Angola, Mozambique eye SACU membership

A senior Namibian ministry of industry and trade official said that the two countries, Angola and Mozambique, swiftly recovering from decades of civil strife are mulling joining the SACU, one of the oldest customs union in the world.

SACU came into agreement in 1969 and comprises of South Africa, Namibia, Lesotho, Botswana and Swaziland.

The aim of the regional customs union is to maintain free trade between member countries at the same time providing for a common external tariff and a common excise tariff. All customs and excise collected in the coming customs are paid into South Africa’s national revenue fund.

The revenue is shared among members according to a revenue sharing formula as described in the agreement.

“Angola and Mozambique are investing opportunities for joining SACU but nothing has been agreed upon at the moment, everything is still under consideration,” said the ministry of trade official who also added that Mozambique would be sending a team of government officials and investment experts to Namibia to gather first hand information on how SACU operates.

Angola rich in oil, diamonds and timber has had its economic growth stifled by a three-decade long civil war which ended with the death of UNITA rebel Jonas Savimbi in 2002.

Oil exports to the United States and China and billions of dollars in unconditional lines of credit from the world’s fourth largest economy, China, have raised hope for a swift economic recovery in the war torn country.

Mozambique’s economy has also been flourishing due to a construction boom and growth in manufacturing during the past years despite high rates of poverty.

The Mozambican economy is said to have expanded by 7.5 percent in 2005 and a healthy 10 percent in the first six months of 2006.

The Namibian ministry of trade official said should Angola and Mozambique join the region’s oldest customs bloc, it would be a boost to regional integration moves.

At the last Southern African Development Community (SADC) summit held in Maseru last month, regional leaders pledged to a speedy implementation of SADC economic integration aimed at creating a single economic bloc by 2018.

Under SACU, revenue accrued to each member state is calculated from a share of customs pool, a share of excise pool and a share of a development component.

The excise component, net of the development component, should be allocated on the basis of gross domestic product (GDP), which is fixed at 15 percent of the total excise pool and distributed to all SACU members according to the inverse of each country’s GDP.

Presenting the 2006/7 national budget in March this year Namibian finance minister Saara Kuugongelwa-Amadhila said that SACU had been the largest contributor to the country’s foreign currency receipts.

Kuugongelwa-Amadhila said that national revenue would during the current fiscus rise from N$3.7 billion to N$6.7 billion including formula adjustments of N$761 million due to SACU receipts.

In the budget statement, Kuugongelwa-Amadhila said that overall tax revenue would rise from N$11.4 billion to N$14.3 billion buoyed by SACU payments.

Daniel Motinga, economist and director of Namibia’s think tank and research unit, Institute of Public Policy Research (IPPR) said that though the move by Angola and Mozambique would result in ‘greater consolidation’ of regional economies, it would also present institutional challenges as the two economies are not aligned to that of SACU member economies.

Motinga said that some of the conditions for joining SACU border on the contentious issue of governance, which some of the countries might fail to meet.

“The issue is whether these economies (Angola, Mozambique and SACU members) are converging and at the moment they are not at par,” Motinga said.

He confirmed that negotiations have been taking place for Angola and Mozambique to join SACU but said there was need for a serious effort to place the same economies on the same wavelength.

Motinga said boosting SACU membership with two other economies would beef up SACU’s revenue pool but warned that customs unions’ importance were diminishing as the world moves towards economic liberalisation.

“The resource pool will increase and this would be a boost to international trade but there is also the declining relevance of customs unions in the future as economies liberalise,” Motinga said.

SACU is driven more by regional economic powerhouse South Africa.

Economies of member SACU countries have remained heavily aligned to South Africa with Namibia linking its currency, the Namibian dollar on a one-to-one with the South African rand. Motinga said there where advantages to consolidating trade ties with South Africa adding that SACU presents an impetus for the region’s economic integration.

September 2006
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