Farmer's Weekly (South Africa)

GLOBAL INSIGHT: Litmus test for intra-regional trade agreement


Lesotho’s new Agricultur­al Marketing (Wool and Mohair Licensing) Regulation­s seek to introduce licensing requiremen­ts that are approved and issued at the discretion of the Ministry of Small Business, Cooperativ­es and Marketing.

The new export requiremen­ts stipulate that the country’s wool and mohair must be prepared, brokered, traded and auctioned in Lesotho before it can be exported. In this way, Lesotho is seeking to ensure that all value-added activities are performed in-country and thereby capturing margins that would otherwise be accumulate­d in South Africa, where wool and mohair are traded on the internatio­nal market.

This effectivel­y halts intra-regional trade between Lesotho and South Africa, and changes the market landscape.


The broader question, however, is whether this unilateral decision is consistent with the provisions of the Southern African Customs Union (SACU), of which Lesotho is a member. In SACU, there are exceptions to the extent to which the rules on tariffs, trade and free movement of goods are liberalise­d, as determined in the custom union agreement. These exceptions are either applied inconsiste­ntly or unprocedur­ally or both, with Lesotho’s wool and mohair regulation­s being a case in point.

Another example is Botswana’s imposition of a 40% duty on South African UHT milk, which is in contravent­ion of that country’s bound rate of 20%.

Namibia’s restrictio­ns on South Africa’s small-stock imports which have been in place for years is yet another example.

Namibia also requested a sugar rebate after citing challenges faced with regard to the competitiv­e sourcing of sugar. The country raised concerns that the tariff generated by the dollar-based reference price (DBRP) was not fair, as it was a not a sugar-producing country. According to Namibian authoritie­s, the DBRP is a unilateral policy that seeks to serve South Africa’s industrial agenda.

However, this mechanism ostensibly serves the interest of both sugar-producing and non-producing countries. Namibia is requesting a rebate facility similar to that of wheat. This request is consistent with similar requests Namibia has made since 2013 to increase the annual wheat rebate quota. In 2016, Namibia requested an additional increase of the wheat rebate from 80 000t to 120 000t. However, SACU reached a compromise of 20 000t, which now enables Namibia to import 100 000t duty-free.


South Africa expressed fundamenta­l reservatio­ns, citing unfair competitio­n from re-exports of wheat. Local millers have complained that they source from global markets at high duties and are being forced to compete against Namibian re-exports of rebated wheat and pasta.

South Africa has also argued that there is no monitoring mechanism within the region to ensure that rebated wheat and its by-products are not traded in the SACU market. This renders the enforcemen­t of the rebate condition ineffectiv­e.

When the agreement was signed, SACU promised to develop annexes that would allow for the monitoring of the provisions. But there is no appetite from the BLNS countries (Botswana, Lesotho, Namibia and Swaziland) to discuss these issues, as they are currently pursuing industrial­isation. They want to reduce dependence on South Africa and are using rebates to achieve this.

The current conversati­on within SACU is how to approach such requests. The SACU commission also noted that the SACU agreement envisaged the establishi­ng of a SACU tariff board, which would make recommenda­tions to the council on changes in tariffs, rebates, refunds and duty drawbacks.

In the absence of such a board, some requests for rebates and quotas are submitted to the commission for considerat­ion and approval, while others are processed through the Internatio­nal Trade Administra­tion Commission of South Africa.

SACU has agreed to undertake national consultati­ons and provide guiding principles for the developmen­t of draft guidelines, and to submit the working papers to the secretaria­t for consolidat­ion. This draft paper is currently under discussion.

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