Connect with us
Advertisement

EPAs with EU enters into effect – Implications

Five southern African countries – Botswana, Lesotho, Namibia, South Africa and Swaziland – and the European Union (EU) this week started a new chapter in their bilateral relations with the entry into effect of their Economic Partnership Agreement (EPA).

As of this week, the agreement will apply to trade between the EU and the five countries. Mozambique is in the process of ratifying the agreement and will join in as soon as the ratification procedure is completed.

Commissioner for Trade Cecilia Malmström said: "When I visited Botswana in June for the signing ceremony, I saw first-hand how important it is to build a stable trade partnership between Europe and Africa. Today we’re taking a crucial step towards making that a reality. The agreement that we’re putting in place will support sustainable economic growth and regional integration in southern Africa and is designed to help lift people out of poverty in the years to come.  Africa is the emerging continent and the Economic Partnership Agreements have been designed to maximise this dynamism."

The EPA takes into account the different levels of development of the partners. It gives Botswana, Lesotho, Mozambique, Namibia, and Swaziland duty-free, quota-free access to the European market.  South Africa will also benefit from enhanced market access, going beyond its existing bilateral arrangement with the EU.

The southern African markets will open only partially to EU exports, gradually over time, providing their industries with the intermediary goods they need to support growth.  It also provides for a number of protective measures in these countries, for instance for nascent, fragile industries or for food security reasons. Furthermore, the agreement increases the flexibility of southern African producers to put together products with components from various other countries, without the risk of losing their free access to the EU market.

BACKGROUND

The SADC EPA Group consists of six out of 15 members of the Southern African Development Community (Botswana, Lesotho, Mozambique, Namibia, Swaziland and South Africa).  Angola has observer status and may join the agreement in the future.

The EU is the largest trading partner of the SADC EPA group.  In 2015, the EU imported goods worth almost €32 billion from the region, mostly minerals and metals.  The EU exported goods of nearly the same value, consisting mostly of engineering, automotive and chemical products.  Total trade between the EU and the SADC EPA Group (including Angola) amounts to €63 billion.

In signing the agreement, participants commit to act towards sustainable development, including upholding social and environmental standards. Civil society will have a special role in monitoring the impact of the agreement. The Agreement is also of a new species in that it is the first trade deal that directly supports the economic integration of a specific region, favouring closer links within the six Southern African nations involved.

The EPA creates joint institutions to support dialogue, smooth handling of all trade issues, and monitoring of the impact of the trade deal. The EU will work with its SADC partners to ensure smooth implementation of the agreement, together with regional and national development cooperation bodies.

 

RIGHT CONDITIONS FOR TRADE AND INVESTMENT

Economic Partnership Agreements (EPAs) between the EU and African,

Caribbean and Pacific (ACP) countries are the main pillar of ACP-EU trade cooperation, and aim at creating the right conditions for trade and investment. In this context, the EPA between the EU and the SADC (Southern African Development Community) EPA Group establishes a long-term and stable trade relationship between both Parties, in compliance with international trade rules.

The current population of the SADC EPA countries combined is 89 million people. The two largest countries are South Africa and Mozambique, accounting for respectively 61% and 30% of the region's total population.

The average GDP per capita is roughly 3,700 EUR. In purchasing power parities (PPP), this value is much higher, at about 8,400 EUR.

Behind this average hides significant variation.

Per capita GDP in the region's richest country, Botswana is approximately

15,700 EUR, which is roughly 14 times as high as it is in the region's poorest country, Mozambique. The regional average GDP per capita is about 25% that of the EU. Real GDP grew by an annualised 3% over the last decade, a period in which the corresponding figure for the EU was 1%.

In total, the EU imported about 23.7 billion EUR worth of goods from the region whereas its goods exports were 27.2 billion EUR.

THE RATIONALE AND CONTENT OF THE SADC EPA

The EU's trade relations with the ACP countries were historically framed by a series of conventions, which granted unilateral preferences to the ACP countries on the EU market. By the end of the 1990s, it was found that these conventions did not promote trade competiveness, diversification and growth as intended. They were also found to be in breach of the World Trade Organisation's (WTO) principles, as they established unfair discrimination between developing countries. A change was therefore required. EPAs were the response defined jointly by the ACP countries and the EU in the Cotonou Agreement signed in 2000. EPAs build a new reciprocal partnership for trade and development, asymmetric in favour of ACP countries. In keeping with the objectives set out in the Cotonou Agreement, sustainable development is a key objective of the EPA, which is explicitly based on the "essential and fundamental" elements set out in the Cotonou Agreement (human rights, democratic principles, the rule of law, and good governance). The joint EPA institutions are tasked with the function of monitoring and assessing the impact of the implementation of EPAs on the sustainable development of the Parties, also carving out a clear role for civil society and members of parliament.

In view of these objectives, the EPA differs from most Free Trade Agreements (FTAs) currently in place or negotiated by the EU with other trading partners: while it remains a reciprocal agreement, it weighs in favour of southern

Africa through specific provisions:

·Asymmetric market access: The EU has committed to opening its market more than the SADC EPA countries have committee to do. The agreement fully takes into account the differences in the level of development between the two regions.

·Safeguards: Under the terms of the agreement, SADC EPA countries continue to be able to protect their sensitive products from European competition either by keeping tariffs in place or, if necessary, by imposing safeguard measures. To support local agricultural production, the EU has also agreed not to subsidise any of its agricultural exports.

·Flexible rules of origin: companies in the SADC EPA region also have more flexibility to use foreign components while still benefitting from free access to the EU market. In the SADC EPA, the rules defining the origin are formulated in a way to support development of new value chains in the region. The so-called

"cumulation of origin" enables canned fruit exporters to source fruit from neighbour countries, or textile producers to use imported fabric. This type of flexible rules of origin will benefit companies in agri-food, fishery and industrial sectors.

·Development: The EU complements the market opening effort of its partners with substantial development assistance. This will contribute to development, sustainable growth and reducing poverty.

ESTIMATED EFFECTS OF TARIFF REDUCTIONS

The economic impact of the EPA was assessed using a dynamic general equilibrium model, tailor-made for trade policy analysis and adjusted to the specific characteristics which apply to the southern African countries. In a conservative manner, only the impact of the tariff reductions was assessed, i.e. what is easily quantifiable from the agreement. Essential provisions of the EPA (rules of origin, trade facilitation, cooperation on norms, and development assistance) were not considered in the model even though they weigh in favour of SADC EPA countries. The results presented in this study are therefore expected to be exceeded over time. Based on the simulation results,

SADC EPA countries' GDP will be positively affected by the agreement, albeit to a small extent: Individual countries see their GDP grow by between 0.01% and

1.18%, whereas the weighted average GDP increase, which is strongly dominated by South Africa, is about 0.03% (Importantly, all results refer to the situation in 2035 compared to a situation without the EPA).

The variation between countries reflects the extent to which the EPA and the baseline differ: in countries such as Namibia, the EPA provides duty-free quota-free access while the country, in the absence of EPA, would not benefit from a preferential treatment (hence the higher impact).

In Botswana, the main export items (e.g. diamonds) would still benefit from low duties without the EPA (hence the lower impact). For a least-developed country like Mozambique, which would still benefit from duty-free quota-free in the absence of EPA, the main benefits to be expected rather come from the flexible rules of origin, regional integration as well as cooperation on norms and standards to boost its exports (all factors which could not be quantified and therefore were not included in the model).Total exports from the SADC EPA Group to the world are positively affected by the EPA as are total imports.

SADC EPA exports are expected to increase on average by 0.13% and imports by 0.14%. In particular, SADC EPA exports to the EU are expected to increase by 0.91%. The agreement has no measureable impact on the EU's overall trade with the world. Exports to the SADC EPA countries are anticipated to increase by 0.73% against a scenario where there would be no EPA. The sectors with the highest expected increases in exports from SADC EPA countries are red meat (15.3%) and sugar (13.7%). Other sectors where an increase in exports is expected are beverage and tobacco, dairy products, fisheries, motor vehicles, "other food", textile, utilities, vegetable oil, vegetables and fruit, and white meat.

While several of the increases are sizeable, decreases are usually below 0.1%, with the exception of wearing apparel (-1.2%), cattle (-0.8%) and electronics (-0.4%). The increase and decrease reflect the comparative treatment of each sector under the EPA by comparison to the baseline: in many sectors, EU customs duties are already low in the baseline scenario (especially when it comes to inputs into the production or primary products), while EU customs duties on finished goods and agricultural goods are much higher in the baseline than in the EPA, hence the higher positive impact in those sectors.

The remuneration of the factors of production is generally positively affected by the EPA even if only to a small extent. Remuneration of labour and land is generally expected to increase, while other factors such as capital and natural resources offer a more mixed picture.

The SADC EPA is expected to modestly reduce the poverty headcount in the two countries observed (South Africa and Namibia). As a result of tariff reduction, SADC EPA countries will collect less import duties, but the decrease is on average not higher than 0.59% of total import duty collection at the end of the liberalisation period. Revenue loss is therefore expected to be limited.

CONCLUSION

The EPA paves the way for a stable and long-term bi-regional trade relationship between southern Africa and the EU. The outcome of the negotiations is a WTO-compatible Agreement that offers asymmetry in market access. The duty-free access to the European market for the Botswana, Lesotho, Mozambique, Namibia and Swaziland (BLMNS) countries will no longer be at the discretion of the EU but will be anchored in a treaty between the Parties. South Africa has also negotiated better access than currently granted under the Trade, Development and Cooperation Agreement (TDCA) between South Africa and the EU.

OUTLOOK

The EPA, including through its development cooperation pillar, is expected to facilitate intra-regional trade as well as the region's trade with the world. The SADC EPA will also re-establish the common external tariff of the Southern African Customs Union (SACU) and thereby renew the proper functioning of the oldest existing customs union in the world. The EPA creates a joint Council and a joint Committee in charge of the implementation of the agreement. It will be the task of those institutions to ensure that the EPA is properly implemented, as well as to make proposals for the review of priorities set out in the agreement. For that purpose, constant monitoring of implementation is paramount.

Continue Reading

Business

Food prices continue to rise, but at a slower rate

28th November 2022

Prices for cereals or staple foods in Botswana and other Southern African countries continue to rise at a slower pace, following trends in the global markets, according to the latest November 2022 Food Price Monitoring and Analysis by Food Agricultural Organization (FAO) of the United Nations.

This content is locked

Login To Unlock The Content!

Continue Reading

Business

Still doing business the old way?

18th November 2022

It’s time to get business done better with MTN Business Botswana’s ICT Solutions.

Running a digital businessMTN Business Solutions Botswana, popularly known as MTN Business is an Internet Service Provider. We are a subsidiary of MTN Group Limited, a multinational telecommunications Group headquartered in South Africa, which operates in 19 markets across Africa and the Middle East.

More and more, clients are looking for ways to keep their staff productive in a dynamically changing business environment. Whether your people are working from home, the office or abroad, there is a growing recognition that digitising your operations can offer unprecedented commercial value in flexibility, productivity and growth. This new, digital reality means that it is more important than ever to stay agile – if there is anything that can slow a business down, it is being burdened by othatld technology.

Having made substantial investments in fibre technology, high-speed terrestrial and undersea networks and new frequency spectrum across the markets wherein it operates, MTN is perfectly positioned to respond to this shift in the market.

A few years ago, MTN also made the decision to build an IP capable radio network for its mobile services, giving its core network the ability to seamlessly integrate with enterprise IP networks. The mobile towers deliver services to enterprise clients absolutely anywhere it has a network, shortening the last mile and removing complexity and cost.

Now there is increasing demand from clients to connect their remote sites in all areas, including rural and semi- rural. MTN has assisted clients with overcoming this connectivity hurdle, enabling their staff to get the job done wherever they are.
MTN’s evolution

For MTN, the focus has shifted from just being a core telecommunications services provider, towards also becoming a technology solutions provider. The service offering now also includes Unified Communications, Data Hosting and Cloud Solutions, Security-As-A-Service and Managed Network Services. The scope has changed to being client and industry specific, so the requirements and service portfolio vary from one client to the next. The expectation is that a company like MTN must respond to these challenges, helping clients to get business done better as they shift from old to new technologies.

As many businesses continue to grapple with a digitally dynamic world, they face new challenges that have to be solved. This environment will benefit those that are more digitally enabled and agile. It is a brave new world that will favour online over on-site, wireless over wired and fluid over formulaic. Businesses will seek out partners and suppliers that are every bit as flexible and forward-looking as they are.
Ultimately, clients need partners like MTN Business that will invest in infrastructure, deliver the services they require, have market credibility, are financially sound and have a long-term commitment to their market presence.

Continue Reading

Business

BIE to vitalize the Dignity of Engineers

9th November 2022

Botswana Institution Of Engineers (BIE), has last week hosted a gala dinner in  which they appreciated engineers who worked tirelessly and with dedication for 10 years from 1983 to steer the BIE to its current status.

The event that was held at the Phakalane Golf Estate had brought together young, experienced and veteran engineers and was held under the theme “Vitalize the dignity and eminence of all professional engineers”.

Explaining the theme, the institution’s treasurer, Thanabalasingam Raveendran said that engineers were looked upon reverentially with respect as the educated but with time it seems to have deteriorated. He indicated that there is a need to change the narrative by all means.

“The BIE exists for the welfare and the betterment of us Botswana engineers, we need to recognize specialised units within our Institution. We Engineers strongly believe in Engineers make it happen” Raveendran said.

He indicated that under the theme they appeal to all engineers to energize, to attain quality of being worthy of honour and respect and to achieve recognized superiority amongst the Society.

Raveendran stated that engineers need to ensure their end product is of good quality satisfying the end users expectations and engineers must be honest in their work.

“Approximately 8000 engineers registered with Engineering Regulatory Board (ERB) are not members of the BIE, engineers need to make every effort to recruit them to BIE” he said.

He alluded that BIE being a society, it currently needs to upgrade itself at par with professional institutions elsewhere like the UK and USA.

He further stated that BIE has to have engineering units of specialised disciplines like Civil/Mechanical/electrical etc

“As President Masisi indicated in his inaugural speech, the young people, who make 60 percent of the population of this country, are the future leaders and therefore investing in them is building the bridge to the future” said Raveendran

Kandima indicated that BIE has a memorandum of Understanding with Engineers Registration Board (ERB), where BIE is a recognised provider of CPD training, mentorship programmes and more importantly IPD undertaking to upgrade the skills and know-how of our engineers.

“For us to achieve our mandate and make worthwhile changes to engineering in Botswana, we have to be totally focused and act with intent” said Kandima.

Furthermore, Stephen Williams, past president of the BIE from 1986-1988 told the engineers that  the BIE provides a fertile environment where they can meet, share ideas and grow professionally.

“The BIE is also a nesting place for graduate engineers to learn from their peers and seniors, it also cater for engineering technicians and technologists and so nobody in the technology field is left out” he said.

He further indicated that Botswana Government provides a conductive environment for growth of engineering professionals.

“It must be stated that the Botswana Government recognises the existence of BIE and it can further be stated that the government enables ERB to carry out its mandate as a regulator of engineering professionals” said Williams

He plead with engineering companies to recognize and support BIE as it is the only source of engineering personnel’s for various Industries .

Furthermore, when giving his farewell speech, Michael Pinard , a past president of the institution  said how they are viewed as engineers by the general public might be due to some lack of appreciation as to exactly what role they play in the development of the country.

“The BIE slogan is aptly coined-Engineers make it happen, in other words, what man dreams engineers create” Said Pinard.

Continue Reading