‘SACU not only about revenue collection’

> Timo Shihepo

Windhoek – The Southern Africa Customs Union (SACU) says its mandate is not merely about collecting revenue but has other functions such as facilitating industrial development and trade negotiations.

SACU has come in for criticism for compelling Namibia to pay back N$3 billion in the next financial year (2016/2017).

The money is partly to cater for union’s Common Revenue Pool which has incurred a deficit estimated at N$7.6 billion in 2014/15.

This comes at a time when Namibia is battling to raise funds for capital projects.

SACU’s Executive Secretary Paulina Elago has disputed the notion that the customs union is about collecting money from its five member states.

Elago stressed that revenue collection is just one element of SACU’s mandate, which focuses on different operations. She also explained how the N$3 billion came about.

“What happens is that, normally the shares are distributed on the basis of focus and its two years in advance. When the actual revenue is collected, you then go back and do the adjustments.

“So this was really an adjustment because in the end, from the focus, the shares that were paid out on the basis of that focus were high but now we have a N$7 billion reduction that will be distributed among member states and it is proportional according to the allocation of their shares.

“This really means that you do a focus, you pay on the basis of the focus but when the actual revenue is collected then you adjust. In this case what was collected was still in focus so now we adjust, which will result in a reduction. If the amount collected is lower, then you have to adjust the member states’ shares,” she explained.

According to Elago, despite the deficit, the future looks bright for SACU as revenue shares is just one aspect of the customs union because there are other areas such as the regional integration and the six priorities agreed upon.

These priorities are the Regional Industrial Development Policy; Review of the Revenue Sharing Arrangement; Trade Facilitation; Development of SACU Institutions and Unified Engagement in Trade Negotiations as well as Trade in Services.

When asked if the N$3 billion will not put Namibia into a bad position given the fact that the country’s foreign reserves are drying up, which might force the country to borrow – Elago said: “That is really for the Namibian government to comment.”

Intra-trade in SACU rose from N$98.9 billion in 2009 to N$185.6 billion in 2014.

Namibia’s Minister of Finance, Calle Schlettwein recently told Parliament that repaying SACU will definitely have an impact on the country’s economy.

“The state of the global and regional economy is expected to impact on the domestic economic activities and public revenue for Namibia as a small, open economy. The revenue under SACU for which South Africa is a major contributor is projected to decline significantly. Growth for the South African economy, which is closely associated with the Namibian economy, has been marked down to 1.5 per cent in 2015 from the 2 per cent estimated in the budget,” he said.

Several experts have also earlier told The Southern Times that although SACU is good project, Namibia must to look beyond the customs union and try finding other sources to increase its revenue.

Simonis Storm Securities (SSS) Head of Research, James Cumming said Government must look beyond the revenue from SACU “because this is external revenue that the country has no control of and the fact that Namibian revenue generated from SACU is predicted to drop next year it doesn’t help either”.

Klaus Schade, the research associate at the Institute for Public Policy Research (IPPR) focusing on economy, budget and business surveys said low commodity prices combined with low demand and lower than expected transfers from the SACU Common Revenue Pool imply that foreign exchange reserves are not likely to recover soon.

“Therefore there is a need to find effective ways to reduce unproductive imports and prioritise the importation of goods that can stimulate exports.  Furthermore, the involvement of more Namibian companies, which have a proven track record and the capacity to deliver, in infrastructure projects will contribute to keeping more financial resources in the country instead of profits being repatriated by foreign companies,” he said.

SACU is the world`s oldest custom union, with its origin traced to the 1889 Customs Union Convention between the British Colony of Cape of Good Hope and the Orange Free State Boer Republic.

The SACU member countries are Botswana, Lesotho, Namibia, South Africa and Swaziland.

Among its objectives contained in Article 2 of the 2002 SACU Agreement are to facilitate cross-border movement of goods between the territories of the Member States; too promote conditions of fair competition in the Common Customs Area; and to substantially increase investment opportunities in the Common Customs Area.

Last week, senior Trade officials from member countries including the Elago were in Switzerland to undergo reviews of their respective trade policies by the World Trade Organisation (WTO).

It is the fourth time that SACU member states’ trade policies have been reviewed by the world body that governs multilateral trade across the globe.

Earlier, SACU explained in a media statement that Trade Policy Review Mechanism is the most important transparency exercise of the WTO.

“Its purpose is to examine and evaluate Member Countries’ trade and related policies at regular intervals and contribute to improved adherence by all Members to rules, disciplines and commitments made under the different WTO provisions and agreements. Significant developments which may have an impact on the global trading system are also monitored.

“It aims at promoting a smoother functioning of the multilateral trading system, by achieving greater transparency in, and understanding of, the trade policies and practices of WTO members,” read the statement that was issued on the review.

SACU Member States are reviewed every six years by the WTO Trade Policy Review Body.

The last review was held in November 2009.

The four largest members in terms of trade volumes are reviewed every two years; currently, these Members are the EU, the US, Japan and China.

Meanwhile, President Hage Geingob was on Thursday, November 12 expected to be joined by his South African counterpart Jacob Zuma and Ian Khama of Botswana for the official inauguration of SACU headquarters in Windhoek.

Other high ranking officials from SACU member states who were expected at the event were Dr Barnabas Dlamini, the Prime Minister of Swaziland and Lesotho deputy Prime Minister Mothetjoa Metsing.

Elago explained that since the inception of SACU Secretariat in 2004, it was the first time that the organisation was having its own premises.

“The secretariat was housed under a building made available by the Government of Namibia as the host of the Secretariat. The Government of Namibia has also offered the land on which the building was erected. And we are greatly grateful for that,” she said.

Elago said as a regional bloc, SACU was driven by a vision to be “an economic community with equitable and sustainable development, dedicated to the welfare of its people for a common future”.

November 2015
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