This memorandum aims to analyse the overall impact of South Sudan acceding to the East African Community (EAC), including the effects of joining the EAC Customs Union on customs policy and administration and the benefits of free movement of workers within the EAC. The objective of the analysis is to identify potential challenges, propose strategies and policy recommendations for South Sudan. The memo also undertakes a legal and comparative analysis of successful experiences of other East African countries, such as Rwanda and Burundi.
South Sudan joined the East African Community (EAC) in March 2016. Breaking free from forty years of political instability, South Sudan is now part of the Community along with five of its neighbour countries. To integrate into the EAC will bring about important changes for the country politically, socially, economically. South Sudan is now ready to weigh in the global value chain and the integration into the EAC is the first critical step.
The EAC is one of the most advanced economic community in Africa in term of implementation and economic development. EAC Partner States view South Sudan as a valuable partner for the overall development of the region. South Sudan’s accession will open new markets for the Partner States and create economic opportunities. South Sudan enters the EAC with a different development status and vision from previous Partners States. To exploit benefits from the established regime, it is necessary for South Sudan to achieve a progressive and pondered integration.
This memorandum aims to analyse the overall impact of implementing the obligations, to identify potential challenges and to provide policy recommendations based on legal and comparative analysis of successful experiences. Having committed to implementing the EAC’s obligations within three years, South Sudan is advised to plan its integration in a dynamic and profitable manner:
First, joining the EAC Customs Union will change South Sudan’s economic landscape and customs autonomy. The Customs Union will bring States together to create one single market and, therefore, the Common External Tariff (CET) is applicable to all the Partner States. South Sudan’s current tariff line will be changed (increase or decrease of tariff depending on the type of product) to align with other Partner States on imports coming from a third country. While the internal zero tariff for trade within the EAC Customs Union will open the markets for South Sudan and will strengthen the intra-EAC trade.
Especially the Sensitive Items (SI) list as an exception to the CET three-tariff band will significantly influence South Sudan. For items on the list, tariffs will raise up of specific agricultural and manufactured goods imported from countries outside the EAC. While the aim of the SI is to encourage growth of domestic industries within the EAC (including South Sudan), it is currently not suitable for the region. The idea of the SI is to impose high tariffs on targeted goods to avoid competition and to permit local industries to expand. However, the SI list did not achieve its goals because the region does not produce enough of these goods to fulfil the region’s demand. Therefore, the EAC Partner States still have to import products from outside but at a high price. The price hike increases poverty in the region and impact the domestic price that has to adapt to the competition. Overall, this slows down the region’s overall development to the benefit of the minority (the three founding EAC Partners that are net exporter) while increasing poverty for all Partner States. Thus, South Sudan should push for a tariff diminution as a net importer of these products. At the same time, South Sudan has a strong potential in areas such as agriculture, fishing and mining thanks to its vast natural resources and strategic geographic location. The logic is to introduce in the SI list goods South Sudan could produce sufficiently to become a net exporter in the region (and to boost some of its core sectors), while reducing the current tariffs on basic products South Sudan is forced to import from the outside (in order to avoid price hikes for South Sudan consumers). Because the EAC is currently renegotiating the CET, we therefore propose:
- South Sudan should push for a tariff diminution as a net importer of basic products for domestic needs.
- South Sudan should propose putting on the SI list of products with a strong export potential, in areas such as agriculture, fishing and mining.
Second, the key to implementing the tariff structure relies on the establishment of an effective Rule of Origin system. EAC Rule of Origin determines whether a good qualifies for duty-free treatment as an “EAC good”, or origins outside the EAC then is subject to CET. The Rule of Origin mechanism is the basis in all free trade areas and is essential to the functioning of an economic region. However, implementation is not that simple and Partner States have been facing challenges. The key border document, i.e. the Certificate of Origin, is sometimes not recognized among the Partner States, or is issued by unqualified customs agencies, and falsified. South Sudan shall avoid the same mistakes and establish an efficient and transparent Rule of Origin system. An efficient Rule of Origin system will benefit traders by reducing cost and time across borders; ensure the collection of revenue on third country imports and establish South Sudan as a reliable Partner State:
- South Sudan shall establish EAC qualified customs authority in charge of issuance and recognition of the Certificate of Origin with equal treatment to all countries’ imports.
- South Sudan shall enact and implement law to investigate and implement falsifying activities.
Third, customs administration is a critical to address the pressing concern of Non-Tariff Barriers (NTBs) and high trade costs in South Sudan. It includes customs cooperation, the simplification and harmonisation of trade documents and procedures, and is central to the Customs Union Protocol and the Customs Management Act. The cause and effect of administrative barriers are complex and interwoven. It is suggested that South Sudan should learn from past examples of successful domestic reforms (especially by Rwanda), trade facilitation tools and WTO initiatives. South Sudan can benefit from the WTO Trade Facilitation Agreement adopted in February 2013 which goal is precisely to give guidelines to ease the release and clearance of goods. There are also valuable EAC joint efforts and available help by private organization, such as TradeMark East Africa, that are committed to helping South Sudan in removing NTBs at its border. With the help of the EAC Partners and outside knowledge, South Sudan could improve its customs clearance and trading situation. The role of the government is now to promote investment in the country to move away from a highly concentrated economy to a diversified and global economy. Trade facilitation can only fully occur and flourish by bringing the private sector in the economy and changing the mentalities. It is essential to promote and incorporate small and medium-sized companies as a driving force in the economy.
- It is recommended for South Sudan to learn and acknowledge the successes of other Partner States’ reforms, EAC joint operation and WTO initiative.
Fourth, our final point is the free movement of workers for the EAC and South Sudan. Thanks to the EAC Common Market, citizens of EAC Partner States benefit from free circulation among the Partner States. Workers are the basis for a healthy and solid economy and are essential for South Sudan. The country’s goal is to allow free circulation for workers it needs and that are necessary for South Sudan’s peaceful and successful development. This is the case, for instance, of teachers and health-care providers. South Sudan could create incentives to attract these kinds of workers, the aim being to attract highly qualified workers from Tanzania or Kenya. The free movement will also lead South Sudanese workers to leave the country for other Partner States. South Sudan should create incentives to maintain its workers and businesses, while attracting the workers it needs.
- South Sudan shall create incentives to attract these kind of workers, the aim being to attract highly qualified workers.
- South Sudan shall give limited access on selected areas of business to protect domestic employment.
The full report can be accessed and downloaded here.