Southern African Development Community (SADC)

Trade Blocks / By

Formally the Southern African Development Co-ordination Conference (SADCC). Launched in 1980 with the original objectives of reducing dependence on apartheid South Africa and creating a channel for donor aid to the region. The Declaration and Treaty establishing the current Southern African Development Community (SADC) which replaced the Co-ordination Conference was signed in August 1992. The organisation currently has 14 member states namely Angola, Botswana, Democratic Republic of Congo (DRC), Lesotho, Malawi, Mauritius, Mozambique, Namibia, Seychelles, South Africa, Swaziland, Tanzania, Zambia and Zimbabwe.

The aims of SADC are:

  • the promotion of economic co-operation and integration amongst member states with a view to becoming a fully-fledged common market;
  • the strengthening of regional solidarity, peace and security;
  • and the pursuance of common economic, political and social values and systems.

These aims are achieved through the application of eight basic fundamentals as follows:

  • Preservation of democracy, peace and security in the region;
  • Investment in infrastructure and spatial development corridors;
  • Investment in human resources;
  • Conservation and management of natural resources;
  • The pursuit of market economic principles;
  • The creation of a large market;
  • Investment protection;
  • The promotion of science and technology.

The SADC region represents a vast market with a total population of 186 million people and a combined GNP of US$178 billion. The combined imports of the SADC region excluding South Africa amount to an estimated US$20 billion. Economic conditions vary markedly within the region and there exists a huge dichotomy between member states. Since South Africa joined in 1994, there has been a great deal of comment on the role that South Africa can play within SADC due to the size of her economy relative to other member states.

South Africa accounts for 13% of the total land area of SADC, 22% of the total population and 73% of the total GNP. Commentators have repeatedly expressed concern at possible resentment towards the "big brother" of the organisation and the image of a grouping of satellite states clustered around a regional superpower.

Intra-regional trade figures do little to alter this image. Prior to South Africa joining SADC in 1994, intra-SADC trade accounted for 2,6% of regional exports. Since South Africa’s inclusion, this has increased to 14,5% largely as a result of South African exports to SADC states. Currently, 86% of intra-regional imports are supplied by South Africa. Overall, total intra-SADC trade is estimated at 25% of total regional trade, a figure that could increase to 35% once the free trade area is in place.

The SADC Free Trade Agreement (FTA) should encourage economies of scale creating competitive SADC-wide industries thereby increasing intra-regional trade and boosting foreign investment to the region. The former executive secretary of SADC, Kaire Mbuende, has said the FTA will contribute to the creation of 5-million jobs in the short term and add US$2,6bn to SADC's GDP.

It should also be remembered that the creation of a FTA is not going to solve all of the region’s problems. Trade and investment are not going to double overnight, as individual governments need to do a great deal of work in order to create the right framework for industrial development and foreign investment. Certain SADC states have an even greater task of developing completely underdeveloped industrial sectors. The problems that have hampered African trade for years such as bad economic policies, foreign exchange shortages, poor transport infrastructure and intermittent telecommunications remain. These issues need to be addressed before foreign investors flock to the region.

The current political turmoil in Southern Africa centered on the conflict in the DRC and Angola do little for SADC’s image internationally. The open conflict between the South African government and President Mugabe over SADC’s role in the DRC conflict has highlighted the cracks in the SADC grouping and has questioned the ability of the organisation to maintain order in the region.

Despite the inherent problems, the SADC region offers good trade and investment opportunities. On a SADC-wide basis, a key focus is the development of Spatial Development Corridors. These initiatives provide immediate opportunities for companies involved in infrastructural development’ both contractors and suppliers of materials. A down-stream opportunity lies in the development of industry and support infrastructure along these corridors. The private sector is being encouraged to take the lead in these developments not only as contractors but also as investors in infrastructure.

On an investment level, aside from the large SADC market, exports from SADC enjoy virtual duty-free access to the European Union under the current Lomé agreement and the recently concluded trade accord with South Africa. Investment opportunities abound. SADC states are richly endowed with natural resources, from the natural gas opportunities in Mozambique and Tanzania to the agricultural potential of Zambia and the rich mineral wealth of most countries within the region. A number of SADC states are involved in privatisation initiatives providing easy access for foreign investors to established markets.

Source: http://www.mbendi.com