Southern African Customs Union Research Articles

Remittance and carbon dioxide emissions in the Southern African Customs Union region: Is there a modified environmental Kuznets curve?

The remittance-carbon dioxide (CO2) emissions nexus remains a hotly debated topic in the literature, with the majority of studies offering mixed conclusions. This study attempts to reconcile these disparities by investigating the nonlinear effect of remittances on the CO2 emissions in top-remittance receiving countries in Southern African Customs Union (SACU) region, using the modified Environmental Kuznets Curve framework which focuses on the effect that remittances might have on CO2emissions. The Cross-Sectional Autoregressive Distributed Lag (CS-ADRL) approach is applied to these top-remittance receiving countries from 1990 to 2020, representing a pioneering investigation for these countries. The finding of this study reveal that both the estimated coefficient of remittances and its quadratic term are statistically significant, with remittances displaying a positive coefficient and the quadratic term exhibiting a negative coefficient. This pattern confirms the presence of a modified EKC hypothesis, meaning as remittances increases, CO2 levels displays an unambiguous inverted U-shaped trajectory.

Heterogenous Effect of Industrialisation on Environmental Degradation in Southern African Customs Union (SACU) Countries: Quantile Analysis

Southern African Customs Union (SACU) countries are under pressure to commit themselves to sustainable environmental activities. This study employed data from 2007 to 2021 using quantile regression to determine the heterogenous effects of industrialisation on environmental degradation in SACU countries. Prior to the main results, this study investigated and confirmed the existence of a long-run relationship between industrialisation and environmental degradation. This study confirms the heterogeneous effect of industrialisation on environmental degradation. The results through quantile process estimates demonstrated an inverted U-shaped curve. The inverted U-shape suggests that industrialisation at lower and higher quantiles has a minor effect on the environment compared to medium quantiles, where it has a higher effect. This study found that industrialisation increases environmental degradation in the 4th to 6th quantiles, whereas in the 7th to 8th quantiles, industrialisation reduces environmental degradation. Therefore, it is recommended by this study that to mitigate environmental degradation, firms in SACU countries are encouraged to adopt environment-friendly technologies in their production.

Savings and growth nexus in the context of Southern African Customs Union countries

Orientation: The primary goal of Southern African Customs Union (SACU) is to promote economic development through regional coordination. Consequently, SACU members have set economic growth targets through various medium- and long-term policies.Research purpose: The article investigates the savings-growth nexus among SACU countries.Motivation for the study: This study is motivated by low economic growth among SACU countries and the gap in the saving-growth literature. Specifically, previous studies assumed linear relationship, thereby ignoring the fact that savings may be related to economic growth in a nonlinear fashion.Research approach/design and method: The study utilised several panel estimation techniques with data over 1990–2021 for the SACU countries.Main findings: Firstly, there is a strong evidence of long run relationship between saving and economic growth in SACU countries. Secondly, domestic saving exhibits a positive and statistically significant effect on economic growth both in the short-and long-term. Thirdly, there is evidence of non-linear relationship between domestic saving and economic growth. Lastly, it is shown that 16% threshold level of domestic savings to gross domestic product (GDP) ratio is consistent with 6% GDP growth target aspired by SACU union.Practical/managerial implications: The findings of this article suggest that domestic saving is a prerequisite for economic growth provided the funds are channelled to productive investments. Consequently, there is a need to design appropriate policies that can help to promote and mobilise savings.Contribution/value-add: This article contributes to the ongoing debate on saving-growth in the context of developing countries. In addition, it addressed the linearity assumption of the previous studies by incorporating nonlinear assumption.

The Impact of Covid-19 On the Economic Growth of Sacu Countries

The objective of this research was to appraise the influence of COVID-19 on the economic expansion of the Southern African Customs Union (SACU) countries, using yearly averages from the period 2010 to 2021. Prior research has focused on the effect of COVID-19 on the global economy, with limited studies conducted on the economic consequences of the pandemic in the SACU region. The economies of the SACU member states depend on international trade. A panel data random of fixed effects analysis was employed. The results showed a significant negative impact of the lockdown period on GDP per capita, suggesting that the COVID-19 pandemic had a substantial negative impact on the economic growth of SACU countries. As a result, the study recommends that there be an improvement in economic activities during any pandemic that may arise in the future. Moreover, there should be a reduction in import and export levies as so to improve trade. Finally, governments should increase their expenditure to bolster consumer demand during economic downturns caused by pandemics as well as, strengthen digital trade infrastructure and e-commerce capabilities to facilitate trade continuity during periods of limited physical movement.

India’s Export Potential to Southern African Customs Union

The Southern African Customs Union (SACU) is a prominent economic association of the African continent. SACU comprises five southern African countries: South Africa, Botswana, Namibia, Lesotho, and Eswatini. The overall value of India’s trade with SACU increased from $1,477.52 million in 2001 to $1,0941.24 million in 2020, an almost sixfold increase. The export increased almost tenfold between 2001 and 2020, from US$ 343.49 million to US$ 3,760.94 million. In order to increase India’s trade with SACU, the Indian-SACU PTA negotiations are now ongoing. This article examines India’s export potential to SACU nations using the revealed comparative advantage index, the revealed import dependency index, and the Potential bilateral trade equation. The study shows India has trade potential with all SACU member states. Still, it has only utilised this potential with South Africa. India has not taken advantage of the vast potential of exporting its goods to SACU countries except South Africa. The trade intensity index indicates that India’s export and import intensities with SACU have increased over time.

Wavelet-Based Analysis of the Comovement Between Exchange Rate and Stock Returns in Sacu Countries

ABSTRACT: The Southern African Customs Union is the oldest customs union in the world and the member states form a currency union with the South African Rand being the regional currency anchor. Therefore, currency movements amongst SACU member are dependent on the developments on the Rand which, in turn, can affect stock market development in the region. We examine the time-frequency relationship between exchange rates and stock market returns in SACU countries using continuous wavelet transforms. Our empirical analysis is two-staged. Firstly, we employ wavelet power spectrum to examine the time-frequency properties of the individual series. Secondly, we use wavelet coherence analysis and phase dynamics to examine the synchronization between the variables in a time-frequency space. Our findings show stronger (weaker) exchange rate-stock returns relations are found during periods of higher (lower) inflation whereas we observe a stronger (weaker) relationship during periods of lower interest rate environment. Moreover, we find more significant long-run relationships for countries with more independent monetary policy (South Africa and Botswana) whereas these relations are more prominent over the short-run for countries with pegged exchange rates (Eswatini and Namibia). We also observe that periods of oil and currency shocks impact the exchange rate-stock returns relationship in SACU countries with pegged exchange rates (Eswatini and Namibia). Our findings bear important implications for different stakeholders. For instance, this study has implications for exchange rate policy as it addresses the issue of whether the exchange rate can be used to improve market performance or exchange rate developments spillover into the stock market. Furthermore, corporate managers and stock market participants would be interested in our findings as it identifies periods of market inefficiency when exchange rates can be used to beat the stock market.

An investigation of the impact of exchange rate movements on consumer prices in the Southern African Customs Union (SACU)

An investigation of the impact of exchange rate movements on consumer prices in the Southern African Customs Union (SACU)

Industry-Level Evidence of J-Curve Effects in the SACU Region

Our study examines the cointegration relationship between exchange rate movements and trade balances for the five Southern African Customs Union (SACU) countries between 1995 and 2020. We disaggregate trade activity at an industry-level for 19 trade products and then determine whether industries benefit or are at a disadvantage during periods of currency depreciations over the short- and long-run. Applying pooled mean group (PMG) estimators to panel regression specifications of the industry-level J-curve, we find that exchange rate depreciations would be beneficial in 8 out of the 19 trade industries in the SACU region whilst harming theremaining 11 industries. In the strict, theoretical sense we only find J-curve effects in 6 of the 19 industries in which exchange depreciation initially hurt trade balances and then ‘adjust’ towards positive long-run effects. Altogether, we advise policymakers in SACU countries to consider devising (i) export-oriented policies for industries whose trade balance is strengthened by currency depreciations and (ii) import substitution industrialization policies and currency-risk mitigation strategies for industries whose trade balance is weakened by currency depreciations.

SACU and Trade Facilitation: A Post-Covid Pandemic Legal Analysis for Improved Efficiency

The Southern African Customs Union (SACU) prioritizes trade facilitation as one of its primary objectives in its founding Agreement (Article 2 (a)), implementing programmes to increase trade through expedited movement, and release and clearance of goods in the region. The oldest Customs Union in the world anticipated increased trade-flows following the entry into force and implementation of the progressive World Trade Organization’s Trade Facilitation Agreement (WTO TFA), and operation of the African Continental Free Trade Agreement (AfCFTA). Its aspirations, however, were dampened by the Covid-19 pandemic, which presented supply side challenges and slowed customs processes. Members introduced critical legislative measures to reduce or stop the spread of coronavirus disease (COVID-19) and initiate needed trade-facilitations interventions at a national and regional level. SACU also played a role in this regard, albeit a minimal one, through Council decisions. This raises the question of the SACU’s effectiveness, or ineffectiveness, its relevance in its functions, institutional structural readiness to address pandemics and regional emergencies, and future role it will play in this regard. This article examines trade-facilitation related responses from the institution following the outbreak of the pandemic, and adequacies/inadequacies of the said measures. The article, lastly, proposes trade-facilitation related approaches the SACU could adopt to improve efficiency for future pandemics and other global emergencies. SACU, Trade-Facilitation, Customs, Covid-19, Southern-Africa, Africa, AfCFTA, WTO, WCO, Tariff

Kingdom of Lesotho: 2022 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Kingdom of Lesotho

Lesotho has been simultaneously hit by the pandemic, declining transfers from the Southern African Customs Union (SACU), and the impact of the war in Ukraine. The pandemic exacerbated the impact of sluggish regional performance, climate shocks, and longstanding structural issues such as regulation, governance, political stability, financial inclusion, and diversification. Public expenditure has continued to increase, such that the decline in external transfers precipitated significant financing pressures and growing domestic arrears. With limited inflows to the private sector, the resulting public sector-driven external imbalances have continued to put pressure on international reserves needed to maintain the exchange rate peg.

Are SACU countries self-sufficient in cereals? A dynamic panel analysis

ABSTRACT Most countries within Southern Africa are reliant on cereal imports from South Africa, Zambia, and Zimbabwe. In the Southern African Customs Union (SACU) region, cereal insecure countries are often import-dependent. Changing income levels, pandemics, climatic conditions and the trade environment all create a wedge and put pressure on food self-sufficiency. This paper uses a robust dynamic approach of a five-country panel to investigate the key determinants of cereal self-sufficiency in the SACU region. Long-term and short-term effects of selected variables are tested using a dynamic panel data model. The key long-term drivers for cereal self-sufficiency are identified and the short-term results reveal that land surface and rainfall are statistically most significant at a level of ten percent. The Dumitrescu-Hurlin panel causality test suggests that SACU member states could propose further macroeconomic harmonisation and good governance to stabilise national income to cushion against the possible increased cost of cereal production especially in Lesotho, Eswatini and Namibia. The adoption of climate smart technology to safeguard against rainfall variability and reduce the carbon footprint is important to foster an increase in agricultural productivity. A lack of effective harmonised policies may lead to an acceleration in cereal production insecurity and increased poverty.

Responsiveness vs. accessibility: pandemic-driven shift to remote teaching and online learning

ABSTRACT During the first four weeks of the COVID-19 lockdown, African countries recognized that the COVID-19 pandemic would be one of the biggest disasters the continent has faced in recent times. The effects of the virus were being felt at unprecedented levels and like all nations in the world, countries in the Southern African Customs Union (SACU) were grappling with travel bans and social distancing measures. Through a critical discourse analysis lens, this article examines the tensions and contradictions evident in the excerpts of online news articles and newspaper reports published from March 2020 to September 2020 in the SACU region, focusing on the instructive decision-makers charged with the pandemic-driven technology’s adoption and the impact of these decisions on tertiary students in the region. Central to our argument is that responsiveness should not come at the cost of accessibility as this will have a negative impact on remote teaching and online learning, and further entrench the vicious cycle of epistemic injustice and inequity. The discourse in the media reveals that most universities are heavily reliant on learning management systems in an attempt to save the academic year, while there is evidence of unevenness in the distribution of digital infrastructure which has an impact on economically marginalized students. Beyond digital equity issues, there was a need for differentiated professional development activities for lecturers on technology-enabled pedagogies and e-assessments. Furthermore, there is a need for an in-depth exploratory large-scale research to document user-stories on the emergence of remote teaching in the SACU region in order to develop a service-oriented architecture for digital education in higher education institutions (HEIs).

Regional economic integration and economic upgrading in global value chains: selected cases in Africa

This study examined the impact of regional economic integration on economic upgrading in global value chains (GVCs), of the East African Community (EAC), Southern African Customs Union (SACU) and the Economic Community of West African States (ECOWAS), from 2000 to 2015. Using the Least Square Dummy Variable (LSDV) technique, the results showed that regional economic integration is not a significant driver of the economic upgrading of their Members, in GVCs but one-period lagged backward participation in GVCs is. Considering labour productivity as an alternative measure of productivity in the place of productivity linked with participation in GVCs (economic upgrading), regional economic integration turned out to be a weak positively significant determinant. At a disaggregated level, regional economic integration significantly determined labour productivity in both EAC and SACU but not in ECOWAS. More regional efforts are needed to sufficiently aid the contribution of these African RECs to their Members’ economic upgrading in GVCs.

Stability in Food Security within the Southern African Customs Union: A Dynamic Panel Analysis Approach pn Cereals

Food insecurity is no different in southern Africa. This paper attempts to assess the country effects within the aggregated cereal food security status within the Southern African Customs Union (SACU). The impact of a big player on dependent small players is analysed by using the panel data approach to empirically explain the dynamics of climate patterns on cereal food production. The paper employed econometric dynamic models to determine effects of urbansisation, production yield, land availability and weather variables on both country individual and regional food security. Results indicates that a unit decrease in available crop surface per capita in each time period leads to 40% decrease in the ability to be food secure within the SACU region. It implies that countries with less crop surface, low crop yield and high population growth tend to be less food secure because of applying less rigorous food production technologies. Therefore, adjustments in cereal food production in Southern Africa are necessary to follow principles of climate smart agriculture. Resulting shifts in production systems will open an opportunity for regional cooperation in food resource management. Iindividual country policy on food security shows divergence and could be adjusted towards a more holistic regional approach with innovation, trade, health, wealth and geopolitical relations. Individual country support from a regional customs union will strengthen regional equity and sustainable development for ultimate welfare. Technological change in cereal food production practices will be based on resource quality and management skills.

Trade and competition (laws): Interrelations from a Southern African perspective

As a result of the processes of globalisation and of technological revolution, markets now transcend countries’ physical borders. Increasingly interconnected, borderless and digitalised global markets, thus, tend to develop mass markets, increase the integration of enterprises and so produce goods and provide services that are readily accessible for consumers. Easy access improves knowledge transfer and raises economic efficiencies and expectations. However, there are also downsides. The ever-diminishing distinction between goods and services in these markets poses a threat to the diversity of goods and services and, consequently, to small market players at both country and company level. Thus, the rise of anti-competitive cross-border economic activities such as collusion, international mergers and filling dominant positions gives reason to pause and revisit the relationship between competition and trade from the perspective of African countries, where national markets are generally small and where small and medium-sized enterprises (SMEs) represent the majority of market players. While economic analysis of trade on its own often assumes static models, attention to competition and especially to the interface between trade and competition and between its laws and policies reveals possibilities of enhancing the focus on the diversification and development of productive capabilities that are crucial for the economic development of the small-scale national market players, and inclusive growth, within most African states. In this chapter we present such a perspective to economic policymaking in part by distinguishing between trade and competition at the level of economic activity (section 2) and trade and competition laws (section 3) when discussing their interrelations. We illustrate the latter by evaluating whether and to what extent the behaviour of cross-border economic operators is currently disciplined, with a specific focus on South Africa, one of Africa’s largest economies. South Africa has a well-articulated policy architecture for trade and competition; is a party to both major southern African regional agreements, the Southern African Customs Union (SACU) and the Southern African Development Community (SADC); and is involved in recent initiatives directed at African integration. We then conclude the chapter (section 4).

Towards Macro-Economic Convergence in SACU: The Position of Botswana

In light of recent developments such as the African Continental African Free Trade Area agreement (AfCFTA), incrementalist approaches to regional inte gration that focus on sub-regions seems to have been pushed to the backburner as more focus puts the entire African continent at the centre of integration processes. With all its potential, gradual macro-economic convergence has accordingly been neglected. Discussions on macro-economic convergence have on the other hand been cast over the broader sub-region such as the Southern African Development Community (SADC) where a number of indicators and targets have been identified and pursued closely. Whilst looking at Botswana as a point of departure, this paper argues that incremental macro-economic convergence is pivotal to broader regional integration and the Southern African Customs Union (SACU) provides an ideal stepping-stone. An incrementalist approach to macro-economic convergence as well as broader regional integration should begin with identifying key formal institutions that serve as custodians of macro-economic policy such as the central banks and departments of finance or treasuries. Using secondary data sources, with Botswana as a case study, this paper foregrounds macro-economic convergence, macro-economic policy making institutions, and SACU as critical building blocks for broader regional integration.

Towards Macro-Economic Convergence in SACU: The Position of Botswana

In light of recent developments such as the African Continental African Free Trade Area agreement (AfCFTA), incrementalist approaches to regional inte gration that focus on sub-regions seems to have been pushed to the backburner as more focus puts the entire African continent at the centre of integration processes. With all its potential, gradual macro-economic convergence has accordingly been neglected. Discussions on macro-economic convergence have on the other hand been cast over the broader sub-region such as the Southern African Development Community (SADC) where a number of indicators and targets have been identified and pursued closely. Whilst looking at Botswana as a point of departure, this paper argues that incremental macro-economic convergence is pivotal to broader regional integration and the Southern African Customs Union (SACU) provides an ideal stepping-stone. An incrementalist approach to macro-economic convergence as well as broader regional integration should begin with identifying key formal institutions that serve as custodians of macro-economic policy such as the central banks and departments of finance or treasuries. Using secondary data sources, with Botswana as a case study, this paper foregrounds macro-economic convergence, macro-economic policy making institutions, and SACU as critical building blocks for broader regional integration.

The Prospect of the Proposed Currency Union on Intra-Regional Trade: Southern African Customs Union

Formal currency union with a common policy is welfare superlative to formal currency union due to relatively greater transparency. The study evaluates whether adopting a common currency will lead to trade. Additionally, the study estimates whether countries are under trading or overtrading to investigate whether there exists trade potential. The results show there exists greater trade potential due to geographic and economic fundamentals therefore adopting a common currency will lead to trade. Also, the study showed that the financial markets served as a buffer for the volatility of the currencies notably the Rand. The study concludes that a currency union with a common policy could serve as a panacea when the appropriate institutional policy framework is adopted to reduce trade and non-trade barriers.

Investigating the Core–Periphery Relationship in the Southern African Customs Union

This study explores the relevance of the core–periphery relationship in the Southern African Customs Union (SACU), a union comprising five highly unequal economies. In the analysis, the study employs five key indicators: economic size, trade logistics and facilitation, regional integration, and intra-SACU trade, to assess the main aspects underlying the core–periphery relationship in the union. The findings of this study point to dominance-dependency behavior within the union, where South Africa is the dominant core while Botswana, Lesotho, Namibia, and eSwatini are the dependent periphery. Based on the findings, the recommendations are that SACU countries should, among other strategies, identify ways of promoting high-value-added cross-border value chains across the union members. Also, the Botswana, Lesotho, Namibia, and eSwatini peripheries could improve their infrastructure and productive capacity if their objective is to create an export base in some of the products currently supplied by South Africa.

South Africa’s trade policy post COVID-19

ABSTRACT Prior to the COVID-19 pandemic, South Africa faced significant economic challenges that have worsened in 2020 as the country has grappled with the impact of lock down and global uncertainty. Trade policy needs to be adapted to keep pace with technological developments and shifts in supply chains. Now is not the time to abandon the regional integration agenda that has been at the heart of South African trade policy for decades. It is the time to learn from the pandemic by supporting innovation, trade in services and digital trade. These issues need to be captured in a forward-looking trade policy for South Africa that can then form the basis of engagements with other members of the Southern African Customs Union (SACU) and beyond. An updated trade policy framework should be based on evidence and include input from all stakeholders, especially the private sector.