Farmer's Weekly (South Africa)
OBAL INSIGHT : Will 2019 be the watershed year for SACU?
The Southern African Customs Union (SACU), which includes Botswana, Lesotho, Namibia, South Africa and Swaziland, is the oldest customs union in the world. In this column, I will discuss some of the fundamental issues that have threatened its viability and integrity. Two key issues lie at the heart of the current SACU crisis.
Colonial roots
First, SACU was fundamentally a colonial institution that served colonial interests. The modern era of postcolonial African states has forced the regional institution, and others like it, to re-invent itself as a paragon of trade and economic integration.
The problem, however, is that the process of reinvention has not gone far enough to shake off the characteristics that defined its existence in the first place. SACU began as a way for South Africa to compensate its BLNS (Botswana, Lesotho, Namibia and Swaziland) partners for helping to circumvent the effects of international isolation and sanctions, and it has not been re-framed to reflect a 21st century customs union.
Since its formation, SACU has been governed by a revenue-sharing agreement in which the five countries in the union receive a portion of the tariffs and taxes collected from within the union.
Apparently, revisions have been made to the formula, but fundamental reforms to this arrangement have been deemed ‘politically sensitive’, and have been resisted by the BLNS countries. The revenue-sharing arrangement seems to be the most, if not only, important variable. It is, in fact, the glue that holds SACU together, despite persistent unilateralism and anti-free trade practices.
Second, there are concerns about the benefit of SACU, particularly to South Africa, given that BLNS countries have continued to restrict South African exports and companies from trading and investing in the union.
South Africa’s hegemony is inevitable given the size of its economy relative to its BLNS partners. And while the concerns from BLNS countries are valid, the growing sense of trade protectionism has created a situation in which the union itself is not reflective of its own tenets.
But the revenue-sharing formula, despite being central to the whole debate on SACU’s existence, is not the only politically sensitive issue that has dogged the institution’s survival. Some BLNS partners have lobbied for the democratisation of the institution to allow for an equal say accorded to each partner, regardless of economic size.
The problem with this is that it would diminish South Africa’s influence in SACU, even though it is most at risk of being negatively affected by policy decisions. About 90% of SACU’s economy lies in South Africa, and it would not be reasonable to accord equal voting power to small economies such as Lesotho, whose economic size is less than 1% of SACU’s total.
Some partners have lobbied for the democratisation of the institution
Change on the horizon
Given the foregoing, there are ongoing deliberations about how to reform SACU in order to transform the institution into a truly modern customs union. However, such reform propositions cannot be resolved with political ease due to the stakes involved.
While political sensitivities take precedence, the winds of change seem to be blowing to challenge SACU’s position. There is recognition that, for SACU to realise its full potential, it needs to reform and reinvent itself in some fundamental way.