Regional Integration in 
Southern Africa Vol. 1 

South Africa’s
International
Trade Diplomacy
Implications for
Regional Integration 
 

A study conducted for
the
Friederich Ebert Stiftung by:
Peter Draper, SAIIA
Philip Alves, SAIIA
Mmatlou Kalaba, TIPS 
May/June 2006  

Deepening processes of economic integration requires willingness on the part of member states involved in such processes to pool sovereignty. Yet in the SADCcontext it is not clear whether member states are willing to cede real sovereignty, orat least a sufficient quantum to construct a real customs union by 2008 as proposedunder the RISDP. Furthermore, it is well-known that the region is divided on thisquestion with a number of member states “hedging their bets” through membershipof other regional bodies. 

In South Africa much political and institutional capacity has been expended inreestablishing SACU as the core platform from which to integrate into the globaleconomy. So the extent of the South African government’s political commitment tothe SADC Customs Union project (a key RISDP goal) is not clear. If South Africa werean “ordinary” SADC member state this need not necessarily constitute a problem.But it is not. It dominates the region economically (accounting for about 60% ofSADC total trade and about 70% of SADC GDP)[1], rendering it indispensable for anyeconomic integration process. 

The logic of north-south economic integration, which arguably describes well thepattern of South Africa’s commercial links with the region, is compelling: it reinforcescomparative advantages, promotes income convergence, and over time should alsopromote knowledge and skills transfers. In the region only South Africa has therequisite economic capability and levels of diversification to drive economic integrationin a mutually beneficial manner. 

Yet at the same time as South Africa is integrating with the region, it is alsoconducting an active trade diplomacy agenda across the world. Agreements currentlyunder negotiation at various levels and in different forums have the potential tosubstantially alter the playing field: in South Africa, regionally, and internationally.These potential agreements will have major implications for the conduct of businessin the region. 

a. First, SACU, and not just South Africa, is negotiating these arrangements. Thisprocess should strengthen SACU’s institutions and separate it further from theregion in terms of its global connectedness and the efficiency and effectiveness ofits internal workings. 

b. Flowing from this, as SACU’s negotiated concessions start to bite they will haveimplications for regional businesses concerned with accessing the South Africanmarket. 

c. This will intensify regional competition, hopefully generating positive spillovers in terms of competitiveness, consumer benefits, and regional industrial relocation. 

d. However, depending on how regional producers respond it may undermine theprocess of regional economic integration by foreclosing economic opportunitiesopened up through the SADC FTA. 

Therefore, in order to better understand the trajectory and parameters of regionaleconomic integration in Southern Africa, it is necessary to get to grips with SouthAfrica’s trade diplomacy, and for the purposes of the broader FES project relate this toits implications for the goals put forward in terms of the RISDP. 

This assessment begins with an analysis of African development priorities,particularly with respect to foreign direct investment (FDI) needs and trade. That setsthe scene for a focused analysis of South Africa’s African expansion into Africa via FDIand trade, as well as South Africa’s and SACU’s global expansion via bilateral tradeagreements with non-African trade partners, and the implications these hold forregional integration processes.

 Finally, a detailed quantitative analysis explores the nature of the trading relationshipsbetween South Africa and its SADC partners. It outlines the products and industrieswhere SADC producers can expect more competition in the SACU markets fromproducers in extra-African countries with whom SACU pursues FTAs. It attempts tolink tariff liberalization under the SADC Trade Protocol and any increases in intra-SADC trade. It conducts an analysis of the likely trade creation and trade diversion effectsof South Africa’s opening to SADC producers. Last, it analyses problems with rules oforigin in a selected range of commodities that are trade within SADC.

The report concludes with some thoughts on the implications of all of the precedingfor economic integration and development in Southern Africa.