What measures should be put in place to ensure that the sadc free trade area benefits the people of the region in the fight against poverty.
Southern African development Community, formerly the Southern African Coordination Conference, (SADCC) has been in existence since 1980. It was formed as a loose alliance of nine majority – ruled states in Southern Africa, with the main aim of co-ordinating development projects in order to lessen economic dependence on the then apartheid South Africa.
It was formed in Lusaka, Zambia, on 1 April 1980, following adoption of the Lusaka declaration – Southern Africa towards economic liberation. The founding member states were Angola, Botswana, Lesotho, Malawi, Mozambique, Swaziland, United Republic of Tanzania, Zambia and Zimbabwe. The purpose of the formation was to speed the economic growth and development of the region in order to achieve the following, improve the living conditions of the people of Southern Africa, and promote justice and peace and to ensure the region’s self-rule and security. Through regional co-operation, SADCC wanted collective self-reliance. The whole SADCC region aimed to be able to support itself.
This meant that the countries would collectively produce their own food, energy, fuel, goods and services. Thus the programme of action was drawn up at the Lusaka summit in April 1980, to give a special responsibility to each member country. Angola was made responsible for the energy programme whilst Mozambique catered for transport. Zimbabwe was for food security and Botswana was to be responsible for agricultural research and to host the organisation’s small secretariat, to mention but a few.
In response to the political changes in South Africa, in January 1992, SADCC’s governing body, the Council of Ministers, approved proposals to transform the organisation into a fully integrated economic community. As a result, the transformation of the organisation from a co-ordinating into a development community (SADC) took place on 17 August 1992 in Windhoek, Namibia when the declaration and treaty was signed at the summit, giving the organisation a legal character.
South Africa became a member of SADC in 1994. Currently the organisation has 14 members namely; the Democratic Republic of Congo (DRC), Mauritius, Angola, Botswana, Lesotho, Madagascar, Malawi, Mozambique, Namibia, Swaziland, South Africa, United Republic of Tanzania, Zambia and Zimbabwe. SADC headquarters are located in Gaborone Botswana.
SADC has achieved a lot since its formation. The SADC vision is of a common future. A future in a regional community that will ensure economic well-being, improving standards of living and quality of life, freedom and social justice and peace and security for the peoples of Southern Africa. This shared vision is anchored on the common values and principles and the historical and cultural affinities that exist between the peoples of Southern Africa.
A reputable eighteenth century economist, Adam Smith, once said, “No society can surely be flourishing and happy when the far greater part of the members are poor and miserable.” Hence the SADC is aiming at helping the region to eradicate poverty through the establishment of the SADC free trade area.
The free-trade area (FTA) is an agreement between countries to reduce or eliminate trade barriers between the countries. This is a situation whereby the countries have free movement goods and services without any restrictions like tariffs, quotas and embargoes. However, the member countries can maintain separate or their own national tariffs, on imports from non-member countries.
The SADC free trade area is supposed to lead a more profound economic integration of the 14 member states involved. This will be through making goods much cheaper, stimulating greater production as well as consumption. It has been set to be a model of economic integration success in Africa, evidence being the streamlined implementation course so far and the members’ states harmonious approach to their skewed production and consumption power.
There are quite a number of purposes of having the free trade area, reducing the cost of living being the main one. The cost of living is lowered in the sense that countries will only produce goods in which they have a low opportunity cost, that is, those they can cheaply produce. By so doing, they then import with a high opportunity cost, which is, those expensive to produce locally, but can be cheaply produced by other countries.
If trade is free, it means that many goods will be exchanged between countries hence encouraging this king of specialisation which reduces cost of goods produced and ultimately cost of living. The implication is that the real income of the citizens would have increased, that is, what the current income can buy.
The standards of living will be raised within the region and also there will be greater need satisfaction. The existence of free trade would mean free-flow of basic commodities which are considered essential in determining standards of living, in large quantities. This is on contrast with protectionism measures which would result in such goods being imported in limited quantities.
A free trade area, from a social perspective, would result in a close tie between the group members. Unity is likely to prevail in the region. The unity could then contribute positively towards world peace, thereby eliminating the problems associated with social unrests arising from different cultural backgrounds and wars.
The implementation of a free trade area can generate a faster economic growth rate for some more developed countries in the group. Hence, this makes it possible for some member countries to give financial support to the other needy members, thereby increasing the scope for regional self sufficiency.
From a political perspective, the free trade area can promote political stability as well as guaranteeing the security of the region as a single indivisible whole. The caution and discipline employed in the idea has borne fruits and erased most doubts on eventual benefits. Every January since 2001, member states have successfully implemented a tariff phase down schedules which entails gradually trading some product lines at zero tariffs. Free trade areas are always faced with fears of disparity in allotment of benefits accruing from the intra-regional trade. In case of SADC members that stand at different levels of economic development, the threat is very real.
However, SADC has taken and will take certain measures to ensure that the free trade area benefits the people of the SADC region. Of note is South Africa which accounts for a whole two-thirds of the region’s GDP. To resolve this SADC has discharged a model that considers the lop-sided nature of the member state’s economies and dales out respective measure of protection. The secondary industry must benefit from the trickling-in of raw materials and this would mean containing or even reducing inflation in certain countries, for example, Zimbabwe, given the availability of stable and affordable prices of basic commodities.
In order for the free trade area to benefit the people of the region in the fight against poverty certain measures should be put in place. Firstly, self-employed people should be assisted in bringing forth their produces to defined markets where they can sell them profitably and develop their future performances. Take the crocheting industry for example, if these people are assisted in show casing their finished products on a regional context, and are able to export and import finished and raw materials respectively, on a free trade basis, then it means they will be economically empowered. That can be way of fighting poverty.
The creation of a functioning free trade area is likely to provide the economies of scale needed for profitable production, and thus encourage more direct investment in the region. The developmental benefits of Foreign Direct Investment are not automatic, and mechanisms may be required to ensure that the expected benefits are equitably distributed in order to make a positive impact on poverty alleviation and social welfare.
Possible developmental benefits include employment creation, the promotion of forward and backward linkages in the host economy, the development of human capital the implementation of internationally acceptable codes of employment practice and improving the access of the host economy to world markets. This in result will benefit the people and help the rate of poverty in the region.
Leaders within the region should strive for implementing economic policies that are favourable for investment by other member countries inside and outside the region. There should be democracy and rule of law as reflected in the constitution of a country. A constitution that promotes investor confidence, for example, a reasonable percentage of foreign investment in the countries concerned might be helpful.
Governments at regional levels should have talks of scrapping VISAs between countries. This has grown to be a powerful trade barrier as the VISAs are so expensive and few can afford to buy them. There should be easy access of basic commodities in the region and with little or no tariff charges to member countries. The heads of states should establish economic stability in the region where countries from a common denominator of charging tariffs. This will assists in overcoming the problem of certain countries trading with low-tariff charging countries only, and rejecting high-tariff charging countries.
Some countries are suffering from a hyper-inflationary environment, for example, Zimbabwe. There are also differences in the purchasing powers of the region’s currencies. Looking at the hyper-inflation situation, member country leaders might try to assist the affected countries through devaluing their dollar. However, this is detrimental to the Zimbabwean economy. Differences in the purchasing powers can be solved by introducing a SADC region inform currency. This can be witnessed by the use of the US dollar and Euro bond in the West.
Uniform economic policies can also be made, for example indigenisation. Foreign investment should also be encouraged, with no discrimination of any countries. For example, Zimbabwe is looking East whilst other member states are looking everywhere for assistance, especially the West. This might have a negative impact on the SADC region as a whole as the “super-powers” may not want to assist the region in revenging for Zimbabwe’s behaviour.
There is an argument put forward for protectionism, that is, protecting infant industries. This will require the government to subsidise infant industries so that they operate on an equal or level platform with the foreign companies. This would ensure that the member countries enjoy the benefits of belonging to a Free Trade Area together with the powerful competitors, regardless of their position in industry. However, this could result in a huge increase in government spending and could have negative effects on the value of the currency of a country.
Non-state actors also have a role to play to make the Free Trade Area beneficial to the citizen of the SADC region. Individual firms should be able to access loans from the International Monetary Fund organisation and World Bank, that is if there is a harmonised economic policy within the region. Over and above, it should be borne in mind that together we stand, divided we fall.
To fight against poverty there must be economic empowerment of the countries within the region through industrial investment and mechanisation as well as agricultural investments. A severe package of economic and administrative reforms should be introduced. These include freeing most prices, deregulating the trade system and labour market, establishing a uniform exchange rate and cutting public sector deficits.
Poverty cannot be eradicated or the Free Trade Area cannot benefit the people of the SADC unless the peoples’ welfare is uplifted and they are economically empowered. The International Monetary Fund organisation, World Bank and other financial institutions should be there to provide funds for small-scale and labour-intensive projects. The projects must be demand-driven, meaning that these sources of finance will finance projects proposed by local groups. This will increase employment among the poor and at the same time reducing wastage of monies going to undefined projects or uses.
If the above measure is implemented, a reasonable percentage of the poverty level in the region will be eradicated. This is because people would have been employed and have access to earning a living. The money that they get will see them fairing very well in terms of trade. They will be in a position to do cross-boarder trading freely with no restrictions, thus improving their social and economic lives.
Fair trade laws should be put in place, meant to create a level playing field on which fair international trade take place. Why fair trade laws? Some foreign governments can pay subsidies to their exporters so that they gain advantage over the domestic industries. This would result in the exporting country benefiting at the expense of the local industries. Hence fair trading laws would have to be implemented which ban unfair trade practices. However, these laws could be seen as trade barriers.
Another issue is of dumping. This is when goods are sold in two or more countries at prices that are different, for reasons not related to cost. This is an issue raised against free trade. Therefore, to remedy this, anti-dumping duties should be charged in order to reduce this unfair trade practices. This has a negative effect to those countries being charged high prices as they do not get the opportunity to save costs on imports, in order to divert these savings to the betterment of its peoples’ standard of living.
To be more successful, SADC should have at least one customs union, a common market and a monetary union to make the Free Trade equation balance. However, unity among the people of the region as a whole, with the one big family idea in our minds, will determine the destiny of a successful Free Trade Area in our region. The thought of these developing countries that still need a big hand in finding their way to the top as the number one priority, will see us winning the battle against the old age monster, poverty.
