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SD holds its breath


SD holds its breath

This week, Swaziland will attend crunch talks on the revenue-sharing formula under the Southern African Customs Union (SACU)

This week, Swaziland will attend crunch talks on the revenue-sharing formula under the Southern African Customs Union (SACU) and the outcome of the talks will have a huge bearing on the kingdom’s financial stability.

Termed as a ‘make or break’ conference, the talks will be held in Lesotho between 30 and 31 January.

Impeccable sources have revealed that the whole purpose of the talks borders on reviewing the SACU revenue-sharing formula.

Should the formula be reviewed – as is the wish of South Africa – Swaziland could be thrown into a financial crisis.

South Africa is the one that has pushed for the talks because it feels the need to drastically change the formula for its own benefit.

Finance ministers from SACU member states are the ones expected to attend the conference and Swaziland will be represented by Senator Martin ‘Gobizandla’ Dlamini, who is also the former governor of the Central Bank of Swaziland.

Dlamini has confirmed the meeting and that he will be the one attending it.


“The meeting is very important because it is where strategies for SACU are made. Should the revenue-sharing formula be reviewed, it will have a major impact on Swaziland,” Dlamini said.

The minister, however, did not want to preempt the outcome of the talks and only said the purpose of going there is to negotiate.

Swaziland is highly dependent on SACU receipts which account for almost 60 percent of the kingdom’s national budget.

The kingdom is expected to receive E7 billion as its SACU share for the coming financial year.

In an interview with the Sunday Observer last week, new Governor of the Central Bank and former Finance Minister Majozi Sithole expressed worry at the country’s “over reliance on SACU as a source of government revenue.”

During his tenure as finance minister, Sithole experienced an unprecedented financial crisis for Swaziland after a drastic drop in SACU dividends.

Should the formula be reviewed, therefore, Dlamini could be faced with a similar experience where government literally struggles to meet its financial obligations that include paying civil servants’ salaries, paying suppliers and contractors, financing capital projects and issuing of social grants.

Swaziland has a number of social grants that include paying school fees for orphaned and vulnerable children (OVC), funding of free primary education, meeting quarterly grants for the elderly and offering free medical care for citizens aged over 60.

The number of social grants is another worry that was expressed by Governor Sithole last week as he noted that there is “high dependence on government for many things by the public”.


All focus will, therefore, be on the outcome of the SACU crunch talks as all the past challenges that came with the financial crisis could be relived.

Sources have also revealed that should the revenue-sharing formula be passed by the ministers, the only way for Swaziland to survive would be through the intervention of Heads of State.

While South Africa’s Cabinet is reported to be in favour of the revenue-sharing formula, President Jacob Zuma is however said to be against it because he does not want to leave a legacy of having contributed to the downfall of neighbouring countries’ economies.

South Africa is the dominant economy within SACU but feels that there are imbalances when it comes to the dividends.

South Africa’s Minister of Trade and Industry Rob Davies, said that South Africa currently pays about E48 billion to the customs union annually, which constitutes around 98% of the common pool of customs and excise duties shared amongst SACU members.

Of this revenue pool, 55% is distributed to Botswana, Lesotho, Namibia and Swaziland.

This is in line with the revenue-sharing formula agreed upon in 2002, which allocates customs revenue according to each country’s share of intra-SACU imports.


There is also a development component, which is allocated according to a country’s GDP per capita in order to assist the less-developed SACU members.

There has been a demand by South Africa that a percentage of SACU revenue be set aside for regional and industrial development.

It is said that efforts to change the revenue-sharing arrangement so that money can be set aside for regional development would result in less money going into the coffers of Swaziland and other member states.

Currently, the money is received with no strings attached but South Africa, in case she does not pull out, is expected to introduce restrictions on how the revenue derived from SACU is supposed to be spent or utilised.

What is SACU?

The Southern African Customs Union (SACU) consists of Botswana, Lesotho, Namibia, South Africa and Swaziland.

The SACU Secretariat is located in Windhoek, Namibia. SACU was established in 1910, making it the world’s oldest Customs Union.

Historically, SACU was administered by South Africa, through the 1910 and 1969 Agreements. The customs union collected duties on local production and customs duties on members’ imports from outside SACU, and the resulting revenue was allocated to member countries in quarterly installments utilising a revenue-sharing formula.

Negotiations to reform the 1969 Agreement started in 1994, and a new agreement was signed in 2002. The new arrangement was ratified by SACU Heads of State.

The Economic structure of the Union links the Member states by a single tariff and no customs duties between them. The Member States form a single customs territory in which tariffs and other barriers are eliminated on substantially all the trade between the Member States for products originating in these countries; and there is a common external tariff that applies to non-members of SACU.

Source: http://www.observer.org.sz/index.php?news=58141


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