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I. introduction

World Trade




24 March 2003


Trade Policy Review Body

Original:� English



Report by the Governments

Pursuant to the Agreement Establishing the Trade Policy Review Mechanism (Annex 3 of the Marrakesh Agreement Establishing the World Trade Organization), the policy statements by the Governments of SACU members are attached.

Note:������������� This report is subject to restricted circulation and press embargo until the end of the meeting of the Trade Policy Review Body on SACU.


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common policy statement������������� 7

I.������������� introduction������������� 7

II.������������� Background and context������������� 7

III.������������� The new SACU Agreement������������� 7

IV.������������� SACU's Objectives������������� 8

V.������������� SACU's common policies������������� 8

(1)������������� Industrial development������������� 8

(1)������������� Agriculture������������� 9

(2)������������� Competition policies������������� 9

(3)������������� Unfair Trade Practices������������� 9

VI.������������� Participation in the WTO������������� 9

(1)������������� A development agenda������������� 9

(2)������������� Capacity building������������� 10

(3)������������� SACU’s priorities in the WTO������������� 10

Report by the government of the Republic of Botswana������������� 11

Report by the government of the Republic of Namibia������������� 13


II.������������� GENERAL TRADE POLICY OBJECTIVES������������� 13


IV.������������� MEASURES DIRECTLY AFFECTING EXPORTS������������� 16

(1)������������� Export Trade������������� 16

V.������������� MEASURES DIRECTLY AFFECTING IMPORTS������������� 18

(1)������������� Direction of Import Trade������������� 18

(2)������������� Tariffs������������� 19


(1)������������� Agriculture������������� 19

(2)������������� Fisheries������������� 19

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(3)������������� Mining������������� 20

(4)������������� Manufacturing������������� 20

(5)������������� Services������������� 20

(i)������������� Financial sector������������� 21

(ii)������������� Tourism������������� 21

(iii)������������� Telecommunications and road infrastructure������������� 21

Report by the government of the Kingdom of lesotho������������� 22

I.������������� Executive summary������������� 22

II.������������� Main features of Lesotho’s trade policy������������� 22

III.������������� Sectoral policies������������� 23

(1)������������� The agricultural sector������������� 23

(i)������������� Strategic vision of the agricultural sector������������� 23

(ii)������������� Protection and liberalization of the agricultural sector������������� 24

(iii)������������� Government activities and privatisation������������� 24

(iv)������������� Subsidies������������� 24

(v)������������� SPS measures������������� 26

(2)������������� Services������������� 26

(i)������������� GATS and other international commitments������������� 26

(ii)������������� Banking������������� 27

(iii)������������� Insurance Services������������� 27

(iv)������������� Tourism Services������������� 27

(v)������������� Telecommunications������������� 28

(3)������������� Mining������������� 28

(i)������������� Diamonds������������� 28

(4)������������� Manufacturing������������� 28

(i)������������� Textile and Clothing������������� 28

IV.������������� CHALLENGES AHEAD������������� 29

V.������������� CONCLUDING REMARKS������������� 29

Report by the government of the Republic of south africa������������� 30

I.������������� Introduction������������� 30

II.������������� Developments in the Macro-Economy������������� 30

III.������������� Related Policy Developments������������� 31

(1)������������� The Microeconomic Reform Strategy������������� 31

(2)������������� Integrated Manufacturing Strategy������������� 32

IV.������������� Trade Policy Development������������� 32

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V.������������� Trade-Related Policy Development������������� 33

(1)������������� Intellectual property rights������������� 33

(2)������������� Competition policy������������� 33

(3)������������� Trade remedies and trade administration������������� 34

(4)������������� Government procurement������������� 34

(5)������������� Land reform������������� 34

(6)������������� Agriculture������������� 34

VI.������������� International Arrangements and Trade Negotiations������������� 35

(1)������������� The New Partnership for Africa’s Development������������� 35

(2)������������� The New SACU Agreement������������� 36

(3)������������� The SADC Trade Protocol������������� 36

(4)������������� South Africa-EU Trade, Development and Cooperation AGreement������������� 36

(5)������������� Other Regional Trading Initiatives������������� 37

(6)������������� Multilateral Trade Negotiations in the WTO������������� 37

Report by the government of the kingdom of swaziland������������� 39

common Policy statement

I. introduction

              The Southern African Customs Union (SACU) was formed in 1910, making it the oldest customs union in the world. SACU brought together the Union of South Africa (now Republic of South Africa) and the other British protectorates (or ‘High Commission Territories’ (HCTs) as they were called) of Bechuanaland (now Botswana), Basutoland (now Lesotho) and Swaziland. When these HCTs became independent in the 1960s, it became necessary to renegotiate the 1910 customs union agreement to reflect the changed situation as the Union of South Africa had to relate to these partners as independent sovereign states.� Pursuant to the decision to re-negotiate the 1910 Agreement, a new agreement was signed on 11 Dec 1969, and entered into force on 1 March 1970.[1] In 1990, Namibia gained its independence and became a formal contracting party to the 1969 SACU Agreement.� Although the 1969 agreement was an improvement to the 1910 arrangement, it suffered from a range of shortcomings particularly undemocratic decision–making procedures. Prior to 1994, efforts were made to address the challenges embedded in the 1969 Agreement but these focused mainly on the revenue aspects of the Agreement without due regard to other pertinent parts of the agreement.� Only in 1994, with the advent of a democratic government in South Africa did meaningful negotiations begin. In addition, it is also important to note that the 1998 Trade Policy Review (TPR) process also played a critical role in stimulating the continuation of the negotiating process that culminated in the conclusion of the new SACU Agreement in 2002.

II. Background and context

              The re-negotiation of the SACU agreement, post 1994, took place in an environment of political and economic stability in the region.� The independence of Namibia and the end of apartheid rule in South Africa set the stage for all five sovereign states to engage in serious negotiations. The main focus of the negotiations was to democratize decision-making within SACU and to create institutions that would enable Botswana, Lesotho, Namibia, and Swaziland (the BLNS states) to participate fully in the decision-making process of the customs union both with regard to tariff setting and the implementation of trade remedies.� The basic constituent elements of the customs union, such as a common external tariff and the free movement of goods between the SACU members, were not re-negotiated as these were taken as the defining characteristics of the Union.� Other provisions contained in the 1969 Agreement were also retained, albeit in an amended form as far as they were relevant and desirable. Negotiations focused on three key areas.� The first was the creation of a new institutional framework that would establish the SACU as an international organization with legal personality; that would democratize the process of decision-making (e.g. tariff setting and implementation of trade remedies); and that would provide for joint decision making.

III. The new SACU Agreement

              The new SACU Agreement was signed on 21 October 2002 in Gaborone, Botswana, by the Heads-of-State of all SACU countries.� The Agreement now awaits the ratification process through individual SACU parliaments and will enter into force thirty days after the deposit of the instruments of ratification by all Member States. SACU Member States recognized the need to renegotiate the old 1969 Agreement to cater for the needs of a customs union in the 21st century,[2] and align it with current developments in international trade relations.� SACU Member States recognized that the implementation of the 1969 Agreement had been hampered, inter alia, by lack of common policies and common institutions. As Member States of SACU are at varying levels of development, a key objective of the negotiations was to promote equitable development across SACU on the basis of mutual benefit.

IV. SACU's Objectives

              Article 2 of the new SACU Agreement lists the objectives that Member States have set for themselves.� These are: (a) to facilitate the cross border movement of goods between the territories of the Member States; (b) to create effective, transparent and democratic institutions which will ensure equitable trade benefits to Member States; (c) to promote conditions of fair competition in the common customs area; (d) to substantially increase investment opportunities in the customs union area; (e) to enhance the economic development, diversification, industrialization and competitiveness of Member States; (f) to promote the integration of Member States into the global economy through enhanced trade and investment; (g) to facilitate the equitable sharing of revenue arising from customs, excise and additional duties by Member States; and to facilitate the development of common policies and strategies. The creation of an effective, transparent and democratic institution that will remedy the inefficiencies associated with the 1969 arrangement, and allow for a more meaningful participation (on the basis of equality) of all member states in decision-making on all SACU matters.� The new arrangement also aims to strengthen regional political and economic stability that is essential for development and economic growth.� These objectives are consistent with the goals of NEPAD that focus, inter alia, on fostering good governance, political stability as prerequisites for development. The SACU countries are still largely dependant on primary products for foreign exchange earnings, with agriculture and mining still playing a dominant role.� Continued dependence on primary products, whose terms of trade are in secular decline, is not in the long-term interest of SACU countries.� Hence, SACU countries are developing policies that aim to encourage diversification and beneficiation of their primary products.� From the perspective of SACU countries, the new Doha negotiations must remove barriers that impede geographic and product diversification, including for value-added production.

V. SACU's common policies

              SACU Member States have agreed to facilitate the development of common policies and strategies.� Pursuant to this objective, Member States have agreed to develop common policies in the areas of industrial development, agriculture, competition, and unfair trade practices.

(1) Industrial development

              SACU Member States recognize the importance of balanced industrial development of the common customs area as an important objective for economic development. In the development and implementation of common industrial policies, Members will take into account their varying levels of development in order to ensure that the outcomes of these policies are equitable and mutually beneficial. Common industrial policies in SACU will serve to enhance development, diversification, industrialization, and competitiveness of Member economies.

(1) Agriculture

              Agriculture plays a dominant role in the economies of SACU countries. Member States have agreed to cooperate on agricultural policies in order to ensure the coordinated development of the agricultural sector within the customs union area. The SACU agricultural policy will focus on, inter alia�� promoting environmentally sustainable rural livelihoods, sustainable resource management and more equitable access to resources and services for farming communities. The objective would be to ensure a stable/sustained source of income for the agricultural community, thereby reducing rural poverty.� Such a strategy will improve investor confidence and will attract investment (both domestic and foreign) into agriculture-related activities and in rural areas.

(2) Competition policies

              SACU Member States have agreed that there shall be competition policies in each Member State, and also to cooperate with each other with respect to the enforcement of competition laws and regulations.

(3) Unfair Trade Practices�

              SACU Member States have agreed to develop policies and instruments to address unfair trade practices. This will serve to substantially increase investment opportunities in the Common Customs Area.

VI. Participation in the WTO

              SACU countries are individually original WTO Members.[3] SACU countries attach great importance to the outcomes of the Doha Ministerial Conference of 2001, which put development at the centre of the WTO agenda. For SACU, the Doha Development Agenda (DDA) offers the WTO an opportunity to address imbalances and inequities that are evident in current WTO agreements, improving market access opportunities for their exports and establishing multilateral rules that support their development efforts. Notwithstanding the opportunities offered by the DDA, the new negotiating agenda presents SACU countries with unique challenges and has immense implications for these countries. The broadening of the scope of negotiations to include ‘new issues’ will severely test the human and institutional capacity of SACU countries.

(1) A development agenda

              The Doha Ministerial Declaration of November 2001 puts development concerns at the centre of the multilateral trade agenda. To meet this challenge, Members must ensure that the outcomes of the Doha negotiations support poverty-reducing economic growth, while providing space for developing and least-developed countries to pursue national development strategies that enhance welfare and foster economic growth. The negotiations should also contribute to strengthening regional integration initiatives across the African continent.

(2) Capacity building

              To participate effectively in the Doha negotiations, SACU countries require effective and sustained technical cooperation. This assistance should support analytical research at the country and regional levels, and strengthen institutional and human resources to identify and pursue national priorities. In the case of SACU countries, capacity building and technical assistance will be required to establish the institutional structures which have been created to fulfil the objectives of the customs union set out in the new 2002 SACU Agreement.

(3) SACU’s priorities in the WTO

              Furthermore, SACU's priorities in the WTO include the following:� the need to address the outstanding implementation issues emanating from the Uruguay Round and as mandated by the DDA; the commitment to ensure that the developmental concerns of developing and least-developed countries are reflected in the final outcomes of these negotiations; the elimination of all trade and non-trade barriers, particularly on products of export interest to developing and least-developed countries; meaningful special and differential provisions; and capacity building and technical assistance that will allow developing and least developed countries to participate fully and effectively in� the negotiations. In conclusion, SACU Members believe that the TPR process has the potential to contribute further towards the regional integration process currently unfolding in the sub-region.

report by the government of the republic of botswana

              As a country with a small population, the objective of the trade policy for Botswana is to ensure market access for domestically-produced goods in foreign markets;� and also, to open the domestic market to imported products so that consumers and the business community can have a wide choice at relatively competitive prices. Botswana's trade policy can be appreciated by taking into account all of the existing bilateral, regional and multilateral trade arrangements in which Botswana participates.� All of these trade arrangements have one key objective, that of facilitating and expanding trade through the reduction and elimination of all forms of barriers to trade. Botswana is an open economy that has maintained its openness from as far back as 1910 when the Southern African Customs Union Agreement (SACUA) was signed between the Union of South Africa and the British protectorates of Bechuanaland, Basutoland and Swaziland.� Botswana imports her national requirements from the Southern African Customs Union (SACU) while her exports are destined, generally, to countries outside the region. The Southern African Customs Union (SACU) arrangement has affected Botswana's trade relations with third countries in the past and will continue to do so in the future.� Whereas under the 1969 SACU Agreement, a Member State could, with the concurrence of other Member States, enter into bilateral trade agreements, the new SACU Agreement signed in October 2002 gives SACU the legal personality that allows it to negotiate Free Trade Agreements with third parties, as a group.� This approach is being used, amongst others, in the current negotiations on the proposed SACU/U.S. Free-Trade Area (FTA) Agreement. Botswana has also ratified the SADC Protocol on Trade Cooperation launched in September 2000 with the aim of creating a Free-trade area by 2008.� Botswana is participating in ongoing negotiations with respect to rules of origin for textiles, wheat flour, motor vehicles, plant and machinery, plastic and other products.� Negotiations on trade in services are also moving forward. The Government of Botswana, as one of the founding members of the World Trade Organization (WTO), is participating in the negotiations mandated by the Doha Ministerial Declaration of November 2001.� The negotiations could result in additional commitments in the form of new agreements.� The agenda includes, amongst others, liberalisation of trade in goods and services;� TRIPS and public health;� reform of agriculture; linkage between trade and environment;� clearer rules on anti-dumping, subsidies and countervailing measures;� and the reform of the dispute settlement system. Botswana also participates in the African, Caribbean and Pacific Countries (ACP) and the European Union (EU) negotiations launched in September to 2002, to negotiate reciprocal Economic Partnership Agreements (EPAs).� The EPAs will include, among other issues, trade in services as well as cooperation with regard to competition policy, protection of intellectual property rights, the environment, and trade and labour standards. Manufacturers in Botswana have preferential market access to the U.S. market through the African Growth and Opportunity Act (AGOA).� In August 2002, the U.S. amended AGOA to accommodate Botswana's request, together with that of Namibia, to be reclassified as least developed countries for purposes of accessing textile raw materials from non-African third countries and still qualify for AGOA preferences when exporting finished products to the USA market. Even though this provision will expire in 2004, it will boost exports to the U.S.
Future outlook
              The development of trade policy is a continuous process that is influenced by changes in national and international environment.� Therefore, trade and trade-related� policies must be reviewed and/or developed so that they complement each other in achieving the Government broad objectives of achieving sustainable economic growth and diversification.� In this regard, Botswana is currently developing an Investment Strategy and an Investment Law that will send a clear signal to the international investment community that Botswana is open to foreign direct investment (FDI).� The Foreign Investment Law will outline the principles of good treatment and protection of foreign investment. Furthermore, Botswana is in the process of developing a National Export Strategy, in close cooperation with the private sector and other stakeholders.� This Strategy will not only focus on the identification of export markets through export promotion (a "borders-out" approach) but also on a "borders-in" approach which focuses on developing the capability and capacity to produce competitive goods and services.� The Strategy will also consider "border" issues, to minimize the cost of international transactions.. It will also identify and implement measures to maximize the contribution of the export to the social and economic development of Botswana.

Report by the government of THE REPUBLIC OF NAMIBIA


              Namibia is a multi-party democracy.� The constitution is the supreme law of the Republic of Namibia and provides for the separation of power between the Executive, Legislature and the Judiciary. The power to conclude international treaties, including trade-related agreements, is vested in the President, (who normally delegates such responsibility to a portfolio Minister). However, such treaties/agreements only become operative and binding when ratified by Parliament. These same procedures were followed for the WTO Agreements. The Ministry of Trade and Industry (MTI) is, in the first instance, responsible for the formulation of trade policy as well as its implementation, including negotiating trade agreements at the regional and multilateral level. Other line Ministries and agencies of the Government are consulted and participate in the process of formulating trade policy and in negotiation of trade agreements. The Government periodically consults, formally and informally, with the private sector on the design of economic and trade policy. Cabinet approval is required for initiatives by portfolio ministries to form, or amend legislation.� Tabling and approval of a bill in parliament are followed by consent by the President of the Republic of Namibia and publication of the Act in the Government Gazette, after which the bill becomes law.


              Trade liberalization and investment promotion constitute key elements of Namibia’s trade policy framework and her development strategy.� The following are the main objectives:

- Promotion and further liberalization of trade;

- Expansion of exports and diversification, in terms of both products and markets;

- Provision of tax-based incentives for manufacturing enterprises and exporters;

- Support to small and medium-size enterprises (SMEs); and

- Creation of an environment conducive to investment and growth.

              With the objective of attracting investments, the government has, since independence, embarked on creating a multifaceted incentive regime that focuses on manufacturing and export-oriented industries:

- The corporate tax rate have been reduced to 35%;

- No income tax is payable on dividends accruing to resident shareholders (with the exception of some building societies’ dividends of which only one third is tax free);

- Non-resident shareholder tax (withholding tax) has been reduced to 10%;

- Plant machinery and equipment can be written off over a period of only three years; and

- Buildings can be written off over 20 years, with 20% depreciation allowed in the first year.

              The Special Incentives for Manufactures allow registered manufacturer 50% tax abatement on taxable income for a period of five years, to be phased out over a subsequent period of ten years.� Further, manufacturers:

- can write-off factory building over only ten years;

- are exempted from paying sales taxes on the import of manufacturing machinery;

- are allowed an additional tax deduction of 25% for production line wages and training expenses, (i.e. deductible at 125%); and

- can claim tax deductions and even cash grants for export promotion activities.

              To promote Namibia as a trading centre within Southern Africa, the Government has introduced a very generous tax allowance on income derived from the export of manufactured goods.� An 80% tax abatement is allowed on the taxable income derived from the export of manufactured goods (excluding meat and fish), irrespective of whether these goods have been manufactured in Namibia or not. The flagship of Namibia’s incentive regime is the Export Processing Zone (EPZ) regime.� Enterprises with EPZ status are exempt from all corporate income tax, customs duties on the import of raw materials, machinery, sales taxes, transfer duties and stamps, i.e. they can operate in a totally tax-free regime.� EPZ enterprises are free to locate anywhere in the country as a single factory EPZ, or within an EPZ park as developed in Walvisbay, at the western coast and Oshikango, at the northern border with Angola. The Government encourages trade diversification by promoting the manufacture of export-oriented no-traditional goods as well as other value adding activities.� In recognizing the private sector as the engine of economic growth, the Government has taken initiatives directed at creating an environment investment legislation, whose framework is to create an attractive environment for investors.� In this context, various incentives are being offered, such as those under the Export Processing Zones – directed at export-oriented value adding activities, which are meant to seek and penetrate international markets. In addition to the overall incentive framework, including the EPZ, the Government has introduced the concept of “industrial parks” as part of its investment promotion strategy.� The aim of these parks is to cater for those investors who need ready-made factory shells.� Industrial parks can accommodate small/medium and large-scale business enterprises. SMEs are also being given high priority as they form the basis of business development, rural development and, subsequently, large-scale industrial development.� To this end, the Government has recently adopted an SME policy as part of its overall industrial policy.�� The underlying principle is to broaden the industrial base, which hardly existed at independence in 1990. Namibia recognizes that an efficient and expanding private sector operating in a free market environment will be the driving force of the economy in terms of employment creation and increased incomes.� As such, the Government will continue to facilitate and play a catalytic role in providing an environment conducive to private sector growth.� Policy will focus on the development of human resources, development and improvement of infrastructure, promotion of trade and diversification into non-traditional exports. Namibia attaches great importance to the multilateral trading system, which has contributed much to predictability and growth in international trade.�� Namibia has, therefore, always supported the role of the WTO in strengthening the multilateral trading system.� In the area of market access, Namibia is committed to continue liberalization of trade and of investment for the production of goods and the progressive opening of the services sector.� Namibia will continue to pursue tariff reductions in line with its liberalization efforts and commitments in the WTO.� Non-tariff measures will be continuously reviewed with a view to their progressive elimination.


              Namibia is an open economy.� In recognition of this, the country attaches great importance to trade cooperation, on both regional and global levels, as a means of securing and enhancing export markets and fostering international economic cooperation.� Namibia is a signatory to a number of regional and international trade agreements.� These include the Southern African Customs Union (SACU), the Southern African Development Community (SADC), the Common Market for Eastern and Southern Africa (COMESA), the Lom� Convention, and the World Trade Organization. Namibia has also signed a Preferential Trade Agreement with Zimbabwe. A similar agreement is being negotiated with Angola. This is important in view of the reconstruction and revival of the Angolan economy after more than two decades of war. Namibia also participates in the Regional Integration Facilitation Forum (RIFF). Additional, bilateral trade agreements, providing most-favoured-nation (MFN) status have been entered into with the following countries: Cuba, Peoples Democratic Republic of Korea, Democratic Republic of Congo, India, Indonesia, Malaysia, China (People’s Republic of), the Russian Federation, and Tunisia. Beside trade agreements, Namibia forms part of a Common Monetary Area (CMA), which is an exchange control mechanism, also comprising Lesotho, Swaziland and South Africa.� Under the CMA Agreement, Namibia applies exchange controls similar to those in South Africa. This arrangement is a recognition of an interdependence of the country’s banking system with that of South Africa.� As a result of this arrangement, the scope for an independent monetary policy is very limited. This has led to a situation where the Bank of Namibia generally follows developments in South Africa and the actions of the South African Reserve Bank (SARB). The Government of Namibia views the SACU Agreement as the core of its regional integration efforts. Namibia is a also member of the SADC, and attaches great importance to this arrangement. Namibia views SADC as a strategy to broaden regional trade integration and as a strategic vehicle for integration in the world economy. In this context Namibia signed the SADC Protocol on Trade, which was agreed in August 1996 and whose implementation commenced in September 2000. The main objective of the SADC Protocol on Trade is the establishment of a free trade area within eight years as from the date of implementation. Namibia is a member of COMESA since 1994, but has to date not ratified the COMESA Treaty. The country has not been able to participate in COMESA trade liberalization program because of its membership of SACU. As a result, derogation from tariff reduction obligation has been extended until 31st July 2003; thereafter the country would be expected to pronounce itself with respect to participation in the COMESA-FTA. Namibia, as a member of the WTO, is committed to a liberal and fair trading regime, which entails progressive liberalization of world trade through the reduction and eventual removal of tariff and non-tariff barriers to trade.� Namibia believes that trade liberalization can strengthen the overall economic activities of its members. Namibia endorsed South Africa’s offer to the WTO with a number of exceptions notably in the Schedule on Agriculture and is, therefore, linked to the tariff program of South Africa, which includes significant Uruguay Round commitments, reflecting South Africa’s adopted schedules of commitment as a developed country. From this perspective, Namibia has offered tariff cuts, scope of bindings and phasing arrangements that go well beyond commitments made by most sub-Saharan African developing countries. Namibia is also bound by the common SACU regimes applicable to trade remedies, customs valuation, rules of origin and other border measures appropriate to developed countries.


              Exports remain skewed towards primary unprocessed commodities, mainly minerals, meat and meat products, and fish. The processing of these goods for export purposes remains largely unexplored. There may well be room for further processing and value addition to primary commodities for exports. Value addition in the export sector can contribute substantially to economic growth and job creation. The Namibian economy has been and remains dominated by the export of primary commodities, particularly mineral exports. On average these accounted for about 50% of exports after independence. Merchandise exports have grown substantially from N$ 3.4 billion in 1991 to N$10.1 billion in 2000 posting an increase of about 197.0%.

(1) Export Trade

              There is a particular problem affecting the analysis of export trade. Prior to independence, the trade of Namibia was largely subsumed in the trade statistics of the South African customs territory, of which it was a part. At this stage only import statistics are available in detail. The European Union, particularly the United Kingdom, as indicated in Table 1 is the chief market for Namibian goods. South Africa is next in importance, taking 27% of total exports in 1996. Japan is another important market (10%), mainly for mineral products. These markets account for 77% of total export trade, indicating a very high degree of market concentration.

Table 1

Direction of Trade (1996) Exports


Exports in %

United Kingdom


South Africa










Source:������������� CSO.

Composition of Exports
              The composition of exports mirrors the types of activity in the Namibian economy; ores and minerals; fish and processed fish products and live animals and meat products. Details are set in Table 2 below.

Table 2

Composition of Exports by Main Commodities, 1990-1998

Exports (fob)





















Other minerals










Food & live animals










Manufactured Products










Other commodities




















Source:������������� Bank of Namibia.

              In 1998, diamonds and other minerals combined accounted for more than 50% of total exports, reflecting the sector as the main source of foreign exchange. Diamonds alone accounted for 34.47% in 1998. Because so much of Namibia’s existing trade is directed to South Africa and the EU where it enters duty free under preferential trade conditions, the Uruguay Round MFN tariff reductions have not improved access for the bulk of existing trade. The Uruguay Round results have brought useful gains in Japan and the United States (before for AGOA regime) access for fish products, although the major constraint in Japan is not tariff and sanitary and phytosanitary measures as in the US, but rather quantitative restrictions. The main benefit of the Uruguay Round would seem to be the opportunity it offers to Namibia to find new exports markets for products as the manufacturing base is diversifying and expanding. Although tariff escalation remains a fact of life, the reality is that most tariffs on manufactured goods are already low and are to be reduced further as a result of continuous implementation of the Uruguay Round outcomes, which are likely to get new impetus through the Doha Round negotiations.� Broadly, the growth trends in exports can be examined by looking at the two main components of merchandise exports: mineral and non-minerals exports. Minerals exports form a core of the nation’s exports. From a percentage contribution of 56.5 in 1991, the share of minerals in total exports has fallen moderately to 50.7% in 2000 after a low of 36.5% in 1998. The sharp fall in mineral exports during 1998 was primarily attributed to a depressed demand for diamonds, following the East Asian financial crisis at the time. The 1998 decline was exacerbated by the closure of Tsumeb Corporation Limited (TCL) mines, which led to a virtual hart in the export of blister copper and other by-products such as lead. In 1991, the contribution of diamonds to total mineral exports was 61.4%; this rose to 80% in 2000. During the same period, the export share of other mineral – principally gold, copper, silver, lead and zinc – declined from 38.6% to barely 19.1%. Copper has suffered by far the largest setback, falling from 9.5% to about 6.6% in 1999. However, copper export recovered again after the former TCL mines resumed operations under the new management of Ongopolo Mining Processing Company. The downward trend in the contribution of mineral export witnessed in the last decade is expected to be reversed with the coming onboard of the Scorpion Zinc mines which is expected to start its production in last half of 2003. No-mineral exports, consisting mainly of agricultural products, manufactured and unprocessed fish, have improved moderately since independence. This group’s contribution to total export rose from 47.1% in 1990 to 49.3% in 2000, having outperformed mineral exports in 1994, 1995 and 1998. Manufacturing exports remain the principal subcomponent under the non-minerals export category, having risen from 24.7 to 36.8 as percentage of total exports between 1990 and 2000. A major component of manufacturing is fish products, which account for about 68% of total manufactures and close to 25% of total exports. This is followed by meat and meat preparations, representing about 14.6% of manufactured exports. The other manufactured products consist mainly of beverages, hides and skins, dairy products, crafts, fine arts and jewellery - in that order. Agricultural exports recorded some contractions during the period under review in the decade since independence, falling from about 9.6 to 3.1% of total exports. The major subcategory here is live animals and animal products, which accounts for close to 88% of total agricultural exports. It is instructive to note that exports of other agricultural products like ostriches, karakul pelts, and grapes have experienced rapid growth, particularly in the past three years.


(1) Direction of Import Trade

              As Table 3 indicates, Namibia’s import trade is highly concentrated. South Africa is the major trading partner of Namibia, supplying 87% of imports and a market for 27% of exports. Consequently, Namibia is susceptible to inflationary movements in South Africa directly via the currency mechanism and also through any increase in the price of goods imported from South Africa. Import patterns have changed, from 1992 onwards, as the value of imports from non-SACU countries such as Germany, France and Japan are becoming more significant. As a result, South Africa’s share of total imports declined over time, from 90% in 1990 to 87% in 1996. The high levels of imports from South Africa could be explained by the competitive nature of the South African economy; but equally it could result in from the relatively high levels of the common external tariff making the prices of similar goods from third countries uncompetitive; or the existence of commercial, financial and transport links that favour South African trade. It is also possible that some goods imported from South Africa may be sourced from elsewhere, but having entered the common customs territory, are recorded as goods of South African origin in Namibian statistics.

Table 3

Direction of Trade (1996) Imports Table 1


Imports in %

South Africa












Source:������������� CSO.

(2) Tariffs

              Like other members of SACU, Namibia applies the Common External Tariff of the customs union. Namibia has a preferential trade agreement with Zimbabwe and this is the only general exception in the application of the SACU Common External Tariff on Namibian imports.


(1) Agriculture

              Agriculture is the mainstay of the Namibian economy and it underpins its social and economic fabric. Agriculture is also one of the principal sectors of the Namibia economy.� In fact, most of the Namibian population live in rural areas and derive their livelihood from agriculture. The Government has taken a number of initiatives whose objectives are, not only to improve agricultural productivity, but most importantly to ensure sustainable land utilization and food security at both household and national levels. Agricultural activities in Namibia are subject to unpredictable climatic conditions that are characterized by frequent droughts. For example, agricultural output, which rose significantly in 1995, fell again in 1996 due to the effects of drought. The Government is committed to gradual movement towards a fully liberalized agricultural trade regime as required by the WTO Agreement. Already, the majority of Namibia’s external agricultural trade is unrestricted, other than for the application of tariffs and non-restrictive phytosanitary and veterinary control measures. In the case of the continuing quantitative restrictions on maize and wheat imports, there is an ongoing liberalization process that must be managed with caution, given the high vulnerability of an economy as small as that of Namibia.

(2) Fisheries

              The fishing is a major component of the Namibian economy and is one of the sectors with the greatest potential for growth, in terms of employment creation and export revenues. The sector’s share of real GDP increase from 4.5% in 1990 to 7.7% in 1994. Employment in the fisheries sector in 1997, is estimated at 13,500 and is projected to have reached 16,000 in 2000. The sector registered a decline of 7.7% in 2001 relative to a growth of 2.9% the previous year. This is due to the decrease in fish catches and quota allocation.

(3) Mining

              The mining industry has been an important part of the economy and continues to play a dominant role in terms of total exports, and foreign currency earnings.� The sector contributes up to 15% of GPD, 11% of tax earnings and 60% of all export earnings (of which two thirds are generated by the diamond mining industry). Despite the adverse effect of depressed metal price worldwide, there has been a positive trend in exploration activities in Namibia.� In 1994, N$38 million was spent on exploration in the country, N$95 million in 1995, N$118 million in 1996 and it is estimated that N$120 million was spent in 1997. The success achieved by large-scale offshore diamond mining operations has interest of investors, with the potential of further significant increases in Namibia’s diamond output in the coming years.� Further exploration for gold, dimension stones and prospecting activities for base metals are set to increase in the future. The mining sector has seen a substantial investment of up to N$ 2.5 billion in 2001 with the investment in the zinc smelter in the southern part of the country. There is a concern of export of raw minerals without value addition. The government, therefore, is encouraging investments in plants to add value.

(4) Manufacturing

              Namibian’s manufacturing sector is under-developed in terms of its lack of diversification, modern technology, skilled labour and its geographical concentration. To date, manufacturing other than food processing plays a minor role in Namibia’s economy.� Manufacturing as a whole contributes slightly more than 11% GDP and employs less than 6% of the work force. The share of manufactures in exports, which stood at 28% in 1995, however, is impressive but these exports comprise mainly fish, meat and food processing. It is in recognition of the need to increase our manufacturing capacity that the Ministry of Trade and Industry introduced special incentives for manufacturers and exporters. The Ministry is also assisting the small-scale and informal sector to expand and to increase its contribution to the GDP.� In order to broaden the manufacturing base, the Government has also embarked upon the establishment of export processing zones, the upgrading and promotion of the ports of Walvisbay and Luderitz and the launch of industrial parks for small and medium-scale enterprises. Despite all these efforts, the need for increased value-added activities in all sectors remains. The focus of the Government’s industrial policy is facilitation rather than regulation. Therefore, there are currently no sectors excluded from entry by foreign investors and no price controls for manufacturing outputs. Foreign investors are not required to engage local joint venture partners, but can own 100% of their investment.

(5) Services

              With a contribution of more than 60%, the services sector is the greatest contributor to the GDP. The sector is also a large employment provider, accounting for over 57% all employed persons. The major contributor to the services sector is the government service.� Other important contributors are the financial, real estate and business services, tourism and the wholesale and retail trade sub-sectors.

(i) Financial sector

              Namibia has a relatively developed financial system. The Ministry of Finance is responsible for overseeing government policies and operations with regard to fiscal, monetary and financial affairs. In August 1990, the Bank of Namibia was established with the objectives to promote and maintain internal and external monetary stability, to foster monetary, credit and financial conditions conducive to orderly, balanced and sustained economic development and to assist in attaining national economic goals. There are five commercial banks and 16 financial institutions operating in Namibia. Namibia Financial Institutions Supervisory Authority (NAMFISA) – Act No. 3 of 2001 supervise the non-banking financial institutions.

(ii) Tourism

              Tourism is currently the leading and fastest growing industry in the world. In Namibia, tourism is a remarkable contributor to GDP (almost 7%), third after mining and agriculture.� It is estimated that, shortly after the turn of the century, tourism will be the largest contributor to GDP. This projected growth in the tourism industry will have a major positive effect on the Namibian economy as a whole. The Ministry of Environment and Tourism promotes and regulates tourism locally and abroad. The Ministry manages 12 tourist resorts, as well as a number of camping sites, situated mainly in nature reserves and conservation areas. More than three-quarters of the total number of accommodation units and beds in the Namibian tourism industry are supplied by the private sector. All tour operators and travel agents, as well as most of the sub-sectors of the tourism industry, are parts of the private sector.� The commercialization of the Namibia Tourist Resorts has been finalized with the establishment of Namibia Wildlife Association.

(iii) Telecommunications and road infrastructure

              Especially taking into account its size (824 000 square kilometres) and population (2.1 million), Namibia proud itself in having one of the most modern telecommunication infrastructures in Africa.� There are 60 automatic telephone exchanges in Namibia.� Customers can dial directly to 199 countries.� To date, the network capacity is around 100,000 ports with 109,400 subscribers, 29 manual service nodes and 14 multi-party lines serving 6,400 customers with basic telephone services.� Local dial-up access to e-mail and Internet services is possible in all larger urban centres. Namibia has a well-established road infrastructure. The majority of towns and communities throughout the country are connected with the existing tarred road transport network that covers a total distance of 45,000 km. The country is also linked by tarred round road to Zimbabwe, Zambia, Botswana, Angola and South Africa.� Major development projects include the Trans-Kalahari highway, linking Namibia to Botswana and South Africa, and the Trans-Caprivi highway to Botswana, Zimbabwe and Zambia. Namibia also participates in the Walvisbay-Maputo corridor, which will link the two ports.

Report by the government of THE Kingdom OF lesotho

I. Executive summary

              As this is the second time that Lesotho is participating in the WTO Trade Policy Review process and the first time that the trade policies of the SACU member states are reviewed as a single bloc, the government of Lesotho wishes to seize this opportunity to reiterate its commitment to the review process. The government of Lesotho views this collective review of SACU members as a significant step towards contributing to the realization of the full economic integration of the sub region.
              Since its first Trade Policy Review in 1998, Lesotho still remains the only Least Developed Country member of the Southern African Customs union (SACU), with per capita GDP of just US$540 in 2000.� Since 1998, Lesotho has been offered and benefited from enhanced conditions of access for its exports into major markets under expanded GSP schemes of some developed countries including into the US market through the Africa Growth and Opportunities Act, the European Union/ACP Cotonou framework Agreement. Furthermore, the recently concluded SACU Agreement and the SADC Trade Protocol have served to strengthen Lesotho’s integration into the regional economy. The access Lesotho exports enjoy under the US AGOA has facilitated increased Foreign Direct Investment in the Textiles and Clothing Sector. This Increase in Investment has led to the creation of jobs estimated at 44000 at the end of 2002.Additional investment projects are in the pipeline and it is expected that they will also contribute towards job creation. Despite this positive developments in the manufacturing sector, Lesotho continues to face growing levels of unemployment caused largely by the decline in the labour intensive components of the Lesotho Highlands Water Project and the retrenchments in the mining sector as a result of a combination of factors including declining terms of trade in the sector and industry restructuring.

II. Main features of Lesotho’s trade policy

              There are no major changes in the features of Lesotho trade policies.� It can further be added that Lesotho has simplified its import procedures.� Import permits are in place for statistical purposes and to monitor trade flows.� Some import restrictions would seem to be in place largely for economic reasons and supply management, for example, restrictions on the importation of used clothing, automobiles and some agricultural products. Export promotion has been one of the key elements of Lesotho’s trade policy, partly to offset domestic inefficiencies such as poor infrastructure, inefficient financial intermediation.� As such, the export finance scheme and insurance has been resuscitated. In 2000, Lesotho underwent an economic reform programme, again under the auspices of the IMF, which included both structural adjustments and as well as quantitative financial targets.� Besides, the Government has agreed to prepare a poverty reduction strategy.� An Interim Poverty Reduction Strategy Paper (IPRSP) published by the Government identifies, among other policies, macro-economic management, prudent fiscal management, legal and judicial reforms, export-led economic growth and employment creation as the core of the medium term strategy for the realization of poverty alleviation.� Policy measures for economic growth will include institutional, regulatory and other reforms to boost private investment and export.� The Lesotho Government through parliament has formulated a vision 2020, which succinctly maps out a way forward for the development of its economy.� Further to this, there are white papers due to be brought to parliament such as a national strategy for development and promotion of small business sector in Lesotho and Lesotho Consumer Rights and Protection Bill.� Finalization of the Standards Bill is still on going, whereas the Marketing Policy Framework is under way for submission to Cabinet. As indicated earlier on, SACU revenue collection has been the main source of Lesotho government income, however, recent studies have shown that tremendous losses of revenue will be experienced due to the RSA-EU/FTA where most of the EU products will access the SACU market at zero tariff.� Alternative measures to curb the situation are underway.� To this effect, Lesotho is currently engaged in a Pro-Poor Integrated Framework, where Government and the six core agencies are working together to seek strategies for the implementation of the results of a diagnostic study on trade-related needs recently concluded by the Six Core Agencies of the Integrated Framework.

III. Sectoral policies

              There have been a number of developments since the last Review that was conducted in 1998, especially in the manufacturing and services sectors.� As noted, Lesotho’s trade policies are significantly influenced by SACU policies, which are presently outward looking, including a general liberalization of markets, tariffication of non-tariff barriers and a commitment to a phased reduction of import tariffs following the conclusion of the Uruguay Round. Progress appears to have been made in raising the competitiveness of domestic producers, through the liberalization of a number of service activities, including financial, telecommunications and energy.� Private participation has been introduced in recent years, either as a substitute for, or to compete with, state-owned firms.� As the role of Government as a service provider has declined, its role as a regulator has grown considerably.

(1) The agricultural sector

              The macroeconomic importance of Lesotho’s agricultural sector is evidenced by the fact that 80% of the population lives in the rural areas where most agricultural activities occur.� More than 50% derive their livelihood from crops and livestock production and about 60% of labor force is employed in the sector. Agriculture accounts for 16% of exports and 75% of the country’s basic food needs. However, it is expected that the agriculture sector will decline further by an estimated 1.5% reflecting long term depression in the sector. In addition, it has been established that unless drastic measures are put in place, the sector will continue to suffer structural constraints. Furthermore, there is evidence that the HIV/AIDS pandemic is beginning to adversely affect the sector.

(i) Strategic vision of the agricultural sector

              The concept behind the development of a vision for the agricultural sector is one where output is based on sustainable, efficient and competitive production practices providing long-term comfortable and secure livelihood, free from poverty. Markets will be reached through an efficient and integrated marketing system. Production in the sector will be based on goods where Lesotho enjoys a comparative advantage. The objective therefore is to encourage the development of a sector through development and implementation of a policy that promotes the interest of farmers and facilitates the growth of a sustainable, efficient and competitive sector that reflects comparative advantage. Lesotho’s agriculture is relatively open to external influence. Since the Republic of South Africa and Lesotho are members of SACU, no import tariffs are levied on trade between the two countries. Where the Government of Lesotho does not restrict importation, price trends and changes in South Africa directly affect prices in Lesotho. Thus, there is a strong direct link between prices in South Africa and Lesotho and a direct interdependence of trade policies. Over the past few decades, the GOL has been directly participating in producing, marketing and processing most agricultural inputs and outputs, thereby limiting private sector involvement in these activities. This has reflected the perceived need to reduce dependence on food imports from RSA and protect domestic producers against unfair competition from large, RSA farmers. This led to extensive state intervention in production, marketing, processing and pricing of agricultural commodities, thereby distorting market signals and resulting in an inefficient allocation of resources and severely weakened private sector.

(ii) Protection and liberalization of the agricultural sector

              The general strategy of the Government of Lesotho is to recognize and remove the distorting tendencies of protection.�� However, it also recognizes the need to take account of the impact of protection and subsidies that exist in the main potential trading partners in the developed world on growth in Lesotho. Liberalization of regulations is therefore being studied on a case-by-case basis.� Where regulations are ineffective or not achieving their goals for some other reason, they will be removed.

(iii) Government activities and privatisation

              The Government of Lesotho accepts that it should not be involved in directly productive activities. Here again, however, the Government recognizes the danger that privatization of certain types of enterprises may simply replace inefficient public monopolies by private ones. This may turn out to present problems to the consumer and the tax payer that are just as great as those that arose out of government intervention in productive activity. Privatisation is therefore also being studied and carried out on a case-by-case basis. Sixteen Government owned enterprises have been identified for study and privatisation has been initiated where appropriate.

(iv) Subsidies

              Like protection, subsidies are a fact of life in developed countries as much as in poor ones. Subsidies by themselves are not regarded as inappropriate policy even when they are unsustainable over a long period. It is important, however, that where subsidies are provided, they should be for clearly defined purposes that do not lead to distortions or have counter productive implications. Government has now completed a study on the impact of subsidies in order to help government clarify its policy in this area. The results are presently under consideration and a policy paper is being prepared. The process of deregulation started in 1995/96 with the deregulation of maize and maize meal.� In 1997 this was followed by the liberalization of quantitative restrictions on the import of wheat and flour.� Driven by the overall goals of poverty alleviation and reduction, employment creation in the private sector and the attainment of national food security, the GOL desires to further the process of liberalization in the remaining controlled markets. It has however become imperative that before introducing marketing policy reforms, stakeholders in this case policy makers, the farming and trading communities, and consumers have clear understanding of what the impact of current policies are and how the future is likely to unfold if market reforms are introduced. It is important to note that the government has already made a commitment to liberalise markets but what is crucial is to determine the rate at which the changes should occur taking into account among others the structural make up of the economy and external marketing and economic environment. Hence, it is necessary to diagnose needs and opportunities derived from the reform process and to follow-up with the stakeholders. The GOL is continuing with the process of revising agricultural production and marketing policies, moving them away from a highly regulated inward-looking strategy based on the goal of self-sufficiency, towards a liberalized outward-oriented market environment within an integrated regional economy. A programme to follow-up some of the implications of the report and the recommendations made, and a series of consultations have being undertaken in order to ensure that the views of all stakeholders, including farming and trading communities affected by this policy reform process are considered. Deregulation implies a substantial policy change that will affect agricultural production activities of the farming community at both commercial and subsistence levels.� The Department of Marketing, in collaboration with Policy Section of the Department of Planning and Policy Analysis (DPPA) of the Ministry of Agriculture, Cooperatives and Land Reclamation has therefore implemented these consultative workshops in all districts before recommendations on the policy changes are submitted for government approval. It is envisaged that recommendations generated from these consultations, especially with respect to the schedule of liberalization, will be presented to Cabinet for consideration and approval with a view to continue the process of reforms.� It is hoped that in the near future, marketing policies will be characterized by minimum government interventions in terms of both export and import of agricultural commodities except application of SPS measures which are still in the development stages at the moment. Agricultural policies have changed considerably over the last decade or so and many policies that have not been working well have already been abandoned. In brief, the government is committed towards moving away from in-ward looking approaches to outwards looking approaches based on comparative advantage. The overriding strategy by which the policy objectives will be achieved involves commercialization of agriculture into market-responsive and competitive sector that utilizes resources efficiently and sustain ably. The privatization of agricultural enterprises is being implemented in accordance with the overall Privatisation Act of 1995. The objective is to eliminate the fiscal burden on government and to improve efficiency. All state run agricultural enterprises have been advertised after Cabinet approval. Expert on privatization issues have been engaged to fast track the process.

(v) SPS measures

              The key regulations covering livestock are Proclamation 57 (1952) – Importation of livestock and livestock products; Stock diseases Proclamation (Amendment 1954 and the Stock Diseases Regulations of 1973. Proclamation 45 of 1951 covers Fishing Regulations. Recent regulations are the legal notice of Stock Diseases Proclamations of 1986 and the notes of the Chief Veterinary Officer of May 2000. The regulations governing the importation and export of animals and animal products are derived from the Proclamation no 10 of 1957 (Amended in 1984) and Legal Notice no 27 of 1972. Proclamation no 10 of 1957 states that animals or animal products will be imported or exported outside Lesotho only under a permit issued by the Department of Livestock Services (by a person designed by the Department). The Stock Diseases (Amendment Act of 1984 is specifically targeted to prevent introduction of and spread of among livestock in Lesotho of any disease that is specified in the regulations. It regulates the importation of livestock from outside the country and controls the movement of livestock within the borders of Lesotho The Act also provides for the notification of disease outbreaks within the country and gives power to the Minister of Agriculture to appoint inspectors to carry out inspection of livestock. Under this Act, inspector can detain, isolate, test inoculate, remove, brand, dip, or remove livestock and levy charges on livestock owners. The Agricultural Marketing (Distribution of Dairy Products) Regulations 1992 (Legal Notice 241 0f 1992) empowers the Lesotho National Dairy Board to issue permits to dairy producers and processors and surcharges a levy on all invoiced products. The Legal Notice No 19 of 1993 provides amendments to the milk hygiene Regulations and is based on FAO Consulting Document of 1981. The Proclamation 45 of 1951 – Fishing Regulations, governs regulations on fisheries. It governs all forms of fishing and grants power to the Minister of Agriculture through the Department of Livestock Services to issue fishing permits and controls the fishing season. The main legislation governing trade in plant and plant material� provides protection to agricultural plants from damage by pests and diseases. The Act controls the importation of growing media, injurious organisms, insects and plants. It also controls the operations of all nurseries where plants are grown. It also prescribes the list of organisms and diseases that guarded against. It allows for the eradication and prevention of plant diseases and pests both for imports and exports. It is important to note that the Act generally governs the import and export of plant and plant materials; it does not have actual standards that would be used as a basis of accepting or rejecting any consignment.

(2) Services

              The services sector plays a major role in the Lesotho economy and has potential for growth.

(i) GATS and other international commitments

              Under the General Agreement on Trade in Services (GATS) which include provisions regarding cross border supply of services, consumption abroad, commercial presence and services through presence of natural persons.� There are no restrictions concerning the first two modes of supply.� With regard to the establishment of foreign enterprises or joint ventures with Lesotho, foreigners must satisfy minimum capital outlay and foreign equity requirements of US$ 200,000 and US$50,000 in cash or in kind respectively.� The authority of the foreign parent company to negotiate and conclude contracts on their behalf establishes agencies.� Presence of natural persons is automatic for up to four senior expatriates and specialised skill personnel in accordance with the relevant provisions in the laws of Lesotho. There are no limitations in the case of provision of national treatment in all modes of supply.

(ii) Banking

              Since Lesotho’s last Review in 1998, there have been some changes in the regulatory framework of the banking sector.� Lesotho’s schedule of commitments in banking and other financial services covers the following sectors:� acceptance of deposits and other repayable funds from the public lending of all types; all payments and money transmission services; guarantees and commitments; trading for own account or for accounts of customers which covers money market instruments, foreign exchange; derivative products and exchange rates and interest rate instruments; and money broking.� In the latter, mode 3 has no limitations and all the other modes are unbound for both market access and national treatment.� For all the other services modes 1, 2 and 4 have no binding commitments and relevant authorities restrict mode 3-market access, but there are no limitations for national treatment. Through the revised Financial Institutions Act (FIA) 1999 and in order to effectively undertake its mandate to promote financial stability, the Central Bank brought the quality of its supervision of financial institutions up to international standards and practices.� Major improvements were made in monitoring the soundness of the banking system in terms of the adequacy of bank’s risk management practices, financial data, and their compliance with prudential regulations. In August 2000, the Central Bank of Lesotho Act 2000 took effect.� While this Act focuses more on the administration of the Central Bank and its relations with Government, it also contains provisions that govern the Central Bank’s relationship with licensed financial institutions.� All exporting companies are required by law to remit their proceeds on free on board (f.o.b.) basis within the period of six months after exportation.

(iii) Insurance Services

              Under this service sector, Lesotho made commitments in direct life insurance, non-life insurance services and reinsurance retrocession.� In all these sectors, cross-border supply is unbound and consumption abroad has no limitation in both market access and national treatment.� To establish a commercial entity, both foreign and domestic insurers have to be incorporated and domestic insurers have to be incorporated as a public company under the Companies Act for market access, national treatment has no limitations.

(iv) Tourism Services

              Ecotourism is another sector that offers high potential for development.� Lesotho is, blessed with beautiful, often snow-clad mountaintops.� The country enjoys a cool, temperate climate.� Mountain climbing in the Maluti Range, trout fishing, pony trekking and bird watching are some of the leisure activities that can be made part of an ecotourism package.� Lesotho has made commitments in hotels and restaurants, travel agencies and tour operator’s services and tourist guide services.� Cross-border services for hotels and restaurants services are unbound except for catering which has no limitations under market access.� Consumption abroad has no limitations, commercial presence and presence of natural persons are unbound except as indicated in i) above.� Travel agencies and tour operator services have no commitments, except of presence of natural persons that depend on the horizontal indication.� Tourist guide services are unbound for cross-border supply due to lack of technical feasibility, there are no limitations under modes 2 and 3 and mode 4 depends on the horizontal indication.

(v) Telecommunications

              Since Lesotho’s last Review in 1998, the telecommunication sector has undergone major restructuring.� The most important change stems from the Lesotho Telecommunications Act No. 5 of 2000 that provided for the regulation and licensing of the telecommunications authorities.� Hence the establishment of Telecommunications Authority, as a regulator and licensing of operators such as Telecom Lesotho, Econet Ezi Cel Lesotho and Vodacom Lesotho.� The Lesotho Telecommunications (Amendment) Act of 2002 further incorporates broadcasting services under the purview of Act No.5 of 2000. There is also a policy on postal services sector being formulated, whose objective is to put in place a regulator to oversee the licensing of operators including express courier service providers. Under telecommunications, Lesotho made commitments in six (6) categories namely, electronic mail, on-line information and data base retrieval, electronic data interchange, enhanced/value added facsimile services, code and protocol conversion, and on-line information and/or data processing. Lesotho covered all the four main categories classified under audio-visual services i.e. motion picture projection services; radio and television services and radio and television transmission.� In all the four categories, cross-border supply has no measures, consumption abroad is unbound, while commercial presence and presence of natural persons depends on horizontal entries except for motion picture and video tape production and distribution services where commercial presence has no commitment.� This is in terms of both Article XVI and XVII of the GATS.

(3) Mining

              To date exploration for minerals in Lesotho has been directed at diamonds, semi-precious stone, dimension stone for production of building sandstone, and ceramic clays.� Mineral output remains limited.

(i) Diamonds

              Lesotho’s mining sector is governed by the mining and Mineral Act of 1967 (have to confirm with mines and geology whether a new act is in place).� The Department of Mines and Geology administers the Mining and Mineral Act and issues licenses for diamond digging, diamond buying and cutting, diamond export, sales tax, selling of maps, etc. Value added by the mining and quarrying sector and its share to GDP is estimated to have dropped by 2.0 per cent since 1998.� The sector seems not to have recovered from the 1998 civil unrest that led to substantial loss of customers in the quarrying industry.

(4) Manufacturing

              There are no major changes from the 1998 Review in terms of laws regulating the sector.� The driving force of the economy continues to be the manufacturing sector that is growing rapidly.

(i) Textile and Clothing

              The textile and clothing sub-sector is one of the fastest growing sub-sectors, within the manufacturing sector.� This is largely attributed to positive contribution from the Africa Growth and Opportunity Act enacted in mid-2001.


              We however wish to underscore the challenges that currently face Lesotho with respect to prevalent poverty in the rural communities, food insecurity, unemployment, income inequality, and development of an appropriate policy framework for the advancement of the agricultural and industrial sectors and HIV/AIDS pandemic.


              We wish to indicate that the Government of Lesotho remains committed to the process of trade liberalisation with a view to maximizing benefits thereof and enhancing all processes that contribute towards the development and economic growth of the country. It should be noted in particular that some the worst excesses of market regulations, both trade controls and subsidies for local producers, are to be found in developed member countries. Some of this makes it impossible for poorer countries to compete and so develop their own structures o production in a balanced way. It is now well recognized by most agencies involved in development activities that liberalisation in the developed world would be the most important single act that could be implemented for promoting development in the developing member countries; with an impact far outweighing anything offered through bilateral or multilateral aid flow. It should be noted that the effectiveness of liberalisation policies in developing countries is critically undermined by the continued distortions in the international trading arena as a result of current trade policies.



I. Introduction

              On 27 April 2003, South Africa will celebrate nine years of democratic governance. In 1994, South Africa embarked on a national effort to confront the developmental challenges that are the legacies of five decades of racial oppression and three decades of economic decline. The imperative of redressing inherited injustices and inequalities in South Africa required that the new Government also heed the constraints, challenges and opportunities presented by rapid changes in the global economy.
              South Africa's first free elections in April 1994 established the political prerequisites to define, through a broad‑based consultative process, the key strategies required for revitalizing the economy. Policy interventions aimed, at the outset, to stabilise the macro-economy. A series of complementary policies have since been put in place including: the Microeconomic Reform Strategy and the Integrated Manufacturing Strategy. Together, these and other more specific interventions comprise a comprehensive and integrated set of policies for economic growth and development. At the center of South Africa's economic strategy is industrial policy which aims to shift the dependence on raw material exports to increasingly higher value‑added manufacturing exports. The reduction of tariffs and phasing out of subsidies to enhance competitiveness has been accompanied by a shift towards market‑led supply‑side support measures to promote industrial restructuring, technology upgrading, investment and export promotion, small, medium and micro‑enterprises development, and black economic empowerment. Of particular importance is the development and enhancement of existing capacity in knowledge-driven activities. A transformation programme of this scale inevitably entails significant socio- economic adjustment costs. To sustain processes of restructuring, it is necessary to ensure that key constituencies bearing the burden actively participate in the evolution of economic policy. In this connection, the National Economic Development and Labour Council (NEDLAC) was established as a statutory consultative body drawing together Government, organized labour and business, and community organizations to forge consensus around key areas of economic, trade, labour and development policy‑making. Cooperative governance underpins processes of policy-making and implementation in South Africa and is mandated by the Constitution, which also provides that all spheres of government and all organs of state within each sphere must provide effective, transparent, accountable and coherent government for the Republic as a whole. The Government Report for the WTO TPR in 1998 outlined the key developmental challenges confronting South Africa that were the result of five decades of racial discrimination and three decades of economic decline. That Report located the discussion on South Africa’s trade policy against this background and within broader development strategy and framework that had been designed to overcome the legacies of apartheid. Specifically, the report elaborated the policy framework contained in the Reconstruction and Development Programme (RDP) and the Growth, Employment and Redistribution Strategy (GEAR). This report outlines key developments since 1998.

II. Developments in the Macro-Economy

              South Africa is classified as an upper middle-income developing country, with GDP at US$8.74 billion in 2000. South Africa’s economy is reasonably diversified, with manufacturing and services contributing a sizeable share of total GDP. The growth in real domestic product in 2000 is attributable to steady increases in the output of various sectors, including agriculture, mining, wholesale and retail trade, transport, communications, financial intermediation, and general government services. In a short period of nine years, the Government has begun to reverse the economic decline that had typified South Africa up and until 1994. Indeed, between 1994 and 2000 real GDP has grown annually by approximately 2.6%. In 2000, the growth rate was 3.1%. Other macroeconomic indicators have also shown positive trends. Inflation rates have been contained within the official target range of 3 to 6%, and real interests rates have been stabilized. Monetary policy has been strengthened through improved transparency and predictability, along with a shift away from defending the exchange rate to meeting inflation targets. The resilience of the South African economy has been demonstrated by the manner in which the economy has weathered the impact of the recent global economic downturn. Increases in foreign direct investment inflows have been evident, accounting for about 10% of gross domestic investment. South Africa’s unemployment rate, 28.8% in 2001, is one of the highest in the world, and is a major impediment to poverty reduction. Employment creation remains a pressing challenge and a priority for coordinated government policy.

III. Related Policy Developments

              The programme for restructuring public enterprises was launched in 2000. From the government’s perspective, the increased pace of restructuring of public enterprises, will help increase productive efficiency, attract foreign investment and technology, and reduce government indebtedness. An integrated human resource development strategy is being implemented to address skill deficiencies. Government passed a number of laws for purposes of attaining these objectives, including the Skills Development Levies Act and the Skills Development Act in 1998. The latter Act provides an institutional framework to devise and implement national, sector and workplace strategies to develop and improve the skills of the South African work force. The Act provides for internships that can result in recognized occupational qualifications and for financing skills development by means of a levy-grant scheme. Amendments to South Africa's labor legislation are being implemented and include more flexible work practices and steps to protect the interests of retrenched workers through streamlined arbitration and conciliation procedures.

(1) The Microeconomic Reform Strategy

              An initial set of microeconomic policy reforms had been initiated after 1994. Early successes of these reforms are reflected in the increased share of manufactured goods in exports, and in increased labour productivity. By late 2000, it was becoming increasingly clear that levels of economic growth and employment were inadequate to meet the state’s policy goals, and that macroeconomic reform alone could not stimulate the levels of savings and investment needed to promote growth on the scale needed. This concern lead to the development of the Microeconomic Reform Strategy, announced at the beginning of 2002, which sets out a programme of specific microeconomic interventions over the next period. It defines more precisely the structural change South Africa seeks to achieve by 2014, including higher levels of growth, increasing employment, and greater socio-economic equity built on improved skills levels. Broader ownership of productive assets, appropriate urban and rural development strategies, and improved access to basic services and infrastructure for those engaged in economic activities are key elements of this strategy. To achieve these objectives, attention is focused on economic sectors demonstrating a high potential for growth and job creation, including agriculture, energy, tourism, cultural industry, certain export sectors, and information and telecommunications.

(2) Integrated Manufacturing Strategy

              In 2002, the National Department of Trade and Industry (the dti) formulated the Integrated Manufacturing Strategy (IMS). This strategy is premised on the view that the manufacturing sector provides a focus for stimulating the growth of other activities, such as services, to achieve specific outcomes, such as value addition, employment creation, and economic empowerment. The IMS proceeds from the Microeconomic Reform Strategy for coordinated government efforts aimed at:

- A geographic spread of social and productive investment;

- An integrated manufacturing economy capable of high degrees of value added;

- An intensive information and communication technology (ICT) and logistics system capable ������������� f speed and flexibility;

- A high degree of knowledge and technology capacity;

- Greater diversity of enterprise type and size;

- Skilled, informed and adaptable citizens; and

- An efficient, strong and responsive state structure.

              The IMS identifies five focus sectors:

- Agriculture and food production;

- Tourism;

- Information and technologies

- Cultural industries; and

- Export sectors, including clothing and textiles, metals and minerals, automotive and transport, chemical, and biotechnology.

IV. Trade Policy Development

              Over the past nine years, South Africa has pursued a consistent trade policy reform program. In the context of the Uruguay Round Negotiations, South Africa committed a tariff phase down over five years that took effect in January 1995. It consisted of:

- Industrial tariff reductions averaging one-third by 2000;

- Binding 98% of tariffs lines;

- Rationalizing the number of tariff lines;

- Converting quantitative restrictions and formula duties to ad valorem tariffs; and

- Terminating export subsidies (effective July 1997).

              Compared to middle income countries, imports to South Africa confront average levels of protection. South Africa has committed itself to a reduction by five percentage points of its import-weighted average tariffs in manufacturing. Average economy-wide tariffs fell from 28% to 10%, and the average manufacturing tariff dropped from 30% to 16% in the 1990s. Manufacturing export growth has been robust between 1996 and 2001 with over 6% average annual growth in constant Rands. Moreover, the share of exports in manufacturing output has more than doubled in seven years (from 14% in 1996 to 28% in 2001). Manufacturing’s share in total exports has risen from 35% in 1994 to over 50% at the end of the 1990s. The balance of trade for manufactures, while still negative, improved further in 2001 to a little under R31 billion ($3.6 billion) from R33.6 billion ($3.9 billion) in 2000. Capital goods, motor vehicles and transport equipment are large net importers while metal products are large net exporters.

V. Trade-Related Policy Development

              Since 1998, important developments have taken place in the area of legislative reform and amendment. Some of these changes were aimed, inter alia, at addressing the supply-side measures in the economy, giving effect to the various Constitutional mandates for economic empowerment, promotion of equity and participation, as well as ensuring compliance with international obligations.

(1) Intellectual property rights

              In order to address the enforcement weaknesses that characterised South Africa's intellectual property framework, the legislation has undergone changes since the last review, including the adoption in 1997 of the Counterfeit Goods Act in 1997 and the Intellectual Property Laws Amendment Act. This was followed in 2002 with the Copyright Amendment Act, the Patents Amendment Act, the Merchandise Marks Amendment Act, and the Performers Amendment Act. The Counterfeit Goods Act was adopted to provide additional protection to owners of trademarks, copyright and certain marks under the Merchandise Marks Act of 1941. The new Act covers offences in regard to counterfeit goods, including possession of such goods. The Intellectual Property Laws Amendment Act, adopted to amend the Merchandise Marks Act of 1941, the Performers’ Protection Act of 1967, the Patents Act of 1978, the Copyright Act of 1978, the Trade Marks Act of 1993, and the Designs Act of 1993, aims to bring South African intellectual property legislation fully in line with the TRIPS Agreement. Amendments to the Patents Act of 1978 aim to bring it in line with the TRIPS Agreement, and provides for the implementation of the Patent Cooperation Treaty (PCT), to which South Africa became a party in March 1999.

(2) Competition policy

              South Africa enacted a new Competition Act in 1998 that replaced the 1979 Maintenance and Promotion of Competition Act. The 1998 Competition Act aims to: promote the efficiency, adaptability and development of the economy; provide consumers with competitive prices and product choices; promote employment and advance the social and economic welfare of South Africans; expand opportunities for South African participation in world markets, recognizing the role of foreign competition in South Africa; ensure that SMEs have an equitable opportunity to participate in the economy; and promote a wider ownership, in particular to increase the stakes of historically disadvantaged persons. The Act applies to all economic activity and prohibits anti-competitive practices between firms in vertical and horizontal relationships; prohibits abuse of a dominant position; provides for restrictive practices to be exempted on specified grounds; and requires notification of merger transactions above a specified threshold and of the regulation thereof. The Act also further restricts anti-competitive behaviour of state-owned enterprises, especially when they compete unfairly with the private sector.

(3) Trade remedies and trade administration

              Government promulgated the new International Trade Administration Act in 2002. This Act established the International Trade Administration Commission (ITAC) and is responsible for tariff administration and trade remedies (antidumping and countervailing measures). In terms of the new Act, the Commission shall be responsible, inter alia, for investigating and evaluating applications with regard to alleged dumping, or subsidized exports, safeguard measures, and amendments of customs duties in the common SACU area. The Commission is required to implement measures to promote public awareness of the provisions of the new Act.

(4) Government procurement

              The Constitution provides that State contracts for goods or services must be done in manner that is fair, equitable, transparent, competitive and cost-effective. The Constitution provides that the State is not barred from implementing a procurement policy providing for preferential allocation of contracts and the protection or advancement of persons, or categories of persons, disadvantaged by unfair discrimination. In 2000, parliament passed the Preferential Procurement Policy Framework Act to give effect to this Constitutional mandate by providing a framework for the implementation of the procurement policy contemplated in the Constitution.

(5) Land reform

              The discriminatory laws of the past resulted in highly disproportionate patterns of land ownership. Skewed ownership of productive assets in South Africa (in this case, land) is still one of the most visible legacies of apartheid. The new Land Reform for Agricultural Development Programme (LRAD) has been designed to expand the range of support measures that will be available to previously disadvantaged South African citizens to access land specifically for agricultural purposes. The South African government recognizes that market based programmes of state directed land redistribution perform better than programmes that are operated exclusively by the public sector. The government is committed to ensuring the success of this programme and ensuring that individuals from disadvantaged groups obtain access to land in a speedy and orderly fashion.�

(6) Agriculture

              South Africa has formulated a strategic plan for agriculture aimed at increasing commercial production, building international competitiveness and addressing historical biases that have resulted in skewed access to ownership of productive resources. The key aspects of the strategies include: i) equitable access to and participation in agricultural opportunities, deracialisation of land and enterprise ownership, and unlocking the full entrepreneurial potential of the sector; ii) enhanced global competitiveness and profitability through improving the sector’s primary production, agri-processing and agri-tourism; and iii) sustainable resource management. The successful pursuit of these objectives should lead to wealth creation in rural areas, sustainable employment in agriculture and increased incomes and foreign exchange earnings. It will also reduce poverty and inequalities in land and enterprise ownership and improve farm efficiency and national household food security. In addition, investor confidence will be boosted and safety and security will be enhanced.

VI. International Arrangements and Trade Negotiations

(1) The New Partnership for Africa’s Development

              South Africa has joined with other African countries in a bold and ambitious programme, The New Partnership for Africa’s Development (NEPAD). The objectives of NEPAD include:

- To accelerate the eradication of poverty and inequality in Africa;

- To place African countries, both individually and collectively, on a path of sustainable growth ������������� nd development;

- To halt the marginalization of Africa in the globalization process; and

- To promote the empowerment and economic integration of women.

              The Principles adopted are:

- African ownership and leadership;

- Development of the basis of the resources and resourcefulness of African people;

- Accelerating regional and continental economic integration;

- Creating conditions to attract investors to Africa;

- New Partnership with the industrialized world; and

- Comprehensive, holistic and integrated development programme for Africa.

              The priority areas of focus are:

- Political governance;

- Economic and corporate governance;

- Infrastructure development and information and communication technology;

- Market access and agriculture;

- Human development, including health, education and poverty eradication;

- Capital flows, including domestic resources, private flows, ODA and debt reduction.

              The thrust of the African trade strategy includes: i) trade policy development within a comprehensive and integrated development strategy; ii) supply side support; iii) institutional development; and iv) effective participation in the WTO, strengthening intra-African trade, and mutually beneficial extra-continental bilateral relations.

(2) The New SACU Agreement

              The Southern African Customs Union, comprising South Africa, Botswana, Lesotho, Namibia, and Swaziland (BLNS) is the oldest customs union in the world (formed in 1910). The 2002 SACU Agreement is aimed at democratizing SACU and creating new institutions that will enable all members to participate fully in the decision-making process in the customs union. The new SACU Agreement sets out key objectives that include: to facilitate the cross-border movement of goods between the territories of the Member States; to create effective, transparent and democratic institutions which will ensure equitable trade benefits; to promote conditions of fair competition in the Customs Union Area; to substantially increase investment opportunities in the Customs Union Area; to enhance the economic development, diversification, industrialization and competitiveness of Member States; to promote the integration of Member States into the global economy through enhanced trade and investment; to facilitate the equitable sharing of revenue arising from customs, excise and additional duties levied by Member States; and to facilitate the development of common policies and strategies. From South Africa’s perspective, the new SACU Agreement will help deepen regional integration in Southern Africa and create a basis for addressing the developmental challenges facing the region and its peoples.

(3) The SADC Trade Protocol

              In 2000, the Member States of the Southern African Development Community (SADC) signed the SADC Protocol on Trade. The Protocol incorporates revised rules of origin; cooperation in customs matters; a dispute settlement mechanism; and arrangements for market access and cooperation in various sectors. Negotiations continue on outstanding issues such as rules of origin; the improved tariff offers to increase the trade coverage; a work programme on Standards Quality Assurance and Metrology (SQAM); and a work programme on technical barriers to trade and sanitary and phytosanitary measures. South Africa has undertaken to fast track the lifting on import tariffs on goods from the SADC region. Tariffs on 65% of imports have been lifted in 2000 while 95% of imports from the region would be duty free by 2005.

(4) South Africa-EU Trade, Development and Cooperation AGreement

              In 2000, South Africa and the EU signed a bilateral Trade, Development and Cooperation Agreement (TDCA). The agreement provides, inter alia, for a reciprocal process of removing tariffs on bilateral trade. The TDCA is fully compatible with WTO rules and builds in the principle of asymmetry. The Agreement should contribute positively to promoting economic growth and development in both South and Southern Africa. In terms of the TDCA, the EU will, within 10 years of implementation, remove duties on imports from South Africa of approximately 95% of its tariff lines. This will be most extensive and rapid in the case of industrial goods. In fact, most industrial products produced in South Africa, which qualify under the rules of origin, will be able to enter the EU market duty free within three years of the implementation of the Agreement, that is, by the end of 2002. South Africa will be required to remove duties on approximately 86% of its total imports from the EU. In South Africa’s case, products to be subject to removal of duties are divided into four categories, with varied phase down schedules. Those currently attracting the lowest duties will be phased out soonest, and those with higher duties over not more than 10, or in a few exceptional cases 12 years. Trade between the EU and South Africa has continued to grow, since the conclusion of the Free Trade Agreement (FTA) in January 2000. The EU is South Africa’s largest trading partner, accounting for 31.3% of exports and 39.7% of imports in 2000. The EU agreement is heavily front-loaded in favour of South Africa.� Some analysts show that there was a net increase in exports of South Africa for those products that were subjected to a tariff reduction of 2000.� A more elaborate analysis is needed to isolate the impact of the FTA on South Africa/EU trade bearing in mind the depreciation of South Africa’s exchange rate and other factors.�

(5) Other Regional Trading Initiatives

              South Africa has also benefited from the Africa Growth and Opportunity Act (AGOA), passed by the US in 2000. Some of the major sectors that have benefited from AGOA are clothing and textiles, some agricultural and mining sectors. South Africa’s clothing and textile exports to the US rose by 28% to $356 million in 2001 while there was a 17% overall increase in exports to the U.S. To build on the success of AGOA, South Africa and its partners in SACU have agreed to negotiate with the U.S. for an FTA by 2005. The envisioned agreement will be consistent with WTO rules and, for SACU countries, should build in the principle of special and differential treatment. In the context of building South-South trade and economic linkages, South Africa and its SACU partners are pursuing discussions for possible free trade areas with Mercusor, India and China. These discussions are at varying stages but the objective is the same: to build stronger economic linkages among developing countries. South Africa and its SACU partners are also engaged in talks with the EFTA for a possible bilateral FTA.

(6) Multilateral Trade Negotiations in the WTO

              WTO disciplines can enhance certainty and security for market access. The WTO reduces the scope for unilateral trade measures and aims to ensure that economic interactions, including resolution of disputes, are subject to rules, and not solely the outcome of economic power. Notwithstanding these advances, the outcome of previous multilateral negotiations responded mainly to the interests of developed countries. For developing countries, WTO agreements contain imbalances that undermine their development interests. Further, the agreements, designed in the main by industrialised countries, reflect the concerns of sophisticated economies and presuppose an institutional, human and financial base that is often lacking in developing countries. Developing countries, thus, have a clear interest in strengthening the system to promote their development. Sustained global economic growth requires unlocking the growth and development potential of developing countries. To achieve this, developing countries must pursue industrialization by processing their natural resources where they possess comparative advantage. The strategic objective in the new negotiations is, therefore, for developed countries to undergo far reaching structural adjustment in their economies. It is on this basis that developing countries, including African countries, agreed to launch negotiations in Doha. Moreover, developing countries were successful in ensuring that the Ministerial Declaration agreed in Doha was balanced and that it provided scope to accommodate their trade objectives. Nevertheless, given the wide disparities in the distribution of political, economic and institutional power among WTO members, it is clear that these negotiations will be difficult and developing countries will be hard pressed to ensure that negotiation outcomes promote their development in a meaningful way. Indeed, translating the developmental intent of the Doha Ministerial Conference into meaningful outcomes has, thus far, been frustrated. Three key issues, of great interest to developing countries (public health, special and differential treatment, implementation issues) had interim deadlines in December 2002. These have been missed, thus undermining developing country confidence that this, indeed, would be a Development Round. The result of the failure to meet the December 2002 deadlines, and disappointment at the progress in agriculture suggests an inability of major economies to transcend narrow conceptions and commercial interest in the interest of global economic growth and development, and have put the Doha Development Agenda at risk.

report by the government of the

kingdom of swaziland

              Swaziland is a small open economy whose trade comprises a very high proportion of national production. A considerable proportion of this trade is in the form of exports to preferential markets in the EU and the U.S.� The continuation of these preferential market access arrangements would be an important application of the WTO concept of special and differential treatment.� The opposite would result in the marginalization of the Swaziland economy in the global trading system.� This would, in turn, have negative consequences for the other SACU members. Special and differential treatment for Swaziland would help in the amelioration of the major problems it faces.� The first high dependence on very few agricultural export products the major one being sugar.� In such a situation, the performance of the overall economy (in terms of growth, employment, incomes, etc…) depends critically on the export receipts from that one or few agricultural commodities.� This makes Swaziland to be highly vulnerable from both production and demand.� From the production side, the vulnerability is associated with changes in weather conditions which can be quite drastic at times.� On the demand side, the vulnerability is associated with possible adverse changes in the market conditions of trading partners as well as upward inflexible quotas which prevent the exploitation of favourable market conditions. A second problem is that the agricultural production intended primarily for the domestic market faces stiff competition from imported closely substitutable products.� This may be due to higher foreign productivity improvements, economies of scale in production exchange rate movements, or export subsidies (some of which are hidden). Safeguard provisions may be difficult to apply for a variety of reasons – including low administrative capacity, involvement of multinational corporations whose transactions may be difficult to monitor, and inefficient local markets resulting in surpluses in parts of the country coexisting with shortages in other parts of the same country.� The net result is high exposure for an otherwise already vulnerable small economy. A third problem is restricted scope for economies of scale in agricultural production due to small land surface area.� This means that where trade is based on relative production costs, Swaziland is at a disadvantage other things being equal.� Even where it has a relatively cost advantage, it may be swamped in trade by larger producers through all kinds of pricing strategies. A fourth problem is long distances to foreign markets which add considerably to transportation� costs.� The problem is compounded even further by the fact that the country is land-locked. A fifth problem is fragility of the social system which is, in turn, closely associated with the high dependence on one or a few agricultural exports.� Most of the agricultural exports originate from the rural sector where core areas of high economic activity have been created.� These core areas generate high employment opportunities.� In addition, they provide social services like education, health care, housing, water, sanitation and recreation.� These services are mostly provided by the business sector.� To the extent that these services would normally be provided through the public sector, their provision by the business sector is a significant relief on public resources.� If the industries were to lose their ability to provide these social services, then human development would slow down considerably in the countries concerned.� On strict efficiency criteria, industries which cannot compete in the global market should be allowed to shut down.� Neo-classical economics informs us that resources would then move to higher-yielding areas or occupations.� This would bring about a more efficient allocation of global resources.� There are two problems with this view.� One is that it ignores equity considerations which are equally important in international trade.� The other problem is that where some resources are not mobile, especially across national boundaries then it is a myth to talk about a more efficient allocation of resources.� A case in point is the highly restricted international mobility of skilled and semi-skilled labour which Swaziland has in plentiful supply. Swaziland has made tremendous strides in human developments as a result of non-reciprocal preferential market access.� This was possible because of guaranteed market access at guaranteed prices, especially for sugar.� Event though the real value of the guaranteed prices has tended to be on a downward trend due to secular pressures on agricultural prices (which are, in turn, a result of productivity improvements on the supply side and technological innovations resulting in the availability of substitutes at lower prices on the demand side), inflation and adverse foreign exchange rate movements, there have been stable and predictable resource flows.� From these resources, there has been considerable investments to modernize production, raise operational efficiencies, generate incomes and reduce poverty. Because of enormity of the development task, the retention of preferential market access arrangements involving small and vulnerable economies like Swaziland, is crucial for their sustainable development.� The impact of liberalization shocks would otherwise be devastating.� It is recognized that in some cases these attributes are closely inter-twined with various support measures in the more developed countries offering the market access.� It is for this reason that flexibility imagination and innovation are required for movement towards higher trade liberalization.


[1] The new revenue sharing arrangement was deemed to have come into operation on 1 April 1969.

[2] Vide preamble to the new SACU Agreement.

[3] Botswana joined the GATT on 28 August 1987, Lesotho on 8 January 1988, Namibia on 15 September 1992, South Africa on 13 June 1948, and Swaziland on 8 February 1993.

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