The Department of Trade and Industry (DTI) affirmed on Monday that South Africa was not seeking to threaten the stability of the Southern African Customs Union (Sacu), or trade in the region in general, by deciding not to sign an Economic Partnership Agreement (EPA) with the European Union (EU).

It stated that the legal requirements to manage the way Sacu functions, would need to be addressed.

Speculation that the 99-year old Sacu was under threat because of fragmentation among members emerged, as Botswana, Lesotho, Swaziland signed an EPA with the EU in Brussels last week, while South Africa, Namibia and Angola did not sign the agreement.

The legal requirements under the EPA were, in many instances, inconsistent with the requirements of Sacu, and these issues, regarding the way various members of Sacu would comply with differing obligations to the EU, were managed, would now need to be addressed.

DTI international trade and economic development deputy director-general Xavier Carim emphasised that South Africa was not threatening the union or the region, however, it was important to "deal with the real issues that arise through legally binding agreements and how they relate to one another".

"How we manage the fact that we have different commitments to the EU, within a single customs union - that will be the difficulty and that is what we will have to address now," said Carim.

"It is a question of the legal requirements to manage the way the union functions. This is not a political issue, these are legal requirements in order to protect our markets," he added.

South African Institute of International Affairs trade programme head Peter Draper emphasised that the customs union was "not about to blow up overnight".

"Some of these issues have been bubbling under for a while. They are serious issues, and how Sacu deals with them is important - and there is always the possibility that these differences become irreconcilable, but at this stage I don't see that," he added.

The Sacu members that signed the EPA with the EU would need to move towards ratification of the EPA, whereby the agreement would go through each country's parliament, and would come into force in the future.

Where the problem was said to arise, was that if these countries implemented the interim EPA in its current form, it would immediately create a tariff differential facing the EU, and that would mean that a range of products could get into Botswana, Lesotho, and Swaziland (BLS) at lower tariff duties, and with more liberal rules of origin.

This could potentially lead to trade deflection, where products came in through BLS countries, but were actually destined for South Africa. This was why South Africa may need to step up border controls between these countries. Particularly considering the sensitive clothing and textile industries.

The Sacu external tariff would, however, be kept in tact.

Not playing the issue down, Carim noted that if these issues of management, tariff realignment, and rules of origin, could not be addressed before the EPA was ratified by signatories, there was a very real danger to the union.

"The crux is that you have a union with a common external tariff, you can't have some members going off and negotiating separate deals. As I understand it, there is an agreed process to align the agreed tariff schedules, so, therefore, that problem should fall away," added Draper.

Draper further suggested that the issues that were arising could perhaps signal the "early throes of disintegration", although this need not be the case, because there was a lot at stake for all the union members.

Business Unity South Africa (Busa) said that it was "extremely disappointed" with recent developments in the EPA negotiations between the EU and the Southern African Development Community EPA group countries.

"These negotiations have been difficult from the outset," said Busa CEO Jerry Vilakazi. "The divisions that have been caused in the region and in Sacu in particular, are of serious concern for the private sector," he added.

Busa expressed frustration with the lack of transparency and communication around key issues since the interim EPA was initiated by some countries in November 2007.

The EU was viewed as an important economic partner and the EPA provided an opportunity for the region to rationalise its trading regime with the EU. Busa believed that this opportunity was undermined.

"The result is now a very real threat to SACU and plans for deeper economic integration of the SADC," the organisation said.