South Africa's experience of the Trade, Development and ... · IPE - International Political Economy IR - International Relations NEPAD - New Partnership for Africa’s Development

"South Africa's experience of the Trade, Development and Cooperation

Agreement (TDCA) with the European Union from 1995 to 2005"

by

Oscar van Heerden

Cambridge University

Centre of International Studies June 2008

Oscar van Heerden SA’s Experience of the TDCA with the EU

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CONTENTS

Contents .......................................................................................................................... 2 List of Figures ............................................................................................................. 2 List of Acronyms ........................................................................................................ 3

Introduction..................................................................................................................... 4 Understanding the South Africa-EU TDCA................................................................... 6 The South African experience of the EU - South Africa TDCA .................................. 10

Analysis of General EU-South Africa Trade Flows from 2000 – 2005 ................... 10 Negotiation Structure and Preparation...................................................................... 23 Weighing up Gains and Losses................................................................................. 30

Conclusion .................................................................................................................... 32

List of Figures

Figure 1: EU-South Africa Trade (2000-2005) ................................................................ 10 Figure 2: EU-South Africa Trade (1958 - 2005) .............................................................. 11 Figure 3: EU-South Africa Trade Balance (2000- 2005).................................................. 13 Figure 4: EU-South Africa trade as percentage share of EU-Global trade (2000-2005).. 14 Figure 5: EU-South Africa Trade as percentage share of EU-Global trade (1958-2005) 15 Figure 6: EU Trade with Major Imports and Export Partners (with the world 2005) ...... 16 Figure 7: South Africa Trade with Major Imports and Export Partners (with the world 2005) ................................................................................................................................. 17


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List of Acronyms

ACP - African Caribbean Pacific ANC – African National Congress BLNS – Botswana, Lesotho, Namibia and Swaziland COMESA – Common Market for Eastern and Southern Africa COSATU – Congress of South African Trade Unions DG - Director General DRC - Democratic Republic of the Congo DTI – Department of Trade and Industry EAC – East African Cooperation EC - European Community EEC - European Economic Community EDF - European Development Fund EU – European Union FDI – Foreign Direct Investment FTA – Free Trade Agreement GEAR – Growth, Equity and Redistribution IGAD – Inter Governmental Authority on Development IMF – International Monetary Fund IOC – Indian Ocean Commission IMF - International Monetary Fund (IMF) IPE - International Political Economy IR - International Relations NEPAD - New Partnership for Africa’s Development RDP – Reconstruction and Development Plan RISDP – Regional Indicative Strategic Development Plan SA - South Africa SACU – Southern African Customs Union SADC – Southern African Development Community SITC - Standard International Trade Classification TDCA – Trade Development and Cooperation Agreement US - United States of America WTO – World Trade Organisation


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INTRODUCTION

This paper reflects on what South Africa gained and lost in the final TDCA agreement. It

sketches the various developmental gains achieved by South Africa over the period 1994-

2004 in an attempt to demonstrate that indeed the country has managed to attain many,

although not all, of its developmental objectives as set out during the TDCA negotiations.

It does so in order to demonstrate progress as envisaged by the EU, since their approach

to these negotiations was always two pronged. On the one hand, was the somewhat rigid

framework of the Free Trade Agreement and on the other hand, the socio-political

standing of South Africa, given its recent history of an unjust and inhumane system of

discrimination of the majority of its population under Apartheid.

The rationale for this study is the need to document the experience of South Africa in

devising and pursuing its development-oriented trade strategy, in organising itself and in

mobilising its limited capacity to conduct negotiations on a free trade agreement with the

EU. The paper will seek to answer the following research question: What has been South

Africa's experience of the Trade, Development and Cooperation Agreement (TDCA) with

the European Union from 1995 to 2005? It does this with the hope that other developing

countries could possibly learn from this process in conducting future trade negotiations

with other trading partners.

After many years of isolation and sanctions against South Africa due to the Apartheid

policies of the racist regime, the political change that swept through South Africa in the

1990’s was welcomed by the international community. The release of political prisoners

such as Nelson Mandela saw a South Africa re-entering the international political scene.

South Africa soon realised that the globalised world meant that small trading partners

such as itself would have to find creative ways to negotiate with the bigger trading units


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out there. “How to do it?” was the major question for South Africa. The European Union

(EU) had always been a major trading partner of South Africa even though this was

obviously very restricted in many ways due, at least in part, to the EU having enforced

economic sanctions against South Africa up until 1990. It was the advent of democracy

within South Africa that brought about the trade agreement that followed.

South Africa has a population of 46 million people and a GDP of $ 570.2 billion. As the

19th largest economy in the world, it is seen as the economic powerhouse of Africa.1 The

EU on the other hand has a cumulative population of 494 million people and a GDP of

$ 13, 881 billion.2 Given the fact that South Africa is the largest economy on the African

continent and popularly seen as the gateway to Africa, it was clear why these two parties

would want to engage into a free trade agreement. The Trade, Development and

Cooperation Agreement (TDCA) which the two parties entered into, was established in

January 2000. A Free Trade Agreement (FTA) between South Africa and the EU

committed South Africa to grant duty-free access to 86% of EU imports over a period of

12 years, while the EU committed to liberalise 95% of South Africa’s imports over a 10-

year period.3 It was expected that the TDCA would help to restructure the South African

economy and stimulate long term economic growth.4 The agreement covered “trade and

related issues, and co-operation in economic, social and political fields”. 5 It also

provided “a legal framework for ongoing EU financial assistance on grants and loans for

development co-operation, which [amounted] to R900 million per year.”6 Since 2004,

South Africa has had the benefit of 12 more European countries becoming part of the EU

– making the EU market now an effective 560 million citizens. It has also seen the TDCA

ratified by all the EU member countries in 2004, which has elevated the status of South

Africa with the EU.7

1 Burger, D. (ed), South Africa Yearbook 2005/06, Thirteenth Edition, (Pretoria: Government Communication and Information System, 2005), http://www.gcis.gov.za/docs/publications/yearbook06.htm. 2 ibid. 3 ibid. 4 ibid. 5 ibid. 6 ibid. 7 ibid.


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UNDERSTANDING THE SOUTH AFRICA-EU TDCA

It is appropriate to start with an understanding of what the agreement in question

represents. In the official EU view the TDCA agreement was “the conclusion of a long

term bilateral agreement on trade and development aid”. 8 It was viewed as setting a

framework for dialogue in order to support the efforts of South Africa to strengthen the

economic and social foundations of its transition process. 9 It was also intended to

promote regional cooperation and economic integration in Southern Africa with the

ultimate aim of encouraging the integration of South Africa in the world economy of

promoting cooperation between the EU and South Africa.10

Flowing from this, one may conclude that there was a clear commitment on the part of

the EU community to cooperate with and assist South Africa to come back into the global

economy and to begin a process to rebuild the economy after Apartheid. From the South

African perspective, its motives were simply that, having inherited an economy that did

not function to its full potential due to previous sanctions and a over reliance on a few

commodities, it was important to stabilise and strengthen the economy as soon as

possible. The best way for the South Africans to achieve these objectives was to engage

foreign support with two sets of approaches: on the one hand, strengthening trade

relations with the EU and on the other, appealing to their goodwill to supply

developmental assistance and/or foreign aid. It was on these assumptions that the TDCA

idea was born.

The main provisions of the FTA were agreements on:

• An asymmetric timetable;

• Identification and protection of sensitive products;

8 Europa (Online), Summaries of legislation, ‘Trade, Development and Co-operation Agreement (TDCA)’, OJ L 311 of 4.12.1999, (European Communities, 1995-2007), http://europa.eu/scadplus/leg/en/lvb/r12201.htm. 9 ibid. 10 ibid.


7

• The integration of South Africa into the global economy;

• The introduction of the ‘rules of origin’ doctrine; and

• Cooperation in diverse fields.

In addition to the above, the provisions of the TDCA extend to cooperation in fields as

diverse as:

• social cooperation, where both parties committed to initiating dialogue on this

subject in order to tackle questions relating to the social problems of a society

coming out of an era of Apartheid. They both guaranteed basic social rights such

as the freedom of association;

• co-operation to protect the environment;

• cultural cooperation;

• co-operation in the fight against drugs and money laundering; and

• co-operation in the field of health and, in particular, the fight against AIDS.11

The above was particularly important for the EU since most countries were in agreement

that given the history of South Africa, it needed help beyond the economic front.

Apartheid had left the country with many social and political woes and hence an

economic package in the absence of tackling these components would be a futile

exercise. It formed part of the trade agreement in the context of South Africa wanting to

ascend to full membership of the Lomé Convention through which it would have

qualified for various developmental assistance and Aid, but since they were not

incorporated (for reasons later explained) into this agreement, another arrangement had to

be effected.

In sum, the EU and South Africa value each other as trading partners. For South Africa

the EU is its biggest trading partner (accounting for about 40% of trade) and seen as a

pivotal partner in supporting its domestic reconstruction and development. For the EU

South Africa is small (accounting for about 1,5% of trade), but significant in terms of its

11 ibid.


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regional and international position as the largest trading partner in Africa. If focusing

only on trade quantities the TDCA was particularly asymmetrical. It was a trade

agreement between a powerful economic region of the north, and a small relatively

weaker country of the South. However when looking beyond the trade numbers and

considering the South African political, cultural and development context in relation to its

domestic, regional and international positioning, it was not as asymmetrical.

In developing the TDCA the motives of both parties were very clear prior to the

commencement of the trade agreement. The EU on the one hand wanted to fulfil its

developmental objectives for South Africa and on the other hand negotiate a genuine

trade agreement to the benefit of both parties so as to ensure that South Africa re-entered

the world economy as a strong stable economic force. The South Africans for their part

wanted to cement a free trade agreement with its biggest trading partner in order to assist

the South African economy to address the social and economic ills of the past, thus

putting it in a much better position to provide basic services and jobs to the disadvantage

people of its country.

The following measures are set out by Bilal et al, as pertinent in assessing whether indeed

the overall objectives of the TDCA have been met:

• the agreement should contribute positively to placing the South African economy

on a new development orientated growth path, and to achieving the broad socio-

economic objectives defined in the RDP;

• it should lead to the restructuring of the present unbalanced economic relationship

into a more balanced and mutually beneficial one. This imbalance is also reflected

in the growing trade deficit that South Africa experiences with the EU;

• it should remove the discriminatory treatment which currently applies to South

African exports to the EU compared to those of comparable countries;

• it should increase foreign direct investment in outward oriented South African

sectors and in the region's infrastructural projects;


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• it should contribute positively to the promotion of equitable and mutually

beneficial co-operation and integration in the Southern African region to which

both SA and the EU have repeatedly declared their commitments;

• it should provide an appropriate framework for political dialogue between South

Africa and the European Union, that will allow the development of close relations

in all areas of common interest.12

These contexts are expounded upon in more detail in the sections that follow.

12 Bilal, S. and Laporte, G., ‘How did David prepare to talk to Goliath?’, European Centre for Development Policy Management, Discussion paper, No. 53, September 2004.


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THE SOUTH AFRICAN EXPERIENCE OF THE EU - SOUTH

AFRICA TDCA

Analysis of General EU-South Africa Trade Flows from 2000 – 2005

The TDCA was essentially a trade agreement, in that while it included broader

developmental and cooperative elements, its primary focus was on trade. As such, one

must analyse the trade flows between the two parties concerned. This section focuses on

the trade patterns after the TDCA and puts this into its historical perspective where

appropriate.

When reflecting on the impact of the TDCA on South Africa-EU trade relations one must

consider the evolution of the trade balance from the point at which the TDCA was

implemented to the present. The following figure plots the imports and exports for EU-

South Africa trade for the period 2000-2005.

Figure 1: EU-South Africa Trade (2000-2005)

Source: South Africa Country data extracted from European Commission, Euro Stat1314

13 European Commission, EuroStat, (Online), ‘Statistical Year Book, Data 1958-2005’, op cit. 14 It should be noted that Namibia was included in the South Africa trade data figures up to December 1989.


11

EU-SA Trade (2000-2005)

0

10

20

30

40

50

60

Year

Valu

e (b

n Eu

ro/E

CU

)

EU imports from South Africa EU exports to South Africa

EU imports from South Africa 35 34.4 32.2 31.9 35.9 46.3

EU exports to South Africa 31.6 30.7 29.8 32.6 41.2 48.3

2000 2001 2002 2003 2004 2005

After minor annual decreases in trade flows for 2000 - 2003, 2004 and 2005 have seen

substantial increases in EU exports and imports. The significance of the increase in trade

after the TDCA is only made stark when put into its historical context. The following

figure presents the trade data for 1958-2005.

Figure 2: EU-South Africa Trade (1958 - 2005)


15 European Commission, EuroStat, (Online), ‘Statistical Year Book, Data 1958-2005’ op cit. 16 It should be noted that Namibia was included in the South Africa trade data figures up to December 1989.


12

EU-South Africa Trade (1958-2005)

0

10

20

30

40

50

60

Year

Valu

e (b

n Eu

ro/E

CU

)

EU imports from South Africa EU exports to South Africa

EU imports from South Africa 1 1.1 3.3 8.9 8.7 10.1 10.6 10.1 8.8 8.6 18.3 19.9 19.3 22.5 17.7 20.2 20.9 21 22.6 26.8 25.2 24.3 35 34.4 32.2 31.9 35.9 46.3

EU exports to South Africa 1.5 1.5 3.6 13.3 12.5 12.3 15.1 10.4 8.7 8.9 15.8 17.3 14.9 15.3 15.1 16.4 20.2 21.8 22.5 26.6 26.2 24.9 31.6 30.7 29.8 32.6 41.2 48.3

1958

1960

1970

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

It should be noted that this figure shows total trade value data for: 1958; 1960; 1970 and

then from 1981 annually. The substantial increase in trade between the EU and South

Africa is clear with the sharper increase in 2000 and an overall growth trend thereafter.

Again, it should however be noted that an increase in total trade value would be expected

given annual inflation (Figure 2 data is not inflation adjusted). As such changes over time

in the overall share of global trade that South Africa represents for EU and the relative

ranking of South Africa as an EU main trade partner are explored below as these are not

inflation dependent.

The trade balance for EU-South Africa after the TDCA is represented in Figure 3.


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Figure 3: EU-South Africa Trade Balance (2000- 2005)


EU-South Africa trade balance (2000-2005)

-6-5-4-3-2-1012345

2000

2001

2002

2003

2004

2005

Year

This is the EU-South Africa trade balance which is the ‘value of EU imports from South

Africa’ minus the ‘value of EU exports to South Africa’. While 2000 to 2002 saw a

positive trade balance with the EU importing more from South Africa than it exported to

it, this was reversed from 2003 to 2005.

Finally, to reflect fully on the historic changes with the implementation of the TDCA,

consideration must be given to the analysis of changes over time in the overall share of

global trade that South Africa represents for EU and the relative ranking of South Africa

as an EU main trading partner. Figure 4 presents the changes in South African trade as a

percentage of the EU trade with the world:

17 European Commission, EuroStat, (Online), ‘Statistical Year Book, Data 1958-2005’ op cit.


14

Figure 4: EU-South Africa trade as percentage share of EU-Global trade (2000-2005)


0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

2000 2001 2002 2003 2004 2005

Year

Perc

enta

ge (%

)

% Share of global imports to EU % Share of global exports from EU

With EU - South Africa trade accounting for between 0.6 and 0.7 per cent of the EU’s

trade with the world from 2000 to 2003, its share increased 0.8% by 2005. This is put into

its historic context in the following figure:

18 ibid.


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Figure 5: EU-South Africa Trade as percentage share of EU-Global trade (1958-2005)


Eu-SA trade as % share of EU-global trade

0

0.5

1

1.5

2

2.5

1958

1960

1970

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

Year

Perc

enta

ge (%

)

% Share of global imports to EU % Share of global exports from EU

The increase in South Africa’s share of EU trade from 1995 onwards is clear. While there

has been some fluctuation post 1995, there is a clear increase from 2003 to 2005.

In terms of changes in relative ranking of South Africa as a trade partner, in 1995 South

Africa was ranked as the 17th main trading partner of the EU in terms of EU exports. By

2000 it had dropped its ranking to 20th. By 2005, South Africa had increased it ranking as

a trade partner in terms of EU exports substantially, ranking 15th. With regard to EU

imports from South Africa, in both 1995 and 2000, South Africa was ranked as the 16th

main trading partner with the EU, showing no change during this period. By 2005, South

Africa had also increased its ranking as an import partner to 17th.

19 ibid.


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Figure 6: EU Trade with Major Imports and Export Partners (with the world 2005)

Source: EuroStat, European Community20

The major import partners The major export partners

Partners Mio euro % Partners Mio euro %

World 1,176,055 100.0 World 1,061,836 100.0

1 USA 163,057 13.9 1 USA 251,657 23.7

2 China 158,098 13.4 2 Switzerland 81,980 7.7

3 Russia 106,766 9.1 3 Russia 56,445 5.3

4 Japan 73,243 6.2 4 China 51,796 4.9

5 Norway 67,474 5.7 5 Japan 43,663 4.1

6 Switzerland 66,354 5.6 6 Turkey 41,849 3.9

7 Turkey 33,492 2.8 7 Norway 33,787 3.2

8 Korea 33,326 2.8 8 United Arab Emir. 25,288 2.4

9 Taiwan 23,835 2.0 9 Canada 23,681 2.2

10 Brazil 23,300 2.0 10 Romania 21,825 2.1

11 Saudi Arabia 22,092 1.9 11 India 21,110 2.0

12 Algeria 20,735 1.8 12 Australia 20,710 2.0

13 Libya 19,473 1.7 13 Hong Kong 20,434 1.9

14 India 18,911 1.6 14 Korea 20,130 1.9

15 Singapore 18,219 1.5 15 South Africa 18,077 1.7

16 Canada 17,174 1.5 16 Singapore 17,227 1.6

17 South Africa 16,731 1.4 17 Mexico 16,762 1.6

18 Malaysia 15,905 1.4 18 Brazil 15,987 1.5

19 Romania 15,305 1.3 19 Saudi Arabia 15,443 1.5

20 WA_AO 13,761 1.2 20 WA_AO 13,484 1.3

By 2005 South Africa was the 17th largest trade partner with the EU overall, accounting

for 1.6% of all EU trade with the world (see Figure 6 which presents a ranking of overall

EU trade with main partners in the world for 2005).

20 European Commission, EuroStat, (Online), ‘EU Bilateral Trade and Trade with the World (ACP including South Africa)’, op cit.


17

From the South African perspective, by 2005 the EU had cemented itself as its major

trading partner for both imports and exports.

Figure 7: South Africa Trade with Major Imports and Export Partners (with the world 2005)

Source: EuroStat, European Community21

The major import partners The major export partners

Partners Mio euro % Partners

Mio

euro %

World 48,283 100.0 World 46,331 100.0

1 EU 20,269 42.0 1 EU 16,682 36.0

2 USA 3,455 7.2 2 USA 4,543 9.8

3 China 3,390 7.0 3 Japan 4,052 8.7

4 Saudi Arabia 3,180 6.6 4 China 2,555 5.5

5 Japan 2,906 6.0 5 Australia 965 2.1

6 Iran 2,834 5.9 6 Zimbabwe 854 1.8

7 Australia 1,271 2.6 7 Korea 805 1.7

8 Korea 1,167 2.4 8 Mozambique 723 1.6

9 Brazil 1,002 2.1 9 Zambia 673 1.5

10 Nigeria 967 2.0 10 Switzerland 639 1.4

11 Thailand 746 1.5 11 India 518 1.1

12 India 712 1.5 12 Canada 464 1.0

13 Hong Kong 621 1.3 13 Hong Kong 453 1.0

14 Malaysia 597 1.2 14 Nigeria 452 1.0

15 Argentina 548 1.1 15 Angola 450 1.0

16 Singapore 490 1.0 16 Kenya 443 1.0

17 Switzerland 475 1.0 17 Turkey 370 0.8

18 Zimbabwe 432 0.9 18 United Arab Emir. 349 0.8

19 Canada 330 0.7 19 Israel 343 0.7

20 Indonesia 280 0.6 20 Tanzania 325 0.7

21 ibid.


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The EU is clearly the number one overall trading partner for South Africa, accounting for

a sizable 39.1% of all South African trade with the world. Comparing Figure 6 with

Figure 7 again reveals the asymmetrical nature of the EU - South Africa trade

relationship. Figure 6 is from the EU perspective, focusing on what percentage of EU

trade is with South Africa: 0.8% of the EU trade with the rest of the world in 2005 was

with South Africa. Figure 7 is from the South African perspective, focusing on what

percentage of South African global trade is with the EU: 42% of South African imports

from the world are from the EU, and 36% of South Africa’s exports to the rest of the

world are to the EU.

The South African government gives a quantitative analysis of its trade relationship with

Europe in 2005: “Europe remains South Africa’s largest trading region and source of investment. In 2005, Europe

accounted for 38,9% (R116,94 billion) of South Africa’s total exports, and 40,3% (R140,448

billion) of its total imports. During the same year, the EU accounted for the bulk of this trade, with

exports to the EU reaching R106,465 billion in 2005 (up from R93,426 billion in 2004), and

imports reaching R128,360 billion in 2005 (up from R121,064 in 2002).” 22

It is also significant that currently, six European countries are among South Africa’s top

10 export destinations, and four European countries are among the top 10 countries from

which South Africa’s imports originate. 23 It is also worth noting that, in 2005, the United

Kingdom and Germany, both EU member countries, were the largest source of import

and largest export destination respectively for South Africa: “Germany has been South Africa’s largest source of imports. In 2005, South Africa’s imports

from Germany totaled R49, 197 billion. The UK remains South Africa’s largest export destination

in Europe with South Africa’s exports to the UK amounting to R32, 377 billion in 2005.” 24

From this it is clear that South Africa has gained considerably in relation to increased in

trade with the EU over time. This point to gains in trade from the TDCA (although as

22 Burger, D. (ed), ‘Chapter 7: Economy’, South Africa Yearbook 2006/07), op cit. 23 ibid. 24 ibid.


19

mentioned above, these changes cannot be solely attributed to its implementation). This is

evident in that:

• South Africa has seen a substantial increase in exports to and imports from the

EU, with a sharp increase evident in 2000 and an overall growth trend thereafter;

• The trade balance has fluctuated with 2000 to 2002 being a positive trade balance

with the EU importing more from South Africa than it exported to it, and this

being reversed from 2003 to 2005.

• South African trade accounts for between 0.6 and 0.7 per cent of the EU’s trade

with the world from 2000 to 2003, and this share increased to 0.8% by 2005.

• By 2005 South Africa was a major trading partner of the EU, ranking 17th as

amongst its import partners and 15th amongst its export partners.

• By 2005 the EU had cemented itself as its major trading partner for both imports

and exports. The EU is clearly the number one overall trading partner for South

Africa, accounting for a sizable 39.1% of all South African trade with the world.

Analysis of changes in South Africa with regard to development objectives

The TDCA was also intended to fulfil some broad objectives and a closer look will allow

us to evaluate whether South Africa indeed did meet its developmental objectives as set

out at the beginning of the process. In analysing whether these objectives were met one

draws on the ‘ten year review’, a process involving a in-depth review of progress made

by the South African Government in the first ten years of democracy, which culminated

in a document, released by the government. One does so with the expectation of

answering a series of questions presented as measures of success. 25

Did the TDCA contribute positively to placing the South African economy on a new

development orientated growth path, and to achieving the broad socio-economic

objectives defined in the RDP?

According to the Ten Year Review undertaken by the South African Government, it

states that, on average, per capita growth was negative in the decade before 1994 and that 25 As cited from Bilal, S. and Laporte, G., 2004, op cit.


20

since then the economy has grown at a rate of 2.8% per annum, on average.26 It goes

further to say that real per capita growth has been a little over 1% per year since the

beginning of 1994 and hence South Africa grew wealthier at a rate slightly faster than 1%

per year since 1994.27 It would be folly to suggest that it was only the result of the TDCA

that gave rise to these figures above but it certainly did contribute as is evident in the

trade data. Additional factors worth mentioning could also be attributed to the strong

fiscal discipline enforced by the South African Reserve Bank as well as the many good

decisions taken by the National Treasury as it relates to Tax collection from the Private

Sector and Social benefit expenditure, both of which were in a state of chaos by the time

the ‘new government’ took power.

Did the TDCA lead to the restructuring of the present unbalanced economic

relationship into a more balanced and mutually beneficial one?

Between 1995 and 2002, the number of people employed in South Africa grew from

9,557,185 to 11,157,818. This represents 1 600 633 net new jobs. The figures show that

out of a total of 8.9 million workers (ie excluding employers, self employed and those

working without pay) 1 115 000 were temporary (12.5%), 567 000 were casual (6.4%),

365 000 had fixed term contracts (4.1%) and 62 000 were seasonal workers (0.7%).28

A key point to note here is that even though the overall job market seems to have

increased job opportunities, the reality is also that due to numerous shedding of public

sector jobs and the loss of the textile industry to the Chinese market a number of jobs

were also lost in the same period. A further point to mention is the empowerment

opportunities which government had to legislate, for the Previously Disadvantaged

Individuals (PDI) during the same period. This was a legislative framework enacted to

ensure that equitable sharing of wealth takes place as it relates to ownership of capital,

particularly in favour of black South Africans. The review indicates that the proportion of

top managers who are black grew from 12% to 13% between 2000 and 2001, whilst the 26 Government Communication and Information Services (Online), Policy Coordinating and Advisory Services (PCAS) the presidency, ‘Towards a Ten Year Review’, October 2003, http://www.gcis.gov.za/docs/publications/10year.pdf. 27 ibid. 28 ibid.


21

proportion of senior managers overall grew from 15% to 16%.29 This shows that

empowerment in the workplace is happening but at a very slow pace. As far as extending

black ownership of companies are concerned, recent estimates indicates that black equity

in public companies is 9.4% in 2002, compared with 3.9% in 1997. This is the case from

being virtually non existent before 1994. These are all indications that the restructuring of

the present unbalanced economic relationship that exist within the South African

economy is indeed being addressed, albeit at a slow but steady pace. Again it should be

noted that this cannot entirely be attributed to the TDCA but if one take the trade data

into consideration and what the net benefit effects of this has been, then one could make

the assertion that it assisted a great deal in stimulating the above factors.

Did the TDCA remove the discriminatory treatment which currently applies to

South African exports to the EU compared to those of comparable countries?

When looking at the ACP countries as well as the preferential trade deals afforded to the

countries surrounding South Africa, it becomes clear that the unique economic reality the

country finds itself in (being very wealthy but at the same time having huge disparities of

wealth) must be seriously reviewed in order for South Africa to be truly in a position to

correct the socio-economic wrongs of the past. Furthermore, a closer look at those sectors

that were excluded from the agreement needs to be revisited, such as the Agriculture

sector and other policies of the EU. One could argue that the EU had gone a long way in

accommodating the South Africans but that in the end, it did boil down to economics.

Did the TDCA increase foreign direct investment in outward oriented South African

sectors and in the region's infrastructural projects?

Though the aid package designed for South Africa does go a long way in addressing

some of the above concerns, FDI has generally been very low all round. FDI stock as a

percentage of GDP in 2000 was distributed as follows: primary sector (28.9%), secondary

sector (26.4%) and tertiary sector (45.5%).30 Its worth noting that most FDI inflows have

entered South Africa through state leveraged deals and the privatisation of state assets

29 ibid. 30 ibid.


22

only and almost none from the South African private sector initiatives. One mentions this

point because foreign investors’ lack of confidence is usually based on how much the

domestic private sector is willing to invest in its own country, and since it is very low,

there have generally been very low levels of FDI inflows into South Africa. The reason

for this phenomenon some argue is the fact that the South African private sector still has

some fears of a black government in Africa, given the trends we’ve seen elsewhere on the

continent. This however, is a matter of grave concern since more than ten years on, this

remains a stark feature within the South African economy.

Did the TDCA contribute positively to the promotion of equitable and mutually

beneficial co-operation and integration in the Southern African region to which

both South Africa and the EU have repeatedly declared their commitments?

To this end, the launch of NEPAD has provided much needed long term political

direction to South Africa’s regional integration efforts in Africa and the Regional

Indicative Strategic Development Programme (RISDP), one of the programmes of

restructuring, is intended to provide SADC member states with a coherent and

comprehensive developmental agenda on social and economic policies over the nest

decade, with clear targets and timeframes. The challenge according to the review is to

ensure that the RISDP is aligned with the NEPAD vision.31 The EU member states like

Germany and the UK has embraced the basic tenets of NEPAD at the G8 forum and the

UK in particular has taken the process forward by promoting the policy approach to the

EU when the UK occupied the Chairpersonship of the EU commission. As to whether it

will ultimately bear fruits as envisaged by the various African leaders’ remains to be

seen.

Did the TDCA provide an appropriate framework for political dialogue between

South Africa and the European Union, which will allow the development of close

relations in all areas of common interest?

The support to South Africa in its efforts of peace keeping operations throughout Africa

is indicative of this relationship. This was evident with the support the EU gave South

31 ibid.


23

Africa in the DRC and the Sudan region. Also, the relationship is cemented in the various

forums of support the EU is giving South Africa in attempting to operationalise the

African Union and the Pan African Parliament in which South Africa plays a crucial role.

The various assistance extended by the European Parliament to the South African

Parliament, is a further indication of the willingness on the part of the EU to support the

socio-political aspects of the relationship between the EU and South Africa. South Africa,

together with India and Brazil are also being seen as major representatives of the

developing economies and rising powers, hence they get invited into the green room

conferences at the WTO sessions. This is further proof of the commitment of the EU to

ensure that indeed South Africa does occupy its ‘rightful’ space within the global

economic arena.

Negotiation Structure and Preparation

When looking at the way South Africa organised itself to prepare and conduct the

negotiations on the Trade, Development and Cooperation Agreement (TDCA) with the

EU, one must identify the key roles played by strategic considerations, high-level

political leadership, strongly coordinated intra-governmental relations, broad consultation

with parliament, economic and social actors, dedicated technical preparation and targeted

lobbying strategies.32 A closer look at these elements will shed light on the arduous task

undertaken by South Africa in these negotiations. This section will also counterpoint

South Africa’s experience to that of the EU components. It does so by arguing that South

Africa’s negotiating strategy was based on the ‘two level model’ and that the EU strategy

was based on the ‘three level model’.33

The structure within which South Africa had to negotiate can be likened to that of Robert

Putnam’s theory, two (extended to three) level game model.34 The model according to

Larsen states that the negotiator is the key actor who, by operating alternately at all

32 Bilal, S. and Laporte, G., 2004, op cit. 33 Larsen, M., ‘A single voice’, CSD Bulletin, Summer 2007, Vol. 14 (1&2). 34 Putnam, R, “Diplomacy and Domestic Politics: The Logic of Two Level Games”, cited in, International Organisation, Vol. 43, No. 3, Summer 1988, pp. 427 – 460.


24

levels, unites the domestic and international levels of negotiations.35 The main task of the

negotiator at the international level is to compose a tentative agreement, which will have

to be ratified at the domestic level.36 At the domestic level the negotiator has to

coordinate the different domestic opinions into a unified view that can provide terms of

reference in the international negotiations. Putnam follows the logic of “principal agent

analysis”, in which the agent acts on behalf of the principal. This straightforward model

can be said to have informed the South African negotiations team’s overall strategy,

whereas the EU had an additional third leg to this process. The three levels were:

• the intra Commission negotiations between the different Director General’s (DG);

• the Council negotiations between the EU member states; and arguably also each

member state (in certain cases), plus

• the international negotiations with South Africa.

So, whereas South Africa had the traditional two level model, the EU had to content with

the time consuming three level model. This had various advantages for the Europeans as

well as some disadvantages, as we will see a little later on.

In terms of the South African organisation for the TDCA negotiations, Bilal et al provide

a very useful analysis of the various levels of organisation.37 They note that firstly the

South Africans constituted a Cabinet committee which played an instrumental role.38 The

entire negotiations strategy was undertaken under the watchful eye of Cabinet. It was the

Cabinet that decided to group the strategic government departments together. These were

all directly affected by the trade negotiation, such as Trade and Industry; Finance;

Agriculture and Foreign Affairs. The Cabinet also regularly convened with regard to this

matter and kept close contact with the negotiators in Brussels. Secondly they argue that it

was the Department of Trade and Industry (DTI) that took the lead role and provided the

necessary technical expertise for the negotiations team and that the Department of

Foreign Affairs was the third main player.39 Through this department, the foreign

missions played their part in the various EU member states in a lobbying capacity. They 35 Larsen, M., 2007, op cit. 36 ibid. 37 Bilal, S. and Laporte, G., 2004, op cit. 38 ibid. 39 ibid.


25

were politically massaging the climate in order to make it more conducive and

capitalising on the fact that South Africa is a new democracy trying to stay afloat within

this global economy. Using the name of Mandela also added tremendously to the

effectiveness of the overall negotiations strategy, though Mandela himself did not get

involve in the business of negotiations. Lastly, they mention the technical team assisting

the negotiators as well as the negotiating team members themselves. All of these groups

together under the careful guidance of the DTI ensured that tension were kept to a

minimum amongst government departments but also meant that greater gain could be

attained in the negotiations due to the effective co-ordination amongst these groups.40

From the South African side the role of parliament was also critical. Given the history of

South Africa, it must have been particularly special to be part of the first democratically

elected representatives of the people of South Africa. With Mandela as the newly elected

President and the hopes of millions on their shoulders, a grave responsibility rested on

them. Given this huge responsibility and commitment by parliamentarians, it was obvious

that they took a keen interest in the negotiations with the EU.

The South Africans established a committee to monitor trade related issues which

consisted of representatives of both houses of parliament. It was this committee that

received regular briefings as to the progress made in Brussels.41 Though it seems as if

there were many role players involved on the South African front this was kept very

tightly under the auspices of the DTI. This clearly shows how the ‘two level model’

worked for the South Africans and how the negotiating team could both unite domestic

priorities and thus negotiate better on the international front. The principal – agent

relationship worked well for them.

For the Europeans however, the situation was a little more complex. An example of this

is that whereas the principal in the case of South Africa was only the Cabinet committee

under the leadership of the DTI, it was the case in the EU structure that the Commission

40 ibid. 41 ibid.


26

negotiating team was the agent but that they were controlled by two sets of principals: the

DGs in the Commission and the Member States in the Council.42 This made matters very

difficult for the EU team at times.

Bilal (et al) also argue that the key components of the negotiations process can be divided

into five subsets: the clear identification of strategic interests; technical preparations;

coordination mechanisms; broad consultations and lobbying over one’s negotiation

strategy.43

As outlined above, because of the extensive consultation process undertaken by the ruling

party so as to correctly inform the government on which direction to take in terms of an

economic strategy (RDP and GEAR), what flowed from this was a clear identification of

South Africa’s strategic interests. This in a way forced the South Africans to take a closer

look at what exactly it was that they want out of this trade agreement with the EU. This

latter process plus that of the former policy documents such as the RDP and GEAR

crystallised the strategic interest of the country. These however, did not necessarily result

in there being zero caveats for the South Africans.

On the EU part there was a strict monitoring of the process taking place as well. Larsen

stipulates that, “During the negotiations with South Africa, both the DGs and the Member States were able to

monitor the behaviour of the negotiations team, the DGs regularly met the Commission

negotiating team to monitor progress made in the negotiations.”44

In addition, a core group consisting of the DGs most affected by the TDCA negotiations

– DG Trade, DG Agriculture, and DG Enterprise was established. This group met more

frequently, and its representatives were all present during the actual negotiations with

South Africa. Some of them also led some of the technical aspects of the negotiations, for

example the agriculture element of the agreement was negotiated directly by DG

42 Larsen, M. 2007, op cit. 43 Bilal, S. and Laporte, G., 2004, op cit. 44 Larsen, M. 2007, op cit.


27

Agriculture while the Commission would have liked to give a more developmental

emphasis on matters, this was not the intention of the DG Agriculture.45

Furthermore, it is generally accepted that the South Africans were not prepared nor did

they fully understand the complexities associated with the decision making mechanisms

of the 15 member states of the EU. EU decision making takes time and once a decision is

reached it becomes very difficult to challenge and indeed change it. According to

Meunier and Nicolaidis four stages in the negotiation of international agreements are of

relevance: • the design of the negotiation mandate;

• the representation of the parties during the negotiations;

• the ratification of the agreement once it has been negotiated; and

• the implementation and enforcement of the agreement afterwards.46

All the above was not fully adhered to by the South African team, which did present all

sorts of problem areas for them. Another issue that needs attention is the fact that South

Africa needed to lobby certain member states more proactively prior to the Commission

receiving its mandate from the Council, which finalises and ratifies a decision on a

particular issue. In so doing it might have been able to influence the end result of such a

decision. A time consuming process is undertaken by the Commission in order to arrive

at a uniformed decision and once arrived at, it seems unlikely to be repeated. This process

could be said to be not dissimilar to the role of the US Congress when that country is

negotiating a trade agreement.

On the technical front, it is commonly acknowledged that negotiation is a ‘give and take’

process and hence in order not to give more than one takes, one has to be technically

ready for the process. This involves undertaking a “strategic competitive analysis; a specific detailed analysis; an in-depth knowledge for

negotiations management and finally detailed negotiations inputs.”47

45 ibid. 46 Meunier, S & Nicolaidis, K. 2005, op cit., p. 247. 47 Bilal, S. and Laporte, G., 2004, op cit.


28

A strategic competitive analysis means that the country should have identified the core

reasons why this agreement should come into effect and how it would positively serve the

strategic interest of the country both economically and politically. As outlined above,

South Africa did undertake this process. Once this was established they could undertake a

specific and detailed analysis which means a sector and/or industry specific analysis of

what it is these sectors require from such negotiations.48 This could have a bearing on

matters concerning the bottom line but also on issues such as employment and job losses.

An in-depth knowledge of negotiations management simply implies that once you set out

to negotiate, you need to ensure that you know who the players are on the other side, how

are they organised in terms of decision making and what political forces you are

contending with during this process. This is useful because it assists you with knowing

how to handle the negotiations overall. The problem however, as seen above, was that the

South African team had to contend with a number of people, and the multiple levels of

EU organisation, not only the negotiating team members. At times it was evident that the

South Africans were not completely ready to contend with these aspects.

Bilal (et al) argue that the detailed negotiations input concerns itself with the efficiency of

the technical analysis that flows from the negotiating team members and their

governments.49 In other words, how fast can the team respond to very specific proposals

being tabled? Can they analyse the pros and cons fast enough to make an intelligent

decision? Do they have the technical backup in order to facilitate this? These are some of

the questions that the South Africans had to consider when preparing the negotiation

inputs. It should be mentioned that in many ways the South Africans did have good

technical backup but be that as it may, there were times when even they could not match

the efficiency of the EU delegation, who had many years of experience in negotiating

techniques and procedures.

Another important point from the South Africans quarter to mention however is the

‘party discipline’ that also played its part during this cumbersome process. Many inputs

48 ibid. 49 ibid.


29

and papers analysing this process seem to be quiet on this point, which may be because

they don’t understand the importance of the ruling party mechanisms in most of these

issues. Given the history of the liberation movement (ANC) a great emphasis is placed on

party discipline. In other words, those who are card carrying members of the ruling party

(much like the former Soviet style communist party) must conform to the decisions of the

party in all aspects of life. One mentions this because when there is talk of very little

tension amongst government departments and generally smooth facilitation amongst

other key strategic players in South Africa; the background is the role played by the party

to avoid such disagreements. For instance, it is common practice within the party to have

parallel standing committees to those that exist within parliament and in this way have

unfettered and frank discussions amongst each other, without the interference of

opposition parties and the limelight of the media. Similarly, it was the case in this

instance that the economic transformation committee was tasked with getting to grips

with the issues as it relates to the TDCA negotiations and by virtue of the various

concerned Ministers being part of this committee, feed these discussions back into

Government. Also worth mentioning, is the President’s use of the International Business

Council in these matters. The council was established by the then Deputy President

Mbeki and comprises of leading international business leaders, such as George Soros and

other ‘captains of industry’, to advise the President in matters related to investment and

trade. This council was also called upon by the ruling party at times. In short, what the

party decides with its collective intelligence, pretty much becomes the way forward for

most. It is worth noting at this point that all but two members of the current Cabinet are

members of the ruling party and that policy formulation is concluded within the party

structures first before it is tabled at government level.

Having explored some of the ways South Africa organised itself to negotiate the TDCA

and the complexities it faced in navigating the EU levels and structures, we turn now to

an examination of South Africa’s gains and losses from the TDCA.


30

Weighing up Gains and Losses

Taking account of other commentaries’ on this agreement, one must indicate that there

are those that are of the view that the agreement was not necessarily a huge success for

the South African economy. To that end one can mention the failure, that with regard to

market access, the EU is required to eliminate tariffs on approximately 95% of goods

currently traded, and South Africa on 86%. However, as is noted by Sandrey, prescribed

EU tariff changes affect only 25% of current trade goods and their weighted average

tariff is only 2.7%. South African tariff changes affect 40% of currently traded goods in a

context of a weighted average tariff of 10%. The greater burden of the TDCA in terms of

tariff adjustments could therefore be argued to fall on South Africa. One commentator

has even described the Agreement as a ‘raw deal’ for South Africa.50 The South African

Government however stated at the end of 2004 that trade between South Africa and the

EU had grown by close to 50% since the advent of the TDCA. From its perspective the

TDCA is a success.

A major loss for South Africa was the issue concerning agricultural products. As

stipulated above this area of trade was earmarked a ‘sensitive sector’ and as a result did

not fall within the benefits of the trade agreement for South Africa.

Another possible loss was the exclusion of South Africa as a full member of the Lomé

Convention. All was not lost in this regard for South Africa, however, as the parties

resolved this issue by agreeing on development aid through a bilateral programme called

the European Programme for Reconstruction and Development. The programme covered

the period 1995-1999 with a budget of EUR 125 million. Its focus was fighting poverty

and improving the living conditions of the poorest people in the South African

population.51

The above therefore shows us that although the two level model worked for South Africa

it also imposed various constraints on the country. The ruling party more than often had

50 Greenberg 2004, cited in Grant, C., 2006, op cit. 51 Europa (Online), ‘Trade, Development and Co-operation Agreement (TDCA)’ op cit.


31

to intervene in order to ensure that matters ran smoothly and the South Africans found

themselves wanting on the technical front as well as completely underestimating the

capacity of the EU for decision making. The EU found their own constraints highlighted

by the three level model. The examples above show that their team had to engage in two

sets of internal negotiations – within the Commission and in the Council – in parallel

with the negotiations with South Africa. But more important according to Larsen, the

examples also demonstrate how it was clear that the EU did not speak with one voice and

that the divergent interests of both the DGs and the Member States were reflected

throughout the TDCA negotiations.52

52 Larsen, M., 2007, op cit.


32

CONCLUSION

South Africa’s part in the TDCA could be judged as having made progress, but could still

do better. Although this agreement is generally hailed as a huge success for South Africa,

it is worth mentioning some shortcomings which were evident during and after the

process. In the view of Bilal (et al) these were, “better anticipation of the European decision making process; proactively influencing the

European mandate; better integration of regional concerns and expectations; stronger focus on

lobbying EU member states; dealing with European negotiations ‘power plays’; readiness for the

final stages of negotiations and retaining capacity beyond the negotiations.”53

Regional integration was high on the South Africans agenda yet a flaw within the process

saw most of South Africa’s regional partners complaining of the little consultation there

was between them and South Africa. Some of the decisions taken by South Africa, they

argue, had dire consequences for them and their trade priorities. If indeed South Africa

did apply a three level game model with their regional partners forming the third leg of

their negotiations strategy, much of the dualism could have been avoided perhaps.

Also, at various points in the negotiation process individual EU member states got

directly involved once a matter affected them, such as Italy and Greece concerning their

wine and spirits industries. South Africa was ill equipped to deal with this phenomenon

and as a result valuable time and energy was consumed on these countries concerns. This

was a further indication of the complexities encountered due to the ‘three level game’

model referred to in the preceding section. A strategy to engage some of the EU Member

States from earlier on would have perhaps been more useful.

The EU representatives at the negotiations also exercised various forms of power plays

during the process. In hindsight, South Africa could have dealt with those more

effectively by also playing the ‘infant democracy’ card whilst the moral clout of Mandela

53 Bilal, S. and Laporte, G., 2004, op cit.


33

could have been used more effectively. Often, the South Africans were caught off guard

by the tough negotiating strategy of the EU representatives.

Finally, the lack of readiness for the final stages also proved crucial. Since this is when

one ties up all the various loose ends, and closes all the seemingly small issues, it can

prove to be very valuable indeed. South Africa’s negotiators seemed tired at this stage

and made some mistakes towards the end. Retention of the capacity one builds up during

such a period also becomes a very valuable asset. The trade negotiators and the technical

expertise should be developed and safeguarded particularly by a developing country such

as South Africa. This was not always the case in this trade agreement, with many people

who were involved leaving for the private sector and elsewhere according to Bilal (et al).

In conclusion then, we should answer the overall research question: what has been South

Africa's experience of the Trade, Development and Cooperation Agreement (TDCA) with

the European Union from 1995 to 2005? One must take all of the above into account and

come to the realization that the TDCA was in fact successfully negotiated by the South

Africans. The analysis of trade data shows increases in trade flows, with South Africa

amongst the top 20 trading partners with the EU and the EU as South Africa’s number

one trade partner globally. The TDCA managed to attain most of the developmental goals

it set out to achieve although there are challenges still to be faced.

If indeed there are some lessons to be drawn from this undertaking by South Africa for

other developing economies involved in trade negotiations it would paradoxically be that

in order to amass the amount of resources both human and material, (that South Africa

had to amass for this process) then the only viable answer is that of greater regional

integration. Without this necessary element, ‘weak powers’ will certainly not be able to

engage their economically stronger counterparts in successful or meaningful negotiations.

It seems to me that it will only be able to do so when the various technical teams,

governments and negotiating experts come together and pool their respective resources,

that success might be possible. As we often see the developing countries employing this

‘pooled resources’ approach in the WTO negotiations process.


34

Another key challenge for many developing countries would be the issue of

diversification of their respective economies. As we have seen above, South Africa came

through a long and arduous process to diversify its economy from primary sector over-

reliance, to secondary and tertiary sector integration. This is not always possible in

countries in Africa where for decades certain countries were solely reliant on one or two

primary commodities.

As for the issue of dualism as it relates to trade negotiations, this will remain an obstacle

for as long as the ‘neo-mercantilist’ world view remains intact. Nations will always put

their domestic priorities above those of the regional partners unless they begin to put into

practice an alternative view of how they might survive economically within this

globalised market economy.

South Africa, as we have seen also had to contend with numerous stakeholders internally

and as a result had to rely on ‘party discipline’ to steamroller certain fundamental

decisions, a luxury not many developing countries have at their disposal. A further

complication would be the fact that in many respects it was precisely because of South

Africa’s unique economic situation that it could take the bold decision not to go to the

World Bank and the IMF post 1994, for loans to assist in the transition period

immediately after democracy was attained. Many African countries were not in this

position by the time they acquired their respective freedoms after the colonial period and

hence they still today remain trapped in the poverty/debt cycle. It also seems to me that

further cooperation is required between the members of the G77 if indeed they want to

see some positive moves on the issues of sensitive sectors that the EU so bitterly protects

albeit at huge costs to itself. This refers particularly to the agricultural subsidies for

European farmers.

The situation in South Africa since 1995 has indeed improved overall. There remain huge

social and political challenges ahead but if the above data is anything to go by then there

are reliable partners in the form of the EU out there that have been true to their word in as

far as the social and economic uplifting of Africa is concerned. Will the TDCA ultimately

result in the growth patterns needed by the South African economy in order to create the


35

much needed job opportunities? Only time will tell. There are many different views on

what South Africa could have done differently during this negotiation process but be that

as it may, the South African government is resolute that the TDCA with the EU has

produced the required results and that it will continue to do so in the immediate future.

South Africa is also very much satisfied with its standing within the international arena at

this point in history. It has been welcomed into almost all the necessary international

organizations and has already demonstrated in many respects that it can fulfill a

leadership role if and when required to do so, as we have seen with the chairpersonship of

the World Bank and the IMF, as well as the current rotating seat in the United Nations

Security Council.

Finally, the twin track approach adopted by the EU Commission (even though it met

huge resistance from certain quarters at times) did finally pay off. The DG for

Development would have wanted to see greater concessions made for South Africa but in

general a better deal came out of these negotiations than have been initially anticipated.

As for South Africa and the socio-political advances attained, the EU can only but be

satisfied that not only has there been sufficient progress but that their ultimate aim of

wanting to position South Africa as a leading power on the continent has come to

fruition.

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