By Deputy Minister Pahad on the Occasion of the 2nd SADC/MERCOSUR Conference held in Sao Paulo, Brazil - 25 & 26 October 2000.

Ladies and Gentlemen,

I wish to thank the organizers for inviting me to participate in this 2nd SADC/MERCUSUR conference.

Travelling to Sao Paulo it struck me, once again, that the flight time from South Africa to Brazil is less than that of a flight from South Africa to Europe. Southern Africa and MERCOSUL are therefore neighbours.

It is exciting and challenging to be here because not only are we close in a geographical sense, but we are bound together first and foremost by our shared values, commitment to democracy, social responsibility, the creation of employment, transparency, sustainable economic growth and the eradication of poverty. Values that are increasingly important in an ever faster evolving world. Values, that need to be actively pursued, not only by our political leaders and governments, but also by civil society and the business community.

Our common belief in progressive governance in the twenty first century further binds us as southern neighbours and entrenches the principles of South-South Cooperation and Dialogue.

The demise of the Cold War, together with the process of globalisation resulted in the rapid dismantling of political, economic, cultural and ideological barriers. However, the reality is that while globalisation represents an opportunity to fast-track development, it has also resulted in the increasing marginalisation and underdevelopment of many countries.

President Cardoso encapsulated these challenges presented by globalisation when he said : " We must make the globalisation process more symmetrical by making capital movements and access to the market into effective development tools. Only thus will we be able to prevent the crystallisation of hegemonies and the aggravation of inequalities."

President Cardoso was referring to the dynamics of Globalisation which pose a major challenge to humanity. A casual consideration of some statistics reveal a startling reality.

According to the 1999 UN Human Development Report, more than 80 countries have per capita incomes that are lower than they were a decade or more ago.

Since 1990, 55 countries, mostly in Sub-Saharan Africa, Eastern Europe and the former Soviet Union have had declining per capita incomes.

The income gap between the fifth of world's people living in the richest countries and the fifth in the poorest was 74 to 1 in 1997, up from 60 to 1 in 1990.

The richest fifth accounted for 86% of the World's GDP while the bottom fifth shared 1%.

Koffi Anan's Millenium report states that : "Nearly half the world's population still has to make do on less than $2 a day.

Approximately 1.2 billion people - 500 million in South Asia and 300 million in Africa struggle on less than $1 a day. People living in Africa - south of the Sahara are almost as poor today as they were 20 years ago.

Africa's share of world trade has plummmeted since 1960. It now accounts for less than 2% of world trade and if SA is taken out of the equation, the figure for Africa is a mere 1.2%. Africa is the only region to see investments and savings decline after 1970. Savings rate in many African countries are the lowest in the world. Tax revenue declined in poor countries from 18% of the GDP in early 1980's to 16% in 1990's.

Africa is burdened with severe debt problems. In 1997 Africa's debt was estimated to be $159 billion and in 1999 this increased to $201 billion. We are faced with the reality that outstanding external debts in many African countries exceed the entire GDP, and debt service requirements exceed 25% of total export earnings. No HIPC country can achieve sustainable development if the debt issue is not resolved.

Overseas development assistance has dropped moer than one fifth in real terms since 1992.

Many of our countries have taken steps to create a climate conducive to direct foreign investment. They have either through structural adjustment programs or as country programs put in place trade liberalization policies; the strengthening of the rule of law; improvements in legal and other instruments; greater investment in infrastructure development, privatization, greater accountability and transparency, greater degree of financial and budgetary discipline and the creation and consolidation of multi-party democracies. However foreign direct investment has not flowed sufficiently to Africa. In 1999 Africa received $10 billion in FDI. Although this was an increase from the $8 billion in 1998, it represented only 1,2% of global FDI inflow. South Africa received the largest share of this. South Africa, Angola, Nigeria, Egypt and Morocco accounted for 70% of the FDI to Africa.

Diseases such as HIV/AIDS, Malaria and Tuberculosis are causing havoc. This is also a new world order in which we are experiencing an unprecedented scientific technological revolution. In 1993 there were 50 pages on the World Wide Web, today there are more than 50 million. In 1993 143 million people used the Internet, by 2001 there will be 700 million users. In 1996 the e-commerce market was $2.6 billion and it is expected to grow to $300 billion by 2002.

There are more computers in the Us than in the rest of the world put together. However, electrical power consumption per person in Africa is the lowest in the world; Africa has 14 telephone lines per 1000 persons. Tokyo has more telephones than the whole of Africa; less than half of 1% of all Africans have used the Internet.

Why are we faced with such a reality? Some of the answers can be found in the World Bank and other studies, inter alia, that Africa’s economies are generally characterized by narrow commodity exports with little benefaction or diversification, therefore highly vulnerable to market fluctuations and commodity prices; primary markets are limited to the North, to which African countries are highly dependent for their imports; large rurally based agricultural population, engaged in subsistence economy, alongside a weakly developed large urban based economy; weak macro-economic policies and management principles combined with low skills, low productivity, corruption and lack of regulatory framework, lack of reliable socio-economic data. Why is this so? The legacy of slavery, colonialism, imperialism, neo-colonialism and the Cold War contributed much to Africa’s under-development.

Will regional integration help us to overcome this legacy?

It is increasingly accepted that regionalisation and regional integration can not be explained solely with economic formulas, such as economic stabilization, tariffs or fiscal and monetary harmonization.

The Declaration of the Millennium summit stated that : "The central challenge we face today is to ensure that globalization becomes a positive force for all the world’s people. While globalisation offers great opportunities, at present its benefits are very unevenly shared, while its costs are unevenly distributed. We recognize that the developing countries and countries with economies in transition face special difficulties in responding to this central challenge.

Thus only through broad and sustained efforts to create a shared future, based upon our common humanity in all its diversity, can globalization be made fully inclusive and equitable".

The Summit identified certain fundamental values which are essential to international relations in the twenty-first century. These include:

Freedom. Men and women have the right to live their lives and raise their children in dignity, free from the fear of violence, oppression or injustice. Democratic and participatory governance based on the will of the people best assures these rights.

Equality. No individual and no nation must be denied the opportunity to benefit from development. The equal rights and opportunities of women and men must be assured.

Solidarity. Global challenges must be managed in a way that distributes the costs and burdens fairly in accordance with basic principles of equity and social justice. Those who suffer, or who benefit least, deserve help from those who benefit most.

Tolerance. Human beings must respect each other, in all their diversity of belief, culture and language. Differences within and between societies should be neither feared nor repressed, but cherished as a precious asset of humanity. A culture of peace and dialogue among all civilizations should be actively promoted.

Respect for nature. Prudence must be shown in the management of all living species and natural resources, in accordance with the precepts of sustainable development. Only in this way can the immeasurable riches provided to us by nature be preserved and passed on to our descendants. The current unsustainable patterns of production and consumption must be changed, in the interest of our future welfare and that of our descendants.

Shared responsibility. Responsibility for managing worldwide economic and social development, as well as threats to international peace and security, must be shared among the nations of the world and should be exercised multilaterally. As the most universal and most representative organization in the world, the United Nations must play the central role.

These are values that we share.

We are therefore under an obligation to guarantee these rights and values against human frailties and greed. Mechanisms that could provide such guarantees include, inter alia,

-a participative, accountable and transparent constitution building mechanisms

-independent judiciary

-human rights watchdog bodies, etc.,

Ladies and Gentlemen

The process of globalisation is sustained by, and produces, national and regional inter-dependencies. By contrast to the Cold War focus on regionalism as a means of collective security arrangements, there is a new emphasis on political and economic regional groupings committed to people-centered economic development, to democratic consolidation, transparency, efficiency, social responsibility, equity, scholarship, peaceful resolution of conflicts and protection of our environment.

This Conference's stated aims are to focus on the perspectives of developing inter-regional forms of association, specifically in the commercial and economic fields with a view to advancing an agenda of co-operation between the two regional blocs (SADC and MERCOSUR). This may eventually lead to a free and more intense trade and investment flow across the South Atlantic.

Regional co-operation/integration and intra-regional integration should be perceived broadly beyond the backdrop of economic and trade concerns.

We believe that regional associations or integration must be based on a sense of belonging, a shared value system of like- minded associates. In this shared vision of peace and stability, democracy, human rights, equity and social responsibility lie the roots of economic growth and prosperity and the improvement of the quality of life of our peoples.

We in Africa, who represent the poorest of the poor are seeking to learn from the experiences of others in the South.

Ladies and Gentlemen,

Regional integration and intra-regional cooperation will provide a rich crop of rewards, such as the promotion of economies of scale, the development of comparative and competitive advantages, the creation of a climate conducive to investment, and the efficient utilisation and joint management of resources and infrastructure to the benefit of all.

Regional integration is a sine qua non for the continent’s renewal. Therefore SADC is the foundation on which we seek to achieve economic growth, prosperity, peace and stability and improve the quality of life of the masses of our people.

The aim of SADC is to create a Community providing for regional peace and security, sector cooperation and an integrated regional economy. As a regional institution it has laid the basis for regional planning and development in Southern Africa.

It could not be otherwise:

The countries of the Southern Africa region can achieve their full potential only through close cooperation in the exploitation of natural resources in a co-ordinated fashion, the pooling of technical expertise, the harmonization of trade practices and the promotion of economies of scale.

Increased regional trade, sectoral cooperation programs [SDI’s] and joint development of regional resources and infrastructure has to be achieved. However as we strive to achieve regional integration, we are acutely conscious that the region is characterized by acute imbalances, unevenness’ and inequities. Not only are the sizes and levels of development of the economies of the various countries very different [see annexure 1 and 2]. Also the historical pattern of economic relations in the regional economy has been very uneven. Essentially, the main poles of accumulation were located in SA, while the economies of the other countries were incorporated in roles as providers of migrant labour, services and as ‘captive markets’ for higher priced South African exports. These imbalances were exacerbated in the years of conflict and destabilization that characterized the late apartheid period."

During the 1990s the distribution of consumption in the SADC countries, for which data is available has been relatively skew. In SA the wealthiest 20% of the population had a 64,8% share of total consumption, followed by Zimbabwe with 62,3%. Lesotho with 60% and Zambia with 54,8%. Southern Africa is also grappling with the problem of limited fixed capital formation. The generally accepted international standard for gross domestic fixed capital formation in developing countries is around 25% of GDP. In 1998, only four SADC countries exceeded this standard namely Lesotho (49,4%), Zambia (37,4%), the Seychelles (35,2%) and Swaziland (33%).

We also have to deal with the consequences of insufficient FDI.

In 1998 total foreign direct investment in the SADC countries amounted to 22,5% ($821 million) of the total of Sub-Saharan Africa ($3,6 billion) in that year.

Inter-Regional trade is also minimal and uneven. Currently this is 10% of total exports, as compared to 24% for MERCOSUR, 70% for APEC, 55% for the EU and 52% for NAFTA. (see annexure 5). Some 86% of intra-regional imports are supplied by South Africa.

In terms of the Southern African Custom Union’s (SACU, which comprises Botswana, Lesotho, Namibia, South Africa and Swaziland) trade with the SADC region, Zimbabwe is the most important trading partner. In 1998, SACU’s exports to Zimbabwe amounted 34,6% of total exports to SADC countries, followed by Mozambique (16,4%), Zambia (13,4%), Malawi (7,6%), Tanzania (7.0%), the DRC (6,7%), Angola (6,6%), Mauritius (6,5%) and the Seychelles (1.1%). With regards to imports, 60,8% of total SACU imports from the SADC region came from Zimbabwe in 1998, followed by 17,5% from Malawi, 9,6% from Zambia, 8,2% from Mozambique, 1,3% from Mauritius, 1,0% from both the DRC and Tanzania, and 0,3% from the Seychelles. The major products exported by SACU to the SADC region in 1998 were machinery and equipment (12,6% of the total), mineral fuels and products (9,0%) and vehicles, parts and accessories(8,3%). SACU imports from SADC in 1998 consisted mainly of cotton (14,3% of the total), tobacco and tobacco products (8,4%) and certain apparel and clothing articles (6,8%). Despite these problems there has been some progress towards building a regional community. Most encouraging, notwithstanding the conflicts in Angola and the DRC and the tensions in Zimbabwe, is the growing sense of political will, determination and urgency which SADC members are displaying in tackling the difficult challenges that confront us.

Slowly but surely, the SADC region is developing into a regional economic entity. Far-reaching economic reforms are being implemented by SADC Member States, in pursuance of their shared vision of creating a single economic space through deeper economic integration. Through the implementation of appropriate macro-economic policies, a number of SADC countries have managed to put themselves on a sustainable economic growth path.

There is a strong trend to move beyond ‘functional integration’ to embrace a program of ‘development integration’. Development integration is the appropriate approach in a region in which, there are countries with economies of very different sizes and levels of development. In these circumstances it is argued that trade integration measures should be complemented by:

- Efforts to promote coordinated regional industrial development, through the establishment of regional industrial policies;

- Measures to give less developed members greater preference in access to regional markets and facilities and a longer period to reduce tariffs through asymmetrical trade agreements; and

- Some coordination of macro-policies at a relatively early stage, particularly in relation to fiscal incentives for investment.

A practical consideration of these measures have been, inter alia,

1. Since 1994 SA has championed Spatial

Development Initiatives (SDIs). The Spatial Development Initiatives (SDIs) are concerned with unlocking the inherent under- and unutilized potential of economic development of specific spatial locations and corridors within certain sectors. SDIs in the SADC region are specifically designed to enhance economic integration and cooperation between the various countries and different sectors (see annexure 8).

An SDI may be executed on a bilateral basis, a multilateral basis (eg, SDIs which span more than five states. It could even be restricted to one country only, with the eventual option of crossing into neighbouring states.

The key to the success of an SDI includes access to labour, transport, innovative economic and product development, competent government support on a local and national level as well as access to technology.

It is a partnership between governments, developmental institutions and the private sector.

-The Maputo Development Corridor (MDC) is one of the most ambitious and exciting development initiatives undertaken within the Southern African region. [see annexure 9]. The vision is to rehabilitate the core infrastructure in the corridor (notably road, rail, port and dredging, and border post, through public/private partnerships thereby re-establishing key linkages and opening up inherent under utilized economic development opportunities. Common to both countries was the importance of the initiative to the respective reconstruction and development programs (specifically to achieving GDP and employment growth targets, increasing local and foreign fixed investment and improving exports). Underlying this vision was the desire to see this initiative contributing to other key policy areas –

notably regional economic integration international competitiveness and a broadening of the ownership base in the economy of the corridor.

There is a continual process of project identification and preparation in the MDC. There are currently 180 projects under consideration, in all economic sectors, with a total value of US$7bn and a potential to create an estimated 35 000 permanent new jobs. Potential contributions to foreign exchange earnings are also substantial. Of the above, approximately US$4bn has now been committed, with the creation of 12 000 jobs. Beyond these very tangible/visible impacts, the MDC has also had a strong bridge-building function – stimulating new bilateral agreements, restoring trust and addressing trade imbalances. The MDC is also playing a significant role in the regional economic integration debate - demonstrating through projects the nuts and bolts of integration.

2. On the structuring of a new regional trading relationship that promotes equitable and mutually beneficial development integration, South Africa’s policy is to work towards a multilateral, regional agreement with flexibility to take into account bilateral specifics.

As Davies said in the first SADC-Mercosur seminar "The draft protocol prepared by international consultants commissioned by the SADC secretariat envisaged a rather mechanical timetable for tariff phase-downs, leading to the establishment of a free trade area. Those with higher incidences of overall protection were to phase down more rapidly than the others. This formula was criticized as taking no account of the variations in capacity of the individual countries, nor of concrete conditions in specific industries or sectors.

We were concerned about the consultant’s approach because other studies suggested that the introduction of literal free trade would exacerbate rather than reduce polarization. Therefore we argued that South African access to the markets of other SADC countries would need to be carefully structured and phased, we needed an asymmetrical arrangement (which could nevertheless qualify as a WTO-legal FTA), in which South Africa opened up its market to a greater extent than would be required by other countries, and which operated on a somewhat differentiated basis country by country.

South Africa also argued that the other SADC members

should identify products for which they wanted better

access into the South African market, and that we

should stop the futile debate about the comparative average

tariff levels. This was, however, seen by several other countries, as South African

protectionism.

The negotiations became protracted and it was only 4

years later – in September 2000 that the Southern African

community Free Trade Agreement was signed by all SADC

members [excepting Angola and DRC].

which 7 have entered into force.

The signing of the Trade Protocol marked an important milestone in our region's history. It will increase regional trade through the removal of tariff and non-tariff barriers and discard other restrictions that block entry or increase the cost of doing business in the region.

Given our commitment to mutual beneficial economic development that entails more than trade, we have taken steps to encourage joint partnerships and SA investments into SADC.

In this regard we have taken several concrete measures, inter alia, SA investors have been given a higher threshold for capital export to SADC; Institutions such as the Industrial Development Corporation and the Development Bank of Southern Africa are undertaking developmental projects in other SADC countries.

This is only the beginning, we still have to grapple with many challenges.

The Agreement is very complex and aims to achieve regional cooperation by asymmetrical reduction of trade barriers, over a 12 year period, and by achieving harmonization, inter alia, in the financial institutions, customs and excise systems, investment policies, capacity building and macro-economic strategy.

Given the vast imbalance in trade between SA and other SADC members it was agreed that SA would meet 96.7% of its obligations within 5 years, while the others will drop tariffs on 97.6% of SA imports within 8 years.

Like any other regional grouping, SADC will have to deal with issues such as border control, duty evasion, tariff abuse, falsified certificates of origin, subsidies, potential job losses and corruption.

All these factors indicate that we are realistically conscious of the problems that the SADC regional integration program will have to confront, and therefore have strengthened the dispute resolution mechanisms.

Ladies and Gentlemen

The next phase, and challenge, for SADC will be the implementation of the Protocols in order to make regional integration a reality. This demands that the existing SADC structures need to be strengthened in order to have the capacity to assist member states with implementation.

If the Review Committee's recommendations are accepted by SADC members, the organization is poised to become a catalyst for the stabilization of the region, effectively dealing with political, security and socio-economic challenges allowing economic growth and development.

Prime Minister Blair speaking at the Millennium Summit said: "There is a dismal record of failure in Africa on the part of the developed world that shocks and shames our civilization ¼

Nowhere are more people being left behind on the wrong side of growing digital and economic divide. 30 years ago the same depressing analysis might have been made of parts of Asia or Africa ¼

There can be hope for Africa. There is political leadership, business opportunity and above all the will of the people for a better future in Africa. We must be partners in the search for change and hope."

We accept that conflicts are inextricably linked to underdevelopment. Regional integration and the African developmental Agenda cannot be achieved if there is no peace and stability on our continent.

Kofi Annan said: "In intra-state conflicts in Africa, the main aim increasingly, is the destruction not only of armies but of civilians and entire ethnic groups.

Preventing such wars is no longer a matter of defending states or protecting allies, it is a matter of defending humanity itself".

He was referring to the shocking reality that from Sierra Leone to Angola, from the streets of the DRC to Sudan, from the killing fields of Ethiopia and Eritrea, to the killing fields of Rwanda and Somalia, violent conflicts have become the scourge of our continent. Over the past three decades over 8 million Africans have perished in the fires of ethnic and racial hatred, religious intolerance, political ambition and material greed. Over 15 million refugees and displaced persons live in terrible conditions. This is the highest number of refugees anywhere in the world. We cannot accept the fact that landmines are indiscriminately planted, injuring and killing innocent citizens and that the infrastructure of many countries is systematically destroyed and their agricultural land laid to waste.

The "Report of the Panel on UN Peace Operations (Brahimi report) and the UN Secretary General’s Millennium Report categorically underscore the need for all who are involved in Conflict Prevention and Development – the UN, The Bretton Woods Institutions, Governments and Civil Society Organizations to address these challenges in a integrative comprehensive and holistic way".

To give meaning to this conclusion, we should look at some of the root causes of conflict. This, inter alia, includes the legacies of the past which has resulted in weak and dependent civil society; weak institutions of governments and civil society; ethnisation of politics; imposition of models of governments by former colonial powers; corruption; "privatization of conflicts" [people in Africa and internationally are profiting from the conflict.]

The African Renaissance envisages a continent whose peoples are finally free from need, poverty, violence and disease; a region with a culture of human rights, good governance and respect for the rule of law; a region that has people and stability; a region with investment flows and trade that sustains economic growth and development.

In essence this demands that we do not diverge from the values and vision we share with our MERCOSUR neighbours. Africa alone cannot achieve regional integration or renewal. We call on our neighbours in Mercosur to deepen and strengthen existing South-South relations in order to re-align and restructure South-North relations.

The similarity of development challenges between Southern Africa and South America, and indeed among other countries of the south, makes it imperative for our countries to adopt and present common positions in multilateral fora, including the democratization of the United Nations, the Bretton Woods Institutions and the reform of the global political and economic order.

Both the Southern African and South American regions have commodity-based developing economies, with large and growing populations. Strong mining sectors in both regions offer not only the possibilities of investment, but also the sale of specialist knowledge and equipment. The agro-economies of South America and Southern Africa serve to draw the regions together in co-operating in multilateral forums, with shared membership of initiatives such as the Valdivia and Cairns Groups.

Our common national and international approaches further provide fertile ground for co-operation in jointly combating globalizes threats to human security such as drug trafficking, trans-national crime, terrorism, environmental degradation, poverty, disease etc. Governments can, however, not contribute to this end alone. Civil society and specifically the private sector, need to join Governments in their endeavors. I am heartened by the fact that the private sector supports this Conference, thereby stimulating co-operation between our two regions.

Ladies and Gentlemen

Regional integration and the increased prominence of multilateralism represent two major global trends. Regional and continental integration and cooperation is essential in making us more competitive globally. Further alliances and relationships need to be developed with regions, states and organisations in the South, as well as in the North. In this way, understanding, acceptance and support can be generated for a common agenda of the South, while support and material backing can be generated for the issues under this common agenda in the developed North.

This Conference is held at an opportune moment. President Thabo Mbeki will address the MERCOSUR Presidential Summit, to be held in Brazil on 15 December this year.

It is envisaged that negotiations for a Framework Trade Agreement with MERCOSUR will have been finalised for signature during the December MERCOSUR Presidential Meeting. As political and economic groupings, SADC and MERCOSUR will be better positioned to tackle the negative effects of globalisation while reaping the advantage of its positive aspects.

THE SOUTH SUMMIT PROGRAMME OF ACTION SHOULD GUIDE US: I QUOTE:

"We the Heads of State and Government of the developing countries which account for almost four-fifths of the world’s population, have assembled here in Havana for the first South Summit at a truly historic moment in the evolution of human society. At the dawn of a new millennium, our countries and people stand at the crossroads of history poised between the achievements of the past and the hope and expectations of a yet uncharted future. Rather than be passive witnesses of a history not of our own making, we in the South will exert every effort to shape the future through the establishment of a World Order that will reflect our needs and interests while also laying the foundations for a more effective system of international development co-operation.