On 25 October 2006, tralac Associate and Professor Emeritus of Economics, University of Stellenbosch, Colin McCarthy, presented a paper at a workshop convened by the Institute for Global Dialogue. The workshop dealt with developmental integration and the harmonisation of industrial policies in SACU.

Professor McCarthy’s paper was entitled The Challenge of Reconciling Revenue Distribution and Industrial Development in the Southern African Customs Union. The paper notes that the new SACU Agreement, concluded in October 2002 and operational since July 2004, has given new impetus to the debate on the development of SACU and its future as a regional integration arrangement that aims to facilitate economic development.

The new Agreement represents a radical transformation in the management of SACU operations and has distinct provisions for the economic development of SACU and its member states. These provisions have been formulated to take cognizance of the unequal nature in economic size and level of industrial development between South Africa, which generates more than 90 per cent of the SACU GDP and the much smaller Botswana, Lesotho, Namibia and Swaziland (BLNS).

Dealing with inequalities in a regional integration arrangement is always difficult; hence, the importance attached to economic homogeneity and political commitment in achieving success in regional integration. In the case of SACU the difference in economic size is enormous by any standard. This and the peculiar political history of the SACU add to the complexity of having to manage regional integration effectively.

In considering likely future developments and challenges the premise of the paper is that an understanding of the past, that is, the history of SACU, is necessary to contemplate the nature of SACU and what the future under the 2002 Agreement might hold. Hence, the paper briefly touches on the origins and development of SACU. But to provide perspective on the SACU Agreement as an instrument of development, it is helpful to first contemplate the rationale of a customs union as an integration arrangement. Against this background it is possible to review the conflicting goals of revenue earnings and economic development, and consider the possibility of SACU expansion.

» Read more in Industrial policy in the Southern African Customs Union: Past experiences, future plans | Proceedings of a workshop on harmonising industrial policy in SACU