examine the role of the Central Bank in the development of domestic and capital markets; · Discuss the role of Central banks in the establishment of sound and well managed banking institutions, including the responsibilities for bank regulation and supervision; · Explore the involvement of Central Banks in international financial relations, such as the management of foreign reserves, exchange rate systems and the use of repatriation facilities for the bank notes of other members in the region; · Assist in the development of national and intra-country clearing and settlement arrangements for financial transactions; · Promote training in the field of central banking; · Co-operate on the exchange of basic economic data and information on the banking system and structures; and · Explore ways and means to combat money laundering in the banking system. Attachment 3c SADC Protocol on Education and Training SADC has made great strides to achieve universal basic education. Most SADC member States have net enrolment rates at primary education within the range of 80-100%.3 Illiteracy rates have fallen over the last three decades. In 2000, SADC recorded the lowest level of adult illiteracy rates (27%) as compared with those of other regional arrangements in Sub-Saharan Africa. The region is also well-endowed with high level of educational institutions. It is estimated that there are about 90 universities and technikons most of them concentrated in South Africa (21 universities and 15 technikons), Zimbabwe and Tanzania. The region has also seen the establishment of a number of private higher education and training 3 See SADC, Official SADC, Trade, Industry, and Investment Review, 1997-2001. 190 institutions, mainly in these three countries. In 1999 564000 students were enrolled with 386000 being full time. However, the performance of secondary and tertiary levels of education lags far behind the potential of the region. It is estimated that, on average, less than 50% of students progress to secondary school level, and less than one percent to tertiary education.4 Another problem that SADC countries face is the gender disparity in enrolments. In all countries, school enrolments ratios for women are much lower than those for male adults. In Lesotho, fewer female students are enrolled in pure sciences and science programs. In Malawi, the female student population has never exceeded 28%and female enrolments in the science subjects are low despite the affirmative action at the University of Malawi. In most SADC countries, women are under-represented in certain fields of high and technical education such as science, management and engineering. The consequence of this gap is the scarcity of women in the labor force in certain positions and disciplines. SADC countries have also taken steps to address the gender gap. For instance, countries like Malawi, Mozambique, Tanzania and Zimbabwe offer financial support for female students to undertake courses in fields where they are under-represented, have established quota systems for female enrolment and use positive discrimination in the recruitment of female lecturers to higher institutions of learning. In particular Mozambique has adopted an affirmative action program (the Convention on the Elimination of Discrimination Against Women) aimed at encouraging female participation through provision of scholarships for girls to follow science and mathematics courses. In Mauritius, the gender composition of enrolment is well balanced. At the University of Mauritius, women represented 47% of the student population in 1999. However, education and training in the SADC region still faces problems and challenges that include: a growing number of students; the low level of existing infrastructure, instruction and learning material and qualified and motivated trainers / teachers; gender inequality; the social, economic and financial impact of HIV/AIDS on the education and training systems; and the weak links between educational and training programs and labor markets. The main objectives of cooperation in Education and Training between SADC countries include: (i) To develop and implement a common system of regular collection and reporting of information by Member States about the current status and future demand and supply, and the priority areas for provision of education and training in the Region; (ii) To establish mechanisms and institutional arrangements that enable Member States to pool their resources to effectively and efficiently produce the required professional, technical, research and managerial personnel to plan and manage the development process in general and across all sectors in the Region; (iii) To promote and coordinate the formulation and implementation of comparable and appropriate policies, strategies and systems of education and training in Member States; (iv) To develop and implement policies and strategies that promote the participation and contribution of the private sector, non-governmental organization and other key stakeholders in the provision of education and training; (v) To promote and coordinate the formulation and implementation of policies, strategies and programs for the promotion and application of science and technology, including modern information technology and research and development in the Region; 4 See SADC, Official SADC. 191 (vi) To work towards the reduction and eventual elimination of constraints to better and freer access, by citizens of Member States, to good quality education and training opportunities within the Region; (vii) To work towards the relaxation and eventual elimination of immigration formalities in order to facilitate freer movement of students and staff within the Region for the specific purposes of study, teaching, research and any other pursuits relating to education and training; (viii) To promote policies for creation of a an enabling environment with appropriate incentives based on meritorious performance, for educated and trained persons to effectively apply and utilize their knowledge and skills for the general development of Member States and the Region; (ix) To promote the learning of English and Portuguese as the working languages of the Region; (x) To achieve gradually and over a period not exceeding twenty years from the date of entry into force of this Protocol, the implementation of the ultimate objective as stated in (k); (xi) To progressively achieve the equivalence, harmonization and standardization of the education and training systems in the Region which is the ultimate objective of this Protocol. The Protocol on Education and Training entered into force in July 2000. Progress has been achieved in putting in place institutional structures for its implementation. Four out of the seven committees have been established: Technical Committees on Scholarships and Training Awards, Accreditation and Certification, Basic Education and Distance Education. Moreover, the Human Resources Development (HRD) Sector Coordinating Unit (SCU) coordinates the implementation of the Sectoral Programs of Actions focusing on education, training and human resource development. Regional Cooperation Activities. · Regional Cooperation in Policy Development. This project started in October 2000. It aims at contributing towards capacity building to SADC member States to develop comprehensive and appropriate education and training policies through: (i) the development of program to train planners and those in policy making, development and planning; (ii) information dissemination on education policy, statistics and research; (iii) provision of opportunities and support to joint policy, research and initiatives among member states; and (iv) holding capacity building forums to allow for exchange of information and expertise. · Regional Cooperation in Basic Education. A strategic plan was developed with seven strategic objectives: (i) to provide universal basic education for at least nine years of schooling; (ii) to provide special support to severely disadvantaged groups in order to balance access to education; (iii) to promote consciousness about SADC as a community; (iv) to facilitate cooperation for purposes of broadening the knowledge base and skills of curriculum developers, teachers and education managers; (v) to improve and sustain educational standards at primary and secondary levels; (vi) to provide learners with information and experience to facilitate the acquisition of life long skills; (vi) to design and develop curricula that facilitates comparability, harmonization and eventual standardization. · Regional Cooperation on Distance Education. A Technical Committee on Distance Education was established with the following objectives: (i) Reviewing the provisions of the Protocol and making a baseline assessment of developments in this area; (ii) Developing a strategic plan for the next three years: July 2001-June 2004; (iii) Developing project proposals for sub-projects emanating from the program areas. · Regional Cooperation in higher education and training, including access to universities, undergraduate studies and centers of excellence and specialization; · Regional Cooperation in research and development; · Regional cooperation in life-long education and training, including distance education, adult education, short-term courses, and seminars and workshops; · Regional cooperation in publishing and library resources. 192 Regional Projects in Education, their objectives and funding status include the following: SADC Inventory of Regional Training Institutions. The project aims at providing adequate and updated information on available educational facilities and opportunities in the region thereby promoting human resources/capital mobility within the region. Funds for Studies and Experts in the Human Resources Development Sector. The project objective is to provide for short-term technical assistance and for studies and surveys to investigate critical issues relating to the program of action for the Human Resources Development Sector. SADC Scholarships and Training Awards Program. The project aims to support training of SADC nationals in the critical areas of the region through sponsorship to training courses of a short or long duration at institutions inside or outside the region. SADC Vocational Education and Technical Training Program. The main objective of the project is to develop a regional mechanism for cooperating in Vocational Education and Technical Training. In the long run, the project seeks to establish a centre of Specialization in the area of vocational and technical education in the region. Harmonization, Rationalization and Strengthening of Education and Training Systems in the Southern African Development Community. The aim of the project is to strengthen the education and training systems of member States. Two initiatives are particularly important. · SADC Intra-Regional Skills Development Program. This program aims to provide properly qualified personnel to give impetus to the productive sector in Southern Africa. The program focuses on the improvement of the quality and cost-effectiveness of post-secondary training by optimizing the use of available resources, achieving economies of scale and reducing the need and demand for overseas scholarships. · SADC Initiative in Educational Policy Development,Planning and Management. The objective of the program is to enhance capacity in education policy development, planning and management with a view to achieving sustainable educational development in the SADC member States. SADC Distance Education Program. The program aims at improving education and training through distance learning in then SADC region. A Regional Distance Education Centre would be established to serve and strengthen existing national educational institutions in the region. SADC Science and Mathematics Program. The objective is to improve mathematics and science education in the SADC region. The project also aims at strengthening basic mathematics and science education through sharing of expertise and experiences, establish and strengthen a regional network of professionals in these fields and offer training opportunities to mathematics and science teachers. Training for SADC Organs. The project aims to provide training to SADC staff namely: personnel of the Sector Coordinating Units, SATCC Commission, SADC Secretariat, Sector and National Contact Points. Establishment of Two Regional Centers of Specialization for Public Sector Administration and Management (CESPAM). The objective of this project is to build capacity for regional training institution to offer education and training program in critical and specialized areas. In the long run, the project seeks to establish long term postgraduate (Masters Program) and short-term executive development program at the University of Botswana and the University of Zambia to train practicing managers and administrators. 193 Capacity Building for the Human Resources Development Sector Coordinating Unit. The project seeks to enhance the capacity of the HRD Sector Coordinating Unit to perform its task within the SADC Program of Action. The major components of the program are: (i)Development of a Strategic Plan for the HRD Sector; (ii) Regional Networking; and (iii) Resource Management. Senior Managers Training in Road Traffic and Transportation of the SADC Region. The main objectives were to undertake in-service training of senior managers in road traffic and transport and to strengthen local training capability in road transport management and to create a pool of regional resource personnel. Table A.3.4: Projects Directly Supervised by the SADC HRD SCU Estimated Cost US$ Million Funding status US$ Million Under Funding Gap Negotiation Project Title Total Foreign % Local % Secured Source % Amount % Amount % Inventory of - - - - - - - - - - - - Regional Training Program SADC - - - - - - - - - - - - Scholarship and Training Awards Program* Funds for - - - - - - - - - - - - Studies and Expects in the HRD Sector** SADC - - - - - - - - - - - - Vocational Education and Technical Training Program Harmonization, Rationalization, Strengthening of Education And Training Systems of SADC a) Intra-Regional 0.075 0.075 100 0 0 0.075 EC 100 0 0 0 0 Skills (Study) b) SADC Initiative 0.920 0.920 100 0 0 0.504 Netherlands 54 0.416 46 0 0 (Project) Strengthening of 0.800 0.800 100 0 0 0.800 Germany 100 0 0 0 0 Regional Center of Specialization for Critical Areas Capacity 0.088 0.088 100 0 0 0.088 Belgium 100 0 0 0 0 Building for HRD Sector (Study) Distance - - - - - - - - - - - - Education for SADC* SADC Science 0.050 0.050 100 0 0 0 100 0 0 0.050 0 and Mathematics (Study) Total HRD 2.933 2.933 100 0 0 1.467 51.7 0.416 14.8 1.050 33.5 Sectors Project Source: SADC Human Resources Development. Annual Report, July 1999-June 2000. 194 Attachment 3d SADC Gender Initiative The responsibility for coordinating gender issues at the regional level has not been allocated to one of the SADC Member States because gender cuts across all sectors. A policy and institutional framework for mainstreaming gender into the SADC Program of Action was adopted by the Council of Ministers at their meeting in Windhoek, Namibia, in February 1997. It includes: · A Committee of Ministers responsible for Gender and Women's Affairs; · An Advisory Committee consisting of Government and NGO representatives from each SADC member State; · A Gender Unit at the SADC Secretariat; and · Gender Focal Points in the Sector Coordinating Units. A number of important developments have taken place since the decision of Council. · The Standing Committee of Ministers has met annually since 1997 and the Gender Unit was established at the SADC Secretariat in June 1998. The Unit has the overall responsibility to advise all SADC structures on gender issues and to ensure that a gender perspective permeates the entire SADC Program of Action and Community Building Initiative. · A Declaration of Gender and Development was signed by SADC Heads of States and Government in Blantyre, Malawi in which they commit their countries to the following among others: o The achievement of at least 30%target of women in political and decision-making structures by 2005; o Promoting women's full access to, and control over, productive resources to reduce the level of poverty among women; o Repealing and reforming all laws, amending constitutions and changing social practices which still subject women to discrimination; and o Taking urgent measures to prevent and deal with the increasing levels of violence against women and children. · In 1998 SADC Heads of State signed an Addendum to the Declaration, the Prevention and Eradication of Violence against Women and Children. It contains the following major elements: o Recognition that violence against women and children is a violation of fundamental human rights; o An identification of the various forms of violence against women and children in SADC; o A concern that the various forms of violence against women and children in SADC continue to increase and a recognition that existing measures are inadequate; and o Recommendations for the adoption of measures in a number of areas. · A Plan of Action for Gender in SADC was also adopted during 1998. It identifies activities to be undertaken in the following areas: Policy and institutional framework for gender, Women's human rights, Women in power and decision-making, Women's access to economic structures and resources, Peace and stability, Gender capacity building, and Networking and information dissemination. SADC Achievements · During its first year of existence, the Gender Unit at the SADC Secretariat facilitated the adoption of the various documents referred to above, and coordinated the implementation of activities under the Plan of Action. SADC has, since the adoption of the various policies and instruments referred to above, made impressive achievements in the area of gender equality and mainstreaming: · A regional program of action on women in politics and decision-making has been adopted. It is now being implemented and is already bearing fruits. This is reflected in the increase in the numbers of women MPs and Ministers in the countries of Botswana, Malawi and South Africa, which held 195 elections during 1999. A progress report in this area was presented to SADC Heads of State at their August 1999 Summit, and they further committed themselves to adopt special measures, such as constitutional or legislated quotas, and nominations to ensure the attainment of agreed targets. Regional training of trainers and empowerment for women in politics, as well as review conferences are planned to coincide with elections in various countries between now and 2005. Commitment to fund these activities has been secured at regional level, and member States have undertaken to ensure the funding for national level activities. · A gender audit of policies, programs and activities is presently being carried out, whose major output will be concrete, sector-specific intervention in SADC member States. Gender sensitization and training workshops are being conducted at the SADC Secretariat and in the Sector Coordinating Units. · Gender analysis of the SADC Trade Protocol has been carried out. It has been presented to the SADC Trade and Gender Ministers and to the Council of Ministers. The Gender Unit has been tasked with the responsibility of devising concrete regional programs and activities to ensure increased access to resources and economic structures in all countries of the region. · Uniform reporting and accountability frameworks have been adopted by Gender Ministers and approved by Council to ensure the proper monitoring of member States' implementation of their commitments under the Gender Declaration and Addendum. Towards the end of 2000, a conference will be held in Lesotho to review member States' implementation of the Addendum on the Prevention and Eradication of Violence Against Women and Children. · Gender Ministers also decided Member States would report on implementation of the SADC Declaration on Gender Development from February 2000 onwards. · A strategic partnership framework in the field of gender equality and mainstreaming with the UNDP, UNIFEM and other UN agencies was adopted in 1999 by SADC Gender Ministers, to facilitate better coordination, avoid duplication and maximize the utilization of resources. · In close collaboration with UNIFEM's Sub-Regional Office for Southern Africa, initiatives on gender budgeting have taken root and are spreading throughout the region. · Reports and other publications detailing these activities have been published and are available from the SADC Secretariat. One such document is the SADC Gender Monitor, an annual journal which is being produced in collaboration with the Southern African Research and Documentation Centre, based in Harare. This journal monitors the implementation of the PFAs by SADC member States. A special edition of the SADC Gender Monitor was produced for the Beijing Plus Five session in New York in June 2000. Since 2000, the challenge for SADC has been to ensure the implementation of the Plan in a manner that will move the SADC region towards gender equality early in the new millennium. 196 Attachment 3e Cooperation on Labor and Employment Issues in SADC In order to strengthen the labor and employment sector, SADC has initiated a wide-range of regional activities dealing with social security, occupational safety and health, training and education, labor relations, eliminating the use of child labor, accession to international labor conventions and gender issue. The following is a summary of the main cooperation initiatives: · Capacity Building of the SADC Employment and Labor Sector Coordinating Unit (EL SCU). This project started in 1996 and aimed at strengthening the capacity and capability of the Employment and Labor SCU. · Study on the Formulation of Policies and Strategies for the SADC Employment and Labor Sector. The project started in 1999. It aims to produce a policy document that will outline the objectives, strategies, priorities and the time frame required for their realization. A study on the formulation of policy and strategies for the sector has been completed. · Implementation of International Labor Standards. This project that started in 1996 aims to encourage the ratification and implementation of ILO standards and to develop a reporting system on the applications of ILO conventions in the SADC region. · Creation of a SADC Regional Data Bank on Employment and Labor Issues. The project was launched in 1998. It main objective is to create data bank on employment and labor in the SADC region to be based at the EL SCU in Lusaka. · Regional Program on Child Labor in SADC. The project began in 1999 and aims at formulating policies and strategies that will promote common approaches to combating child labor and institute appropriate mechanisms for monitoring and enforcing legislation within the region. · Study on Labor Market Issues in Southern Africa. This project that was launched in September 1998 aims to study the SADC labor market and establish a common, regional data bank that would facilitate the formulation of appropriate policies, strategies and programs on employment and labor issues in the region. The project will involve preparing sub-projects proposals on a number of labor market issues as appropriate. · Regional Program on Occupational Safety and Health (Working Conditions and Environment). The project started in July 1997. Its main objective is to promote cooperation in the design and implementation of Occupational Health and Safety measures in the region at regional, national and enterprises levels. It also includes the updating and harmonization of Occupational Health and Safety Legislation in the region. 197 Attachment 3f Cooperation on Transport and Communications 1 Roads Table A.3.5: Progress in Roads Institutional Reforms in SADC, 2000 Country Road funds, boards and agencies Existence of dedicated road fund, Plans for establishing road fund, road board and road agency autonomous road agency and road board Angola None National policy and national strategy underway for establishment. Botswana None National policy and strategy and legislation underway for establishment of the road fund and roads board. Autonomous roads agency need to be created. DRC Lesotho Road fund and road board have been established and fully operational Malawi Road fund and road board have been National policy completed and some other tasks on national strategy and established legislation underway for establishment of road fund and roads board and roads agency. Mauritius Road fund and road board h established National strategy and legislation on road fund, roads board and roads agency underway. Mozambique Road fund already established. National policy completed. National policy and legislation underway for road fund, road board and roads agency. Namibia Legislation completed, road fund, road board and road agency established. South Africa Road fund, roads board and autonomous National policy and strategy completed for road fund and roads board, and roads agency established. legislation is underway. For agency, national policy is completed and national strategy and legislation need to be completed. Swaziland None National policy on road fund and roads agency completed. National strategy and legislation underway. Roads agency still need to be addressed. Tanzania Road fund in place but needs Work underway to strengthen some legislation on road board. improvement. Road board established. Road agency under establishment. Zambia Road fund and roads board already in National policy completed on road fund and roads board. Work on national place. strategy and legislation is underway. Work on roads agency still need to be done. Zimbabwe None National policy completed. National strategy and legislation underway for road fund and roads board. Work on national strategy for creation of roads agency has started. Source: SADC. Transport, Communications and Meteorology. Annual Report, July 1999-June 2000. 198 2 Railways Table A.3.6: Railways Countries Main Achievements Angola Botswana Botswana Railways (BR) is in a privatization process. DRC Lesotho Malawi Malawi railways Ltd was concessioned (1994). The concessionaire started operated the rename "Central East Africa Railway (CESAR)" at the end of 1999. Mauritius Mozambique - January 2000: agreement was reached to concession the Mozambique Railways, CFM (N) and Nacala Port to the same concessionaire operating CEAR. - Mozambique Railways, CFM (S): A concession agreement on the Limpopo and Goba lines is expected to be signed soon to one concessionaire. - Ressano Garcia line: efforts are still underway to find a suitable concessionaire. Namibia Seychelles South Africa South African Railways (Spoornet) is in a restructuring process. Swaziland Tanzania - The Concession of the Tanzania Railways Corporation (TRC) is expected by the end of 2001 or early 2002. - Tanzania-Zambia Railway Authority (TAZARA): there is a consideration for feasibility of a joint venture concessioning between Chinese interests and private sector and their counterparts in Tanzania and Zambia. Zambia The Concession of Zambia Railways Ltd (ZRL) is currently in process. Zimbabwe National Railways of Zimbabwe (NRZ) is in a privatization process. 3. Ports Table A.3.7: SADC Ports' Share of SADC Transit Traffic, 1998 and 1999 Port Transit Traffic (000 tons) Total Traffic (000 Transit Traffic as Percentage of SADC SADC Other tons) % of total Traffic Transit Traffic 1999 1998 1999 1998 1999 1998 1999 1998 1999 1998 Dar es Salaam 244 731 413 233 3713 3564 17.7 27.0 4.85 12.87 Nacala Beira 185 116 642 462 28.8 25.1 3.68 2.04 Maputo 1685 1814 7 2144 2285 78.6 79.4 33.50 31.93 Port Louis 2048 2035 3102 3017 66.2 67.5 40.71 35.82 Richards Bay 4208 4119 0.0 0.0 0.00 0.00 Durban 80208 86407 0.0 0.0 0.00 0.00 East London 863 936 51751 52398 1.7 1.8 17.16 16.48 Port Elizabeth 5 1268 1607 0.0 0.3 0.00 0.09 Cape Town 7466 6719 0.0 0.0 0.00 0.00 Saldanha Bay 9726 8316 0.0 0.0 0.00 0.00 Walvis Bay 58 28808 30636 0.0 0.0 0.00 0.00 Namibe 5 44 1866 1736 3.4 2.5 0.10 0.77 Lobito 82 70 0.0 0.0 0.00 0.00 Luanda 385 470 0.0 0.0 0.00 0.00 1599 1486 0.0 0.0 0.00 0.00 Total/Average 5030 5681 478 233 196968 203292 2.8 2.9 100.00 100.00 Source: SADC Transport, Communications and Meteorology. Annual Report, July 1999-June 2000. 199 Table A.3.8: Ports Countries Main Achievements Angola Port Authority Act establishing the "landlord" port authorities to oversee private sector involvement in terminal development and operations. Botswana DRC Lesotho Malawi Mauritius Port Authority Act establishing the "landlord" port authorities to oversee private sector involvement in terminal development and operations. Mozambique - Agreement was reached in September 2000 on an overall concession for the Maputo Port operations. - Agreement has also been reached to concession the Nacala Port in the same package with the Nacala railway concession. Namibia Seychelles South Africa Portnet has been split into a Port Authority Division and a Port Operations Division. The former is intended to be the "landlord" and the latter to be responsible for commercial and operations activities. Swaziland Tanzania Privatization of the container terminal in the Port of Dar es Salam was concluded in the second quarter of 2000. Zambia Zimbabwe 4. Civil Aviation Table A.3.9: Top 10 African Countries for Domestic Traffic Movements Forecast Country 1999 2000 2001 2002 2007 2012 South Africa 126982 131653 136102 140710 157490 176564 Kenya 25921 27002 28501 30232 37944 47769 Algeria 22306 23287 24558 25836 31518 35694 Egypt 21683 22637 23873 25115 30638 34697 Seychelles 20728 21593 22792 24176 30343 38200 Ethiopia 19638 20844 22555 24632 34593 48582 Madagascar 16953 17660 18641 19773 24817 31243 Morocco 13602 14200 14975 15754 19219 21765 Zimbabwe 12615 13079 13521 13978 15645 17540 Cape Verde 12553 12921 13537 14127 16557 19404 The Rest of Africa 66284 68558 71658 74778 87576 101861 Total Domestic 359265 373434 390713 409111 486340 Source: SADC Transport, Communications and Meteorology. Annual Report, July 1999-June 2000. Table A.3.10: Civil Aviation Reforms Countries Main Achievements Angola Autonomous airport company has been formed. Botswana Autonomous civil aviation in process. DRC Lesotho Privatization of the National Airlines. Malawi Autonomous airport company has been formed. Mauritius Autonomous airport company has been formed. Mozambique - Autonomous civil aviation in process. - Autonomous airport company has been formed. Namibia - Autonomous civil aviation in process. - Autonomous airport company has been formed. Seychelles South Africa - Autonomous civil aviation has been formed. - Autonomous airport company has been formed. - Partnership between Airports Company of South Africa (ACSA) and Aeropoti di Roma. Aeropoti di Roma acquired 20% of the company shares. - Partnership between the national airlines, South African Airways (SAA) and Swiss Air. - Air Navigations services are provided by an independent company (ATNS). Swaziland - Autonomous civil aviation in process. - Privatization of the National Airlines. Tanzania - Autonomous civil aviation has been formed. - Autonomous airport company has been formed. - The Kilimanjaro International is under long-term operat ing and development lease to a private company. Zambia Autonomous airport company has been formed. Zimbabwe Autonomous civil aviation has been formed. 200 Table A.3.11: Status of Airline Companies in SADC Country Company Status Remarks Angola Linhas Aereas de 100% state-owned. - Establishment of a new cargo airline, Air Gemini which is a private Angola company. - Shareholding: local private investors and Portuguese interests that hold 70% of the shares. Botswana Air Botswana 100% government- Currently the only scheduled operator in the domestic market. owned. DRC Lesotho Airways Corporation 100% government- Its operations to Johannesburg and Capetown have not been revived since owned. late 1998. Malawi Air Malawi 100% government- owned. Mauritius Air Mauritius Ownership is mixed. Air Mauritius Holdings, Ltd. (AMHL) holds 51% of the shares. Other local institutions, British Airways, Air France and Air India hold the rest. Air Mauritius Ltd. has invested in several companies; namely Mauritius Estate Development Corporation Ltd. (93.7%), Airport Catering Services Ltd. (80%), Pointe Coton Resort Hotel Company Ltd. (54.4%), Airports of Mauritius Co Ltd. (5%) and Mauritius Shopping Paradise Company Ltd. (41.7%). Air Mauritius has successfully made a profit during 31 years of its operation and is one of the seven largest companies by market value in Mauritius. In 1998, it carried 55% of the 1.5 million passengers that traveled to/from Mauritius. Mozambique Linhas Aereas de 100% government- Operations hampered by high insurance cost and small, low growth market. Mocambique owned. Solution to overcome these impediments: Five year (1998-2002) corporate plan geared towards fleet re-equipment, yield improvement to 1.5% per annum and local factor improvement to 70% system wide. Namibia Air Namibia 100% owned by the 1998 Performance: total of 223444 passengers, 56% of which were on the government holding regional routes. company, Air Namibia lost approximately US$8.4 million in 1997/98. TransNamib. Plans to eventually privatize the airline. Seychelles Air Seychelles 100% government- owned. South Africa South African 75% government Swissair has bought 25% of SAA shares. Airways (SAA) owned. SAA has suffered financial losses for a number of years. Other commercial airlines: COMAIR, Airlink, and Sabena/Nationawide. Comair is a publicly owned company. It was listed on the Johannesburg Stock Exchange on 22 July 1998 and operates domestic and regional routes. Swaziland Airlink Swaziland Ownership is mixed. Royal Swazi National Airways Corporation which was 100% government (new company) owned was privatized in March 1999 to form a new company, Airlink Swaziland. The new airline is 60% owned by the government and 40% owned by SA Airlink Tanzania Air Tanzania 100% government- It has shares in several companies, namely Dar Es Salaam Airport Handling Corporation (ATC) owned. Company (60%), the Tanzanian Airport Catering Company (50%), Alliance Air (10%) and In-flight Catering Services Ltd. (25%). In 1992, ATC was granted the operational autonomy. Zambia Zambian Airways Private operators Zambian Airways takes over all regional and domestic operations. Eastern and Eastern Air Air services the regional routes from Lusaka to Bujumbura, Lubumbashi, Harare, Dar Es Salaam, Lagos, Lilongwe, Port Louis, Mombasa and Maputo. Zimbabwe Air Zimbabwe 100% government- In 1997/98, the airline carried a total of 608,000 passengers and achieved an owned. average load factor of 47.5%. It made a loss of US$4.7 million. 201 Table A.3.12: Member Airlines Performance Analysis (July-December, 1999) Airline Passenger Overall Passengers Cargo Average fleet age (years) Punctuality (%) Load Factor % Load Factor % Carried carried (Tn) Jet Turbo On time Within 15 min Within 60 min. Aero Zambia Air Austral 67% 64% 189,684 1,704 6 82% Air Botswana 61% 61% 79,464 10 Air Malawi 42% 67,933 1,053 9 4 75% 92% 78% Air Mauritius 61% 57% 168,082 4,232 12 6 95% 97% 99% Air Namibia 12 13 85% Air Zimbabwe 64% 49% 219,715 1,989 12 88% 94% 97% Airlink Swaziland 36% 36% 24,006 34 22 Comair 64% 639,661 3,995 80% 99% 100% East Coast Airways National Airways 73% 2,324 10 22 90% 92% 98% Nationwide Air Safair 69% 70% 220 16,813 25 26 98% 99% 99% South African Airlink 56% 56% 44,237 4 83% South African Airways 62% 45% 3,344,078 27,829 17 89% 94% 91% South African Express 50% 50% 386,749 1 3 6 77% 91% 99% Total/Average 59% 54% 2,166,153 48,682 86% 92% 95% Projected Annual Data 1999 59% 54% 10,332,306 97,364 13 12 Source: SATCC-TU Annual Report 2000/01 Table A.3.13: SADC Airline Performance 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 Passengers (thousands) 9,788 9,053 8,834 11,722 12,472 14,127 15,946 17,861 20,006 22,100 RPKs (millions) 19,327 18,599 18,942 23,007 22,694 24,225 26,101 27,271 28,493 30,000 ASKs (millions) 31,933 30,760 31,504 34,611 33,896 38,516 39,712 41,663 43,710 45,000 Pax LF (%) 60.52 60.46 60.13 66.47 66.95 62.90 65.73 65.46 65.19 66.67 Freight TKs (millions) 6.98 735.00 772.00 813.00 856.00 1,000.00 Fleet value (US$ million) 2,241.3 2,364.0 2,476.9 2,490.4 2,286.2 2,390.1 Operating revenue (US$ Mill) 2,741.4 2,505.4 2,433.8 2,185.1 2,435.0 2,274.8 Operating expenditure (US$ Mill) 2,633.4 2,306.8 2,324.0 2,137.8 2,388.4 2,190.9 Operating result (US$ mill) 108.0 198.6 109.8 47.3 46.6 83.9 Employees 28,844 27,794 25,824 26,635 24,638 24,562 24,544 24,502 24,305 24,000 RPKs/employee (million) 0.67 0.67 0.73 0.86 0.92 0.99 1.06 1.11 1.17 RevEx Ratio 1.04 1.09 1.05 1.02 1.02 1.04 % RPKs Change (0.68) (3.77) 1.84 21.46 (1.36) 6.75 7.74 4.48 4.48 Source: SADC airlines and airline industry publications 202 5. Telecommunications Table A.3.14: Telecommunications Achievements Countries Main Achievements Angola Botswana - Cellular phone operators. - More than one Internet service providers. - New regulation law has been passed. - Autonomous and independent regulator has been established. DRC. - More than one Internet service providers. Lesotho - Partial Privatization of national telecommunications operations. - New regulation law has been passed. Malawi - An agreement with a strategic partner is in process. - Cellular phone operators. - More than one Internet service providers. - New regulation law has been passed. - Autonomous and independent regulator has been established. Mauritius - An agreement with a strategic partner is in process. - Cellular phone operators. - New regulation law has been passed. - Autonomous and independent regulator has been established. Mozambique - More than one Internet service providers. - New regulation law has been passed. - Autonomous and independent regulator has been established. Namibia - More than one Internet service providers. - New regulation law has been passed. - Autonomous and independent regulator has been established. Seychelles - Partial Privatization of national telecommunications operations. - Cellular phone operators. - New regulation law has been passed. South Africa - Partial Privatization of national telecommunications operations. - Cellular phone operators. - More than one Internet service providers. - New regulation law has been passed. - Autonomous and independent regulator has been established. Swaziland - New regulation law has been passed. Tanzania - An agreement with a strategic partner was scheduled in January 2001. - Cellular phone operators. - More than one Internet service providers. - New regulation law has been passed. - Autonomous and independent regulator has been established. Zambia - Cellular phone operators. - More than one Internet service providers. - New regulation law has been passed. - Autonomous and independent regulator has been established. Zimbabwe - Cellular phone operators. - More than one Internet service providers. - New regulation law has been passed. 203 Table A.3.15: Progress in Southern Africa Telecommunications Sector Country New Policy National Cellular Regulator Fixed Per 100 Cell Cellular As % of Internet Total PCs per operators Operators lines inhabitants subscribers density total tel subscribers hosts 100 inhbts (k) 1998 1998 (k) (per 100p) subscribers (K) 1998 1998 Angola Y Angola Angola Independent 72.2 0.70 9.8 0.14 12.0 2.5 6 0.08 1997 Telecom Telecom 2000 Botswana Y Botswana 1. Vista Independent 121 7.4 23.0 2.7 18.4 10.0 658 2.55 Telecoms Telecommunica Cellular BTA, 1996 Act 1996 tions 2. Mascom Corporation 1980 DRC Not available OPTC Not available Not available 21.0 0.04 8.9 [97] 0.02 29.8 [97] 0.2 .... ...... Lesotho Y Lesotho Vodacom Independent 20.1 0.97 9.8 0.48 32.8 0.2 .... .... Telecoms, bid Lesotho 2000 for 70% Mountain Kingdom Consortium accepted Malawi Y, Malawi Joint MTC & Independent 37.4 0.4 10.5 0.097 21.9 2.0 1 0.08 Telecommun Telecoms 1999 Telekom MACRA ications Act Malaysia 1998 1998 2. Celtel joint Malawi Dev Corp & MSI Mauritius Y, Full Mauritius 1. Cell Plus Independent 245.4 21.42 60.5 5.25 5.28 12.5 575 8.73 competition Telecom, 1992 2. Emtel (50% MTA 1998 by 2004, Luxembourg) WTO commitment Mozambiqu Y, TdM, corporate M-Cell (TdM & Independent 86 0.40 6.7 0.05 8.2 3.5 156 0.21 e Telecoms Exclusivity Detecon)) INCM, 1992 Act 1992 ends 2003 2nd license expected Namibia In progress Namibia Mobile Independent 113.9 7.5 19.5 1.24 14.6 5.0 2654 2.41 Telecom 1992 Telecommunica 1992, but not tions Co (MTC) strengthened owned by NT, under law Telia, Swedfund Seychelles Y Bharti Operators: No 19.0 24.97 3.8 .. 16.7 2.0 7 12.42 Enterprises Cable & (India) ­ Wireless operator license TSL (Telecom Seycelles Ltd ­ Bharti Enterprises 204 Country New Policy National Cellular Regulator Fixed Per 100 Cell Cellular As % of Internet Total PCs per operators Operators lines inhabitants subscribers density total tel subscribers hosts 100 inhbts (k) 1998 1998 (k) (per 100p) subscribers (K) 1998 1998 South Y, Telkom SA 1. Vodacom Independent 5075.4 12.47* 2500.0 8.32 33.0 1266.0 144,4 5.16 Africa Telcoms Act partially (Telkom joint 1996 [55000: 45 1996 privatized, SBC venture) 2000] and Malaysia 2. MTN Telecom (private) 3rd license being deliberated Swaziland In Progress Swaziland SPTC and No (SPTC) 29.0 3.2 4.7 0.96 13.9 1.0 278 .... Posts and MTN joint Telecommunica venture tions Corporation (SPTC) ­ state monopoly Tanzania Yes 1.Tanzania 1.Mobitel Independent 121.8 0.4 37.9 0.12 23.8 3.0 129 0.17 Telecommunica 2. Tritel TCC, 1995 tion Company 3. Vodacom (TTCL), to be Tanzania privatized MSI 4. MIC 2.Zansibar: Tanzania Ltd TTCL and 4. Zanzibar Zantel Telecom (Zanzibar) Zambia Yes, Zambia 1. ZamTel Independent 77.7 1.0 12.0 0.24 6.2 3.0 303 0.68 Telecoms Telecoms 2. Telecel CAZ, 1994 Act 1994 Company Zambia opened up (ZamTel) 3. Zamcel private sector participation Zimbabwe In progress, Zimbabwe 1, NetOne In progress 212.0 1.89 55.0 0.48 20.6 10.0 1031 1.14 does not Posts and (ZPTC) comply with Telecommunica 2. Econet WTO tions Wireless commitment Corporation 3. Telecel (ZPTC) Zimbabwe Average 11* 2 with SEP, 2 Competition in 10 **** 4.7 1.67 in progress** 7 *** Sources: ITU; BMI-Techknowlege Communications Technologies Handbook 2000; SATCC Annual Report 2000; Note: * SATCC; ** Various, *** SATCC; **** TRASA; ITU 205 Attachment 3g Cooperation on Water The constituent countries of southern Africa are experiencing large imbalances between water availability and water usage5. As a general trend, rainfall over Southern Africa increases northwards towards the equator. The more northerly river basins enjoy a much higher runoff per unit area than do their southern neighbors. For example, unit runoff for the Gariep (Orange) River basin as a whole is a mere 12 mm, whereas the average runoff for the Zambezi is around 90mm. Unit runoff for the Zaire River basin, which straddles the equator, is over 300 mm. However, so far, large-scale utilization of water resources has been confined to the relatively poorly endowed southern rivers, i.e. the Gariep and the Limpopo. The overall picture is thus of a water-deficient south as against a water-rich north. The southern states are already reaching the limits of water availability while the northern states are in need of development. Table A.3.16: Southern Africa River Basins River Basin Basin Area (Km2) River Length (Km) Natural Mean Annual Runoff (Mm 3/a) (at the mouth of the river) Buzi 31 000 250 2 500 Cunene 106 500 1 050 5 500 Cuvelai 100 000 430 Ephemeral Incomati 50 000 480 3 500 Limpopo 415 000 1 750 5 500 Maputo 32 000 380 3 500 Nile 2 800 000 6 700 86 000 Okavango 570 000 1 100 11 000 Orange 850 000 2 300 11 500 Pungué 32 500 300 3 000 Rovuma 155 500 800 15 000 Save 92 500 740 7 000 Umbeluzi 5500 200 600 Zaire 3 800 000 4 700 1 260 000 Zambezi 1 400 000 2 650 94 000 Source: Adapted from Pallet, J, (ed.), Sharing Water in Southern Africa. Desert Research Foundation of Namibia 1997. Against international benchmarks, most SADC countries, particularly Malawi, South Africa, Zimbabwe, Zambia and Tanzania are among the less favorable countries in terms of the availability of fresh water per capita6. As demand rises under growing population pressures (at the average annual population growth rates of the mid-1990s) or through expansion (and change) of industrial and agricultural activity, the sub-region might be facing increasing water scarcity. The extent to which each country utilizes its resources through annual freshwater withdrawals indicates that, apart from South Africa most of the countries only exploit a small percentage of the water available to them. In addition, most of the water available is used for irrigation. In a number of SADC countries, safe water is a scarce resource. For instance, in Angola, the DRC, Zambia, Tanzania, and Malawi, about two-thirds of the population lack access to safe potable water. Cooperation in water resources now takes place in terms of the `Revised Protocol on Shared Watercourses,' signed in August 2000 by all but one SADC country, i.e. the DRC. The status of signature and ratification of the Protocol is indicated below - by mid-2001 only two countries (Botswana and Mozambique) have ratified it. 5 Only 10% of the water resources of the sub-region are in SA, while the country accounts for more than 80% of total consumption. Pitman W.V. & Hudson J. 1997. `Regional Water Resources: Prospects for Trade and Cooperation' in Kritzinger-van Niekerk L (Ed.), Towards Strengthening Multi-sectoral Linkages in Southern Africa. DBSA Discussion Paper, No. 33. See Hollingworth, B. 2000. An Overview of the Water Sector in Southern Africa. DBSA, unpublished mimeo. 6 If the availability of fresh water per capita drops below 1667 m3 per annum, the country is said to suffer water stress while less than 1000 m3 per annum means water scarcity. This concept is however relatively limited since it does take into account factors such as variability and distribution. 206 Table A.3.17: Water Availability in the SADC Countries Country Total Annual 1990 2025 (UN Medium Population Projection) renewable fresh water available by country (cubic kilometers) Per Capita Water International Population Per Capita Water Availability Availability Rank (1= driest) (thousands) (cubic meters) (cubic meters) Angola 158, 00 17,185 100+ 26, 619 5, 936 Botswana 18.0 14,107 100+ 2, 980 6, 040 DRC 1,019.0 27,220 100+ 104, 639 9, 738 Lesotho 4.0 2,232 39 4, 172 959 Malawi 9.0 961 19 22, 348 403 Mauritius 2.2 2,081 35 1, 481 1, 485 Mozambique 58.0 4,088 65 35, 139 1, 651 Namibia 9.0 6,672 81 3, 049 2, 952 South Africa 50.0 1,349 26 70, 951 705 Swaziland 6.96 9,355 90 1, 647 4, 226 Seychelles - - - - - Tanzania 76.0 2,969 49 62, 894 1, 208 Zambia 96.0 11,779 97 19, 130 5, 018 Zimbabwe 23.0 2,323 40 19, 631 1, 172 Source: Engelman R. and Leroy P., 1995. Sustaining Water: Population and the Future of Renewable Water Supplies (Update). Population Action International. Washington, January 1995. In order to improve the regional management of watercourses, a Regional Strategic Action Plan on Water Resources was developed in 1998 and a list of 31 priority projects was established Table A.3.18. Watercourses Management: Projects Proposed Projects 1999 2000 2001 2002 2003 2004 1. Regional Guidelines for Review and Formulation of Water Legislation ........................... 2. Regional Guidelines for Dam Safety Legislation and Procedures .......................... 3. Capacity Building for Joint Integrated Basin Management ............................................................... 4. Consultative Forum on Water Issues ............................................................... 5. Program on Water Supply and Sanitation for SADC Region ........................... 6. Guidelines for Ground Water Management in SADC ......................... 7. WSCU Capacity Building Project ................................................ 8. Implementation Program for the SADC Protocol on Shared Watercourse .................................... Systems 9. Regional Guidelines for Water Policy Strategy in Eight SADC Countries .......................... 10. Develop and Implement Water Sector Policy and Strategy ............................................................. 11. Establish Regional Water Sector Policy and Strategy ............. 12. Economic Accounting of Water Use ............................. 13. Study for Expanding Private Sector Involvement in Water and Sanitation ........................ 14. Assessment of Surface Water Resources ............................................................. 15. Expansion of the SADC-HYCOS Project ................................................. 16. Regional Project to Control Infestation and Translocation of Aquatic Weeds .............. 17. Training in Surveying, Mapping and Geographic Information Systems .................................... 18. Upgrade and Modernize Water Resources Monitoring System in Lake ................................... Malawi 19. Rehabilitation of Joint Monitoring Systems- Angola and Namibia ........................... 20. Awareness-Building for Decision-Makers .................................... 21. Involving the Media in WaterIssues .......................... 22. Human Resources Development Program ............................................................. 23. WaterNet .................................... 24. Promotion of Stakeholder Participation in Integrated Water Resources ............................................................. Management Activities 25. Feasibility Study for Creating Fund to Support NGO and CBO Participation ............. in SADC Activities 26. Empowering Women ............................................................. 27. Control and Development of Lake Malawi and Shire River .................................... 28. Study of the Navigatibility of the Zambezi and Shire Rivers ............. 29. Stabilization of the Course of the Songwe River ................................................ 30. Lower Orange River Feasibility Study ........................... 31. Integrated Basin Management Plan for the Okawango River ............................................................. Source: SADC Water sector Coordinating Unit, 1999. Integrated Water Resources Development and Management in the Southern African Development Community, First Round Table Conference. 207 Table A.3.19: Ongoing SADC Water Projects: Objectives and Funding Status (US$ Million) ProjectTitle Estimated Cost Funding Secured Funding Financing Comments/Status under Gap Total Foreign Local Amount Source Negotiation Zambezi River 8.55 6.74 1.81 5.44 NORDICS 1.30 ZACPLAN Category 1 System Action Plan 1.81 SADC project funded by UNEP and the NORDICs are under implementation and nearing completion. ZACPRO 6 under implementation Hydrological Cycle 3.00 2.50 0.50 2.50 EC Under implementation Observing System for 0.50 SADC SADC (HYCOS) Program on Water 0.12 0.11 0.01 0.00 0.11 Negotiation ongoing with Supply and Sanitation 0.01 SADC Belgium for SADC region Regional Project to 0.26 0.23 0.03 0.00 0.23 Funding Sought controlInfestationand 0.03 SADC Translocation of Aquatic weeds Groundwater 15.90 14.31 1.59 0.00 14.31 Funding Sought Management Progr am 1.59 SADC for the SADC region Total 27.83 23.89 3.94 11.88 0.11 15.84 Source: SADC Water. Annual Report, July 1999-June 2000. Attachment 3h Cooperation in the Energy Sector The region has large resources of energy in various forms such as hydro-power, concentrated mainly in central Africa on the Zambezi and Zaire Rivers, although there is additional potential in a number of other countries. The region is also well endowed with coal, but as is the case with hydro-power, it is not uniformly distributed. Only Namibia and Angola appear to have no exploitable coal reserves, but they do have gas reserves, together with Mozambique and SA. The region is also rich in renewable energy resources, such as solar energy for electricity generation and heating. The region's total production and consumption are relatively low compared to international standards. In 1999, SADC produced 7.62 quadrillion British thermal units (Btu) of commercial energy (2% of total world production) and consumed 5.14 quadrillion Btu (1.3% of total world production); it generated 112.8 million metric tons of carbon emissions; its total installed electric generating capacity was 49541 megawatts (MW), but the total electricity generation for the whole SADC was 215.06 billion kilowatt hours (bkwh). Net hydroelectric generation was 21.26 bkwh. Zambia and the DRC are the largest generators with 7.6 bkwh and 5.16 bkwh, respectively. Table A.3.20. SADC Installed Generation in MW, 1999 Country Installed MW Thermal Generation in billion kWh Hydro Generation in billion kWh South Africa 38042 173.34 0.73 DRC 2548 0.11 5.27 Zambia 2436 0.04 7.60 Mozambique 2313 0.30 2.00 Zimbabwe 1961 4.05 1.73 Angola 596 0.48 1.00 Tanzania 596 0.50 1.75 Mauritius 365 1.15 0.11 Botswana 217 0.61 0.0 Malawi 308 0.03 1.00 Swaziland 131 0.2 0.18 Seychelles 28 0.16 0.0 Lesotho - 0.0 0.0 Namibia - 0.0 0.0 SADC 49541 180.97 21.26 SADC (excluding SA) 11499 7.63 20.53 Source: USAID (The Regional Centre for Southern Africa). Energy Program Sub-Strategy for Legal, Regulatory and Policy Assistance to the SADC Countries. March 2001. 208 Table A.3.21. SADC Net Electricity Generation in Billion kWh, 1980-1997 Country 1980 1990 1995 1996 1997 1980-97 Rate South Africa 93 156 176 187 196 110% 4.5% Zambia 9 8 8 8 8 -16% -1.0% Zimbabwe 4 10 8 8 8 71% 3.2% Angola 1 2 2 2 2 27% 1.4% Tanzania 1 2 2 2 2 41% 2.0% Mauritius 0 1 1 1 1 178% 6.2% Malawi 0 1 1 1 1 126% 4.9% Botswana 0 1 1 1 1 47% 2.3% Mozambique 14 0 1 1 1 -96% -17.3% Swaziland 0 0 0 0 0 52% 2.5% Lesotho 0 0 0 0 0 NA NA Namibia 0 0 0 0 0 NA NA SADC 125 180 200 210 219 75% 3.4% SADC (without 32 24 23 23 23 -28% -1.9% South Africa) Africa 190 306 346 359 376 98% 4.1% Total World 8027 11311 12640 12962 13225 65% 3.0% Source: USAID (The Regional Centre for Southern Africa). Energy Program Sub-Strategy for Legal, Regulatory and Policy Assistance to the SADC Countries. March 2001. Energy Projects: Objectives and Funding Status As of May 2000, SADC is implementing a list of 43 projects representing a total amount of US$ 608.04 million. · General Support to the Energy Sector Technical and Administrative Unit-TAU. The main objective of this project is to provide technical, financial and administrative support to strengthen the TAU. · Documentation Centre for Energy Sector. This project aims at ensuring proper management of large flow of information, data and documents within the Energy Sector. It was established with the assistance from the Norwegian Agency for Development Co-operation (NORAD). · Establishment of the Regional Energy Planning Network (RPEN) in the SADC Region. · TAU/TU Office Facilities. The main objective of the project is to improve the working conditions and performance of the Sector's coordinating structure. · Regional Petroleum Training Centre. The Norwegian Agency NORAD has committed to support phase III of this project. · Management Development and Specialists Training for the SADC Petroleum Sector. The project aims at training and development of professional core management staff of the national oil companies and the member States' ministries responsible for energy. · Petroleum Exploration Program. NORAD is one of the donors involved in the project. · Investigation of Possible Harmonization of Laws, Rules, Standards and Regulations, including Environmental Protection and Safety in the Petroleum Sector. · Manpower Development and Training for the Coal Sub-Sector. The objective of this project is to develop a training need survey to provide a basis for planning a manpower development and training program for the Coal Sub-Sector. · Regional Rural Electrification Program. The project intends to identity the institutional and socio-economic settings and framework for Rural Electrification in SADC member States. Phase I of the project was successfully completed in 1991. · Specialized Training in the Field of Electric Power Phase III: Five-year Regional Power Sector Training Program. The main objective of the project is to identify training needs for electricity utilities' personnel and formulate a training program. Phases I and II were successfully completed in 1987 and 1991 respectively. The objective of Phase III is to implement the training program defined during Phase II. · Plan for Integrated Utilizatio n of the CUNENE River Basin. The objective of the project is to develop a master plan to utilize the CUNENE River Basin's water resources fully. The project is currently implemented and financed by ICE (Portugal) funds. 209 · KAFUE GORGE Regional Training Centre. The objective of this project is to continue providing specialized training for hydropower personnel from the SADC countries. · ANG 3.2 Interconnection of the Northern, Central and Southern Grids in Angola and Possible Extension to Namibia. The project aims at studying the technical and economic feasibility of interconnecting the three main electricity grids in Angola. It also intends to consider possible interconnection with Namibia. · ANG 3.3 Completion of the Gove Hydroelectric Development. Feasibility study. The first Phase of the project (feasibility study) is completed. · ANG 3.4 Provision of a Communication and Information System for the Angolan National Power Grid. Phases I and II, part 1: Study and implementation, Northern System. The project seeks to improve communications in the Angolan power system in order to prepare for possible connection to neighboring countries. · ANG 3.6 Repair of Gove Dam. The objective is to restore the Gove Dam to regulate the Cunene River's flow. · BOT 3.4 Second 220 kV Line Morupule-Gaborone. Implementation. The project has been deferred until around the year 2002-2003. · LES 3.2 Transmission Network Development in Lesotho. Phases III, IV, V, VI, VII (Reformulated 1991). The project aims to improve quality and reduce the cost of electricity to the consumer. It also intends to reduce consumption of diesel fuel, kerosene, and wood fuel. Both the Governments of Sweden and Norway financed the project on a bilateral basis. The project is completed. · LES 3.6 MUELA Hydropower Project. The objective of this project is to increase the Lesotho installed capacity in order to promote general development of the underdeveloped Highlands region. · MAL 3.6 Malawi/Zambia Power Cooperation in the Border Region. The objective of this project is to provide electricity supply as an alternative source of energy to the rural areas on both sides of the Malawi-Zambia border. · MOZ 3.2 275 kV Interconnection between Mozambique and Swaziland. The objective of this project is to enable more reliance and increased security of supply between the three countries Mozambique, RSA and Swaziland, and at the same time broaden the regional access to the cheap Cahora Bassa hydropower. · MOZ 3.5 Mozambique-Malawi Interconnection of Electricity Supplies- Phase III. The objective of the project is to promote regional co-operation and significantly reduce possible major costs by delaying construction of large generation facilities. In February 1998, both Governments of Mozambique and Malawi signed the agreement for the interconnection of the two systems. · MOZ 3.7 Reconstruction of Mavuzi Hydropower Station. Implementation. The project aims at finalizing the refurbishment program for Mavuzi power station. · MOZ 3.13 Control Centre for the Supply of the Beira Corridor and Mozambique-Zimbabwe Tie Line. The objective is to upgrade the power control centre in the EDM Central Region to take account of planned national and regional power system improvement in the Provinces of Manica and Sofala, and adjacent areas in Zimbabwe. · NAM 31 Power Supply Cooperation in Border Regions between Angola and Namibia. The project aims to provide supply to electricity to the border areas of Namibia and Angola. · TAN 3.6 Supply of Sumbawanga in Tanzania. Phase II: Implementation. The project seeks to determine the preferred least cost scheme to supply Sumbawanga in Tanzania with power from Mbala in Zambia. Phase I, Load Flow Cost Estimate Study was completed in October 1992. Phase II was approved in 1993. Construction of a 66 kV transmission line from Mbala in Zambia to Sumbawanga in Tanzania is in progress. · ZAM 3.6 Refurbishment of Victoria Falls Power Station. The objective of the project is to refurbish the Power Station in order to improve the reliability of power supply to Western Province of Zambia, Northern Botswana and Northern Namibia. The European Investment Bank and the Zambia Electricity Supply Corporation Limited put up ECU 175,000 and ECU 21,700 respectively. The World Bank and other donors have undertaken a Power Rehabilitation Project (PRP) to rehabilitate the generation, transmission and distribution systems of Zesco in the amount of about US$ 200 million. 210 · ZAM 3.7: 132KV Tie-Line Zambia -Malawi. The project seeks to extend the study performed on project ZAM. 3.1 to feasibility level and establish whether an interconnection of the Zambia and Malawi power systems at 132kV is feasible. · ZAM 3.8: 330/220 KV Tie-Line Zambia-Tanzania. Feasibility Study. The objective of the project is to demonstrate whether an interconnection of Zambia and Tanzania power systems at either 330kV or 220kV would be a technically and economically sound project. · ZAM 3.9: Power Cooperation between Zambia and Namibia. The project seeks to provide hydroelectric power to enhance development of the great agricultural potential of Northern Namibia and generally improve the reliability and increase the capacity of power supply to the region. · SADC Capacity Building on Utilization of Renewable Technologies. The main objective is to improve the living standards and reduce poverty of the rural people and enhance the sub-region industrialization and energy supplies. · Development of National Wood fuel Strategies and Plans. The project aims to develop comprehensive wood fuel strategies and implementation plans for each Member State. It also intends to provide data to assess national capabilities for the implementation of wood fuel programs. · Rural Energy Planning and Environmental Management Training Program. The project aims to stimulate and contribute to the human resource development efforts in the SADC region for sustainable rural energy development, utilization and environmental management. It also aims to develop training program and conduct rural energy planning and environmental management courses in the SADC region on a sustained basis. · Strengthening the Coverage of Wood fuel and Environmental Protection in Relevant SADC Training Institutions. The objective of the project is to strengthen the coverage of wood fuel and environmental protection issues in relevant training institutions in the SADC region. · Program for Biomass Energy Conservation. The project aims to enhance capacities and commitments of governments and developments institutions/organizations to plan and implement integrated biomass energy conservation programs. It also intends to contribute to the improvement of quality of life for the poor rural and urban populations by enabling them to fulfill their energy needs in a socially and environmentally sustainable manner. · SADC Industrial Energy Management. The objectives of the project are to develop energy management expertise in SADC through training and technology transfer. It also aims to determine the energy use patterns and potential for savings in selected sub-sectors (Food and Beverages, and Mining and metals) and develop an industry-government network to promote and coordinate energy management in the various industrial sub-sectors. In addition, the project seeks to develop a capability within Member States engineering firms to plan and undertake energy management projects. · Demand Side Management Opportunities for SADC Utilities. The objectives of the project are to identify sectors/sub-sectors where there are inefficient or peaking end-uses of electricity. It also aims to determine a series of utility demand side management investment programs to encourage industry, commercial establishments and other consumers to adopt these cost-effective means to improve efficiencies or reduce peaking. In addition, the project seeks to bring tariffs in line with the long-run marginal cost of supply to encourage wider user investment in energy efficient technology. · Energy Efficiency Improvements in SADC Heavy Industry. The project aims to provide a preliminary assessment for energy savings potential in a variety of heavy industries, followed by detailed energy audits of plants designated as having a significant savings potential. 211 The following table indicates that the foreign funding requirement amounts to US$ 574.43 million while US$ 28.68 million in under negotiation. Table A.3.22: Ongoing SADC Energy Projects: Funding Status (US$ Million) Project Title EstimatedCost Funding Status Funding Financing Comment/Status under Gap Negotiation Total Foreign Local Secured Source O verall Coordination General Support to the 29.88 23.82 6.06 6.06 ANG Under Energy Sector-TAU 21.34 NOR implementation 2.48 Bel, Bra, Can, EC, SWE, FRA, POR, UK Energy Bulletin - - - - - - - Under Review Documentation Centre 0.31 0.31 - 0.31 NOR Under for Energy Sector implementation Establishment of a 2.50 2.50 - 2.50 Bel Under Regional Energy implementation Planning Network in SADC TAU Office Facilities 1.50 - 1.50 1.50 SADC Under implementation Sub-Total 34.19 26.63 7.56 34.18 0.00 Petroleum Regional Petroleum Training Centre Phase I and II - - - - - - - Completed PhaseIII - - - - - - - Under reformulation Management 1.55 1.55 - - - 0.00 1.55 Funding sought Development and Specialist Training for the SADC Petroleum Sector Joint Petroleum Exploration Program Phase I Task Force - - - - - Completed Phase II Steering - - - - - Completed Committee - - - - - Incl. under Phase Phase III Basin Studies 61.75 52.13 9.62 9.62 SADC 27.73 24.40 IV Phase IV Joint Petroleum Funding sought Exploration Program Investigation of the possible harmonization of petroleum Laws, Rules, Standards, and Regulation Phase I: Inception 0.04 0.04 0.04 - Under negotiation Mission 0.43 0.36 0.07 0.07 ANG 0.36 - Under negotiation Phase II: Working Group I, II and III 0.43 0.36 0.07 0.07 ANG - 0.36 Subject to Phase II Phase III: Working results Group IV and V 0.51 0.44 0.07 0.07 ANG - 0.44 Subject to Phase II Phase IV: Research and results Study Project ANG 1.1 Oil Supply - - - - - - - Suspended from Lobito to the SADC Region TAN. 1..3 0.10 0.10 - 0.10 NOR - - Under Biostratigraphic implementation Reference Collection Sub-total 64.81 54.98 9.83 9.93 28.13 26.75 Coal Manpower Development 0.11 0.11 - - - - 0.11 Funding sought and Training for the Coal Utilization Sub-sector Sub-total 0.11 0.11 - - - - 0.11 Electricity Regional Rural Electrification Program 212 Project Title EstimatedCost Funding Status Funding Financing Comment/Status under Gap Negotiation Total Foreign Local Secured Source Phase I: National Surveys - - - - - - Completed Phase II: Rural 7.00 7.00 - - - 7.00 Funding sought Electrification, Information, Research and Pilot Program Specialized Training in the field of Electric Power Phase I: Pre-feasibility - - - - - - - Completed study Phase II: Power Sector - - - - - - - Completed Training Needs Phase III: Five Year 28.43 23.03 5.39 5.39 SADC - 23.03 Funding sought Regional Power Sector Training Program Plan for Integrated 0.62 0.60 0.02 0.02 ANG - - Under Utilization of the 0.60 POR implementation CUNENE River Basin Computer Model for Analysis and Planning of SADC Transmission Systems Phase I: Preliminary - - - - - - - Completed Study - - - - - - - Withdrawn at Phase II: SADC Power EOM98 Grid Model Coordinated Utilization of Regional Generation and Transmission Capacities Pre-feasibility Study - - - - - - - PhaseI:Inception - - - - - - - Completed Phase II: Intermediate - - - - - - - Completed Phase III: Institutional - - - - - - - Completed MaintenanceDeveloping - - - - - - - Withdrawn at the Program Phases I and II EMM/96 Kafue Gorge Regional 10.08 9.11 0.97 0.58 SADC - 2.73 Under Training Centre 6.77 NOR/SWE implementation PhaseIII- Extension 4.09 2.56 1.53 1.53 SADC - 2.56 Under implementat ion Lightning Research - - - - - - - Withdrawn at the EMM/96 Interconnection of the Northern and Southern Electricity Grids in Angola Phase I: Evaluation study - - - - - - - Completed Phase II: Implementation - - - - - - - Part I: Northern System - - - - - - - Suspended Repair of Gove Dam - - - - - - - Suspended Interconnection of the - - - - - - - Completed BotswanaandZimbabwe Second 220KV Line from 39.00 36.50 2.50 2.50 BOT - 36.50 Deferred unt il Moropule to Gaborone 2002/3 Power Network Expansion for the Southern and Central Region of Lesotho Phase III 10.60 10.60 - - - - 10.60 Funding sought Phase IV 7.70 7.70 - - - - 7.70 Phase V 9.80 9.80 - - - - 9.80 Phase VI 4.50 4.50 - - - - 4.50 Phase VII 10.90 10.90 - - - - 10.90 LES. 3.6 Muela 220.6 220.60 - 220.60 EU - - Under Hydropower Project implementation MAL 3.2 Small - - - - - - - Completed Hydropower Plants in Malawi MAL 3.6 Malawi/Zambia 5.00 3.63 1.38 1.38 MAL, - 3.63 Funding sought Power Cooperation in the ZAM Border Region 213 Project Title EstimatedCost Funding Status Funding Financing Comment/Status under Gap Negotiation Total Foreign Local Secured Source Border Region MOZ 3.2 Master Plan for 0.62 0.62 - - - - 0.62 Reactivated in the Electricity Supply of 1994. Funding Swaziland and sought Mozambique MOZ 3.5 - - - - - - - Phase II completed, Mozambique/Malawi Phase III to be Interconnection of prepared by Electricity Supplies MOTRACO (Phase II and III) Project. MOZ.3.7Reconstruction - - - - - - - Under of Mavuzi Hydropower implementation Station, Mozambique MOZ. 3.12 Cahora Bassa Power for SADC Phases I and II Feasibility - - - - - - - Completed Study PhaseIIIEngineering - - - - - - - Completed Services and Implementation MOZ. 3.13 Control 0.12 0.12 - 0.12 - - - Under Centre for the Supply of implementation the Beira Corridor and Mozambique-Zimbabwe Tie-Line Phase I: Feasibility Study NAM. 3.1 Power Supply 9.40 9.40 - 6.40 NOR - 3.00 Funding partially Cooperation in Border secured. Namibia Regions Between Angola side is funded by and Namibia Norway. Angola side suspended. SWA. 3.1 Dredging of - - - - - - - Completed Mkinkomo Reservoir Development TAN. 3.6 Supply of Sumbawanga in Tanzania Load flow and Cost Estimated Study Phase I - - - - - - - Completed Phase II (Extension) 8.00 8.00 - - - - - Funding sought ZAM 3.2 Upgrading of Kafue Gorge Power Plant Phase II Extension (Training Centre) Phase III Provision of spare parts Phase IV Restoration 54.70 50.22 4.48 50.22 NOR - - Under after Fire Accident 4.48 SADC implementation ZAM. 3.3 Refurbishment of the National Control Centre Zambia: Phase I 8.50 8.50 - 8.50 SWE - - Under Phase II implementation ZAM.3.5PowerLine - - - - - - - Withdrawn at the Carrier Communications EMM/96 on the Northern Transmission System ZAM. 3.6 Refurbishment of Victoria Falls Power Station 0.26 0.25 0.01 0.01 ZAM Under Phase I: Feasibility Study 0.25 EIB implementation 10.00 10.00 - 10.00 - - - Phase II: Implementation Under implementation ZAM.3.7132KV - - - - - - - Feasibility study Tieline Zambia-Malawi completed. The next Feasibility Study stage awaiting tariff negotiations ZAM. 3.9 Power 15.94 14.55 1.39 1.39 ZAM, - 14.55 Funding sought Cooperation Between NAM 214 Project Title EstimatedCost Funding Status Funding Financing Comment/Status under Gap Negotiation Total Foreign Local Secured Source Cooperation Between NAM Zambia and Namibia ZIM. 3.3 Upgrading of - - - - - - - Completed ZESA National Control Centre Sub-Total 465.8 448.18 17.67 320.74 0.00 145.11 5 New and Renewable Source of Energy SADC Program for 1.58 1.58 - 1.40 HOL - - Under financing Energy 0.19 OPEC implementation Services for small-scale Energy Users(FINESSE) SADC renewable Energy 11.70 10.40 1.30 1.30 SADC - 10.40 Funding sought Project SADC Capacity Building - - - - - - - Funding sought on Utilization of Renewable Technologies LES. 4.2 Solar Photovoltaic Power Generation in Rural Areas-Lesotho Pilot 0.08 0.08 - - - - 0.08 Funding sought Project Phase I: Feasibility study Sub-total 13.35 12.05 1.30 2.88 - - 10.47 Wood fuel and Other Traditional Fuels Support to TAU Wood fuel Section PhaseI - - - - - - - Completed Phase II (Extension) 0.78 0.68 0.11 0.11 SADC - 0.68 Funding sought Development of National WoodfuelStrategiesand Plans Phase I: Dev. of TOR for - - - - - - - Completed LES/TAN Phase II: Pilot Study 0.55 0.55 - - 0.55 - Negotiations with LES/TAN Norad PhaseIII:Implementation 0.57 0.47 0.10 0.10 SADC - 0.47 Funding sought Rural Energy Planning 3.35 3.09 0.26 0.26 SADC - - Under and Environment 3.09 HOL implementation Management Training Program Strengtheningthe 7.40 6.73 0.67 - - - 7.40 Funding sought coverage of Wood fuel and Environmental Protection in Relevant SADC Training Institutions Sub-Total 12.64 11.50 1.14 3.55 0.55 8.54 Energy Conservation Industrial Energy 10.00 10.00 - 10.00 CAN - - Under Management implementation Demand Side 0.99 0.99 - 0.99 CAN - - Under Management implementation Opportunities for SADC Utilities Energy Efficiency Improvements in the SADC Heavy Industry PhaseI - Feasibility Study 0.40 0.40 - - - - 0.40 Funding sought Phase II and III- 1.58 1.58 - - - - 1.58 Funding sought Implementation Sub-total 12.97 12.97 - 10.99 - - 1.98 Grand Total 603.9 566.42 37.50 382.28 - 28.68 192.97 Source: SADC Energy. Annual Report July 1999-June 2000. 215 Attachment 3i Cooperation in Tourism Apart from the Protocol on the Development of Tourism, SADC has initiated a Regional Tourism Organization of Southern Africa (RETOSA) in 1996. The main task of this organization is to form a partnership between SADC governments and the private sector. According to the Charter, RETOSA offers different membership categories, with full membership comprising of registered and nationally recognized private sector umbrella organizations and national public sector tourism authorities operating in Member States. Associate membership is available to fee paying, accredited members in SADC countries, whether of the public or private sector. Affiliate members are fee paying but from non-SADC countries. RETOSA's objectives are to: increase the profile of Southern Africa as a holiday destination in the tourist origin markets; to motivate tour operators in the source markets to expand their programs to the region and to package new ones to southern Africa; to increase the awareness of regional customers of the travel opportunities within SADC; and to expand the organization's database and to develop market research programs. For this purpose, RETOSA carries out a wide range of activities, including the maintenance of a regional tourism directory and web-site, production of tourism statistical reports, and research activities such as collaboration with the WTTC to undertake an economic impact study of tourism in the region. SADC has initiated a series of eight projects aimed at strengthening the tourism sector to make it a key area of growth and development in the region. These are: · Internal Distribution Network. The main objective of this project is to set up an efficient network of incoming wholesalers to program and package comprehensive regional multi-destinations tours; to sell these internationally and regionally; and to handle incoming passenger flows. · Strategy for the Development of the Tourism Sector in the SADC. This project aims to evaluate the implementation of the Sectoral Strategic Development Plan for the tourism sector launched in 1993 and to prepare a successor 5 year strategic plans for the sector (the current plan is for 1999- 2004). It also aims to assess the perception of the key stakeholders on the role that the strategy has played in assisting tourism development in the region. · A Univisa System. The aims of the project are to facilitate intra-regional travel for the development of tourism through the easing or removal of travel and visa restrictions and harmonization of immigration procedures; and to facilitate movement of international tourists in the region in order to increase the market share and revenue of the region in world tourism. · HIV/AIDS Strategic Plan for the Tourism Sector within the SADC region. The project covers the period 2000-2004 and aims at formulating HIV/AIDS policy for the Tourism sector in the SADC region and reassuring tourists on the availability of high quality health care in the SADC region. It also aims to support community-based tourism in the SADC region through HIV/AIDS prevention activities. · Classification of Hotels and Tourism Plant. The objectives of the project are to design and implement a standard grading and classification system for hotels, other accommodation establishments and ground operators and achieve uniformity of service standards throughout the region. It also intends to ensure acceptable international standards of services at all tourism plant in operation. · Study on Training of Trainers in the Travel and Tourism Sector for the SADC region. The main objective of this project is to identify the demand for training in the Tourism and Travel sector and to make an assessment of the capacity of training institutions in the SADC member countries to train trainers during the period 2000-2004. · Women in Tourism. The aims of this project are to ensure the development of a policy and institutional framework for gender mainstreaming in the policies and programs in the tourism sector. It also aims to monitor and evaluate the implementation of the 1997 SADC Declaration on Gender and Development and the Gender Program of Action with respect to the tourism sector. The following table summarizes the funding status of these projects. 216 Table A.3.23: Ongoing SADC Tourism Projects: Funding Status (US$ Million) Project Title Estimated Cost Funding Secured Funding Financing Comment/Status under Gap Negotiation Total Foreign Local Amount Source Internal Distribution 0.020 0.020 0.020 Ongoing Network Strategy for the 0.140 0.140 0.140 New Project development of the Tourism Sector in the SADC Region Workshop on UNIVISA 0.085 0.085 0.085 JICA 0.085 Completed System HIV/AIDS Strategic Plan 0.981 0.981 0.981 New Project for the Tourism Sector within the SADC Region Classification of Hotels 0.020 0.020 0.020 In Pipeline and Tourism Plant Training course on 0.065 0.065 0.065 New Project Tourism Statistics Study on Training of 0.100 0.100 0.100 New Project Trainers in the Travel and Tourism Sector for the SADC Region Women in Tourism 0.120 0.120 0.120 New Project Total 1.531 1.531 0.085 1.446 Source: SADC Tourism Sector. Annual Report, July 1999-June 2000. Attachment 3j Food, Agriculture And Natural Resources The following tables summarize the funding status (amounts in US$ million) of projects in the FANR cluster of sectors. Table A3.24: FANR Sector Development Unit (US$ Million) Project Title EstimatedCost FundingSecured Funding Financing Comment/Status Total Foreig Local Amount Source under Gap n negotiation Technical Assistance 3.52 2.20 1.32 1.32 SADC - 2.20 Under Prog. For FANR Implementation Coordination FoodSecurityand 10.75 10.75 0.00 7.50 WB, FAO, - 3.25 Under Rural Dev. HUB JICA, IFAD, Implementation FRA REWS Phase II 2.50 - 2.50 2.50 SADC - - Under Implementation Remote Sensing for 2.40 2.40 - 2.40 EU, NET - - Under ESW Implementation Regional 1.95 1.95 - - - - 1.95 Project scaled down Information System and funding sought Regional Food 1.88 1.88 - 1.88 NET - - Phase I completed Security and Nutrition Information System Regional Food 2.77 2.77 - 2.77 UNDP - - Under Security Database Implementation Project Agriculture 3.90 3.90 - - - - 3.90 Funding being sought Potential Info. System Regional Food 6.50 4.50 2.00 4.50 EU - - Under Security Training 2.00 SADC Implementation Regional 1.50 1.50 - 1.50 ITA, SADC - - Under Communication Implementation Program Grand Total 37.67 31.85 5.82 26.37 - 11.30 Source: SADC. FANR, Annual Report, July 2000-June 2001. 217 TableA.3.25: Agricultural Research and Training (US$ million) Project Title Estimated Cost Funding Secured Funding Financing Comment/Status Total Foreign Local Amount Source under Gap negotiation Land & Water Management Program. Phase I-(Training Component) - - - - - - - Completed in Oct. 1994 Phase II 4.65 4.65 - 4.65 EU - - Under Implementation Management of - - - - - - - Under Reformulation Black Cotton Soil Sorghum and 10.37 10.07 0.30 7.29 USA - - Under Implementation Millet 2.78 FRG Improvement 0.30 SADC Program. Phase III Grain Legume 10.81 10.31 0.50 1.60 FRG - 8.39 Bean & Groundnut under improvement 0.50 SADC Implementation. Cowpea 0.32 ADB to restart when funding available (sought) Training in Research Management Phase I - - - - - - - Completed Phase II 0.18 0.18 - 0.18 ADB - - Under Implementation Agro-forestry 9.11 9.11 - 9.11 CIDA - - Under Implementation Research Program SADC Plant 22.6 11.0 11.6 11.6 SADC - - Under Implementation Genetic 11.0 NORDICS Resource Centre Maize & Wheat 6.05 5.20 0.85 5.20 EEC - - Under Implementation Improvement 0.85 SADC Strengthening 17.0 13.4 3.6 10.8 FRG - - Eight MSc Programs Faculties of 0.05 UK underway. Additional Agriculture, 2.55 GTZ funding sought Forestry and 3.6 SADC Veterinary Medicine Dairy Livestock 13.3 9.35 3.95 3.95 SADC - 9.35 Funding sought Productivity Improvement in large and smallholder farmers in Southern Africa Regional 10.23 8.5 1.73 1.0 BMZ - 6.68 Funding sought Collaborative 1.73 SADC Network for 0.82 BMZ Vegetable Research and Development Network on - - - - - - - Being developed Drought Animal Power and Other Farm Power Equipment Southern 8.61 7.0 1.61 7.0 USA - - Under Implementation African Root & 1.61 SADC Tubes Crops Research Network (SARNET) Wool & Mohair 2.30 2.27 0.03 0.03 SADC - 2.27 Funding sought Improvement Biosystematics 3.64 3.44 0.20 0.32 SADC - 3.32 Under Implementation Networks for Southern Africa (SAFRINET) Total 118.85 94.48 24.37 88.84 - 30.01 Source: SADC. FANR, Annual Report, July 2000-June 2001. 218 Table: A.3.26: Crop Sector (US$ Million) Project Title Estimated Cost Funding Secured Funding Finan- Comment/Status Total Foreign Local Amount Source under cing negotiation Gap Support to the 1.70 1.00 0.70 1.00 BEL - 0.70 Additional Funding Coordination Unit being sought SADC Soil Fertility 0.75 0.75 - - - - 0.75 Funding being sought Analysis Services Regional Food Reserve 0.0 0.0 - - - - 0.0 Under review Project Regional Post Production 3.60 3.60 - - - - 3.60 Funding sought Food Losses Reduction & Food Processing - Phase II Feasibility Study on - - - - - - - Completed Regional Seed Production & Supply Regional Seed Technology 4.17 2.55 1.62 - - - 4.17 Funding being sought and Information Centre Plant Quarantine 1.01 1.01 - - - - 1.01 Funding being sought Production and Breeding 0.20 0.20 - - - - 0.20 Funding being sought of Vegetable Seed Harmonization of Seed 0.86 0.86 - - - - 0.86 Funding being sought Laws Seed Production on Small 5.55 5.55 - - - - 5.55 Funding being sought Scale Farms in SADC Small Scale Seed 3.68 3.60 0.08 3.60 GER - - Under Production for Self Help 0.08 SADC implementation Groups Regional Seed Quality 0.06 0.06 - - - - 0.06 Funding sought Laboratory and National Sub-Units SADC Seed Security 0.20 0.15 0.05 0.15 AUSTRI - - Pre-implementation Network 0.05 A Phase started in June SADC Improved Irrigation in the 0.50 0.48 0.02 0.48 AUSTRI - - Study completed and SADC Region 0.02 A recommended SADC projects Regional Irrigation 0.70 0.65 0.05 0.05 SADC - 0.65 Funding being sought Development Strengthening and 1.40 1.12 0.28 1.12 FRG - - Under Coordination of Migrant 0.28 SADC implementation Pest Control Grand Total 24.38 21.58 2.80 6.83 - - 17.55 Source: SADC. FANR, Annual Report, July 2000-June 2001. Table A.3.27: Livestock Production and Animal Disease Control (US$ Million) Project Title Estimated Cost Funding Secured Funding Finan- Comment/Status Total Foreign Local Amount Source under cing negotiation Gap RegionalHeartwater 4.0 4.0 - 4.0 USAID - - Under Research & Vaccine implementation Production Training of Animal Health 0.11 0.11 - 0.11 SWE - - Arrangement are Auxiliary Personnel underwayfor5 th Region course to be held in Zambia Training on Capacity 0.2 0.2 - - 0.2 - Funding is being Building of National sought. Negotiations Veterinary Services ongoing with FAO Emergency CBPP Control 5.3 5.3 - - - 5.3 - Negotiations ongoing in SADC with Japan and EU Regional Rangeland 5.3 5.3 - - - - 5.3 Newly reformulated Management & Training project Management of Farm 2.3 2.3 - 2.3 UNDP - - Under Animal Genetic Resources implementation in SADC Assistance for the 5.2 2.4 2.8 2.8 SADC - 2.4 Under Establishment & implementation. Organization of the Additionalfunding National Laboratory in sought. Angola Regional Foot & Mouth 15.7 15.7 - 15.7 EEC - - Under Disease Control-Phase II implementation 219 Regional Training Centre 4.8 4.8 - 0.0 4.8 - Funding under for Meat Inspection & negotiation Meat Technology-Phase II Regional Tsetse & 28.8 28.8 - 28.8 EEC - - Under Trypanosomiasis implementation Total 71.71 68.91 2.80 53.71 10.30 7.70 Source: SADC. FANR, Annual Report, July 2000-June 2001. Table A.3.28: Marine Fisheries (US$ Million) Project Title Estimated Cost Funding Secured Funding Finan- Comment/Status Total Foreign Local Amount Source under cing negotiation Gap SADC Regional Fisheries 2.70 2.70 - 2.70 DFID - - Under Information System implementation Support to SADC Fisheries 0.13 0.13 - 0.13 ICE, - - Under Coordination Unit NOR, implementation FRG Assessment of Marine 20.0 20.0 - 1.33 GTZ, Fisheries Resources of the ICE, SADC Region NOR 0.18 SADC Marine Fisheries Training - - - - - - - New project Harmonization of Marine 0.25 0.25 - 0.25 FAO - - Yet to be developed Fisheries Policy within SADC Coastal Countries SADC Monitoring Control 16.1 16.1 - 16.1 EU - - Funding secured: 6.2 and Surveillance of Fishing (RIP) & 9.8 (NIP) Activities Large Marine Ecosystem 14.0 14.0 - 14.0 GEF - - Under Benguela Current implementation Total 53.18 53.18 - 34.69 - - 18.49 Source: SADC. FANR, Annual Report, July 2000-June 2001. Table A.3.29: Inland Fisheries (US$ Million) Project Title Estimated Cost Funding Secured Funding Finan- Comment/Status Total Foreign Local Amount Source under cing negotiation Gap Regional Fisheries 9.67 9.67 - 2.2 NORAD - 7.47 Funding sought Training Program , ICE Regional Fisheries 7.26 6.09 1.17 0.05 - - 7.21 Phase I completed. Information Program Phases II & III not funded Aquaculture for Local 9.27 9.27 - 7.07 SWE - - Phase I completed Communities (ALCOM) 2.20 BEL Phase 2 Support to SADC Fisheries 0.97 0.80 0.17 0.80 ICE - - Under Coordination Unit 0.17 SADC implementation Conservation of 10.0 10.0 - 10.0 CIDA - - Under Biodiversity of Inland implementation since Waters of the SADC June 1995 Region Zambia/Zimbabwe 8.34 8.34 - 0.77 DEN - - Under 7.57 NOR implementation Total 45.51 44.17 1.34 30.83 - - Source: SADC. FANR, Annual Report, July 2000-June 2001. Table A.3.30: Forestry (US$ Million) Project Title Estimated Cost Funding Secured Funding Finan- Comment/Status Total Foreign Local Amount Source under cing negotiation Gap Regional Forestry 15.0 15.0 - - - 15.0 - Funding under Inventory Project negotiation Tree Seed Centre Network 14.0 14.0 - 14.0 CIDA - - Under implementation Southern Africa 8.89 7.29 1.6 7.29 GEF - 0.0 Under Biodiversity Program et.al. implementation 1.6 SADC (GEF, USAID, CIDA, WB & Food Foundation total contribution$7.29m) Improvement & 5.2 4.1 1.1 0.6 FIN, 3.5 1.1 Additionalfunding Strengthening of Forestry SADC sought Colleges in the SADC 220 Region (Phase III) Management of Indigenous 5.3 5.3 - 5.3 FRG - - Under Forests Implementation Establishment of Plants 1.0 0.94 0.06 0.94 ITA - 0.06 Under Resources Regional implementation Network in SADC SADC Timber 0.2 0.2 - - - - 0.2 Funding sought Organization Strengthening of Forestry 29.19 27.34 1.85 0.07 SADC - 29.12 Funding sought and Forest Products Research Institutions in SADC Development of Forestry 2.5 1.7 0.8 - - - 2.5 Funding sought Management Information Network in the SADC Region Centre for Advanced 4.6 4.6 - 4.6 NOR - - Under Practical Forestry implementation Training Total 85.88 80.47 5.41 34.4 18.5 32.98 Source: SADC. FANR, Annual Report, July 2000-June 2001. According to SADC information, cooperation in the Environment and Land Management sub- sector (SADC ELMS), is represented by six projects: · Capacity Building for Environmental Impact Assessment (EIA) in the Southern African Development Community Region: Its main objectives are amongst others: (i) to assist member states to develop environmental impact assessment (EIA) guidelines for national projects implementation; (ii) to run courses and workshops for capacity building for EIA with national institutions, NGO's and CBO's. · Plan of Action for Kalahari-Namib Region: The primary goals are: (i) to design sustainable land use management systems as an overall strategy of controlling and reducing desertification; (ii) to gain a better understanding of existing practices and evaluate the capability of recommended activities and practices from the point of view of the indigenous knowledge of the local communities. · SADC Environmental Information Systems Program: The objectives of this project are: (i) to improve the collection, storage, exchange and management of environmental data for sustainable development in the SADC region; (ii) to strengthen capacity in environmental information systems in Member States. The First Phase of the Project was funded by UNEP. · Environmental Education (E.E.) Program: This project aims at enabling interaction among SADC Environmental Education agencies by optimizing information sharing and building capacity for environmental problem solving and effective environmental management to achieve sustainable living. It also aims at enabling networking partners, at all levels, to strengthen environmental education process for equitable and sustainable development in the SADC region. The three-year EE program came to an end in June 2000. A five-year program has been developed to continue EE activities. SIDA has agreed to fund this program and DANCED will fund one of the components. · Land Degradation and Desertification Control Program: Two objectives: (i) to combat land degradation and desertification and mitigate the effects of drought in the SADC Region, leading to improved living conditions, in particular at the community level; (ii) to initiate a process of coordinating designed SADC sub-regional activities to combat land degradation and desertification and mitigate the effects of drought and support member states in the development and implementation of National Action Programs. Phase I of Sub-Program I on Support to National Capacity Building started in January 2000. The subsequent phases will start once the Phase I has been completed. · Strengthening of Desert Research Foundation of Namibia (DRFN): The objective is to institute a capacity for the DRFN to provide training and research and improve information access such that all SADC members have available the necessary expertise and information with which to implement the Convention to Combat Desertification. The First Phase of this project is under implementation. 221 In addition, the sector is also initiating development of transboundary projects for environment and natural resources management. These include: (i) Integrated Management of Natural Resources in the Limpopo Basin, under the Integrated Land and Water Management program of the World Bank; (ii) SADC Regional Waste Management Program; (iii) Transboundary Air Pollution in Southern Africa; (iv) Management of Persistent Organic Pollutants in Southern Africa; and (v) Clean Technology Initiative. The SADC Council of Ministers at its meeting in Swaziland, February 2000, approved the development of a SADC Protocol on the Environment. __________________________________________________________________________________ Attachment 3k Institutional Restructuring of SADC The 1999 Maputo Summit instructed an exercise to review and rationalize the institutions and operations of SADC. The Council of Ministers then constituted a Review Committee at officials level consisting of the Mozambique (Chair), Namibia (Deputy Chair), South Africa (Outgoing Chair) and Zimbabwe (Chair of the Organ) and approved the following Terms of Reference (TOR) for this Committee. · Examine the objectives and functions of SADC as provided for in the Declaration and the Treaty with a view to elaborating a common agenda for the Community in line with the objectives · Study the program and activities of SADC in order to streamline and prioritize the program of action in line with the elaborated common agenda · Prioritize the activities with the aim of achieving sustainable growth and development to impact on economic growth and poverty reduction · Review the current institutional structure and organizational frameworks with a view to making it consistent with the priorities of the organization; · Review and streamline the management structure of all SADC institutions including the Organ on Politics, Defense and Security; · Examine the decision-making process in order to recommend a speedy and effective implementation of the organization's activities · Review the current funding methods of the SADC activities and recommend a sustainable resource mobilization strategy consistent with the priorities of the Community; · Examine sustainable ways in which all stakeholders could participate in the funding of the regional development program · Criteria for future membership of SADC In consideration of the issues identified by the Review Committee and its recommendations, the 2001 Windhoek Summit thus approved a range of far reaching recommendations pertaining to the principles, objectives, strategies, institutional structure and management system of SADC as well as steps for implementation of the reforms. These recommendations or Summit summarized below, and in some instances these are supplemented by a note on potential caveats in the decisions. 1 Principles, Objectives, Strategies and Strategic Priorities: · Member States were unanimous that the objectives of SADC as provided for under Article 5 of the Treaty remain relevant and valid, but Summit agreed that: o The ultimate objective in addressing poverty should be poverty eradication and that this ultimate objective be included in the objectives, priorities and Common Agenda of SADC o Combating of HIV/AIDS be included in SADCpriorities. 222 · The hierarchy of objectives (`the Common Agenda') should be: o The promotion of sustainable and equitable economic growth and socio-economic development that will ensure poverty alleviation with the ultimate objective of its eradication; o Promotion of common political values, systems and other shared values which are transmitted through institutions which are democratic, legitimate and effective; and o The consolidation and maintenance of democracy, peace and security. · While the objectives in the Declaration and Treaty are well defined, in practice, the SADC Common Agenda has neither been quite clear nor has its implementation and progress in its realization been subject to regular performance monitoring and measurement. Since 1992: o There has been little pragmatism in prioritizing objectives, goals and intermediate targets for regional cooperation and integration, taking into account the capacities of Member States and their economies. o There has been little differentiation between national and regional priorities. Consequently policies, programs and strategies failed to lead towards regional integration. o There has been a lack of clarity on what is meant by regional priorities, whether it is a sum total of national priorities or regional cross-sectoral issues. o There has been insufficient harmonization of natio nal, regional, continental (vis-à-vis the Abuja Treaty) and global agendas. Against this background, Summit approved the use of appropriate selection criteria for Common Agenda activities and their prioritization such as: o subsidiarity, implying that activities should be undertaken at levels of government where they can best be handled; i.e., at global, regional, national or sub-national level; o integration, implying that activities should be undertaken which directly integrate markets for goods, services and factors of production (capital and labor); o development, facilitation and promotion of trade and investment, suggesting that activities should be undertaken which develop, facilitate or promote trade and investment; o dynamic and scale gains, implying that activities should be undertaken which can be carried out through regionally coordinated investments or operations by means of which substantial cost savings and investment and employment benefits could be realized; and o additionality, implying that activities should be undertaken that increase regional output, capacity or resources. · Given the principles, objectives, strategies and common agenda issues and coherence among these as well as the problems experienced in making progress with the regional integration agenda7, Summit directed that aRegional Indicative Strategic Development Plan be designed, based, inter alia, on the following priority areas: * Economics: development of measures to alleviate poverty with a view to its ultimate eradication; agricultural development and sustainable utilization of natural resources; development of a common market through a step-by-step approach, while restructuring and integrating the economies of member States; harmonization of sound macroeconomic policies and maintenance of an environment conducive to both local and foreign investment; development of deliberate policies for industrialization policies; and promotion of economic and social infrastructural development. * Political: to consolidate democratic governance; and establishment of a sustainable and effective mechanism for conflict prevention, management and resolution. * Social: Mainstreaming of gender in the process of community building; human resources development, utilization and management; combating of HIV/AIDS and other deadly (multi- 7 An overview of current SADC programs has revealed a plethora of activities that do not necessarily or at least directly support the objective of regional economic integration. All those activities compete for the same scarce human and financial resources and are sometimes even duplications. There is therefore need for a focused and time-bound agenda around which all other activities could evolve. 223 country common?) diseases; and development of programs for the improvement of quality of health and social welfare. * Others: development of science and technology, research and development; development of effective disaster preparedness and management mechanisms; and consolidation of international cooperation with other regional groupings. 2 Institutional structure, 2001 Summit also approved the following recommendations regarding the institutional structure and functioning of institutional mechanisms: (i) Summit The functions of Summit should remain in accordance with the Treaty (Article 10), including having the responsibility to decide on · The overall regional policies; · The creation of regional institutions; · The admission of new members; · The adoption of legal instruments for the implementation of the provisions of the Treaty; · The appointment of the Chairperson and Vice chairperson; and · The appointment of the Secretary General. The Summit shall be the supreme policy-making body for the Organization to which all other, structures will be reporting through the Council of Ministers. Summit should meet at least twice a year. (ii) Organ The Organ shall be responsible for matters related to Politics, Defense and Security in the region. It shall operate on a Troika system and its Chairperson shall report to the Chairperson of the Summit. The Chairperson & Vice-Chairperson of the Organ shall rotate on an annual basis. The Chairperson of the organ shall not simultaneously hold the Chair of the Summit. The structure, operations and functions of the Organ shall be regulated by the protocol on Politics, Defense and Security Cooperation. It was agreed that the Member State holding the Chair of the organ should provide the Secretariat services. Subsequently, the latter decision has been reviewed in favor of the SADC Secretariat providing secretariat services for the Organ. It was argued that a temporary secretariat (changing on an annual basis from country to country) might be appropriate if its function would be confined to organization and management of Organ meetings. However, a temporary secretariat would have difficulty to deal effectively with an enriched range of functions such as supply of information, interaction with the conflict management divisions at the OAU (AU) and UN, management of an early warning information system to sensitize the Organ and its sub-structures of developments in SADC, monitoring the implementation of decisions of Summit, undertaking strategic control, planning and management of the programs of the Organ, etc.] (iii) Council The Council's functions should remain as provided for under Article 11 of the SADC Treaty. Council will oversee the effective implementation of SADC policies and programs, with the Integrated Committee of Ministers reporting to it. The Council will be composed of Ministers responsible for SADC Affairs in Member States and shall report to the Summit. Council shall also meet at least twice per annum. 224 (iv) Tribunal This is an autonomous legal body and its functions should remain as provided for under Article 16 of the Treaty. (v) Integrated Committee of Ministers The Integrated Committee of Ministers will oversee each of the core areas of co-operation, (namely Trade, industry, Finance and investment; Infrastructure and Services; Food, Agriculture and Natural Resources [FANR]; Social and Human Development and Special Programs.) and shall report to Council. This committee should provide policy guidance to the Secretariat, make decisions on matters pertaining to the Directorates as well as monitor and evaluate their work; and should monitor and control the implementation of the proposed Regional Indicative Strategic Development Plan, once this is approved by Council. This committee should have decision-making powers ad referendum to ensure rapid implementation of the programs that otherwise would wait for a formal meeting of Council. (vi) Committee of Ministers of Foreign Affairs, Defense & Security The Committee of Ministers of Foreign Affairs, Defense & Security shall report to the Organ. In addition, Ministers of Foreign Affairs shall meet as and when required. (vii) Standing Committee of Officials This Committee shall be a technical advisory committee to Council as provided for in the Treaty (Article 13) and a clearinghouse for all documents to be submitted for consideration to Council. However, Article 13(a) should be relaxed to allow for an official from the Ministry that is the SADC National Contact Point, rather than only from the Ministries of Finance or Economic Planning. A potential problem with this decision is the following: within SADC, decisions are made by consensus. As previously, the Standing Committee of Officials may again present a bottleneck in decision-making in terms of either time or quality of proposals submitted to Council. (viii) SADC National Committees and Sectoral Committees These Committees should be composed of key stakeholders notably government, the private sector and civil society in Member States. Their main functions will be to provide inputs at the national level in the formulation of regional policies, strategies, the SADC Program of Action as well as coordinate and oversee the implementation of these programs at the national level. These committees shall also be responsible for the initiation of projects and issue papers as an input to the preparation of the Regional Indicative Strategic Development Plan. These committees will be working closely with the Secretariat to provide inputs from national levels. (ix) Secretariat Being the main executing organ of the organization, the Secretariat has communication links with all policy organs and functionally reports to Council through the Committee of Senior Officials. The Secretariat should be strengthened to effectively perform its functions as provided for under the Treaty's Article 14. The Secretariat should also perform the following functions: · Gender mainstreaming in all SADC programs & activities; · Provision of technical and advisory services to the Commissions and SCUs until such time that they are transformed; · Organization and servicing of the meetings of the Troika and any other committees established by the Summit, Council and the Troika on an ad hoc basis; 225 · Submission of harmonized policies and programs to the Council for consideration and approval; · Monitoring and evaluating the implementation of regional policies and programs; · Collation and dissemination of information on the community and maintenance of a reliable database; · Development of capacity, infrastructure and maintenance of intra-regional information communication technology; · Mobilization of resources, coordination and harmonization of the programs and projects with cooperating partners; · Devising appropriate strategies for self-financing and income-generating activities and investment; · Management of special programs and projects; and · Undertaking of research on Community Building and the integration process. Functional Relationships within the Secretariat: · The Executive Secretary: The Executive Secretary shall be the Chief Executive Officer of the Organization responsible for the overall functioning of the Secretariat and shall report to Council as provided for under Article 15 of the Treaty. In the performance of her/his duty, the Deputy Executive Secretary shall assist the Executive Secretary. In this regard, the Executive Secretary shall delegate some of her/his responsibilities to the Deputy. · Structure of Secretariat: The key institution within the Secretariat is the Department of Strategic Planning, Gender and Development and Policy Harmonization. The Chief Director shall report to the Executive Secretary and shall be the head of this Department, which shall comprise four Directorates: The Directorate on Trade, Industry, Finance and Investment should be established by August 2001, that on Food, Agriculture and Natural Resources by December 2001 and the remaining Directorates in 2002 and 2003. o The functions of the Trade, Finance, Industry & Investment Directorate will be: harmonization of policies and gender development strategies and programs; market integration; macroeconomic issues; investment promotion; industrial development, particularly SMEs; development of mining and beneficiation of mineral resources; sustainable and equitable economic development; inter-regional and multilateral economic cooperation; functional, efficient and development-oriented financial sector; the acquisition, adaptation and application of science and technology to enhance competitiveness. o The functions of the Infrastructure and Services Directorate will be: harmonization of policies and gender development strategies and programs; harmonization of transport and communications policies; coordination of development, maintenance and administration of transport, water and energy infrastructure; promotion of an enabling environment for investment; coordination of development of tourism infrastructure and related services. o The functions of the Food, Agriculture and Natural Resources Directorate will be: Ensuring sustainable food security policies and programs; harmonization in phytosanitary, sanitary, crop and animal husbandry policies; o Development of measures to increase agricultural output and the development of agro-based industries; harmonization of policies and programs aimed at effective and sustainable utilization of national resources such as water, wildlife, fisheries, forestry, etc.; development and harmonization of sound environmental management policies. o The Functions of the Social and Human Development and Special programs Directorate will be: harmonization of educational, skills development and training policies, strategies and programs; harmonization of policies towards social welfare for the vulnerable groups; harmonization of health care policies and standards; harmonization of employment policies and labor standards; coordination of policy development to effectively combat the HIV/AIDS pandemic and all other communicable diseases; management of special programs such as combating illicit drugs, small arms trafficking as well as de-mining; ensuring the management of the SADC regional disaster management centre; harmonization and coordination of 226 cultural, information and sports policies and programs; harmonization of policies at local, national and regional level · The heads of the Directorates, Gender Advisor Commission, Commissions and SCUs (while these are still in existence) will be members of a Strategic Planning, Gender and Development and Policy Harmonization Board, which will be chaired by the Executive Secretary. This Board shall be a consultative Body that will make regular inputs into the work of the integrated Ministerial Committee to serve as a Think-Tank for Community Building, regional integration and development. It has direct functional relationship with SADC National Committees and technically advises the Integrated Committees of Ministers · The Structure of the Secretariat should also have the following units: legal affairs; internal audit; knowledge and information, including statistics and library services; administration and support services (responsible for personnel, conferences, record-keeping, procurement and stock control and management and disposal of assets) and finance (responsible for budgeting, treasury and accounting). The Legal Affairs, internal Audit, Knowledge and Information, Finance, Administration and Support Services Units shall report to the Office of the Executive Secretary. (x) Commissions and SCUs Commissions and SCUs should be phased out within a period of two years, but while they continue to exist, the Commissions and SCUs will technically report to the Executive Secretary through the Strategic Planning, Gender and Development and Policy Harmonization Department. Further recommendations are the following: · Commissions and the SCUs should be responsible through the proposed Strategic Planning, Gender and Development and Policy Harmonization Department; · Additional regional funding in line with agreed priorities (jointly identified with Integrated Committee of Ministers & the Strategic Planning Department) should be provided for the operations & programs of SCUs. (This shall be based on a percentage to be decided upon as determined by the medium-term expenditure framework budget presented for consideration by Council). However, additional cost has to be shared between the host countries and regional resources in order to meet the set standards and agreed priorities; · Council has to determine the structure and staffing levels of Commissions &SCUs, depending on the priorities, functions, efficiency and cost-benefit consideration; · Minimum staffing requirements, standards, performance indicators/criteria and procedures in the Commissions and SCUs should be established and standardized in preparation for the transformation; (xi) Management System · The Troika: The Troika management system, having been introduced during SA's 3-year term as SADC Chair, should be formalized and provided for in the Treaty. It should function as a Steering Committee to ensure speedy decision-making and facilitate timely implementation of decisions as well as provide policy direction to SADC institutions in between regular SADC meeting. The Troika shall comprise the Outgoing, Incumbent and Incoming Chairperson, but other Member States may be co-opted into the Troika as and when necessary. The Troika system shall operate at the levels of Summit, Organ, Council and Standing Committee of Officials. · Other management systems and procedures: Given the problems associated with the current management system within SADC, e.g. delays in decision-making processes associated with the hierarchical structure of the organization; lack of common procedures, rules and regulations among SADC institutions; overlapping reporting channels; 227 lack of prioritization, common standards, benchmarks, timeframes, performance indicators and monitoring & evaluation mechanisms; and varying application of modern management systems and techniques across SADC institutions, it was recommended that Summit approve the following: · A 10-year Regional Indicative Development Plan, with a rolling budget, should be developed to provide strategic direction to all Sectors; · A Harmonization Board should be established; · Decisions-making authority should be delegated to the various institutional levels as appropriate; · Rules, procedures and regulations of the organization should be streamlined; · Clear reporting channels should be adhered to; · SADC National Committees should be established as fora for consultations and consensus building; · A broader, inclusive management structure for the Secretariat should be put in place, comprising the Executive Secretary and his Deputy, the Chief Director, four Heads of Directorates and Heads of the Units / Departments attached to the Office of the Executive Secretary; · Resource allocation should be on the basis of identified priorities; · Standards and performance indicators for SADC institutions should be set and capacity building measures should be put in place; · Job specifications, descriptions and grading of regional staff and functions of various structures should be clearly defined; · Appropriate information and communication technology should be established at the Secretariat for purposes of promoting and enhancing data collection, information dissemination and managing databases for planning and management purposes; (xii) Resource mobilization Given the fact that about 80% of funds for SADC's project portfolio come from foreign sources and that `hard' projects that can carry some cost-recovery have not been packaged in a way, which would attract private sector e.a. financing, it was recommended that Summit approve: · Investigation into the establishment of a Regional Development Fund and the development of Investment Programs to generate additional resources for the organization to implement the SPA with a view to ensure sustainability; and · Investigation into and putting into place a deliberate strategy for the involvement of stakeholders notably the private sector in the funding and implementation of the SPA (xiii) A change in membership contributions: Due to the disparities in levels of income and wealth among countries as well as in the direct benefits that they derive from membership in SADC (e.g. the two island Member States), Summit was invited to approve that a study be undertaken to establish an equitable formula for membership contributions ­ on the basis of criteria agreed upon through consensus by Member States. (xiv) Admission of New Members There are criteria, which have been approved by Summit in 1995 and that remain valid for accession of new member Countries, however admission procedures require streamlining in order to properly allow assessment of membership application before consideration by Summit. Thus Summit approved the following recommendations: · The moratorium on admission of new members should be maintained; · The region should consolidate its current membership rather than expanding it; and · Procedures for admission of new members should be amended and improved to include a provision for Council to consider applications before submission to Summit. 228 ATTACHMENT 4 INVOLVEMENT BY INTERNATIONAL DEVELOPMENT PARTNERS IN REGIONAL INTEGRATION IN SOUTHERN AFRICA 229 Attachment 4a DBSA's activities in SADC countries Table A.4.1: Loans to SADC Member States up till FY1999/2000 as at 31 March (Millions of rands) Cumulative Total COUNTRY @ 31/03/94 94/95 95/96 96/97 97/98 98/99 1999/2000 Total Multi-state - 0.0% - 0.0% - 0.0% 44 1.8% 200 4.7% 150 7.3% - 0.0% 394 1.9% Botswana - 0.0% - 0.0% - 0.0% - 0.0% 242 5.7% - 0.0% - 0.0% 242 1.1% Malawi - 0.0% - 0.0% - 0.0% - 0.0% 48 1.1% - 0.0% 6 0.3% 54 0.3% Lesotho 561 6.8% 35 3.6% - 0.0% 213 8.7% 389 9.1% 251 12.3% - 0.0% 1,449 6.9% Mozambique - 0.0% - 0.0% 3 0.3% (0) 0.0% 410 9.6% 185 9.1% - 0.0% 598 2.8% South Africa 7,695 93.1% 946 96.4% 1,081 99.6% 2,124 87.1% 2,176 51.0% 1,406 68.8% 1,273 63.4% 16,701 79.2% Namibia - 0.0% - 0.0% - 0.0% - 0.0% 263 6.2% - 0.0% 220 11.0% 483 2.3% Swaziland 5 0.1% 0 0.0% 1 0.1% 59 2.4% 325 7.6% 25 1.2% 97 4.8% 512 2.4% Zimbabwe - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% Zambia - 0.0% - 0.0% - 0.0% - 0.0% 210 4.9% 26 1.3% 82 4.1% 318 1.5% Tanzania - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% Mauratius - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% 330 16.4% 330 1.6% Seychells - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% - 0.0% TOTAL 8,261 100.0% 981 100.0% 1,085 100.0% 2,439 100.0% 4,263 100.0% 2,043 100.0% 2,008 100.0% 21,081 100.0% 230 Attachment 4b Selected Regional Activities of the World Bank in Southern Africa Box A.4.1: World Bank Projects for Environment and Natural Resources Management in SADC SADC Regional Water Activities The Bank's direct involvement in regional water issues in southern Africa is recent and can be dated from early 1998 when the Bank supported the SADC Water Sector in the finalization of the Regional Strategic Action Plan (RSAP) for Integrated Water Resources Development and Management- 1999-2004; and when the Bank attended SADC Water Sector's First Round Table Conference in Geneva from 10-11 December 1998. The main goal of this conference was to promote policy dialogue, build consensus and mobilize resources to implement the region's long- term policies and strategies in water resources management. The Bank has since been supporting SADC Water Sector Coordination Unit (WSCU) in developing project concept notes (PCNs) for identified priority interventions and advising to formulate the right strategies to implement the RSAP. With the assistance of the Bank and other donors, including United Nations Development Program (UNDP), USAID, DFID, Swedish International Development Agency (SIDA), African Development Bank (AfDB), Development Bank of Southern Africa (DBSA), SADC Water Sector Coordination Unit has developed 3 1PCNs for proposed projects, mostly designed to put the enabling environment for sustainable management of the sub-region's scarce water resources. Among the 31 priority interventions, the Bank has expressed interest to support only 4 of them, including: · Protection and Strategic Use of Ground Water for Drought Management in SADC, which constitutes part of the project: "Guidelines for Ground Water Management in SADC"; · Integrated Land and Water Management in SADC; · Regional Project to Control Infestation and Translocation of Aquatic Weeds; · Implementation Program for the SADC Protocol on Shared Watercourse Systems. The first three are Global Environment Facility (GEF)'s projects while the fourth is expected to be an institutional development technical assistance to be provided with other donor partners. The Bank is also a member of SADC's Water Strategic Reference Group composed of key donors, including UNDP, USAID, DFID, AfDB, SIDA, DBSA, DANIDA, and a few others and the Development Bank of South Africa. The role of this group is to provide strategic advice for the implementation of the "Strategic Action Plan" defined by SADC Water Unit. Apart from this, the Bank has also been conducting three `small' internal studies to lay the basis for in-depth analytical work related to SADC Regional Water. These are: · Support for Flood Mitigation in the SADC Region: This project was launched following on the devastating floods in the sub -region. The main purpose is to assist countries affected by flood (Mozambique, South Africa, Swaziland, Zimbabwe) to come together and discuss how to establish some institutional mechanisms to exchange information and coordinate activities at the operational level. The effort may lead to the creation of a regional centre for disaster management which may ultimately include Zambia and Malawi. Some initial progress has been made in supporting multi-country facilitation for flood mitigation in southern Africa. The major actions activities so far relate to: (i) Taking stock of the different ongoing activities, studies and technical assistance being provided by different donors, agencies and international NGOs. (ii) Participation in the October'2000 International Mozambique Flood Conference. · Stakeholder Analysis of Zambezi River Basin: The analysis involves the entire basin with eight riparian countries: Angola, Botswana, Lesotho, Malawi, Mozambique, Namibia, Zambia, and Zimbabwe. Though the Republic of South Africa is not a riparian state, its stakes and potential roles are to be examined as well. The purpose is to explore the stakes, positions and underlying interests of the riparian nations and to identify constraints to and opportunities for cooperation in the joint management of the Zambezi River Basin. About 30% of this analytical work has been executed with the use of trust funds. · Strategy Paper for SADC Regional Water: The purpose is to define and streamline Bank work in line with the SADC's `Regional Strategic Action Plan (RSAP) for Integrated Water Resources Development and Management', through demonstrating the links and implications of integrated water resource management (climate variability, drought, flood, WRM policy framework, legal and institutional framework) and macroeconomic performances at national and sub-regional levels. Other examples of Bank activities aimed at regional co -operation on water issues in SADC include: · The SADC-HYCOS (Hydrological Cycle Observing System): A project was prepared with the assistance from the EU and World Meteorological Organization to build capacity for the development of regional water resources information systems. · The Southern African FRIEND (Flow Regimes from International Experimental and Network Data): where support included those for (i) a common hydrological database architecture standard for national hydrological services in seven SADC countries; (ii) human resources development; and (ii) research into the spatial and temporal characteristics of extreme hydrological events. · Freshwater Quality Monitoring Program: a program developed within the UNEP/WHO/GLOBAL Environmental Monitoring System (GEMS) water program in co-operation with WMO and the United Nations Educational, Scientific and Cultural Organization (UNESCO). This program is already active in several regions and provides education and logistical support. · The WaterNet Project: has been developed at the University of Zimbabwe and is a regional initiative that offers graduate-level training in water resources management, as well as research and information exchange. · The Lesotho Highlands Water Project: a joint project between Lesotho and South Africa to meet the increasing demand for water in the Vaal river system and generate hydropower in Lesotho is currently the largest infrastructure project in the region. · The Zambezi River Basin Action Plan (ZACPLAN): aimed at fostering regional co-operation among the Zambezi basin states for environmentally sound management of the common water resources of the common water resources. The Zambezi River Basin Action Plan Project (ZACPRO2) is one of ZACPLAN's projects. · Program for Regional Information Sharing and Management on Environmental and Sustainable Development: aimed at assisting the SADC Member States to improve planning and management of natural resources in the region. Specific objectives include: to ensure appropriate circulation of environmental information; to promote active involvement of decision -makers in environmental information use; to provide users with environmental information that meets their needs; and to strengthen national capacities for environmental information management. 231 Box A.4. 2: World Bank Support for the SADC Payment System Project When the SADC Treaty was approved in 1992 by a Summit Meeting of the Heads of State of the participating countries, South Africa was given the responsibility of administrating the Finance and Investment Protocol. The South African Reserve Bank initiated the establishment of the SADC Committee of Central Bank Governors as a premise of fi nancial sector cooperation among member countries. The main goal of the Committee is to promote the exchange of experience and incite countries to help each other to build adequate structure for the central bank, the private banking sector and the financial markets. Weaknesses in the payment system can result in the lack of confidence in the banking system, inefficient use of the available money stock, and constitutes an impediment to the development of financial sector. Recognizing these risks, the SADC Committee of Central Bank Governors has taken the lead to foster financial cooperation among Member States through concrete initiatives such as the SADC Payment System Project. The main objective of the project is to help each SADC country build an appropriate payment system strategy. The project also aims at defining a coordinated regional approach to cross-border payments. Recognizing that a sound regional payment system derives from a robust domestic system, the project focuses primarily on the strengthening of national payment system. The 14 SADC countries are expected to participate to the project. International organizations involved in the project include the Bank of International Settlements (BIS), the IMF and the World Bank. The implementation of the project has four phases: · In the short term (Phase 1), the objectives are to initiate the project, sensitize the financial stakeholders in each of the countries in respect of payment system; gather information and develop capacity building in the SADC region. · In the medium term (Phases 2), the main goal is to define a vision and strategy for the payment system reform of each SADC country. · In the long term (Phases 3 and 4), the project will focus on the implementation of the vision and strategies for each of the SADC countries to support free trade within the region and the development of a unified vision and strategic framework. Project approach and initiatives: The project aims at developing capacity through the organization of meetings (workshops and seminars). The main goal of these meetings is to create and enhance awareness on payment system, develop payment system knowledge and relationships between central and commercial bankers. The project also comprises a green book, a website, a newsletter (Vulindlela) and a video. Attachment 4c Table A.4.2. International Agencies Active in the SADC Water Sector Agency National Level Regional Level Canadian International Development Swaziland, Mozambique, Zimbabwe, Wetlands, hydrology, hydro-power Agency (CIDA) South Africa Denmark Co-operation for Botswana Environment and Development (DANCED) Deutsche Gessellschaft fur South Africa, Zambia, Zimbabwe Technische Zusammenarbeit (GTZ) Department for International Namibia, South A frica, Zimbabwe, FRIEND project, Water Management Development (DFID) Mozambique, Lesotho, Tanzania, Zambia European Union (EU) SADC-HYCOS Global Water Partnership (GWP) Protocol Implementation, SATAC Norwegian Agency for Development Tanzania, Zambia, Zimbabwe, Wetlands, Zacplan Co-operation (NORAD) Namibia Netherlands International Mozambique, Zimbabwe, Lesotho, Wetlands, Zacplan Development Agency (IDGIS) Tanzania, Zambia Swedish International Development Namibia, Zimbabwe, Zambia, Awareness and education program, shared Agency (SIDA) Tanzania, Botswana rivers, SADC-WSCU, OKACOM, Zacpro 6, ZAMCOM United Nations Development All countries SADC Water Round Table Process, Komati Program Basin, UNSG Special Initiative on Africa World Bank Angola, Malawi, Namibia, SSA Hydrological Assessment Mozambique, Lesotho, South Africa, Zimbabwe, Zambia Global Environment Facility (GEF) Lake Malawi, Lake Victoria, Okavango World Metrological Organization SADC-HYCOS (WMO) Japan International Co-operation South Africa Agency (JICA) Source: E Soderstrom, USAID, Botswana 232 Attachment 4d Donor Support to COMESA EU Support to COMESA Table A.4.3: EU Projects in COMESA PROJECT DESCRIPTION PERIOD OF SUPPORT VALUE (EURO) Phase II ­ ASYCUDA/EUROTAGE Project: Regional Harmonization of 4 years form 1999 12.8 million Customers and Trade Statistics Systems Project Phase II ­ COMESA Regional Integration Project 5 years from 1999 8.2 million Phase I ­ Advanced Cargo Information system (ACCS) and Standard, Completed (10 months from 0.83 million Quality, Metrology and Testing (SQMT) January 2000) TOTAL 22.83 MILLION Other project activities supported by the EU include: (i) Part of the 4 co-sponsors supporting the Regional Integration Facilitation Forum (RIFF) successor to the Cross-Border Initiative; and (ii) From mid 1998 through to 1999, the EU assisted COMESA with technical and financial resources for the following: o compilation of the Common Tariff Nomenclature (CTN) and operations and administrative structures for the Common External Tariff (CET) in a COMESA customs union; o the Monetary Harmonization Program and Regional Trade Facilitation Project at the Clearing House in Harare ­ Zimbabwe The United States Agency for International Development (USAID) support to COMESA Support to COMESA from USAID largely began from 1998 with the signing of Limited Scope Grant Agreements for: Economic Cooperation; and, Conflict Prevention and Mitigation between two parties. Under these Limited Scope Agreements, USAID has offered financial and technic al support to COMESA of the order of US $ 8.2 million. Examples of the areas of support provided by USAID include the following: · compilation of a handbook, "COMESA and the World Trade Organization: Challenges and Opportunities in the WTO Round"; · Capacity building support to the COMESA Court of Justice; · Review and enhancement of the COMESA Rules of Origin Protocol; · Extension of the Third­Party Motor Insurance (Yellow Card) Scheme to more countries in the Southern African region outside COMESA i.e. Mozambique and SACU member countries; · Preparation of the Regional Investor Road Map. Table A.4.4: Economic Growth Partnership Program from 1998-2000 LSGA Components FY1998 FY 1999 FY2000 TOTAL Business Partnership $ 610,000 $ 570,000 $ 0 $1,180,000 Reg. Telecommunication Harmonization $ 250,000 $ 0 $ 290,000 $ 540,000 Global Information Infrastructure $ 600,000 $ 42,000 $ 450,000 $1,092,000 WTO Training and Dissemination $ 250,000 $ 250,000 $ 400,000 $ 900,000 Regional Investors' Roadmap $ 300,000 $ 200,000 $ 350,000 $ 850,000 Regional Trade Analytical Agenda $ 500,000 $ 0 $ 0 $ 500,000 COMESA Institutional Strengthening $ 200,000 $ 190,000 $ 200,000 $ 590,000 Global Technology Network 0 0 $ 300,000 $ 300,000 *Eastern Africa Sub-Regional Support Initiative for the Advancement of Women Contributions by other International Cooperating Partners COMESA has entered into a number of cooperation agreements with various other ICPs. Examples of the support being received by COMESA are set out below in the table below. 233 Table A.4.5: Support by Other International donors to COMESA ICP ORGANISATION NATURE OF SUPPORT VALUE (US$) United National Development Trade Development and Promotion Program. Executed jointly with the ITC- Not indicated Program (UNDP) UNCTAD/WTO Development of the Growth Triangle Investment strategy pilot program 0.1 million covering Zambia, Malawi and Mozambique. Also funded the feasibility study. COMESA Regional Inland Fisheries Resources Management 0.038 million Study to develop a common agricultural policy for the COMESA region 0.06 million IMF/World Bank IMF studies to assess the Impact of the FTA on Government Revenues of Not indicated COMESA member states World Bank support to he Regional Trade Facilitation Project to provide t Not indicated Political risk cover for COMESA imports and exports IMF support to develop a program of work for examining the fiscal implications Not indicated of the CET and, a framework for closer monetary cooperation World Trade Organization (WTO) COMESA has observer status to a number of WTO bodies Not applicable Food and Agricultural Organization Support to the project on Upgrading Quality and Safety in fish 0.344 million (FAO) Commonwealth Secretariat Funded the regional workshop on the establishment of a Common Marine Not indicated (COMESA) Fisheries Investment and Management Policy Establishment of a COMESA Horticultural Association in six COMESA Not indicated countries Support in trade issues with WTO, ACP-EU and electronic xxxxx Not indicated Common Fund for Commodities Study on Production and Marketing of value-added Fishery Products Not indicated (CFC) United Nations Industrial Supporting projects in the Iron and Sector of COMESA countries to enhance Not indicated Development Organization (UNIDO) productivity Canadian International Development Supporting a Research Network established to carry out studies on Regional Phase 1 ­ 0.5 Research Centre (IDRC) Integration and Multi-Lateral Economic Arrangements million Phase II ­ 0.273 million Organization of African Unit/African Supported a study on Public Procurement Rules; and a workshop on the Not indicated Economic Community (OAU/AEC) COMESA Trade Regime for French speaking member states Economic Commission for Africa Assisted COMESA in finalizing the re-structuring and re-organization of the Not indicated (ECA) Secretariat Sponsored COMESA to phase II of the Tokyo International Conference on Not indicated African Development (TICAD-II), a Japanese funded project African Development Bank (ADB) Have a cooperation Agreement which enables COMESA member states access Not applicable ADB financing support within the framework of the regional integration programs Public Procurement Reform Project: harmonization of public procurement Approved US$1.5 rules, regulation & procedures through COMESA Directives on Public million grant Procurement. The project also aims to improve national procurement systems, to strengthen capacity of the COMESA Member States in public procurement, and to encourage more awareness of procurement opportunities within COMESA. The COMESA draft budget for 2001 indicated the following support from donors, although a large number of activities still required funding at the time: Table A.4.6: Areas of support Support area Costs USS Donor Regional Customs Bond Guarantee System 196,000 USAID Barriers to trade in insurance services 10,000 UNCTAD Regional Road Investors Map 9,000 Donor Implementation program for growth triangles / SDIs 10,000 Donor Private sector promotion and networking 250,000 Donors Policy framework for & mainstreaming of gender 250,000 Donors Harmonization of SPS, health & environment regulations 20,000 FAO/CAB Upgrading of quality and safety of fish 344,000 FAO Agriculture & industrial policy & strategy 30,000 FAO 30,000 Donor Increase production of value-added fisheries products 378,525 CFC 36,750 FAO Increase rice production 339,000 CFC Enhanced cooperation on issues of peace & security 223,217 USAID Operationalize Regional ATI 600,00 EU · Publication of quarterly air transport journal 377,000 EU · Establishment of Air Transport Regulatory Board · Implementation of Phases I & II of the air transport liberalization program · Adoption of air transport competition rules 234 · Establishment of Comesa airports facilitation committee Strengthen Drought Monitoring Centers ­ Harare, Nairobi 10,000 WMO Installation of METEOSAT 2nd generation ground receiving stations ? Donors Launch COMTEL company 50,000 USAID & NTO's Harmonization of telecoms regulations 390,000 USAID Revised harmonized road transit charges 20,000 USAID Updating of hydrographic maps for coastal and inland waterways NA WMO, IMO, PMAESA Develop Program of cooperation on postal services NA Donors IT networking of coordinating Ministries 208,000 USAID Regional Competition Policy 200,000 EU Policy on Public Procurement 50,000 EU Determine impact of CET/FTA on govt. revenues & competitiveness 550,000 EU Install Payroll System­ at Secretariat 25,000 USAID Attachment 4e USAID-RCSA Support for SADC1 1 Increased Regional Capacity to Influence Democratic Performance STATUS: Continuing PLANNED FY 2001 OBLIGATION AND FUNDING SOURCE: USD 1,251,000 DA PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: USD 1,364,000 DA INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: 2004 The USAID Strategic Objective (SO) in Democracy and Governance (DG) was developed in close collaboration with Southern Africans, and is based on the premise that in the SADC region, with its unique history, countries and societies are more inclined to look to fellow member states than to outside the region when it comes to democratic norms and practices. Therefore, USAID's basic approach is to support key partners in the region who foster and advocate for democratic `best practices.' This effort is critical given the tendency of governments in the region towards a consensus approach that, without active interventions by pro-democratic institutions, could result in adoption of democratic norms and practices based on the `least common denominator.' USAID's regional democracy program is focused in three areas: 1) anti-corruption initiatives; 2) electoral and political processes; and 3) media pluralism, freedom and sustainability. USAID continues to support regional partner organizations to develop linkages and mutually supportive information and advocacy networks to promote democratic values, norms and processes. 2 A More Integrated Regional Market STATUS: Continuing PLANNED FY 2001 OBLIGATION AND FUNDING SOURCE: USD 9,000,000 DA PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: USD 5,000,000 DA INITIAL OBLIGATION: FY 1995 ESTIMATED COMPLETION DATE: FY 2004 This initiative enhances Southern Africa's prospects for economic growth by supporting removal of trade barriers. The activities support the establishment of the SADC Free Trade Area (FTA) as well as the improvement of telecommunications, transport and electric power infrastructure efficiency among the member states of SADC. Historically, the region economic potential was hampered as each country or grouping of countries (the five SACU countries) operated as nine separate markets with in the region. An integrated regional market will allow for economies of scale and lower infrastructure costs through shared systems, as well as the freer movement of goods and services, all of which will boost economic activity, employment and incomes. 1 This section draws on information provided by the USAID Regional Centre for Southern Africa, Gaborone. Similar and comparable information could not be readily obtained for the USAID Regional Centre, located in Kenya, providing support for regional activities in the Eastern Africa region. 235 During FY 2000 the regional market integration initiative contributed to several key improvements including: (i) the launching of the SADC FTA, (ii) further intra-SADC import tariff reductions; (iii) the development of private sector advocacy to support trade policy reform; (iv) further improvement in telecommunications services; (v) the establishment of the Coordination Centre at the Southern African Power Pool (SAPP) to promote short-term electricity trade in the region; (vi) policy changes in road and rail transport that will allow private sector to compete with public sector monopolies in these areas, thus creating a more competitive environment in the region; and 7) further progress in establishing the RCSA-funded rail cargo tracking system. 3 Broadened U.S.-SADC Cooperation STATUS: Continuing PLANNED FY 2001 OBLIGATION AND FUNDING SOURCE: $1,000,000 ESF PROPOSED FY 2002 OBLIGATION AND FUNDING SOURCE: $1,000,000 ESF INITIAL OBLIGATION: FY 1999 ESTIMATED COMPLETION DATE: FY 2004 The purpose of this Special Objective (SpO) is to strengthen the relationship and develop stronger economic ties between the member states of SADC and the United States (U.S.). In recognition of the need to strengthen the relationship, the U.S. Government (USG) and SADC have agreed to conduct an annual U.S. - SADC Forum. The Forum aims to facilitate dialogue regarding regional issues of mutual interest and critical importance. The inaugural forum was held in April 1999. A second Forum was held in May 2000. These Forums have brought together senior US government officials and high-ranking SADC and national officials to explore issues of mutual concern, demonstrate USG and SADC commitment to the region, and further assist the SADC states to develop a sense of common identity and position in dealing with the broader global community. To this end, a set of mutually agreed activities, financed through Economic Support Funds (ESF), is being undertaken to further the U.S.-SADC Forum agenda. Activities supported by this program included the following: (i) assist SADC in developing the legal basis necessary to successfully stimulate investment and expand trade by providing training related to intellectual property rights from the Department of Commerce's Commercial Law Development Program; (ii) provide a Trade Advisor to the SADC Secretariat to assist in the implementation of the SADC Trade Protocol through provision of analytical expertise and policy advice. The Advisor will also help strengthen the institutional capacity of the SADC Secretariat; (iii) provide assistance to conduct analysis of the trade data and revenue implications of implementing the proposed SADC FTA; (iv) provide support for SADC's regional HIV/AIDS activities; (v) assist SADC in the development of desert ecotourism; (vi) assist SADC in disaster preparedness management and; (vii) provide technical assistance and training to SADC member s on the use of a natural resource base; (viii) increase Southern African capacity and management experience in conflict prevention and resolution; and (ix) create three model border facilities to serve as demonstration projects. 4 Increased Regional Cooperation in the Management of Shared Natural Resources STATUS: New (approved 1/2000) PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: USD 2,976,000 DA PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: USD 3,336,000 DA INITIAL OBLIGATION: FY 2000 ESTIMATED COMPLETION DATE: FY2004 Southern Africa's most valuable resources -- water, migratory wildlife, and major ecosystems --are shared-- as they are contiguous areas that span 3-4 countries. Actions in one country's wildlife preserve affect the wildlife in the adjoining country. These shared natural resources are important both for the food security of the population directly depending on them as well as for the tourist industry in the region. Therefore, USAID's strategy aims to promote sustainable cross-border management of these resources. Cooperation in natural resources management is imperative, not only to protect these limited resources but also to enable the region's nature-based tourism industry to thrive. USAID is 236 implementing its strategy by promoting the establishment of Transboundary Natural Resources Management Areas (TBNRMAs). These are relatively large tracts of land that straddle the borders of two or more countries and incorporate a large-scale ecosystem. The TBNRMAs present an exceptional environment for implementing viable practices for sustaining improvements to the environment while simultaneously ensuring that rural communities directly benefit from the increased economic activity. USAID also supports creation of a policy environment in governments, SADC sector coordinating units, NGOs and training institutes that provide support services to the nascent TBNRMAs. Investments in improved ecological monitoring inform management decisions and reinforce implementation of the overall strategy. USAID support has resulted in significant progress in preliminary activities needed to establish four TBNRMAs, and advanced negotiations with SADC/Environmental Sector coordinating units for drafting a regional environmental protocol. With regard to the TBNRMAs, participating governments agreed in principle to the establishment of the Four Corners TBNRMA, located at a popular tourist destination. USAID's implementing partner, the International Union for Conservation of Nature (IUCN) led a participatory process whereby an agreement was reached to establish a TBNRMA on the Zambezi River. Donor support stimulated the governments involved to take steps to establish the Gaza-Kruger-Gonarezhou TBNRMA--the world's largest game park, which includes Kruger National Park, Southern Africa's most popular tourist destination. The framework for the establishment of the Limpopo River Basin TBNRMA is established through the SADC Water Protocol on Shared Watercourses. USAID has supported the development of a SADC Environmental Protocol and the ratification of the SADC Wildlife Management and Law Enforcement Protocol. Both of these protocols contribute to the formulation of common standards in the management of shared natural resources. IUCN concluded a seven-country assessment that forms the basis of a Sport Hunting Policy for the region. USAID support to NGOs resulted in adoption of environmental education as a key principle in at least one country in the region. USAID scholarships resulted in an additional 20 people being trained in wildlife management at the South African Wildlife College. A further 25 government planners were trained in natural resources accounting through an activity co-managed by the universities of New York and University of Pretoria. As a result of this training, these planners are now able to factor environmental costs into government accounting calculations and also to attach market-related prices to alternative development scenarios. 5 Expanded Commercial Markets for Agricultural Technologies and Commodities in the SADC Region STATUS: New (Approved January 2000) PLANNED FY 2000 OBLIGATION AND FUNDING SOURCE: USD 3,122,000 DA PROPOSED FY 2001 OBLIGATION AND FUNDING SOURCE: USD 3,300,000 DA INITIAL OBLIGATION: FY 2000 ESTIMATED COMPLETION DATE: FY 2004 This SO supports increases in household incomes and food security in Southern Africa through commercialization of dryland agriculture and the adoption of improved food crop varieties and animal health products. USAID's market-based strategy for agricultural development in the region addresses essential supply and demand constraints including non-tariff barriers related to agriculture, i.e., grades and standards, sanitary and phytosanitary regulations, transfer of germplasm, and intellectual property rights. Private sector agribusiness and agro-industrial associations will promote free trade policies, laws and regulations. USAID is working with selected Southern African countries, each of which has a comparative advantage in the target commodities, stimulating regional trade and investment. In the area of technology development, USAID supported the development of 21 new technologies in FY2000. These include a farm level mechanical grain cleaner capable of economically removing sand and stones from the sorghum before milling. This process makes sorghum purchased from small 237 farmers more acceptable by sorghum processing industries. Demand for sorghum by milling industries is expected to increase. Farmers are benefiting directly from marketing a higher quality and higher-priced product. The South African Root Crops Research Network (SARRNET), a USAID- funded project, introduced a motorized chipping and flour-making machine for cassava farmers in Malawi. The machine produces better quality chips, cassava flour, and cassava starch. Women who are, generally, the primary processors, can save several hours of daily processing time with this new machinery. As a result, farmers are able to increase profits by selling their higher quality improved chips directly to private industry. In the area of private sector participation in commercialization of technology, nurseries established by NGOs and farmer's organizations planted 187 hectares of cassava and 165 hectares of sweet potatoes, to multiply improved planting material in preparation for the 1999/2000 planting season. This has resulted in the planting of approximately 229,000 hectares of cassava and 13,000 hectares of new varieties of sweet potato. Because family farmers frequently trade planting material amongst themselves, this process sustains the program at the community level. However to expand distribution, higher levels of commercialization is required. Meeting this need are NGOs and related organizations that buy planting materials from public multiplication sites established by SARRNET and then sell the improved materials both directly to farmers or via community-level outlets. The NGOs also provide a certain level of extension services to farmers. In technology adoption, a total of 1059 tons of sorghum and 49 tons of pearl millet improved seed were distributed to farmers for the 2000/1 planting season. Approximately 296,000 farmers, 15% of total sorghum farmers in the region, used the improved seed. The USAID-funded Sorghum and Millet Improvement Project (SMIP) activities continue to promote regional germplasm sharing, generate genotypes for commercialization and promote alternative seed delivery systems. Eighteen NGOs, two private organizations and 27 public institutions participated in multiplication and distribution of cassava and sweet potato planting materials. As a result of USAID-supported education and advocacy in the area of market expansion, over 15 industries in four countries have started or substantially increased industrial use of cassava as a substitute for imported commodities. Several additional industries are showing an interest. In Malawi, four main industrial consumers of cassava flour have increased total utilization to 1,160 tons. This amount has a potential to increase to over 7,000 tons. Sorghum and pearl millet grain used for industrial purposes increased by nearly two percent in 2000. As a result, USAID-supported technology has helped industries in the region realize huge savings. A textile manufacturing company in Malawi, which produces over 12,000,000 meters of cloth per year, is saving US$108,000 per year by using cassava starch. In the area of food security and income generation, adoption of drought-tolerant crops has enhanced food security in the region. The SARRNET 2000 survey report on the use of cassava and sweet potato confirmed that root crops contributed over 30% to the national food balance sheet. 238