Business / Economy
New SA law against the promotion of free trade, says AfDB
22 Jan 2013 at 04:43hrs | Views
The African Development Bank (AfDB) says the recent enactment of the Preferential Procurement Policy Framework Act (PPPFA) by South Africa is against the promotion of free trade under the Sadc Trade Protocol.
The Sadc Trade Protocol provides that member states shall, in relation to intra-Sadc trade, adopt policies and implement measures to eliminate all existing forms of Non-Tariff Barriers and refrain from imposing any new barriers.
South Africa in December last year enacted the PPPFA which stipulates that 75 percent of procurement should be local in an effort to protect South African manufacturers.
The measure by South Africa, which is Zimbabwe's largest trading partner, has severely impacted on local firms which were beginning to recover following a decade long economic meltdown.
In response, Zimbabwe introduced duty on certain products originating from South Africa, but this has done little to curb the influx of goods from across the Limpopo.
In its monthly economic review for December last year, the AfDB said the move was impacting negatively on Zimbabwe's export revenue as South Africa was its biggest trading partner.
"To date, South Africa is only absorbing 12 percent of the country's exports, a decline from a share of 30 percent.
"However, South Africa remains Zimbabwe's strategic trading partner, and suspension of the Bilateral Agreement has impacted negatively on Zimbabwe's export revenue," it said.
"This is not consistent with the promotion of a free trade area under the Sadc Trade Protocol. It is imperative that the two countries improve their bilateral relations in order to foster deeper co-operation and economic development between them".
Analysts contend that the new regulations introduced by South Africa will hamper rejuvenation of Zimbabwean industries and the economy in general while the negative trade balance is expected to continue widening.
In 2011, local companies exported R1,4 billion worth of goods while imports onto the local market rose to R15,1 billion.
Zimbabwe exports to South Africa mainly consist of unfinished products including platinum, tobacco as well as finished products including cereals.
The Sadc Trade Protocol provides that member states shall, in relation to intra-Sadc trade, adopt policies and implement measures to eliminate all existing forms of Non-Tariff Barriers and refrain from imposing any new barriers.
South Africa in December last year enacted the PPPFA which stipulates that 75 percent of procurement should be local in an effort to protect South African manufacturers.
The measure by South Africa, which is Zimbabwe's largest trading partner, has severely impacted on local firms which were beginning to recover following a decade long economic meltdown.
In response, Zimbabwe introduced duty on certain products originating from South Africa, but this has done little to curb the influx of goods from across the Limpopo.
In its monthly economic review for December last year, the AfDB said the move was impacting negatively on Zimbabwe's export revenue as South Africa was its biggest trading partner.
"However, South Africa remains Zimbabwe's strategic trading partner, and suspension of the Bilateral Agreement has impacted negatively on Zimbabwe's export revenue," it said.
"This is not consistent with the promotion of a free trade area under the Sadc Trade Protocol. It is imperative that the two countries improve their bilateral relations in order to foster deeper co-operation and economic development between them".
Analysts contend that the new regulations introduced by South Africa will hamper rejuvenation of Zimbabwean industries and the economy in general while the negative trade balance is expected to continue widening.
In 2011, local companies exported R1,4 billion worth of goods while imports onto the local market rose to R15,1 billion.
Zimbabwe exports to South Africa mainly consist of unfinished products including platinum, tobacco as well as finished products including cereals.
Source - New Ziana
