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Key Economic Data 
  2003 2002 2001 Ranking(2003)
Millions of US $ 159,886 104,235 113,300 29
GNI per capita
 US $ 2,780 2,600 2,820 93
Ranking is given out of 208 nations - (data from the World Bank)

Books on South Africa

Update No: 068 - (03/09/07)

South African President Thabo Mbeki fired his deputy health minister August 9 amidst controversy over a foreign trip and reported disagreements with the health minister over HIV/Aids policies. The decision comes after media reports that Madlala-Routledge went on an unauthorised trip to Madrid for an AIDS conference, with her son and a consultant, costing R160,000. Madlala-Routledge is best known for being the outspoken and fiercely independent deputy to South Africa's health minister, Manto Tshabalala-Msimang. She has reportedly taken a stronger line on the HIV/Aids pandemic than her minister. Mbeki's decision was attacked by South Africa's official opposition in parliament. Mike Waters, health spokesperson for the Democratic Alliance, said the dismissal was "a disastrous blow for the war on Aids". Her sacking was also condemned by Aids activists. They say she played a critical role in changing South African policy towards the treatment of HIV/Aids, moving it towards a more science-based approach. Health Minister Manto Tshabalala-Msimang had for years propagated the idea that the virus could be combated by diet. 

Manto Tshabalala-Msimang now faces fresh controversy following revelations she is abusing her position to conceal chronic alcoholism and has obtained a liver transplant. She is further accused of robbing patients while a hospital superintendent in the 1970's. The opposition has called on Mbeki to sack his health minister calling her a " moral and legal liability." Scrutiny of Tshabalala-Msimang's conduct has become politically charged because Mbeki backed her in the power struggle with sacked Nozizwe Madlala-Routledge. The dismissal caused uproar among doctors and Aids activists, who describe Tshabalala-Msimang as a national embarrassment because of her views on AIDS. Mbeki continues to support Tshabalala-Msimang, and many see the sacking of the more orthodox deputy as evidence the Mbeki remains an "AIDS denialist", who questions the link between HIV and the disease. TAC founder and leader Zackie Achmat has suggested Health Minister Manto Tshabalala-Msimang has inordinate power over the president owing to the fact her husband (Mendi Msimang), is the treasurer-general of the ANC.

Despite the country being hit by a spate of strikes, worse inflation than expected and rising interest rates, the economy is expected to grow at 5% this year, the same rate as last year and faster than previously forecast. The Bureau for Economic Research (BER) revised this year's growth forecast August 14. This rises from the 4,8% estimated in April, mainly as a result of upwardly revised capital expenditure plans from public corporations such as Eskom and Transnet, as well as better than expected private residential investment during the first quarter of this year. However, the independent research group forecast gross domestic product (GDP) to slow marginally to 4,8% next year as consumers start feeling the pinch of higher interest rates. 

South Africa's second quarter Gross Domestic Product (GDP) figure for 2007 has come in at 4.5 percent, following 4.7 percent growth in the first quarter, reports Statistics South Africa (Stats SA). Executive Manager of National Accounts at Stats SA, Joe de Beer, said the slow down in GDP is mostly linked to the manufacturing sector. "[Data indicates the manufacturing sector] slowed down a lot in the second quarter only posting growth of half a percent, and it carries the weight of about a sixth of the economy. The main drivers behind the 4.5 percent GDP figure include finance, real estate and business services industry with 1.5 percent. The GDP figure is substantially lower than previous figures such as 5.6 percent in the fourth quarter of 2006; however, it is the 35th consecutive, positive growth indication for the country since 1998. 

The International Monetary Fund (IMF) has given South Africa's economy a broad thumbs up, but does not think growth will meet the 6% expansion rate targeted by the government for 2010 and beyond. In a report released by the treasury August 6, the IMF said economic growth would decelerate to 4,5% next year, versus government forecasts that the pace will quicken to 5,1%. Finance Minister Trevor Manuel said this was largely because the treasury was more upbeat on the strength of investment from South Africa's public and private sectors, which is expected to replace consumer demand as the economy's main growth engine. The IMF projected annual average growth in South Africa's economy at 4,8% over the next five years. "South Africa has made considerable economic progress in the past decade," it said. The country's steady expansion "benefited the rest of the region". "

The second summit between the European Union (EU) and Africa, will take place in the Portuguese capital of Lisbon in December. EU member states and African countries held their first summit in the Egyptian capital of Cairo in 2000, with the aim of promoting relations between the two continents. The second EU-Africa gathering was originally slated to take place in 2003, but was postponed indefinitely after the imposition of sanctions on Zimbabwe by the EU and due to Britain's objection to the presence of Zimbabwe President Robert Mugabe in the event. South Africa's Minister of Foreign Affairs, Nkosazana Dlamini Zuma assured that Zimbabwe would participate. She explained that Zimbabwe, as one of the 53 member states of the AU, will be part of the summit. 

There is a hesitancy on the part of African countries to host the US's new dedicated command for the continent. "The Africom [the US Africa Command] initiative. This sentiment was expressed by Defence Minister Mosiuoa Lekota expressed August 29. The 14-country Southern African Development Community had taken a decision that none of its members would be willing to host US forces. In reply to a question as to whether this decision had been communicated to the United States, Lekota indicated that a decision made by the continental body, the African Union (AU), would likely be communicated by the Addis Ababa administration through the relevant channels. The defence minister added, however, that "it is not unnatural" that one or two countries on the continent may differ from this position, but indicated that a decision not host US armed forces would likely be upheld by the AU's 53 members in the interest of unity.

Rising food and energy costs have been flagged as the main contributors to the Monetary Policy Committee's (MPC) decision to hike the repo rate by the expected 50 basis points to 10 percent. "Having considered recent developments, the MPC has decided that a further adjustment in the monetary policy stance is required in order to ensure that CPIX inflation returns to within the target range," said Xolile Guma, Deputy Governor of the Reserve Bank in Pretoria on August 16. "Accordingly, the repo rate is adjusted by 50 basis points to 10 percent per annum with effect from 17 August 2007." This in turn has led to commercial banks adjusting their prime interest rate to consumers to 13 percent from 12.5 percent. Guma noted that inflation had increased at the rate of 6.4 percent in the year ended June due to the rising costs of food and energy. This is the highest level inflation has reached since September 2003.

A South African minister has said there is no need to build camps to cope with an influx of people fleeing the crisis in neighbouring Zimbabwe. The Home Affairs minister, Nosiviwe Mapisa-Nqakula, made her remarks after meeting the head of the United Nations refugees agency, Antonio Guterres. Mr Guterres told a news conference that contingency plans for a wave of Zimbabwean migrants are now in place. An estimated 3,000 Zimbabweans cross the border daily into South Africa. Most fleeing Zimbabweans are desperate for food, money and jobs. By any definition it is a serious humanitarian crisis. And Mr Guterres has been touring the region looking at ways of dealing with it. Now, Mrs Mapisa-Nqakula says building camps is the wrong approach. After meeting Mr Guterres in Johannesburg, Mrs Mapise Nqakula said the government's current policy of integration remains their preferred strategy and they had no plans to force Zimbabweans into camps. It was a policy the high commissioner endorsed. Camps, he said, should be the last resort. But to a certain extent the high commissioner's and the government's hands are tied. Legally they can only help those who are fleeing persecution or who apply for asylum. Most Zimbabweans are economic migrants who are not willing to risk deportation, preferring instead to avoid the authorities altogether.

Mbeki Adopts Mugabe Line On Non-Existent 'Sanctions'
There are no sanctions currently imposed on Zimbabwe by Western nations or anyone else. There are targeted sanctions that affect only the ruling elite assets and their ability to travel. Yet Robert Mugabe, who is acknowledged by many as a master of propaganda, has managed to create a media frenzy around this issue, constantly blaming sanctions for destroying Zimbabwe's economy. Now South Africa's President Thabo Mbeki is reported to have adopted this spin. Media reports quote Mbeki as saying SADC should "do all that it can to help Zimbabwe address the issue of sanctions," which are hurting the country's economy. In a report back about discussions on Zimbabwe that took place at the recent SADC summit in Lusaka, Mbeki is said to have blamed Western nations, including the US, UK and Australia, for imposing these so-called sanctions on Zimbabwe. Mbeki also accused the media of fabricating false information suggesting that the Heads of State had been divided over the SADC secretariat report on Zimbabwe, which was presented in Lusaka at the recent summit. He is quoted saying: "If anything, the heads of state are united in their resolve to do what is necessary to help Zimbabweans to find a lasting solution to the socio-economic and political problems." The South African president is also quoted as saying: "Sanctions also damage the image of Zimbabwe, causing a severe blow to her tourist sector." Mbeki made other policy recommendations, but it is the "sanctions" issue that has aroused concern. Piers Pigou, a researcher on Southern Africa at The National Archives in South Africa, said there is a media war taking place between those who support Mugabe and those who want to see him go. He described the whole sanctions issue as "nonsense which is being peddled by ZANU-PF and its apologists." He said sanctions are a smokescreen that is not really there but it has given SADC and Africa in general a "headache." Pigou said issues are sometimes over-exaggerated or twisted by both sides to achieve a certain purpose. Pigou also blamed the lack of direct information from Mbeki and SADC leaders for some of confusion that is making the rounds in reports on Zimbabwe. He said Mbeki's "quiet diplomacy" has led to a broader problem of misrepresentation by the media, and his ability to explain things clearly has been problematic."

Mbeki Upbeat On Zimbabwe Solution
Despite many declarations from politicians in Zimbabwe that the discussions brokered by President Thabo Mbeki were going nowhere, Mbeki declared August 30 that he believed the Zimbabweans when they said they could resolve their problems and ensure a free and fair election. Mbeki's confidence in the facilitation process that he heads, came only hours after Movement for Democratic Change (MDC) leader Morgan Tsvangirai told an audience in Australia that the only way the crisis could be resolved would be for President Robert Mugabe to be given indemnity from prosecution, because only then would he leave office. 

Mbeki also flatly rejected any action by SA that was not in the context of the Southern African Development Community (SADC) mandate. He was mandated by an extraordinary summit of the SADC about five months ago to get the parties in Zimbabwe talking. This followed attacks on opposition leaders by Zimbabwe police. Facing MPs across the floor of the National Assembly, Mbeki said: "We are not going to get involved in any kind of regime change in Zimbabwe. We cannot decide for them." He insisted that only Zimbabweans could decide their future. In sharp contrast to statements from Zimbabwean Justice Minister Patrick Chinamasa that there was no need for negotiations with the opposition MDC, Mbeki insisted that Zanu (PF), the two MDC factions and Zimbabwe civil society generally were convinced that they could achieve a settlement that would deliver a peaceful and fair election. "I believe the Zimbabweans about their own country, and they all say that it is possible," Mbeki said. He said Zanu (PF) and the two MDC factions "are meeting, have been meeting, and will continue to meet" to address the climate that was necessary for free and fair elections. Both African Christian Democratic Party MP Cheryllin Dudley and Democratic Alliance (DA) MP Mark Lowe had asked Mbeki what frightened, terrorised and beaten Zimbabweans should do. Lowe said that a recent DA fact-finding mission to the border had encountered only fear and human tragedy, and asked why international pressure could not be used against Mugabe to achieve change in much the same way as the ANC had defeated apartheid. Mbeki said the opposition wanted to beat Zimbabweans with a stick to get them to engage when they were ready do so.

Cosatu Slams SADC Inaction Over Zimbabwe Crisis
The Congress of South African Trade Unions (COSATU) has criticised what it calls the lack of any real progress at the recent Southern African Development Community (SADC) summit meeting in Lusaka, Zambia. The meeting was supposed to have discussed measures aimed at resolving Zimbabwe's political and economic crisis but COSATU took exception to the lack of transparency in the way heads of state discussed the issue. The union says 80 percent unemployment, inflation officially pegged at over 7600 percent and shortages of basic commodities are having a devastating effect on ordinary people. Thousands are fleeing the poverty, hunger and political repression affecting the country and yet the regional bloc ignored all those concerns. Speaking August 28 Patrick Craven, the COSATU spokesperson, said although they are yet to get the full details of the deliberations, they felt the recommendations made by the regional bloc were out of sync with the actual reasons for the crisis. COSATU claims SADC itself seems to have accepted Mugabe's mantra about sanctions hurting Zimbabwe's economy. Craven said the main reason for the lack of investment and extension of credit lines for Zimbabwe was not sanctions 'but chronic economic instability and brutal political repression, which the SADC report ignores entirely.' The South African labour body also noted the lack of any real progress by Mbeki to broker a deal between Zanu PF and the MDC. COSATU say although ultimate responsibility lies with the people of Zimbabwe, SADC governments have to take a much tougher line with the Zanu PF government, because the crisis is affecting them directly.

Cosatu Backs Axed Deputy, Calls for Audit
ANC ally, the Congress of South African Trade Unions (Cosatu), called on the government August 28 to undertake a financial audit of "all cabinet members and senior government officials" who owed the state outstanding money. Failure to do so would suggest the government was pursuing a "vendetta" against former deputy health minister Nozizwe Madlala-Routledge since her axing from cabinet, the federation said. Cosatu is rallying behind the former deputy minister as government officials tighten the financial screws on her for outstanding debts owed to various government departments. "It is highly suspicious that money allegedly outstanding since as early as 1999 is only now being recovered," Cosatu said. "If the government is so concerned about auditing the spending of taxpayers' money, why has it taken so long to discover that these amounts are outstanding?" Cosatu also condemned the government for docking Madlala-Routledge's last salary. It said this was illegal in terms of the Basic Conditions of Employment Act, if the state had taken the money without Madlala-Routledge's consent. However, Public Service and Administration Minister Geraldine Fraser-Moleketi told reporters in Cape Town it was not unusual for a public servant's salary to be docked if money was owed. She cited the recent example of government employees who went on strike and whose salary payments were reversed. The health department docked Madlala-Routledge's last salary for money it said she owed for a travel allowance given to her ahead of the "unauthorised" trip to Spain, which led to her being axed. The government is also insisting that Madlala-Routledge pay back R116357 in expenses and subsistence allowances incurred during her tenure as deputy defence minister from 1999 to 2004. The ANC has yet to decide her fate, but senior leaders want to institute disciplinary charges. Cosatu's backing is likely to irk some in the ANC leadership who have agitated for Madlala-Routledge to face disciplinary charges for having allegedly brought the party into disrepute.

Sexwale Hits Out at ANC's Internal Squabbling
ANC mining magnate Tokyo Sexwale warned August 17 that the ANC would self-destruct if it failed to deal head on with factionalism, tribalism, provincialism, regionalism and ethnicity - and also cautioned against a superstar or populist as a leader. He made an impassioned appeal for an end to public insults, derogatory statements and demoralising public conduct by its leaders - top to bottom. Addressing an ANC Youth League fund-raising dinner in Port Elizabeth, the man some believe should succeed Thabo Mbeki called for an end to internal squabbling and battles in the ANC and the tripartite alliance. In a speech in which he clearly positioned himself as a compromise candidate - the so-called third way and voice of reason between the opposing Mbeki and Zuma camps - Sexwale pulled no punches. The former Gauteng premier turned tycoon made clear that given the problems that still faced the country, including poverty and HIV and Aids, "we must disabuse ourselves of the notion that we are going to elect a superstar or populist know-it-all who is going to come with a magic wand to solve our problems". "What we need is a leadership collective which knows the responsibilities and the demands of the developmental state, knows the challenges facing the movement at present, and is forever mindful of the need to provide a better life for all. That is our bottom line." Noting the current climate of character assassinations, smears, mudslinging, rumour-mongering and whispering campaigns, he said these had little, if anything, to do with achieving a better quality of life for all. National strategic issues were increasingly being pushed aside in favour of personal political power for sectarian and divisive interests and the youth league was complicit in this, he said. Calling for frank self-assessment, he said "the state of affairs around our conduct, our behaviour and revolutionary discipline leaves much to be desired". "This is characterised by incipient and incessant disunity, driven less by political imperatives and more by what Engels and Marx referred to as egotistical calculations." Sexwale said ANC members could make "the ugly choice of living in a fool's paradise of self delusion" pretending there were no problems, "or we can be candid about the situation within our organisation and deal head-on with reactionary issues around factionalism, tribalist tendencies, provincialism, regionalism, ethnicity - thus sharpening our resolve to quash these evils". He warned that if this was not done, history might pass harsh judgement "if we inadvertently lift the lid and open up the proverbial Pandora's Box for our own movement's self-destruction". Sexwale said the insults in public, derogatory statements and similar demoralising public conduct by leaders who should be exemplary - from top to bottom - must be speedily checked. "Otherwise we shall lose the respect of the people; their trust and confidence in us will dissipate. Small wonder the increasingly daring mass protests and the disturbingly violent demonstrations and other forms of lawlessness triggered by social delivery concerns. "Much of what is happening in this creeping social discontent can be traced back to seeping divisions, factional tendencies and other forms of negative conduct emanating from ourselves." Sexwale quoted the late ANC president, OR Tambo, who once said that "no force outside the ANC can ever destroy the ANC - it can only implode; we can only self-destruct". Turning to the role of some members of the youth league in the current conflict, Sexwale said he was disturbed by the unhealthy involvement of "our youth in the senseless squabbles, quarrels and factional fights inside the ANC, instead of playing the role of calling for calm, order, political maturity, sanity and restraint." Sexwale said policies on poverty alleviation, HIV and Aids and issues of the developmental state should dominate debate on the road to the ANC's elective conference in Limpopo. On the issue of succession, he said: "We need to caution ourselves and ensure we add more light in our deliberations around leadership than heat. The process needs to be illuminated rather than aggravated."

Minister's Remorse Opens Way to Prosecutions for Apartheid Crimes
In an extraordinary sequel to South Africa's truth and reconciliation process, an apartheid-era cabinet minister and a former national police chief have been sentenced to suspended jail terms for trying to murder a church leader who has since become President Thabo Mbeki's top civil servant. Adriaan Vlok, a police minister appointed by P W Botha - the former president found by the Truth and Reconciliation Commission (TRC) to have led the South African state into unprecedented levels of criminality - and Johann van der Merwe, chief of police under Botha's successor, F W de Klerk, were each sentenced in the Pretoria High Court August 17 to 10 years' imprisonment, wholly suspended, for their role in the poisoning of the Rev. Frank Chikane in 1989. In 1988, after church leaders responded to the outlawing of a group of political organisations by stepping into the front lines of public protest against apartheid, P W Botha ordered Vlok to arrange to blow up the headquarters of the South African Council of Churches (SACC) in central Johannesburg. The building was destroyed by explosives in August, but it did not deter Chikane, the council's general secretary, and other church leaders from their anti-apartheid campaigning. Early in 1989, Chikane repeatedly fell desperately ill while travelling, then made rapid recoveries upon returning home. The mystery was solved, and his life probably saved, by medical specialists at the University of Wisconsin-Madison after Chikane - on a visit to his wife, Kagiso, who was studying there - collapsed and was hospitalised. Medical tests revealed evidence of organophospate poisoning. As a result of his illness, Chikane missed a White House meeting with President George H. W. Bush, which he had been scheduled to attend with Archbishop Desmond Tutu and other church leaders. In hearings before the TRC nearly 10 years later, Vlok became the only apartheid cabinet minister to apply for amnesty. He, Van der Merwe and a large group of policemen confessed to, and were granted immunity for, blowing up the SACC building. They did not confess, however, to trying to poison Chikane, and the TRC failed conclusively to identify the culprits. Chikane, meanwhile, had gone on to serve on South Africa's Independent Electoral Commission during the country's first democratic elections in 1994, and then to study at Harvard University's Kennedy School of Government. After his return to South Africa, he became director-general of Mbeki's office while Mbeki served as deputy president to Nelson Mandela. He took over as director-general of the presidency when Mbeki succeeded Mandela. Last year, Vlok asked for an appointment with Chikane at his offices at Union Buildings, Pretoria, the seat of the executive. When Vlok arrived he presented Chikane with a Bible inscribed with the words, "I have sinned against the Lord and you. Please forgive me." Then he pulled out of his briefcase a plastic bowl and two towels and asked a startled Chikane whether he could wash his (Chikane's) feet. Chikane consented. The incident became a cause célèbre, with opinion divided between those who accepted Vlok's good faith, those who ridiculed him and those who asked how serious his remorse could be if he had not come clean before the TRC. Soon afterwards, Vlok met a group of mothers whose teenage sons had been murdered by police and washed their feet too. The episode culminated in a plea bargain which was heard and ratified by a judge in Pretoria on Friday. According to an agreement entered into by prosecutors and defence lawyers, three policemen acting on Vlok and Van der Merwe's authority broke into Chikane's checked-in luggage at Johannesburg's airport and laced his underwear with poison. (Under the plea bargain, the court imposed five-year sentences, also wholly suspended, on the three operatives.) After the court hearing, Chikane greeted and shook hands with Vlok and Van der Merwe. He told journalists he wanted to put the incident behind him, but appealed to others who had failed to apply for amnesty to come forward and tell members of victims' families what had happened to their loved ones. However, the poisoning of Chikane appears unlikely to slip quietly into the past for one of apartheid's most recalcitrant police generals. Sebastiaan ("Basie") Smit was an officer who first made his name as a drug squad officer in Durban. After transferring to the security branch of the police, he rose through the ranks of the unit, in time becoming its national chief. The security branch was notorious for its use of torture and for running death squads. Smit showed early signs of resisting any accommodation with apartheid's opponents. In a meeting Vlok had with church leaders over a hunger strike that political detainees embarked on in 1989, Smit was clearly uncomfortable at Vlok's apparent willingness to find a compromise. After the release of Mandela in 1990, a number of high-level police and army generals resisted the ensuing transition to democracy, secretly arming black vigilantes and mercenaries to foment intra-communal violence in black communities. Some 14,000 South Africans died, more than twice the number killed in the rebellion which preceded the transition. Less than six weeks before the 1994 election, an investigating judge, Richard Goldstone - later chief war crimes prosecutor for the former Yugoslavia - told F W de Klerk of evidence that some top officers were still orchestrating violence to destabilize the country ahead of the election. Goldstone's revelation of what he called "a horrible network of criminal activity" forced De Klerk to order the immediate suspension of the officers. One of them was Basie Smit, by then the second-in-command of the national police force. During hearings of the Truth and Reconciliation Commission that followed liberation, hundreds of security policemen applied for amnesty. Smit was not among them, despite being named repeatedly as having ordered killings. Implicit in the political deal which produced the commission was an agreement that if perpetrators of human rights abuses did not apply for amnesty, they would face prosecution. On Friday, the prosecution disclosed that Smit had been the officer who gave the direct order to the three operatives to poison Chikane. And one of the terms of the plea bargain read into the court record was an undertaking by Vlok and Van der Merwe "to act as state witnesses in the event of a prosecution being instituted against General Sebastiaan Smit."

Western Directors Clueless When It Comes to South Africa
Most western directors recognise that SA and other emerging economies will reshape global business, yet they are woefully ignorant about SA's economy and industry. They are so uncomfortable about doing business here that they would rather deal with India, says a study by the UK-based telecoms company BT. Nearly seven out of 10 directors in the UK, France, Germany and the US do not know the local currency is the rand, and 27% could not name SA's main exports or industries. While 61% admit it is "crucial" that their business is able to work with the economies of Brazil, Russia, India, China and SA (BRICS countries) to succeed in the long term, one in five rate SA as the country in which they are least comfortable doing business. Different legislation and regulation is seen as the most significant barrier to effective collaboration with South African businesses by 12% of respondents. The other top barriers are data security, which worries 12%, and political interference, which concerns 9%. BT commissioned Datamonitor to poll 800 senior executives in companies from a range of sectors, with turnovers from $10m to more than $1bn. The findings show that businesses in established economies have a good deal of uncertainty about working with businesses in SA and are ignorant about some of the most basic facts of business life in emerging markets, says Brian Armstrong, BT's vice-president for the Middle East and Africa. Western executives have a lot of homework to do to be ready to work effectively with businesses in SA, but local executives need to play their part too by better conveying the message that their systems are as modern as anywhere else, and their regulations are as secure, he says. South African businesses have shown remarkable agility at adopting new collaborative tools and technologies; quicker, in many cases, than in the US or Europe. Yet nearly one in three western directors perceives SA as the least advanced of the BRICS countries in terms of information and communication technology support for businesses. "These are troubling findings," Armstrong says. The World Economic Forum ranks SA as close to India and ahead of Brazil, China and Russia in terms of technology, but the message hasn't filtered through to the first world. Western businesses have the systems in place to work with SA, but lack the knowledge to do so effectively. "How can they determine winning strategies for global business if they have such an outdated idea of what is going on in significant markets like SA, and how its economy will affect them?" The technology that enables collaboration between companies and countries is in place, but many western businesses are unprepared for the effect emerging countries will have. That needs to change, he says.

South Africa Joins SADC-EU Trade, Development Talks
The Southern African Development Community (SADC) is negotiating economic partnership agreements (EPAs) with the European Union (EU). The EPAs are crucial for future trade with the EU when a waiver on the current trade regime with the EU, the Cotonou agreement, expires at the end of the year. The EPAs are trade deals with a developmental framework - a framework SA does not fit into. However, in March last year, SADC requested the EU that SA be included in the negotiations. The EU's first response was silence but eventually it agreed to include SA in the talks. The argument that convinced the EU was that including SA would smooth the way for greater trade harmonisation, and ultimately help regional integration. So SA is part of trade talks that could have considerable upside, despite the fact that as part of the Southern African Customs Union (Sacu) SA already enjoys a trade relationship with the EU. Commentators see it as ironic that as SA embarks on arguably its biggest drive to boost economic growth, it is not clear at all that the region's powerhouse has the interest of its fellow members of Sacu in mind. In the national industrial policy framework, the blueprint for industrial development, SA is considering a substantial review of import duties in a bid to lower the input costs of downstream manufacturing - the focus of industrial development. One commentator estimates that the review affects as much as 75% of the tariff book. "The plans pay scant attention to a commitment in the Sacu agreement to develop common policies... for industrial development," say observers. "Trevor Manuel signed off on this (industrial policy) but there is a treaty with Sacu - this is an extremely awkward situation. If I were Manuel I would be very worried," says one commentator. In fact, regional industrial development is barely mentioned in the policy. But it is unclear whether SA is considering the effect of its plans on industries in other Sacu countries, and whether it is communicating sufficiently with member countries about the planned changes. 

Tariff Cut Plan Puts Country At Odds With Neighbours
Plans to ease import tariffs under its recently launched industry policy framework could put SA on a collision course with its neighbours in the Southern African Customs Union (Sacu). SA's neighbours are heavily reliant on the shared income from the common revenue customs pool, with this income accounting for more than half of the national budgets of both Lesotho and Swaziland, while Namibia and Botswana also benefit handsomely. Any change is likely to be raise the ire of the other members of the customs union.
SA wants to use the Sacu tariff book to enhance and aid its industrial development. Primarily, the policy framework identifies four lead sectors, namely capital and transport equipment, and metals; automotives and components; chemicals, plastic fabrication and pharmaceuticals; and forestry, pulp and paper, and furniture. But an array of other sectors will also ultimately receive support, including clothing and textiles, agriprocessing, biofuels, information and communication technology, white goods and retail. The industrial policy aims to support key identified sectors in a bid to develop and boost manufacturing capacity in downstream industries. The trade and industry department is looking at three key instruments to achieve this. The first two - industrial financing and tax incentives - have already come in for heavy criticism from some quarters. The third instrument is tariff liberalisation.
The government is planning to review and streamline import tariffs in all relevant sectors, ultimately with the aim to lower the costs of inputs into downstream activities. Xavier Carim, deputy director-general of international trade and economic development at the trade and industry department, played down the threat August 26, saying there was not necessarily a correlation between tariffs and revenues from the customs pool, as the lowering of tariffs tended to boost imports, which in turn could swell customs revenues. But SA's plan to unilaterally tinker with the tariff book also goes against stated objectives in the Sacu treaty of 2003 - a legally binding agreement. Part eight, article 38 of the agreement, under the heading industrial development policy, states that member states recognise the importance of balanced industrial development of the common customs area as an important objective for economic development and agree to develop common policies and strategies for industrial development. The national industrial policy framework's aim to use import tariffs to facilitate SA's industrial development ostensibly undermines this commitment. SA's streamlining of the tariff book means Lesotho, Swaziland, Namibia and Botswana would be left with little policy space if they wanted to embark on their own industrial development. Carim said Sacu members were aware there would be a review but the matter had not been discussed in detail yet, as SA needed to see what it wanted to do first. But he moved to allay fears that SA would act unilaterally, saying SA could not change customs tariffs without consultation. But a commentator pointed out that the political pressure on other Sacu countries, which are deeply dependent on SA, might mean they would be reluctant to cross the big power in the region.

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