An analysis of the level of liberalisation in South Africa's transport sector

Master Thesis


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University of Cape Town

The transport sector is critical to the performance of various sectors of the economy both trade in goods and services hinges on an efficient and reliable transport services sector. South Africa has undertaken limited commitments under the General Agreement on Trade in Services (GATS) of the World Trade Organisation (WTO) in the transport sector. South Africa's transport sector in general is controlled by the government through state owned firms. The transport sector is competitive relative to Africa, however, relative to developed economies, the transport sector lags behind in terms of efficiency and cost (DBSA, 2012). Inefficiencies result in increased transaction costs and impede the overall competitiveness and economic performance of the country. The transport sector and other services sectors in general are mainly governed by domestic legislation. Barriers to trade in services may be located in laws and regulations of individual economies often referred to as behind the border measures such as license, technical, educational, registration and local ownership requirements and as such are more difficult to address than barriers to goods. (Hartzenberg, 2012). To identify these measures it is important to undertake an assessment of the legislation governing sector. This study analyses both vertical and horizontal legislation governing the sector. This study aims to assess the level of liberalisation of South Africa's transport sector to gauge the presence of trade restrictive measures in the sector that would limit access, establishment and or operation by foreign service suppliers. This is done through an analysis of domestic legislation governing the transport sector and its related sub - sectors. This effectively entails a comparison between actual commitments as reflected in South Africa's GATS schedule of specific commitments and applied policy as reflected in legislation. Data from such a study provides valuable technical information to trade negotiators regarding the policy space available allowing them to develop and formulate informed negotiating positions. The methodology employed in this study is adapted from the World Bank's Regulatory Assessment of Services, Trade and Investment (RASTI) and has been adapted for purposes of this study. A country, prior to engaging in a services negotiation should conduct an assessment of the level of liberalisation of each service sector to gauge its competitive strengths and weaknesses. Such an assessment entails an assessment of the country's regulation to determine if such regulation is overly burdensome to the extent that it inhibits competition and trade in services in an economy. Once such an assessment is concluded, a large number of countries have found that domestic regulatory reforms are necessary for effective participation in services negotiations. (Molinuevo & Sáez, 2014). The importance for such assessments often referred to as audits, have been confirmed as the most effective way of ensuring that regulations are not restrictive of trade. (Molinuevo & Sáez, 2014). Moreover, periodic regulatory audits serve the purpose of identifying discriminatory measures and minimising discriminatory effects that have the effect of increasing costs and discriminating against foreign service suppliers. A comparison of the liberalisation of South Africa's transport sector in terms of the actual commitments (as reflected in the GATS services schedule) against the applied domestic regulation is an important exercise in view of the discussions at the WTO level about the liberalisation of services and at a regional level in view of South Africa's regional and continental aspirations to promote regional integration. The transport sector has been identified as a priority sector in the Southern African Development Community (SADC) and the Tripartite Free Trade Area (TFTA) invol ving, COMESA, E AC and SADC. In the TFTA negotiations, even though the first phase focused on trade in goods, the second phase will address trade in services, including transport services. Negotiations in SADC based on the Protocol on Trade in Services are ongoing and wil l include transport services. A study of this nature is important for undertaking and formulating negotiating positions for trade in services and may be replicated across various service sectors.

Includes bibliographical references