Smaller economies pushing for fair share of SACU cake

May 15, 2017
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Tiri Masawi

Windhoek – Namibian Minister of Finance Calle Schlettwein has reiterated the need for the smaller nations within the Southern African Customs Union (SACU) to get a “fair” share of the revenue cake when the new sharing formula is finalised.

SACU, the world’s oldest customs union at 105 years, comprises regional economic powerhouse South Africa, Namibia, Swaziland, Lesotho and Botswana but has been muddled by complains over the skewed revenue formula that favours South Africa.

SACU’s aim is to maintain the free interchange of goods between member countries. It provides for a common external tariff and a common excise tariff to this common customs area. All customs and excise collected in the common customs area 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. South Africa is the custodian of this pool. Only the BNLS (Botswana, Namibia, Lesotho and Swaziland) shares are calculated with South Africa receiving the residual. SACU revenue constitutes a substantial share of the state revenue of the BLNS countries.

However, in recent years, the bone of contention from the other members has been that South Africa enjoys the larger portion of the cake while others have to make do with the remainder, a scenario that has put challenges in revenue collection in other smaller nations, including Namibia.

Ironically, other countries, save for Botswana, are also part of the common rand monetary area in which the SA rand is interchangeably used as legal tender in those countries.

SACU has been locked in negotiations at both heads of state and inter-ministerial levels for the past three years to find common ground on how best to share the income that comes from the revenue inflows.

Speaking to The Southern Times on Tuesday, Schlettwein did not hold back saying, “We are entitled to our SACU share and what we want is a situation where the sharing does not favour others. We want the gains and loses to be equally shared among the member countries.”

He further reiterated that while SACU remains a key component of Namibia’s revenue needs, he would continue to cast the net wider for more alternative sources of financing the country’s expenditure.

Although Namibia received an unexpected windfall of over R5 billion from the revenue pool whose inflows have been inconsistent in the past four years, like any of the supposed smaller nations in the SACU, the country is keen on doing away with the big brother approach when sharing the revenue formula.

“While the negotiations are ongoing we are also of the strong belief that the industrialisation policy was not well negotiated to the satisfaction of all players so we are driving towards a scenario where we push this policy.

“It was agreed last time that we should put more emphasis on industrialisation in all the countries within the SACU set up in order to improve income,” he said.

Schlettwein added that deliberations on the outstanding issues are going on at the secretariat level.

”There are different issues that have been tabled for discussion, including the industrialisation policy and the revenue sharing formula, among others.

“I must say we are entitled to our share from the SACU pool and we want to find a way where we deal with the skewed sharing in a manner that benefit all member states,” he said.

The highest that Namibia has earned from the SACU pool was around R13 billion in the 2013/2014 financial year.

In 2015, the then South African Finance Minister Nhlanla Nene announced during his budget speech that about R57 billion of the total earnings of R80 billion that year was to be shared among Namibia, Swaziland, Lesotho and Botswana.

Ironically, of that R57 billion Swaziland took 50 percent, and the remainder of the money was shared among Lesotho (44 percent) Namibia (35 percent) and Botswana (30 percent).

Revenue streams from the SACU pool finances 40 percent of the Namibian budgetary needs and unpredictable fluctuations in liquidity flows from the customs union has in some cases left most small countries in a financial quagmire as they have to constantly tap on other sources of financing their fiscus.

SACU members heads of state and governments, Namibia’s Hage Geingob, South Africa’s Jacob Zuma, Swaziland’s King Mswati, Botswana’s Ian Khama and Lesotho’s Prime Minister are expected to meet sometime this year to deliberate on progress

Writing in one of the his opinion pieces published in a Namibia daily,  international trade expect, Wallie Roux, once criticised the simplistic nature of the sharing formula of the SACU pool saying, “ One of the articles in the SACU act states that the revenue sharing formula links each country’s share to the common revenue pool to total imports.

“However, this is an over simplification of the revenue sharing formula between the SACU member states and strictly speaking this is not correct.

“The revenue sharing formula actually has three components namely customs excise and development component and each component has a different mechanism for revenue sharing formula.”

To add weight to the ongoing debate where most countries in the revenue sharing union want their fair share as compared to the continued dominance by South Africa, Swaziland’s King Mswati III, who is also the Southern Africa Development Community (SADC) chairperson, is on a whirlwind tour to some of the countries, including Namibia, to deliberate on progress so far made.

King Mswati was in Namibia this week to meet with President Geingob and the two were expected to discuss SACU, among other regional and bilateral issues.

  tirim24@gmail.com or twitter handle @tirie24.

One Response

  1. The mathematics in this report does not add up to 100%.

    Swaziland – 35.6%
    RSA – 28.8%
    Lesotho – 15.7%
    Namibia – 12.5%
    Botswana – 10.7%

    Total. 103.3%, this can’t be right

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