Changes from report parliamentary committee draft to plenary report

Since the signature of the EU-SADC EPA, the INTA Committee and European Parliament has undertaken the following activities:

- five Monitoring Group Meetings,

- INTA has carried out two missions to monitor the implementation of the EU-SADC EPA, both to South Africa.

On 29-31 October 2018, a delegation of seven INTA Members travelled to Pretoria to participate in the EU-South Africa Joint Parliamentary Meeting, but also visited Johannesburg and Cape Town to better assess the implementation of the EU-SADC EPA and bilateral EU-South Africa trade and investment relations.

During the second mission to South Africa on 3-7 April 2023, seven INTA members visited Pretoria, Johannesburg and Cape Town to discuss the implementation of the EU-SADC EPA.

Since the signature of the EU-SADC EPA, the delegation for relations with South Africa has held a total of 26 inter-parliamentary meetings, covering exchanges on the implementation of the EU-SADC EPA.

Overview of the EU-SADC EPA

The EU-Southern African Development Community (SADC) Economic Partnership Agreement (EPA) was concluded on June 10, 2016, between the EU and six South African countries. These countries include Botswana, Lesotho, Mozambique, Namibia, South Africa, and Eswatini. It has been provisionally applied since October 10, 2016, as not all EU Member States have ratified the EPA. Mozambique provisionally applied it from February 4, 2018. Angola, a member of SADC region, also participated in the negotiations on the EU-SADC EPA. However, the country did not sign the agreement in 2015. Instead, the parties agreed to include a specific clause on Angola’s accession to the EPA.

This agreement holds significance as the first EPA between the EU and an African region. It also stands as the first fully operational regional EPA in Africa, with all partners implementing the tariff cuts outlined in the agreement.

The SADC EPA group of countries does not consist of the entire SADC bloc, but rather members of the Southern African Customs Union (SACU) and Mozambique, with an option for Angola to join in the future. The SADC Regional Economic Community includes 16 member states, with a primary focus on achieving economic development, peace, security, poverty alleviation, and an improved standard of living for the people of Southern Africa through regional integration. These objectives are underpinned by democratic principles and sustainable development, as laid out in the SADC Treaty signed in 1992. Six other SADC members negotiated EPAs with the EU as part of different regional groups in Africa.

Negotiations on the EPA started in 2004 and were accompanied by criticism, raising concerns that establishing a free trade framework for goods among nations with varying levels of development and negotiation power could disrupt local production systems, diminish government revenues, and contradict the goal of regional integration.

The EU-SADC EPA is built upon the principles of the Cotonou Agreement and aims to reduce poverty through a trade partnership, promote regional integration, economic cooperation, and good governance. It includes rules on trade in goods, with asymmetric access favouring SADC EPA States. Sensitive products can be exempted from full liberalization, and safeguards can be applied to protect domestic production and infant industries. The Southern African Customs Union (SACU) provides duty-free and quota-free treatment to a significant portion of EU exports to the region, covering 84.9% of these products. An additional 12.9% of EU exports enjoy partial liberalization, involving reduced tariffs or tariff rate quotas.

The EU offers immediate duty-free and quota-free access to goods from Botswana, Lesotho, Mozambique, Namibia, and Eswatini, along with preferential access for 98.7% of goods from South Africa. In return, the SADC EPA States have agreed to gradual tariff liberalization over a period of up to 10 years. Special safeguards and measures were established to protect sensitive products from full liberalization. The SADC EPA States have the authority to increase duties or impose quotas on imports from the EU, particularly in cases where these imports disrupt or pose a significant threat to a particular economic sector or domestic industry.

This agreement primarily focuses on trade in goods and does not address trade in services, investment, or other issues such as intellectual property rights, competition, and public procurement. However, there is a provision for negotiating agreements on these matters in the future. The EU-SADC EPA also features a chapter on trade and sustainable development (TSD) covering social, economic, and environmental aspects. Additionally, it includes a chapter on areas of cooperation, defining priorities such as competitiveness enhancement and addressing supply-side constraints.

Within the TSD chapter, both parties reaffirm their commitment to promoting international trade in a manner that contributes to the goal of sustainable development (with its pillars economic development, social development, and environmental protection). Furthermore, this chapter includes provisions addressing multilateral environmental and labour standards and agreements. Importantly, the provisions pertaining to international labour and environmental obligations do not fall under any dispute settlement mechanism. Instead, they are only subject to consultations conducted through the Trade and Development Committee (TDC), which was established under the EPA and consists of senior officials from both sides.

Angola’s accession

Angola, currently classified as a least developed country (LDC) and a participant in the EU Generalised Scheme of Preferences (GSP), benefits from preferential treatment. It falls under the ‘Everything but Arms’ (EBA) scheme, which eliminates tariffs and quotas for all imports of goods from LDCs entering the EU. However, as Angola is set to graduate from its LDC status in February 2024, it will lose its preferential access to the EU market under the EBA scheme. To maintain its unrestricted access to the EU market, Angola submitted an official application to join the EU-SADC EPA in February 2020. Subsequently, in July 2022, the Joint Council approved Angola’s request to initiate accession negotiations.

Joint monitoring report and EPA review process

The EU and SADC are currently preparing a joint monitoring report on the EU-SADC EPA.

The process started after the final list of monitoring indicators was jointly agreed at the 7th TDC in February 2021. Subsequently, a questionnaire based on these indicators was circulated among all focal points of the SADC EPA States to guide their data collection efforts for the monitoring indicators. However, despite various internal deadlines set by the SADC Secretariat and discussions on the matter at its technical meetings, the SADC EPA States did not provide any input.

In response, the 8th TDC appointed monitoring coordinators representing both the Commission and the EPA Unit of the SADC Secretariat to work on a draft joint report using EU and international data sources. This was done in parallel with the expected input of national data from the SADC EPA States. It wasn’t until October 2022 that the SADC Secretariat received limited data collection input from Namibia, with no input from any other SADC EPA State.

Subsequently, the Monitoring Coordinators proposed to the 9th TDC that a draft joint report, compiled mainly from EU and international data sources, be circulated to all Parties for comments. This was done in early December 2022 and the SADC EPA States were expected to provide their comments by the end of February 2023.

The European Commission has launched a comprehensive ex-post evaluation of the EU-SADC EPA, in line with its obligation under the revision clause. It published a draft inception report for this evaluation on 15 May 2023 and a final inception report on 21 June 2023, outlining its objectives, scope and methodological approach. The Commission has contracted a consortium led by BKP Economic Advisors GmbH/SQ Consult B.V to prepare an external evaluation study. The external evaluation study will support the European Commission’s own evaluation of the agreement, and also inform the joint review of the EPA by the Parties. It is planned to finalise the evaluation study by April 2024. The objective of the ex-post evaluation is to assess whether the EPA has delivered the expected results and whether there is scope for improvement in EPA’s functioning that could form the basis for policy recommendations. The evaluation will cover the whole implementation period of the agreement since the start of provisional application in 2016, respectively 2018 (for Mozambique) up to now, also comparing, where appropriate with a pre-Agreement period of five years (i.e. starting in 2011). The Commission points out that in terms of geographic scope the evaluation will primarily cover the parties to the agreement, ‘although some global effects (e.g. climate change) will also be covered’.

The joint participation of non-state actors in monitoring the EPA is opposed by SADC EPA States. The EU proposed organising a joint conference between with SADC on the five-year anniversary of the EPA, but the offer was not taken up by the SADC side. Instead, a trade conference with the participation of business representatives was foreseen.

Changing geopolitical context

Several geopolitical and geo-economic factors shape the context in which the EU-SADC EPA is implemented, including the consequences of the Russia’s war of aggression against Ukraine. The COVID-19 pandemic, an expansion of the BRICS group and Brexit have further highlighted the need for a different approach for relations with the SADC EPA States. At a Civil Society Dialogue meeting on the evaluation of the EU-SADC EPA that took place on 31 May 2023, the Commission’s DG Trade underscored that strategic challenges such as the war in Ukraine, China’s increasing role in Africa or the EU’s need for access to critical raw materials call for continued close trade relations between the EU and Southern Africa.

EU-SADC trade compared to other key trading partners

The EU is the largest trade partner of the SADC EPA region among China, the US, the UK, India, Brazil and Russia, with an increasing trend since the signing of the EPA. Only China has managed to follow this trend, but remains in second place from 2016-2022. The United States and India follow at lower levels. The EU manages to be the most important partner in terms of trade in goods (among the partners mentioned above) for the three largest economies of the SADC EPA States - South Africa, which is by far the largest economy, followed by Mozambique and Namibia. SADC’s main exports to the EU, with the exception of South Africa, are unprocessed agricultural goods and raw materials. It should also be noted, that apart from South Africa, all other SADC EPA States primarily trade with South Africa and other states on the African continent, which emphasises the objective of regional integration.

In 2021, the EU was South Africa’s top trading partner, representing 22% of its total trade. South Africa’s exports to the EU were diverse, including agri-food, vehicles, chemicals, and machinery, making up 54% of its exports to the EU. The EU market has been especially beneficial for the agricultural sector. Capital and higher value-added goods account for a larger share of South Africa’s exports to the EU when compared to the rest of the world.

EU-27 also holds the top spot among selected partners in trade in goods with Mozambique. Nevertheless, Mozambique trade in goods with China has more than tripled since 2016 -- from € 0.5 billion to € 1.6 billion in 2022. Equally, trade in goods between Mozambique and India has more than doubled, increasing from € 0.9 billion in 2016 to € 2.2 billion in 2022. In comparison, the increase in EU-Mozambique trade in goods has not been as impressive, up from € 1.7 billion (2016) to € 2.6 billion (2022).

Namibia’s trade activity reached €16 billion in 2022, growing by a third since the EPA signing in 2016. Its trade with the EU nearly doubled from €1.1 billion to €2 billion. Remarkably, Namibia’s trade with China grew almost ninefold, from €0.3 billion to €2.6 billion, surpassing EU-Namibia trade. In contrast, the United States and India lag far behind, each at €0.6 billion and €0.4 billion.

EU-Botswana trade remained stable despite a minor disruption in 2020 due to the pandemic, rebounding in 2022. Unlike other SADC EPA States, China struggled to establish a strong presence in Botswana. Nonetheless, China-Botswana trade quadrupled from €0.1 to €0.4 billion between 2016 and 2022, while EU-Botswana trade fell from €2.6 to €1.8 billion from 2021 to 2022.

Among SADC EPA partners, Eswatini and Lesotho have relatively small trading capacities. Eswatini’s trade reached €4.3 billion in 2022 (up from €2.9 billion in 2016), with China being its major trading partner at €0.3 billion in 2022. EU-Eswatini trade has fluctuated between €0.1 and €0.2 billion since 2016. Lesotho’s trade with the EU rose significantly, reaching €0.3 billion in 2022, while its trade with China remained at €0.1 billion. Trade with other partners like the US, Brazil, Russia, and the UK was minimal. India’s trade with Lesotho reached €0.1 billion only in 2020.