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  • Free Trade Area

    Target

    The SADC Protocol on Trade (2005), as amended, envisages the establishment of a Free Trade Area in the SADC Region by 2008 and its objectives are to further liberalise intra-regional trade in goods and services; ensure efficient production; contribute towards the improvement of the climate for domestic, cross-border and foreign investment; and enhance economic development, diversification and industrialisation of the region.

    Freeing trade in the region will create larger market, releasing the potential for trade, economic growth and employment creation. The SADC Free Trade Area seeks to meet the following needs of the private sector and other regional stakeholders:

    • Increased domestic production;
    • Greater business opportunities
    • Higher regional imports and exports
    • Access to cheaper inputs and consumer goods
    • Greater employment opportunities
    • More foreign direct investment and joint ventures
    • The creation of regional value chains.

    Result

    The SADC Free Trade Area was achieved in August 2008, when a phased programme of tariff reductions that had commenced in 2001 resulted in the attainment of minimum conditions for the Free Trade Area - 85% of intra-regional trade amongst the partner states attained zero duty.

    While the minimum conditions were met, maximum tariff liberalisation was only attained by January 2012, when the tariff phase down process for sensitive products was completed.

    For countries falling under the Southern African Customs Union (SACU), this process was completed in January 2007. For Mozambique, the process will only be completed in 2015 in respect of imports from South Africa.

    Twelve out of fifteen SADC Member States are part of the Free Trade Area, while Angola, Democratic Republic of Congo and Seychelles remain outside.

    Malawi fell behind with the implementation of its tariff phase-down schedules since 2004. In December 2010, Malawi undertook a tariff reform exercise to align its tariff schedule to the COMESA and SADC tariff regimes. Since this intervention, the SADC Secretariat is assessing Malawi’s tariff schedule to determine the level of compliance with its commitments under the SADC Trade Protocol.

    Zimbabwe experienced problems in implementing its tariff commitments on sensitive products and was allowed to suspend tariff phase-downs from 2010 until 2012. Annual reductions will therefore resume in 2012, for completion in 2014.

    Although 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.

    Impact

    Since 2000, when implementation of the SADC Trade Protocol commenced, intra-SADC trade has more than doubled, with intra-SADC trade estimated to have grown from about US$13.2 billion in 2000 to about US$34 billion in 2009, representing an increase of about 155%.

    As a proportion of total SADC trade, intra-SADC trade has only grown from 15.7% to 18.5% in the same period.

    As the process to remove tariffs on sensitive products is on-going until 2012, there is still potential for further expansion of intra-SADC trade as most of the products on the sensitive list such as textiles and clothing, leather and leather products are highly tradeable products.

    Monitoring

    SADC is establishing a Trade Monitoring and Compliance Mechanism for monitoring the implementation of the Free Trade Area, with a specific mechanism for identifying and eliminating non-tariff barriers. This mechanism has the potential to facilitate movement of goods and will lead to increased trade.

    Further Reading

    For more information on the targets and progress made towards the Regional Indicative Strategic Development Plan, please refer to the document itself and the Desk Assessment of the Regional Indicative Strategic Development Plan 2005 – 2010.