SACU-Mercosur PTA takes effect

Namibia recently became eligible for preferential trade with the South American sub-regional block of Mercosur countries, under their agreement with SACU which came into force in April.
While the contract - only the second concluded by SACU countries - holds valuable opportunities, Namibia would be wise to consider carefully its implications on existing and future business.
This is according a senior trade and investment analyst at the Namibia Trade Forum (NTF), Maria Lisa Immanuel.
“Indeed, trade agreements such as this one should be embraced from a point of government effort to create alternative market access for the private sector to trade and also to participate in global value chains, especially for a small market like Namibia,” Immanuel says.
“On the other hand, what really matters is how the private sector embraces this agreement, as they are the ones to implement it,” she says.
The NTF, after studying the affected markets, has highlighted some local reservations.
Products affected by the agreement include boneless beef, fish products, horticulture and agronomy, as well as sea salt and table salt.

Local concerns
“According to the Meat Board of Namibia, the agreement might be viewed more as a threat than an opportunity for the beef sector at the moment, as Mercosur countries are more cost effective when it comes to beef production,” Immanuel says.
“By implication, beef imported into Namibia is able to land cheaply and hence have a direct influence on the Namibian producer price.”
In terms of beef, the SACU-Mercosur preferential trade agreement (PTA) grants Paraguay and Uruguay a quota of 500 tons of boneless beef exports to the SACU market, at a tariff rate quota of 25%. Namibia is allowed to export carcasses and half carcasses at a similar tariff rate.
“The other critical threat for Namibia relates to SPS measures. The beef sector cautioned that there has been regular outbreak of FMD in the past, especially in Paraguay, which led the EU to ban Brazilian imports from three Brazilian states bordering Paraguay,” Immanuel notes.
“Namibia is a net exporter of beef with access to lucrative niche markets in the EU and Norway, and therefore strict control mechanisms and verification systems are important to monitor beef imports from Mercosur under this agreement, to avoid jeopardising access to existing markets.”

Slanted worth

In terms of its implications for the fishing sector, Immanuel says the PTA in many ways favours the South American signatories more than it does Namibia.
“The fishing sector argues that it does not see large developments in terms of exports, especially for hake, because countries like Argentina and Uruguay have fishing industries which compete with Namibian hake on the world market. Consequently, they are able to supply hake to their domestic market, and also to their neighbour Brazil, leaving less demand for Namibian hake.
“In addition, the tariff rate is too high for Namibia, making it a less attractive export market for Namibians, especially when the EU market offers duty-free, quota-free market access of fish products from Namibia under the Economic Partnership Agreement (EPA).”

Raw salt best

One area where Namibia is set to benefit substantially is in exporting salt to Mercosur countries.
“Namibia being the second largest producer of sea salt in Africa after Egypt gives a comparative advantage in salt production,” Immanuel says.
“Due to its superior quality, Namibian salt is sought after in international markets such as the EU where approximately 50 000 tons of salt is exported annually to Belgium.”
She noted especially Brazil as a potential market for Namibian salt.
Exporting salt to the regional block will subject Namibian companies to a MP tariff rate of 100% for sea salt and 50% for table salt.
“This is quite interesting, because table salt, which is the value-added product, becomes a bit restrictive to export, as opposed to sea salt, used as raw material in many chemical industries, which can be exported at almost zero tariff,” she says.

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