Do or Die: the SACU Summit in Gaborone

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By Mpho Tebele

Gaborone - Leaders of the Southern African Customs Union (SACU), who have converged on Botswana’s capital, Gaborone, pored over a packed agenda where a number of thorny issues needed to be ironed out.

Top on the agenda was the commencement of contentious talks between SACU and the United Kingdom to conclude a new Economic Partnership Agreement (EPA) with the UK post-Brexit, the union’s Executive Secretary has revealed.

The SACU Summit began on Friday, June 29.

Speaking on the sidelines of the summit, the union’s executive secretary, Paulina Elago, said SACU-Britain ministerial talks held in Johannesburg, South Africa, last year agreed to replicate the EU-SADC-EPA as an immediate step to avoid trade disruption.

She said following the same talks on trade relations post-Brexit between SACU members and the UK held in Johannesburg, UK has also re-affirmed the commitment that the trade relationship between the UK and the SACU countries would not be disrupted due to the Brexit process.

In June last year, SADC countries – Botswana, Lesotho, Namibia, Mozambique, South Africa and Swaziland – signed an EPA with the EU in Kasane.

According to Elago, both parties have shared textual proposals on the changes to maintain EPA text, annexes and protocols adding that the parties have also agreed that the Cotonou Agreement would no longer apply to Britain when it leaves the EU and it had made a proposal in the new agreement.

“SACU is in the process of analysing the essential elements of the Cotonou Agreement, which SACU and Mozambique will propose to be part of the new agreement as a counterproposal to the proposal by Britain and the implications of the Britain-EU implementation agreement,” said Elago.

She revealed further that the roadmap to conclude the engagement had been revised and was envisioned to conclude discussions by the end of August to pave way for legal scrubbing of the final texts, signature and ratification of the agreement next year.

The UK-EU Withdrawal Agreement runs from April 1, 2019, to December 31, 2020, and during such period, the UK would be treated as an EU member state and would remain a party to EU’s international agreements, including the EU-SADC-EPA. 

The UK is one of SACU members’ main export partners with 56% of the total exports destined to the Theresa May-led nation. 

For instance, as at May 2017, the trade balance sheet between Botswana and the UK reached a high of nearly three billion Great British Pound.

Besides the contentious UK talks, Elago said the summit would review the existing revenue sharing formula among member states. The negotiations on the review of the sharing formula resume after it was stopped four years ago. 

The SACU revenue sharing formula was implemented for the first time in December 2004 to calculate 2005/06 revenue shares for member states. 

Member states’ annual revenue shares are determined and approved by council in December for distribution during the subsequent year.

Elago explained that the sharing formula had three components: customs, excise and development. She added that the customs shares were allocated based on each country’s share of intra-SACU imports while the excise component was allocated based on each country’s share of the Gross Domestic Product (GDP). 

The development component, which is fixed at 15% of total excise revenue, she said, is distributed according to the inverse of each country’s GDP per capita.

It is understood that member states use a revenue sharing formula that South Africa is not in favour of because it has a massive burden on its treasury and calls for a more equitable formula.

Another key issue to be discussed, Elago said, involved plans to establish a stabilisation fund to address the volatility challenges of revenue shares for member states.

“The benefits to the member states are that they will be able to utilise the stabilisation fund when the CRP forecast is lower than the actual revenue collected, and revenue shares will not be negatively adjusted,” she said.

 

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