Sacu re­forms plod on

Botswana, Le­sotho, Namibia and Swazi­land will re­ceive a huge blow from SA Cus­toms Union

CityPress - - Business - DE­WALD VAN RENS­BURG de­wald.vrens­burg@city­press.co.za 12 8

Four of South Africa’s neigh­bour­ing coun­tries be­long­ing to the cen­tury-old South­ern African Cus­toms Union (Sacu) will have holes blown in their na­tional bud­gets this year be­cause of an im­mi­nent “Sacu rev­enue shock”. The In­ter­na­tional Mone­tary Fund has pro­jected that the rev­enue shock will mean cus­toms rev­enue in the BLNS mem­ber states (Botswana, Le­sotho, Namibia and Swazi­land) fall­ing by be­tween 23% (in Botswana) and 34% (in Swazi­land).

This graph­i­cally il­lus­trates the con­tin­ued re­liance of the BLNS coun­tries on the cus­toms union, de­spite years of in­ef­fec­tual re­form talks.

The money they will lose rep­re­sents a mas­sive pro­por­tion of to­tal gov­ern­ment rev­enue in all four of the coun­tries (see graphic).

Mean­while, min­is­ters of fi­nance and trade from all five mem­bers of Sacu met in Mul­der­s­drift, Gaut­eng, this week for a min­is­te­rial re­treat.

In South Africa’s bud­get re­view in Fe­bru­ary, Trea­sury said the re­treat would de­cide “how the re­view of the rev­enue-shar­ing for­mula is to pro­ceed”.

Af­ter the re­treat this week, how­ever, a non­com­mit­tal state­ment was is­sued that scarcely men­tioned the rev­enue is­sue or other prac­ti­cal steps.

“The min­is­ters agreed on a set of prin­ci­ples which would guide fur­ther en­gage­ment on the Sacu agenda,” Trea­sury said.

Re­spond­ing to ques­tions in an emailed state­ment, Trea­sury said “par­tic­i­pants ... recom­mit­ted to work­ing to­gether to en­sure the cus­toms union serves all mem­bers’ in­ter­ests in a fair and eq­ui­table way”.

Ger­hard Eras­mus, an as­so­ciate of the Trade Law Cen­tre in Stel­len­bosch, said: “This re­treat has been pos­i­tive. I hear the at­mos­phere was quite ac­com­mo­dat­ing, but no dra­matic de­ci­sions were made.”

The rev­enue-shar­ing for­mula stems from the 2002 re­vi­sion of the Sacu agree­ment.

It has been crit­i­cised from all sides for ei­ther cost­ing South Africa too much or crip­pling the rest of the re­gion, de­pend­ing on where you stand.

Through the for­mula, South Africa “do­nates” much of its cus­toms rev­enue to the other four gov­ern­ments. In re­turn, South Africa ef­fec­tively gets to con­trol trade pol­icy for the re­gion – and guar­an­tees tar­iff-free ac­cess to the re­gional mar­ket for its com­pa­nies.

Eras­mus said it was “facile” to call the Sacu pay­ments – which amounted to R50 bil­lion last year – a sub­sidy. 4 0

He said South Africa had been “adamant” it would not lose the pol­icy power that Sacu granted it.

The Sacu rev­enue sys­tem was, how­ever, fun­da­men­tally un­sus­tain­able over time, he said.

Fur­ther lib­er­al­is­ing trade was the over­ar­ch­ing logic of de­vel­op­ments in trade agree­ments glob­ally.

With each tar­iff that dis­ap­peared, the rev­enue in the Sacu pool fell, he said. “Sacu is a de­clin­ing, un­sus­tain­able en­tity over time.” The Sacu that ex­ists is not the Sacu that was en­vis­aged on pa­per in 2002. In­sti­tu­tions like a Sacu Tri­bunal and a Sacu Tar­iff Board sim­ply weren’t es­tab­lished, de­spite their be­ing part of the 2002 deal.

“An al­ter­na­tive modus operandi set in with Itac [the In­ter­na­tional Trade Ad­min­is­tra­tion Com­mis­sion] in Pretoria ad­min­is­trat­ing tar­iffs,” said Eras­mus. Itac is South Africa’s tar­iff reg­u­la­tor. “One ques­tion is, what would you re­place the rev­enue for­mula with?”

A plan to pool the money into a de­vel­op­ment fund for re­gional in­dus­tri­al­i­sa­tion has been mooted from the South African side be­fore.

“If I were ad­vis­ing one of the BLNS [states], I would be ex­tremely con­cerned. I’ve lost my pol­icy space, now I lose my rev­enue, and all I get in re­turn is a fund sub­ject to South Africa’s idea of in­dus­tri­al­i­sa­tion,” he said.

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