With South Africa and now Namibia pressing for a review of the Southern African Customs Union (SACU), effects on members like Swaziland will be catastrophic.

Swaziland relies on SACU to finance its annual national budget.

At a recent SACU meeting attended by Prime Minister Sibusiso Barnabas Dlamini, Namibia President Hage Geingob called on a review of the SACU revenue sharing model.

He said there must also be a review of the intellectual property, industrial development, and its industrial policy while strengthening the capacity of the SACU Secretariat.

The SACU revenue sharing formula has been a hot topic. South Africa is pressing to reform the SACU revenue-sharing formula and now Namibia is proposing same.

“I, therefore, call upon all our member states to work together to further deepen and strengthen work on the priority areas of focus of SACU, including a review of the revenue sharing model, intellectual property, industrial development, industrial policy, and strengthening the capacity of the SACU Secretariat, amongst others,” he said during the official inauguration of the headquarters of SACU in Windhoek.

South Africa’s Finance Minister Nhlanhla Nene, who also attended the Windhoek meeting, reiterated that the current framework is unfair on South Africa, which is in effect subsidising the four other members: Botswana, Lesotho, Namibia and Swaziland (BLNS). 

The topic of reform has been on the agenda for several years but BLNS reliance on SACU transfers, coupled with diplomatic sensitivity, meant that little headway has been made. 

However, with South Africa’s fiscal space being increasingly squeezed, reform has become more pressing and would be discussed at this year’s heads-of-state summit.

South African data show that transfers to SACU rose from E43.4bn (US$3.7bn) in fiscal year 2012/13 (April-March) to a provisional E51.7bn in 2014/15, equivalent to 5.4 percent of South Africa’s total revenue and 1.3 percent of GDP. The sum included both customs revenue (shared according to a pre-set formula) and a development subsidy (determined by each members’ per-capita income levels).

Notably, SACU’s E51.7bn allocation in 2014/15 accounted for almost two-thirds of customs duties collected, leaving South Africa with just one-third, despite being responsible for the vast majority of trade. South Africa is in effect losing about E30bn a year compared with a fairer formula, which is detrimental for the current-account.

Taxes put Swaziland in better position than SA in attracting FDIs

Taxes are lower in the other SACU members (apart from Namibia) than in South Africa, which is consequently being placed at a competitive disadvantage in terms of attracting investment. 

However, the Botswana, Lesotho, Namibia and Swaziland (BLNS) states are inevitably resistant to change, given the importance of SACU transfers to their budgets.

Meanwhile, South Africa’s President Jacob Zuma at the inauguration said SACU member states needed each other more than ever before.

“We need to consider very seriously what we can do to avert these crises for the benefit of our people. It is my considered opinion that as we celebrate another achievement in SACU we should spare a moment to reflect on all these urgent and pressing challenges. It cannot be business as usual, we need to develop practical work programmes that address the challenges we collectively face to promote complementarities between our economies,” he said.

He said a funding mechanism to ensure speedy and effective implementation of agreed programmes must be considered. 

Zuma said this required taking charge of destiny due to limited resources and aid globally.

“Diversification is important. An economy and export basket concentrated in a few products could be very vulnerable and prone to destabilisation. Sustainable and continued economic development becomes very unlikely, if not impossible, in such a destabilised economic environment. 

“In addition, a strong and diversified manufacturing sector across the region will increase the impact of SACU as an integration tool for all of us. Competitive and diversified manufacturing will increase the trade potential among us,” he said.

He said SACU had a potential through collective effort to address the challenges facing the region. Zuma said the economies have resources that can be utilised to spur economic growth through the development of both our agriculture and manufacturing sector. 

He said efforts must be enhanced so as to build and rehabilitate the regional infrastructure that must underpin production and trade growth.

“We also agreed that SACU continues to play an important role in the economies of its Member States and that it should be transformed into a vehicle for regional integration capable of promoting equitable development and the new SACU Vision. Consequently, as leaders, we agreed on the need to take bold decisions, requiring a collective commitment towards securing the long-term economic prosperity of our region to the benefit of our people,” he said.