SACU’s reforms in shreds

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Timo Shihepo

Windhoek - The Southern African Customs Union (SACU) is struggling to implement reforms that are aimed at revamping the customs union in an effort to make sure that no member state is worse off.

SACU is a customs union of five countries of southern Africa: Botswana, Lesotho, Namibia, South Africa and Eswatini (formerly Swaziland).

Its 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.

In recent years, however, SACU operations have not been functioning at the level required and some members complained, prompting reforms which have led to the formulation of a working programme.

SACU’s work programme is to focus on key areas that includes the review and development of a suitable architecture for tariff settings, review of the revenue sharing formula – a formula based on principles that no member states should be worse off.

This process, however, has failed to meet its 24-month deadline as the SACU heads of state and government gave the SACU Secretariat a mandate in 2017 to implement this programme within two years but the Secretariat is yet to do so.

SACU Executive Secretary, Paulina Elago, told The Southern Times that if the deadline is not met there would likely be a new timeline but nothing is yet to be communicated regarding the new timeline.

Namibia’s Finance Minister Calle Schlettwein, who became the chairperson of the SACU Council of Minister, last week, admitted to The Southern Times that there has been delays in implementing the work programme.  

“Well yes, I think our ambitions were high than our achievements will show. The work programme that we have had agreed upon basically says that the customs union, which has been a revenue driven organisation most of the time has to re-emphasize real economic integration and shared productive capacity to improve trade within and amongst each other but also to improve SACU’s ability to trade with finished goods with other blocs. This is within the continent, and the world in general,” he said.

Much of the reforms were prompted by South Africa – the biggest revenue generator for the union – which is not happy with the current revenue sharing agreement.

South Africa wants to get more money from the revenue pool because it is the top generator for the group. 

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 member states' shares are calculated, with South Africa retaining the residual.

“Our market is sizeable but it is not big enough to allow the 6 or 7 % growth we need to significantly and meaningfully address poverty and I think that’s the core of our ambitions as SACU that we maintain stable revenues not to upset any member, and no one to be worse off,” said Schlettwein.

Despite the challenges, Schlettwein believes that SACU has made great strides in gaining market access, world over. SACU has free market access to the European Union through the Economic Partnership Agreement. It also has a market access into the United States of America through the African Growth and Opportunities Act agreement.

“Additionally, we have got a market access into Southern America. We got a market access into the African continent through the SADC free trade protocol, which we are part of.  That gives us an opportunity to trade globally. What is missing is enhancing productive capacity, enhancing output of finished goods of which we trade. I think that’s where SACU is in within a good opportunity to create cross border value chains within members so that we complement each other without out-competing each other to become export-driven,” said Schlettwein. 

 

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