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International Journal of Scientific and Research Publications, Volume 10, Issue 12, December 2020 535
ISSN 2250-3153
This publication is licensed under Creative Commons Attribution CC BY.
http://dx.doi.org/10.29322/IJSRP.10.12.2020.p10861 www.ijsrp.org
An Analysis Of The Concept Of Derogation In Regional
And Continental Integration: A Case Of Zimbabwe?
Oswell Binha *, Kudzanai Mwakurudza **
* (PhD Student), Africa University, College of Business Peace Leadership and Governance Institute of Peace, Leadership and Governance Course in
Global Governance and Integration
** Economic Analyst
DOI: 10.29322/IJSRP.10.12.2020.p10861
http://dx.doi.org/10.29322/IJSRP.10.12.2020.p10861
Abstract- Africa, like any other continent, has embraced
continental integration, to create continental economies of scale in
pursuit of sustainable economic growth and development. The
notion of resource pooling, collective capacity development,
complementary management of resource endowments and indeed
creation of internal markets will provide opportunity for creation
of a robust African economy, capable of overcoming poverty,
unemployment and social distress.
The African development architecture, as created by the
founding nationalists, neglects the concept of continental
collective capacity development for shared economic
performance, enhanced and simplified movement of persons and
goods, development of common regional infrastructure,
promotion of conducive macroeconomic environment favourable
to facilitation of economic development amongst African states.
The recent realisation by Pan-African Institutions, that
deeper intra Africa collaboration is possible beyond matters of
continental peace and security to engendering macroeconomic
convergence a departure from the usual rhetoric of national
sovereignty. Research has shown that 80 cents out of every dollar
made in Africa is as a result of trade. The realisation that
continental integration remains a logical option, came about
against a background of efforts to railroad other multi-lateral
arrangements with Africa particularly on raw material trade.
Progress has been made in creating African regional trade blocs
albeit with inherent constraints largely driven by turfism,
historical colonial attachments, a leadership gap and general
institutional weaknesses in member-states. Of grave concern
however, is the general failure of rules-based economic
engagements in Africa militating against the vast potential Africa
has, to increase intra African trade.
This paper shall cross-examine and engage in an in-depth
analysis on the concept of derogation in integration, putting into
perspective Zimbabwe’s derogation experiences in SADC,
COMESA and the CFTA, whilst making comparative scrutiny
with cases in other continents. Derogation by nature impacts not
only the country seeking the derogation but retards progress with
the group that has committed to the cause of the economic
cooperation.
Index Terms- derogation, continental free trade area,
industrialisation, regional integration, bilateral agreements
I. INTRODUCTION
imbabwe is a land linked country located at the centre of Sub
Saharan Africa. A modest population of approximately
15million inhabitants, has an averagely developed infrastructure
by regional standards. It can be described as a country in immense
political dire straits with an economy performing worse than most
countries at combat war. Whilst there is generally an outcry on
‘economic sanctions’’ imposed on the country by the west and
their allies, a significant number of national challenges faced are
self-inflicted resulting in consistent negative economic growth,
dwindling per capita incomes, high levels of inflation, very high
unemployment and underemployment, poor agrarian sector
performance leading to food insecurity of astronomical
proportions, foreign exchange shortages, dead economic enablers
and public sector decay.
In its medium-term vision, Zimbabwe aspires to be an
upper middle-income country by year 2030.It therefore translates
to a consistent annual double-digit growth to 2030. The vison
statement competently describes indicators and character of an
upper middle-income country. These include access to high
quality education, health, low levels of unemployment, effective
debt management policies, incremental economic growth
thresholds, bankability of both fiscal and monetary policy
standards, good corporate governance, reporting and
accountability, and macroeconomic stability. However,
weakening national institutions, unavailability of efficient and
correct productive infrastructure for both industrialisation and
trade, weak economic enablers and deepening corruption against
a crippling national debt Are components militating against all the
efforts to create a developmental state aspiring to be an upper
middle-income country by 2030.
The traditional Zimbabwean economy is agriculture based
with the greatest percentage of the population surviving on
agriculture related activities. Backward and forward integration in
agriculture value chains have been destroyed, particularly those
that provided the much-needed sophisticated industrial linkages
for value addition and beneficiation. Historically these linkages
are associated with excellent agriculture value added and
manufactured exports contributing significantly to economic
growth.
Trade and investment opportunities existed in services,
tourism, horticulture, agricultural commodities and minerals. This
extended to elaborate linkages with other sectors particularly
Z
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manufacturing, mining and agroprocessing. Industrial
development and trade policy mix enhanced Zimbabwe chances
of achieving the country’s productivity and trade objectives.
Zimbabwe is a member of the WTO, has been a GATT
contracting party. Zimbabwe domesticated the WTO agreement to
the same status as all treaties the country has entered into with
other parties. The country has been a member of the ACP group,
the G90, as well as the G33, a member of the AU and its economic
community, COMESA, SADC, and the tripartite by virtue of
being in COMESA and SADC.
Zimbabwe entered into bilateral arrangements with
Botswana, DR Congo, Mozambique, Namibia, Malawi and South
Africa among others. Whilst these bilateral arrangements remain
in force, the introduction of the SADC Free Trade area toned down
these bilateral agreements in some areas. The country was delisted
from the US driven AGOA, EPA were negotiated and ratified
under ESA and has a trade and investment technical cooperation
with China. The country is signatory to Multilateral Guarantee
Agency, Overseas Private Investment Cooperation (OPIC),
International Convention of Settlement of Investment Disputes,
New York Convention on the enforcement of foreign arbitral
awards and the United Nations Convention on International Trade
Law. Some of these treaties may have fallen on the way side and
overtaken by global and continental trade developments
The Zimbabwe constitution guarantees protection of
private property. This extends to all the assets acquired under
bilateral investment promotion and protection with countries in
Africa, Europe, South America and the Middle East. These
commitments came under the spotlight during the period of the
land seizures, with white commercial farmers winning all the cases
heard before regional courts particularly the SADC tribunal.
The chief disconnects between intra -African regional and
continental trade and trade between Africa and other multilateral
organisation is the inability of Africa to conform to rules-based
trading principles. The group of (G7) approach to trade has been
traditionally based on a set of key principles on which all member
countries agreed to, namely the commitment to fight protectionism
and the prominence of the rules-based multilateral trading system,
anchored in the WTO (Françoise NICOLAS, Sébastien JEAN
2019) Africa, in particular, is unable to institute trade sanctions on
other African countries because of various errors of omission or
commission. This becomes an inherent weakness in economic
relations of African states.
II. THE PROBLEM
There is a nexus between economic performance,
competitiveness as well as macroeconomic stability and country
competitiveness in both regional and continental integration.
National competitiveness is achieved through national collective
energies harnessed across national economic sectors deployed to
develop an exclusively competitive Zimbabwean economy. The
collective effort is ordinarily government led. Government
leadership is demonstrated by provision of national engagement
platforms assuring all stakeholders that the government has
genuine commitment to creating a robustly competitive
Zimbabwe. Whilst Zimbabwe plays a significant role in creating
both regional and continental integration frameworks (at both
secretarial and strategic levels) the country remains inherently
weak in national trade and industrialisation capacities. The IMF
notes with concern that weak financial reporting in the
Zimbabwean government persistently erodes economic
confidence Sharing of financial information among government
ministries to enhance public sector coordination and organisation
stands out as a factor in the lack of financial accountability in local
authorities and all state-owned enterprises. The integrity of critical
national statistics and public information is put under spot light
particularly as it relates to unrestrained use of statutory
instruments, imposition of subsidies, budget overruns, and
liability management.
Creation of conditions for market failure in country sends
erroneous signals to external markets. Role clarity and misplaced
national priorities in Zimbabwe is and elephant in the leaving
room, lending all economic policies ineffective. Repeated Loss of
value of investments, pensions and other national assets deepens
uncertainty coupled with growing institutionalised corruption. A
compromised monetary regime, crippling national debt contribute
to the assession that Zimbabwe is an extremely high-risk
investment destination. Generally, SADC recognises that
attracting foreign direct investment is competition among the
member states in sub-Saharan Africa as well as with other nations
throughout the globally SADC further recognises that A stable
political and macroeconomic environment, favourable investment
and trade regulations, quality economic infrastructure, qualified
human capital base, and a transparent legal system is a necessary
and sufficient condition. Integration of the national markets into
an expanded regional market with a higher level of liquidity; and
A harmonised investment regime subtends a credible
macroeconomic environment. Consequently, Zimbabwe’s
Investment share continues to drop compared to other countries in
the region. Countries such as Angola, DRC, Botswana and little
Lesotho continue to do well in investment attraction. Company
mortality rate in Zimbabwe is at its all-time high and all businesses
continue to operate in survival mode. The country cannot access
or borrow offshore because a bad repayment record among other
effects.
One therefore develops enthusiasm to evaluate whether
there is any merit in Zimbabwe seeking repeated derogations in
regional and continental integration. Zimbabwe continues to fair
lowly in regional growth statistics in SADC and COMESA.
Repeated denial of the country being highly indebted and poor,
disrespect of most of its bilateral and multilateral commitments
continues to militate against the country’s potential for full
competitiveness. Will derogation assist in restoring the county’s
opportunities for regional integration.
Finally, the country continues to ascend to all regional and
continental integration protocols most of which have a negative
impact on national revenue performance particularly trade related
duties and taxes. Further, according to the confederation of
Zimbabwe industries, capacity utilisation in the manufacturing
sector remain constrained and focus tend to show a consistent
trend till 2027 unless a robust strategy to deal with the
performance of economic enablers is implemented. Generally,
Zimbabwe is complicit in domesticating regional policies.
Domestication of regional and continental policies ensures
harmonisation of regional trade regimes. Zimbabwe requested for
a derogation from the AfCFTA for 15 years. Is repeated
derogation the solution?
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III. METHODOLOGY
This paper shall engage with trade experts, writings of trade
economists, regional economic communities in and out of Africa
to interrogate the concept of trade derogation. Best practice and
case studies shall enhance the researcher to provide a critical
analysis on whether Zimbabwe has optimally utilised the
derogation concept in its pursuit to recalibrate the Zimbabwean
economy for regional competitiveness.
Regional and continental integration aspires to increase
intra and interregional trade. Member states are at different levels
of growth and size. The study will also incorporate various trade
protocols which were entered into and ratified by member states,
tariffs liberalisation and the systems of nontariff barriers as it
relates to reciprocity in integration. The study will then provide a
qualitative evaluation of the impact of derogations in
implementation of trade liberalisation and ascertain whether
derogation is an appropriate tool employed by member states in
seeking a waiver to deal with potential inherent constraints they
face in participating in integration processes.
IV. RESEARCH QUESTIONS
Is regional and continental integration advantageous to
Zimbabwe?
Does regional or continental integration enhance the
economic wellbeing of Zimbabwe?
Has derogation assisted Zimbabwe for reintegration?
Is Integration Derogation effective where rules-based trade
relations, reciprocation and national sovereignty play a central
role?
Hypothesis
Regional integration derogation is not significantly beneficial to
Zimbabwe
Objectives
To evaluate whether Zimbabwe derives direct or indirect
benefits in regional and continental integration.
To ascertain whether regional and continental integration
are purely an economic phenomenon to Zimbabwe
To provide an analysis of whether the current phase of
derogation has enhanced Zimbabwe’s opportunities in
reintegration
To provide an in-depth evaluation of Integration
Derogation, rules-based trade relations, reciprocation and
national sovereignty as they relate to regional and
continental integration
V. CONCEPTUAL FRAMEWORK
Regional and continental integration derogation is not a
solution to fixing inherent macroeconomic weaknesses of a
country. Derogation implies seeking more room for a country to
reorganise its priorities in line with its existing capacities and
abilities. Conceptually, the multiplicity of activities largely
undertaken during periods of derogations do not justify seeking of
derogations by countries. Derogations are a delaying tactic to
pursue protectionism and retard the process of regional or
continental integration. The question that is often asked is whether
the benefits of given derogation are outweighed by the effects
missing out on positive advantages derived from remaining in
integration.
The researcher shall study relevant literature and engage
experts to extrapolate facts about the subject particularly economic
analysis of the rationale for integration.
Background to Zimbabwe’s Application
the prevailing deteriorating macro-economic conditions in
Zimbabwe, e characterized by low production capacity;
inflationary pressures, coupled with low economic growth rates;
shortage of cash specifically the USD which has necessitated the
existence of a dual-currency system; and so, called sanctions
impacting on Foreign Direct Investment and foreign currency
reserves justified the request for integration derogation. The
application was made in 2017.
Trade Deficits?
The last decade has seen Zimbabwe failing to manage the
delicate relationship of the trade balance with Zimbabwean
exports far less than its imports, resulting in sustained trade deficit.
The country remains a net importer of all critical goods and
services. Whilst efforts to promote local procurement,
consumption of locally produced goods and services through buy
local initiatives, the country’s productive capacity remains
constrained, coupled with suppressed quality standards and the
cost of these goods are at their all-time high. Exogenous and
endogenous factors have been identified as causes of Zimbabwe’s
inability to eclipse the trade balance i.e reduction of imports and
achieving increased manufactured exports. The dependence on
primary product exports continues to retard progress in
industrialisation undermining the ability of the country to exploit
benefits of value addition and beneficiation particularly mining
and agricultural products. Conversely, the greatest percentage of
Zimbabwean imports are finished products, giving credence to the
perception that the country has turned into a regional supermarket
and dumping ground for low quality products. The World Trade
Organisation recognises the existence of Dumping and it allows
within its rules, a government to put protective measures to “act
against dumping where there is genuine ‘material’ injury to the
competing domestic industry” Anti-dumping tariffs are an option.
Ad valorem, specific, variable and lesser duties are normally
charged to correct dumping.
Economists agree that “Improvement in export policy is
critical, value addition to exports, market fetching through
regionalism and import substitution is essential to manage the
trade balance” With this state of affairs, would regional and
continental integration be beneficial to Zimbabwe?
Top Exports and Top Imports for Zimbabwe 2016
Top Exports
Gold
($896M),
Raw Tobacco
($383M),
Diamonds
($206M),
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Ferroalloys
($163M)
Nickel Mattes
($149M),
Top imports
Refined Petroleum
($1.19B),
Corn
($285M),
Electricity
($162M),
Packaged Medicaments
($158M)
Delivery Trucks
($114M).
Source: OCD, 2018
Top Exports Destinations and Top Imports Origin for
Zimbabwe 2016
Top Exports Destination
1. South Africa
($1.31B),
2. Mozambique
($267M),
3. United Arab Emirates
($216M),
4. China
($134M),
5. Belgium-Luxembourg
($102M).
Top Imports Origin
1. South Africa
($2.21B),
2. Singapore
($1.02B),
3. China
($380M),
4. India
($170M),
5. Zambia
($170M).
Findings and discussions
Africa union developed a long-term vision, Agenda 2063,
objectively to create a coherent Africa capable of self-sustenance,
economically, politically and socially integrated. The 2063
agenda, is expected “to elucidate critical issues underpinning its
successful implementation, ensure its strengths and weaknesses
are interrogated, ways of dealing with persisting challenges are
crafted. Continental cohesion is achieved through a number of
thematic areas which include, the Agenda 2063 and African
Integration, socio-economic aspects of Agenda 2063 and the
political philosophical basis of the agenda. There is general
acknowledgement that this agenda provides an excellent vision for
African countries and African people to consolidate African
emancipation. Further, the vision is expected to enhance a broad-
based bottom-up participatory approach, and advocates for
inclusion and empowerment of all groups of people. Inherent
weaknesses still exist with potential impact “that the agenda 2063
is likely to be confronted by the same or similar setbacks which
prevented previous African long-term plans from achieving
significant results. These include limited finances, lack of
ownership, lack of political will, diverse and sometimes
conflicting interests, and lack of ideological backup to sustain the
vision” It therefore calls for integrity of leadership to craft
adequate measures to overcome these challenges.
An evaluation of agreed SADC tariff modalities
The recent SADC Summit adopted tariff modalities
tabulated below that would be used by state parties (those that have
ratified) to develop tariff offers. These tariff offers will be the basis
upon which goods will be traded among the state parties withing
the SADC FTA.
Non –LDCs
LDCs
Timefram
e: Non-
LDCs
Timefram
e: LDCs
(SDT)
Non
sensitive
product
s
90 percent
90 percent
5 years
10 years
Sensitiv
e
Product
s
7 percent;
Subject to
Notification
and
Negotiations
;
Method of
Negotiation:
Request and
Offer.
7 percent;
Subject to
Negotiations
;
Method of
Negotiation:
Request and
Offer.
10 years
13 years
Exclusio
n List
3 percent;
Review after
5 years;
subject to
negotiation;
Subject to
anti-
Concentrati
on Clause.
3 percent;
Review after
5 years;
subject to
negotiation;
Subject to
anti-
Concentrati
on Clause.
Transition Period
Tariff phase down shall be in equal installments i.e., Linear
Approach.
Supplementary Modality
Member States may complement the linear approach with
request and offer approach.
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Variable Geometry
Member States who may wish to make deeper cuts within a
shorter time period may do so, on the basis of reciprocity.
Zimbabwe is developing its tariff offer under the category
of Non- LDC countries whereby non sensitive products (90%) will
be phased over 5 years and sensitive products (7%) over 10 years.
The remaining 3% will be excluded from liberalisation. The Non-
LDC status of Zimbabwe continues to be debatable. Whilst the
integrity of the argument and statistics used to sustain the
argument that Zimbabwe is a Non- LDC country further
controversial declaration that Zimbabwe is not a poor country and
highly indebted.
For Zimbabwe, the classification of each category in terms
of the agreed thresholds are in table 2
THRESHOLDS
TARGET
TARIFF LINES
TOTAL
TARIFF LINES
6 377
NON-
SENSITIVE
LIST
90%
5 738
SENSITIVE
LIST
7%
447
EXCLUSION
LIST
3% (Not more
than 10% of
import value from
Africa (2014-2016
or 2015-2017)
192
Given its application under SADC, Zimbabwe together
with 6 other countries now as the G7 requested for a phase own
period of the non-sensitive products according to the agreed
modalities. During the 2019 Summit all member states agreed to
implement this according to the adopted tariff modalities.
According to the CZI in the 2019 manufacturing sector
survey, the country’s unenviable trade balance position is an
indicator of a deficiency of country competitiveness. The doing
business index provides direction to which the country must take,
ensuring prioritisation and streamlining of planning for national
competitiveness. Supply side constraints coupled with foreign
money shortages are weighing heavily on the country’s ability to
increase manufactured exports. The survey further acknowledges
that Zimbabwe’s exports are largely driven by mineral products,
them being predominantly unprocessed. Zimbabwe ratified the
AfCFTA, in March 2019 amid high expectations that the bigger
market shall usher in an opportunity for Zimbabwe to be part of
continental value chains. Downstream benefits will incorporate
increased productive capacity, quality of products and improved
logistics.
Of grave concern to CZI, are the big elephants in the living
room. The currency issues remain unresolved to date though some
levels of stability have been obtaining in the last four months.
Huge National debt in excess of 40% of GDP and the country’s
ability to extinguish this debt, particularly where the country
continues to contract more local and foreign debt is worrying.
Endemic corruption and political polarisation are militating
against the country’s ability to locate itself at the centre regional
and continental exports growth. It therefore gives credence to the
proposition why Zimbabwe must invest in national
competitiveness rather than seeking repeated derogations.
ZEPARU, in its paper on the assessment of Zimbabwe’s
trade performance within the context of regional integration,
studied the extend of liberalisation and commitments undertaken
under various trading blocs, the impact of Zimbabwe’s trade
policy regime, strengths and weaknesses of local institutions,
human capital, and Zimbabwe’s capacity to fully exploit the
integration program. The country has ratified a number of bilateral
and multilateral arrangements commitments of which have a direct
effect on the country’s competitiveness. Liberalisation under
SADC, COMESA, the TFTA, IEPA and the AfCFTA opens up
the country to competition in country whilst its capacity to exploit
the bigger market outside is compromised. Zimbabwe is signatory
to the ACP trade grouping, ratified EPAs under ESA. The interim
EPA was ratified in 2012.
Zimbabwe’s import sources from the TFTA countries
The study concluded that Zimbabwe is currently not
competitive due to a number of factors. These factors are internal
and takes the government to introspect into the broad
macroeconomic environment to ensure necessary policy mix for
national competitiveness is instituted.
The European centre for development policy management
engaged in a comparative study of ECOWAS and SADC
economic partnership agreements.
“In terms of product coverage, ECOWAS will liberalise
75% of its tariff lines, based on its common external tariff, over a
period of 20 years. The list of exclusion covers a wide range of
products, ranging from agricultural goods to industrial goods. It
is meant to ensure that local industries will not be subject to
competition from duty-free products from Europe. Regional unity
and strong political leadership have proved very useful”
“The SADC EPA negotiating group comprises seven
member states. These are Botswana, Lesotho, Namibia, Swaziland
and South Africa, as well as Mozambique and Angola. While
Angola was part of the negotiations, it did not conclude the EPA.
Prior to the EPAs, South Africa’s trade was covered by a different
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regime, the Trade and Development Cooperation Agreement,
concluded in 1999. South Africa joined the EPA negotiations to
improve its market access to the EU and to ensure functional
coherence of the Southern African Customs Union (SACU), a
customs union, of which it is the largest member. The current
market access schedule of the SADC EPA group consists of a
single offer for the five SACU countries, based on SACU’s
Common External Tariff (CET) and a separate offer for
Mozambique, which is not part of the SACU. As a group, the SADC
EPA group is expected to liberalise 80% of its trade with the EU”
The paper concluded that political will is an integral attribute to
achieve coherent regional integration. \A natural phenomenon is
that trade between Europe and Africa has minimal challenges. EU
– Africa relationship continue to deepen trade ties particularly
where EU continues to finance African markets development.
According to a technical report by the Southern Africa Trade hub
of June 2011, on the impact of derogations from implementation
of the SADC FTA Obligations on intra – SADC trade, Tanzania
and Zimbabwe had requested to impose duty on selected sugar
products and a two-year suspension on tarrif phase down schedule
category C respectively. The Southern The SADC Protocol on
trade covers provisions, on tariff phase-down schedules for each
SADC Member State, which was o be completed by 2012.
“Article 3(1)(c) of the Protocol states that “Member States
that have been adversely effected by the removal of tariffs … may
be granted a grace period to afford them additional time for the
elimination of tariffs and (NTBs)”
The paper notes that trade in SADC outside South Africa to
be affected by the derogation request was insignificant particularly
where these derogations are implemented for a limited period of
time. Market access opportunities are insignificantly affected by
these derogations particularly for small economies in SADC.
enforcement and approval of derogations run the risk of
compromising trade in SADC because there is hardly an
enforceable mechanism to police compliance with derogation.
For the purpose of this study, “smaller economies” are
countries classified by the World Bank as low-income (GDP of
US$ 995 or less) and as lower-middle-income (GDP between US$
996 and US$ 3,945). Based on this definition, SADC economies
fall into the following categories:
Smaller Economies
Other Economies
Low-income
Lower-middle income
Higher-middle income
Congo, Democratic Rep.
Angola
Botswana
Madagascar
Lesotho
Mauritius
Malawi
Swaziland
Namibia
Mozambique
South Africa
Tanzania
Seychelles
Zambia
Zimbabwe
Source: world bank
Despite the necessity of intra trade derogations allowed in
the protocol, tariffs of goods under derogations among others, the
“indexes of revealed comparative advantage” derogation poses
insignificant impact on overall SADC trade. This is mainly due
country and trade size, the number of products lines affected by
the derogations, availability of alternative product producers in the
region, and the period of derogation implementation. The concept
of reciprocity is also invoked where there is perceived to deliberate
disrespect of the set principles of the protocol.
Gross Domestic Product Annual Real Growth Rates (%) in SADC. 2009-2019
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Angola
0.8
5.2
4.1
8.8
5
4
0.9
0
0.7
-1.1
-0.9
Botswana
-7.7
8.6
6
4.5
11.3
4.1
-1.7
4.3
2.9
4.5
3
Comoros
3.2
3.8
4.1
3.2
4.5
2.1
1.1
2.3
2.5
3.3
2
DRC
2.9
7.1
6.9
7.1
8.5
9.5
6.9
2.4
3.7
5.8
4.4
Eswatini
1.6
3.8
2.2
5.4
3.9
0.9
2.3
1.3
2
2.4
1.6
Lesotho
2.2
6.7
5.4
6.7
4.2
2.9
2.7
5
-1.3
-0.5
-0.8
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Madagascar
-4
0.6
1.6
3
2.3
3.3
3.1
4
3.9
4.6
4.4
Malawi
7.5
6.9
4.9
-0.6
6.3
6.2
3.3
2.7
5.2
3.9
5.2
Mauritius
3.3
4.4
4.1
3.5
3.4
3.7
3.6
3.8
3.8
3.8
3
Mozambique
6.4
6.5
7.4
7.3
7
7.4
6.7
3.8
3.7
3.4
2.3
Namibia
0.3
6
5.1
5.1
5.6
5.8
4.5
-0.3
-0.3
0.7
-1.1
Seychelles
-0.2
5.9
5.4
3.7
6
4.5
4.9
4.6
4.4
3.8
4.7
South Africa
-1.5
3
3.3
2.2
2.5
1.8
1.2
0.4
1.4
0.8
0.2
Tanzania
5.4
6.3
7.7
4.5
6.8
6.7
6.2
6.9
6.8
7
7
Zambia
9.2
10.3
5.6
7.6
5.1
4.7
2.9
3.6
3.7
4
1.4
Zimbabwe
12.6
19.7
14.2
16.7
2
2.4
1.8
0.8
0.8
4.8
2.3
SADC-Average
0.2
4.5
4.2
4.5
4
3.5
2.2
1.5
2.1
1.9
1.4
Source: SADC selected Economic and Social Indicators (2020)
SADC (EAP group)
Tanzania was on schedule with its tariff commitments, the
Government applied for derogation to levy a 25% import duty on
sugar and paper products until 2015 in order for the industries to
take measures to adjust. Tanzania has made a request for
derogation for its paper industry to support it in achieving required
economies of scale and to successfully compete in international
markets. Mozambique-Mozambique obtained a derogation on
shrimp and lobster. Namibia obtained an automatic derogation of
800 tons for preserved tuna (HS 1604, 0302, 0304).
In COMMESA, Swaziland Derogation had been granted not to
implement the COMESA FTA in recognition of the fact that
Swaziland is required to maintain the Common External Tariff of
the Southern Africa Customs Union (SACU)
European Integration Experience
Europe underwent multiplicity of experiences in ensuring
maintenance of a cohesive integrated group. Brexit is but one of
the many integration weaknesses experienced to date, with Britain
opting out because of a number of economic challenges the
country was undergoing. Whilst on one hand Europe is frantically
signing up economic partnership agreements with the world,
Britain took a bold step to exit the European union.
Robust internal national conversation on the merits and
demerits of Brexit took place, particularly on areas of economic
advantages/ disadvantages, national interest and national
sovereignty, benefits accruing to Britain in European union
integration and indeed whether London would lower its leaving
standards by exiting the EU group. According to Robert Fay
(2019) the integration of Britain into the EU was “never really
about supposed European Union control over the United Kingdom
or about Britain’s inability to set its own destiny without the
encumbrance of myriad rules and regulations mandated by the
European Union, Rather, it was a lightning rod for an intertwined
set of long-simmering issues that have plagued the UK economy:
stagnant incomes as a result of languishing productivity growth —
it has essentially not risen in a decade — which the chief
economist of the Bank of England, Andrew Haldane, notes is
“almost unprecedented” in the modern era; the regional divide, in
part brought on by trade and deindustrialization; rising inequality;
inadequate funding for welfare programs and the National Health
Service; and so on”. United Kingdom took a position which
undermined global consensus that the more integrated countries
are the better the opportunities and economic fortunes for the
members of the integration.
Europe and Differentiated Integration
Europe continues to debate on the concept of differentiated
integration. Despite the drive by non-member states of the EU to
implement “European Union (EU) rules as exemplified by the
European Neighbourhood Policy” The certainty of differentiated
integration remains under the spot light. Broadly the concept of
differentiated integration involves “opting-out and inducing-in. In
the case of opting-out, EU member states can refrain from
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adopting EU rules; inducing-in refers to providing non-member
states with incentives to adopt EU rules”
On the other hand, there are some schools of thought which
believe the European Union is important albeit with some inherent
challenges. They believe fixing these challenges is the most
optimal option considering the milestones already covered
particularly as it relates to collective effort in confronting the
challenges around streamlining EU wide business processes,
engendering the digital market and ensure the future economic
prosperity of the EU union region.
Despite the broad criticism, Europe still enjoys the support
of 66 percent of member states. It is a fact that the EU is
experiencing substantial challenges, Brexit being one of them. The
rise of nationalism and populism has also posed a major huddle
and collective energies to deal with these is key. Intra and inter EU
trade has fast been growing and this is credited to managing red
tape and bureaucracy. Businesses find this to be critical in
facilitating trade and investment. Big data management is also a
critical economic management tool necessary for sustainable
integration. Countries such as America and China have installed
capacity for efficient management of big data for use by economic
players. The EU General Data Protection Regulation (GDPR)
gave impetus to the region and has enormous potential to
positively impact trade and investment in the EU.
VI. DEROGATION EXPERIENCES IN THE EU
While in the previous rules of origin the provisions on
derogation were applicable only to Least Developed Countries,
(LDCs), the current rules of origin extend the possibility of
derogation to developing countries. Cyprus requested for
Temporary derogation, Cambodia and Nepal derogation for textile
products, Denmark and the United Kingdom, it is a permanent
derogation and these states are not obliged to join the European
Monetary Union and Sweden was given temporary derogation for
the use of the Euro as a domestic currency.
The 2018 Convergence Report covers seven Member
States with a derogation and these include Bulgaria, the Czech
Republic, Croatia, Hungary, Poland, Romania and Sweden. Major
issues emanating from these derogations include:
Bulgaria- currently fulfils three out of the four economic
criteria necessary for adopting the euro: the criteria relating to
price stability, public finances and long-term interest rates.
Bulgaria does not fulfil the exchange rate criterion and legislation
in Bulgaria is not fully compatible with the Treaty.
Czech Republic: currently fulfils two out of the four
economic criteria necessary for adopting the euro: the criteria
relating to public finances and long-term interest rates. The Czech
Republic does not fulfil the price stability and exchange rate
criteria and legislation in the Czech Republic is not fully
compatible with the Treaty.
Croatia: currently fulfils three out of the four economic
criteria necessary for adopting the euro: the criteria relating to
price stability, public finances and long-term interest rates. Croatia
does not fulfil the exchange rate criterion. Legislation in Croatia
is fully compatible with the Treaty.
Hungary: currently fulfils two out of the four economic
criteria necessary for adopting the euro: the criteria relating to
public finances and long-term interest rates. Hungary does not
fulfil the price stability and exchange rate criteria and legislation
in Hungary is not fully compatible with the Treaty.
Poland: currently fulfils two out of the four economic
criteria necessary for adopting the euro: the criteria relating to
price stability and public finances. Poland does not fulfil the
exchange rate and long-term interest rate criterion and legislation
in Poland is not fully compatible with the Treaty.
Romania: currently fulfils one out of the four economic
criteria necessary for adopting the euro: the criteria relating to
public finances. Romania does not fulfil the price stability,
exchange rate and long-term interest rate criteria and legislation in
Romania is not fully compatible with the Treaty.
Sweden: currently fulfils three out of the four economic
criteria necessary for adopting the euro: the criteria relating to
price stability, public finances and long-term interest rates.
Sweden does not fulfil the criteria related to the exchange rate and
legislation in Sweden is not fully compatible with the Treaty.
Furthermore, the review of other factors shows that the
countries examined are generally well integrated economically
and financially in the EU. However, some of them still experience
macroeconomic vulnerabilities and/or face challenges related to
their business environment and institutional framework which
may pose risks as to the sustainability of the convergence process.
Regional Economic Communities in Africa
Continental integration is REC driven. The Tripartite is a
cooperation of SADC, COMESA and EAC (The Common Market
for Eastern and Southern Africa; the East Africa Community and
the Southern African Development Community) According to
EAC, the Tripartite Comprises of 26 member countries, formed
for the purposes of accelerating economic integration for the
people of the Eastern and Southern African Region. EAC further
highlights that the tripartite supreme objective is to contribute to
the broader objectives of the African Union that is accelerating
economic integration of the continent and achieving sustainable
economic development leading to poverty alleviation and
improvement in quality of life for the people of the Eastern and
Southern African Region. Despite the Tripartite integration’s
weaknesses, it instructed the formation of the AfCFTA. Lessons
learnt from this initiative provided guidance to the creation of the
continental integration initiative. Africa has 8 Regional Economic
Communities (RECs) and sub-regional bodies which are the
building blocks of the African Economic Community established
in the 1991by the Abuja Treaty. The treaty provides the
overarching framework for continental economic integration.
The Arab Maghreb Union (AMU/UMA) External Link
in the north,
The Economic Community of West African States
(ECOWAS) External Link in the west,
The East African Community (EAC) External Link in the
east,
The Intergovernmental Authority on Development
(IGAD) External Link also in the east,
The Southern African Development Community (SADC)
External Link in the south,
The Common Market for Eastern and Southern Africa
(COMESA) External Link in the southeast,
The Economic Community of Central African States
(ECCAS) External Link in the centre, and
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The Community of Sahel-Saharan States (CENSAD)
External Link in the north.
Source: African Union
The foundation and Building Blocks for the African Union
are its RECs principally to constitute capacity for economic
integration in Africa, but are also key actors working in
collaboration with the African Union (AU), in ensuring peace and
stability in their regions (AUC). Further the RECs have been
central to various transformative programs of the continent,
including the New Partnership for Africa’s Development
(NEPAD) adopted in 2001, and the AU’s Agenda 2063 adopted
by its Summit in January 2015. The First Ten-Year
Implementation Plan was adopted by the 25th Summit of the AU
heads of state and government in June 2015.
Whilst peace and security are important in continental
economic development, “RECs have the immense challenge of
working with governments, civil society and the AU Commission
in raising the standard of living of the people of Africa and
contributing towards the progress and development of the
continent through economic growth and social development”
VII. RECOMMENDATIONS
Regional and continental integration in Africa is a “nice to
have”. Macroeconomic conditions of member states vary. African
countries have varied levels of Vulnerabilities caused by
international factors and by local factors. These vulnerabilities are
the basis for the complexities in regional economic relationships
among countries in Africa. State leadership in creating
developmental states in African is weak particular with the
prevalence of politically induced uncertainty on the rise. African
leaders are vulnerable to strong national institutions in their states.
They believe in creating strong men and women who are
politically sensitised to safeguard and consolidate their leadership
political power at all costs.The study therefore elaborately exposes
a number of weaknesses in African states governance systems
leading to the below recommendations:
1. Seeking Derogation in regional and continental
integration is basically acknowledgement that Zimbabwe
has a deficiency or a gap in readiness to implement
agreed integration milestones. Countries in Africa,
Zimbabwe included, have a general tendency of
ascending to agreements which they are not bound by. It
is therefore important to avoid signing up to these
multilateral and bilateral arrangements when the
conditions in country are suboptimal to comply with and
not in the best interest of the country.
2. Over Dependency on taxation alone demonstrates the
lack of fiscal innovation by Zimbabwe. Whilst rationale
taxation is acceptable, Zimbabwe continues to destroy
the ability of productive sectors to create trade related
capacity because they are overtaxed. To achieve optimal
growth, streamlining tax heads in line with desired
economic growth targets has a knock-on effect on tax
voluntary compliance, simplification of revenue
collection and eradication of corruption.
3. Creation of local infrastructure for trade and
industrialisation increases national competitiveness.
Deploying resources to achieve national productivity
naturally sets up the country for regional, continental and
global competitiveness. The over-all national aspiration
(vision 2030) is to create economies of scale to satisfy the
demand of the bigger market.
4. National stakeholder participation in designing solutions
to matters affecting economic activities is crucial for
holistic buy -in and ownership. Zimbabwe Government
has a tendency to govern by divide and rule, resulting in
restrictions to national coherence. Economic players,
academia, labour and civil society are development
partners in a nation and are partners to the government of
Zimbabwe. They play a significant role, not only in
ensuring checks and balances on the state but they
facilitate operationalisation of government policies at
local, regional and continental levels. Public- private
dialogue (PPD), though very weak in Zimbabwe, plays a
vital role in facilitating collective efforts to achieve
defined national targets.
5. Human capital development strategies answer to the
question of relevant skills mix in keeping with achieving
set national economic goals. Zimbabwe, among
Countries which invest in education, entrepreneurship
and innovations has harvested from huge banks of
knowledge relevant solutions to national economic,
social and political challenges. Zimbabwe national
leadership, sadly is intimidated by highly trained and
educated people particularly in areas of business and
politics.
6. National introspection is necessary to ensure the integrity
of national economic statistical data for futuristic
planning as well as candid evaluation of the existing
economic macroeconomic conditions. Zimbabwe, like
many Countries in Africa, which survive on perennial
denial of their inherent national macroeconomic and
political problems, are prone to repeated derogations
because national economic data is inaccurate to give
impetus to objective decision making. Robust structural
transformation is necessary to warrant harmonisation of
industrialisation and trade strategies. Synchronisation of
trade and industrial policies is imperative for economic
convergence.
7. A whole government approach to development of an
economic marshal plan is an immediate necessity.
Competition for individual or sectorial recognition
continues to dampen role clarity, complementarity and
support in meeting desired national economic objectives.
VIII. CONCLUSION
The paper qualitatively argued that Zimbabwe, despite the
derogation requests, has weak economic fundamentals necessary
for effective exploitation of regional and continental opportunities.
The country would emerge weaker if all pre-requisites of the
SADC FTA, COMESA and the AfCFTA are genuinely
implemented particularly the tariff phase down. There are no
direct benefits accruing to the country as a result of the
introduction of the bigger market precisely because Zimbabwe has
no installed capacity for value added exports, is a high-cost
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producer in the region, and has very low product standards among
other weaknesses.
For Zimbabwe, Regional integration is not purely an
economic phenomenon. Historically, the country has failed to
harmonise and domesticate regional policies and laws to facilitate
smooth integration. The effect of the SADC Tribunal is a case in
point. Further, the country cannot respect its own laws particularly
on property rights, rule of law and commitment to existing
bilateral and multilateral arrangements. No meaningful progress
has been made in improving ease of doing business despite the
rhetorical and hollow open for business mantra. Like most African
countries, weak economic governance institutions in country are
militating against concerted efforts to boost investor confidence
and achieve inclusive growth.
The current regime of national policies has led to the
destruction of critical productive assets in mining, manufacturing
and agro processing particularly where fiscal and monetary
instruments leadto erosion of investments, savings and
confidence. This state of affairs makes the country, not only
uncompetitive but unsuitable for any integration efforts because of
the uncertainties surrounding payment systems and valuation of
assets.
The existing derogations have not helped the country in any
way because macroeconomic conditions have not improved to
have a knock-on effect on regional competitiveness. In actual fact,
the country continues to miss out on all macroeconomic targets.
The transitional stabilisation policy reports significant shortfalls in
achieving its intended objectives save for the recent currency and
exchange rate stability. Capacity utilisation in manufacturing
sector is likely to reduce further according to the 2019 CZI
manufacturing sector survey, disinvestment in the mining sector
continues as evidenced by the Karo resources platinum project
stagnation, supply side constraints remain a serious threat to
company survival and national debt is at its all time high. The
country will potentially seek a further extension due to lack of
preparedness.
The Zimbabwe economy is not as complexly diversified.
Drivers of growth are few, with mining sector occupying the lead
position in the last financial year. Trade in services is driven by
tourism for which product has been negatively affected by the
covid19 pandemic. No New growth nodes potential currently
exists. It therefore translates to potential negative growth beyond
2021. Any future attempts to reintegration beyond the current
derogation period will not give any positive results unless
wholesome changes are undertaken to improve national
competitiveness.
Bold reforms are needed in African integration. African
countries dislike the concept of rules based economic
engagements. Committing to economic integration agreements
remains academic particularly where their rhetoric of protecting
national interest. Zimbabwe falls in the same category and risks
other countries invoking reciprocity to counter the effects of bad
domestic economic policy. Use of statutory instruments in the last
two financial years has seen the removal of a number of products
from the Open General Import Licencing, affecting most products
in SADC FTA protocol. Belonging to a number of different trade
blocs complicates implementation of trade requirements. WTO
rules on most favoured nation (MFN) unlocks market access in all
bilateral and multilateral arrangements by Zimbabwe. This has
likelihood to weaken the fluidity of regional integration. Cherry-
picking preferred and favourable trading regimes in either
COMESA, SADC and the EU among others, may induce
instability in complying with trade requirements particularly when
Zimbabwe continues to undergo inherent macroeconomic
challenges as a consequence of bad economic governance. The
paper has managed to provide an in-depth evaluation of
Integration Derogation, rules-based trade relations, reciprocation
and national sovereignty as they relate to regional and continental
integration.
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AUTHORS
First Author – Oswell Binha (PhD Student),
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http://dx.doi.org/10.29322/IJSRP.10.12.2020.p10861 www.ijsrp.org
binhao@africau.edu, Africa University, College of Business
Peace Leadership and Governance Institute of Peace, Leadership
and Governance Course in Global Governance and Integration
Second Author – Kudzanai Mwakurudza (Economic Analyst)
Pa2md@oracsystems.co.zw
