Revenue sharing in the Southern African Customs Union (SACU)
All customs, excise and additional duties (trade taxes) collected in the SACU Common Customs Area are paid into the Common Revenue Pool and shared among member states. Member states’ share of the pool is disbursed or determined in accordance with the SACU Agreement’s revenue sharing formula. The formula, first implemented in December 2004, is provided in Part Seven of the SACU Agreement and has three components: customs component, excise component and development component. Annex 1 of the SACU Agreement outlines the exact methodology and procedures for calculating member states’ share of the customs, excise and development components.
The Customs Component consists of the gross amount of customs duties and specified and ad valorem customs duties leviable and collected on goods imported into the Common Customs Area; it does not include any duties rebated or refunded under the provisions of any law relating to customs duties (Article 34.3(a) of SACU Agreement). A member state’s share of customs component is calculated from the value of goods imported from all other member states in a specific year as a percentage of total intra-SACU imports (Article 34.3(b)). In other words, a member state’s share of customs component is allocated based on that country’s share of intra-SACU imports.
The Excise Component consists of the gross amount of excise duties leviable or collected on goods produced in the Common Customs Area (Article 34.4(a)). It is distributed on the basis of each country’s share of total SACU gross domestic product (GDP), a proxy for the value of excisable goods consumed.
The Development Component is funded from a fixed percentage (15%) of the excise component or total excise revenue (Article 34.5(a)). Each member state receives a share of the development component and the distribution of this component is weighed in favour of the less development members. The development component is distributed according to the inverse of each country’s (GDP) per capita.
For Botswana, Lesotho, Namibia and Eswatini (BLNE), the SACU revenue share makes up a significant component of total government revenue – even more than half in some years for Lesotho and Eswatini. BLNE get a significant share of their revenue from the Customs Component, whilst South Africa gets more that 90% of its share from the Excise Component. The Development Component is meant to compensate the least developed countries but is distributed more or less equal among all member states.
For 2018/19 revenue shares, South Africa has received the highest share with 47%, followed by Botswana (21%), Namibia (19%), Eswatini (7%) and Lesotho (6%).
South Africa manages the Customs Revenue Pool on a transitional basis. But the SACU member states are considering options for a long-term management of the pool.
Member states are currently in the process of reviewing the revenue sharing arrangement. The process has gone through three stages: identification of areas requiring further study in the present revenue sharing arrangement; and an independent examination of the identified areas; and a process of negotiation to reach consensus on a new revenue sharing arrangement. The following principles were adopted as a guide in the process of reviewing the revenue sharing arrangement:
No Member State should be made worse off than what obtains under the current revenue sharing arrangement;
Revenue shares should be equitable taking into account political, and socio-economic considerations amongst Member States;
Revenue shares allocations should be developmental and not redistributive;
The revenue sharing arrangement should promote economic convergence;
The revenue sharing arrangement should minimise volatility and the pro-cyclical allocation of Member States’ revenue shares; and
The revenue sharing arrangement should be aligned to the SACU Vision and Mission.
It is however reported that “very little progress has been made in discussions to review the revenue-sharing formula despite intense engagements. The major difficulty was the underlying principle of the negotiations, which was that no-one should be made worse off by any agreement. This meant no-one should be better off either.”
 ‘Review of the revenue sharing arrangement.’ http://www.sacu.int/category.php?cat=Review%20of%20the%20Revenue%20Sharing%20Arrangement
 ‘SA pushing for a bigger slice of Sacu revenue’. Business Day, 11 September 2018. https://www.businesslive.co.za/bd/economy/2018-09-11-revenue-sharing-formula-remains-sticking-point-in-talks-between-sa-and-sacu/
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