Changes proposed to SACU benefits

Ndama Nakashole - University of Namibia economics professor and analyst, Roman Grynberg, on Friday said he has come up with a proposal to be presented to the Southern African Customs Union (SACU) which aims to change the union’s core benefit from a revenue sharing one to a development sharing formula.

Grynberg spoke of his ready-to-deliver proposal when he addressed attendees of a SACU information sharing session, held at the university, which was done in conjunction with the university’s Faculty of Economics and Management Science. The session was part of SACU’s ongoing publicity awareness campaign roadshow in Namibia.

According to Grynberg, SACU is currently structured in a way that only benefits South Africa in terms of development, while he sees the billions of dollars that the four BLNS countries (Botswana, Lesotho, Namibia and Swaziland) receive from the union, as a “bribe”, for them to keep importing from South Africa.

Grynberg referred to the formula as “a subsidy for the four BLNS countries to keep importing more goods from South Africa.”

“SACU is not a bad idea, but we need to change its formula from a revenue sharing formula to a development sharing formula,” he said.

Independence

Grynberg further said that there is a need to develop the capacity of the BLNS countries so that they can be a bit independent as well.

He reiterated that with the current SACU revenue sharing formula, the more any of the four BLNS countries import from South Africa, the more money they get.

“We have Lesotho and Swaziland, who get about 70% or so of their total revenue from SACU. If we do not stop this kind of financial dependency, any time South Africa goes broke, then those two countries’ will become mini-Zimbabwes. Their economies will collapse,” he said.

He said the fact that Namibia trades so much with South Africa, yet sells virtually nothing to the southern neighbour, is trade unbalanced.

The academic added that while SACU has been reformed over the years, the formula needs to be touched up, adding that previous arrangements within the union such as the Secret Protocol still have their effects on the BLNS countries.

“How come the four small countries get 80% of the customs revenue? We get money, South Africa gets development,” he said, adding that, that is a radical idea.

He added that although international institutions may not have said it, the World Bank and the International Monetary Fund (IMF) don’t like SACU’s revenue sharing benefit.

He said that his proposal of changing the revenue sharing formula to a development formula is a simple one strengthened with setting up of four funds, including an infrastructure fund.

Opportunities

In her presentation on the operation and programmes of SACU, the union’s executive secretary Paulina Elago stated that the SACU market is growing and therefore provides opportunities for the member states, especially the smaller economies, to increase their trade, especially in exports.

“This would in turn contribute to the diversification of their [BLNS’] economies, which are currently dependent to a large extend on primary commodities,” she said.

Elago stated that such economic transformation could be unlocked further if there is a clear and targeted strategy to diversify and broaden the industrial base through value addition.

She stated that SACU can not only facilitate cross border trade, “but more importantly can serve as an engine of economic growth through the promotion of industrialisation.”

Negotiating

In her presentation during the session, SACU Secretariat’s trade negotiations coordinator Albertina Hitiwa said that most countries are involved in trade negotiations for free movement of goods and services, as improved market access may lead to increased exports and contribution to economic development of a country. She said benefits depend on the ability for a country to utilise the preferential trade arrangement by taking initiatives geared toward leveraging on these market dispensations.

“The SACU Secretariat remains committed in facilitating the SACU negotiating agenda,” she said, adding that SACU has concluded some beneficial trade negotiations.

On-going trade negotiations at SACU, according to Hitiwa, are the COMESA-EAC-SADC Tripartite Free Trade Agreements, Africa Continental Free Trade Agreement, SACU- India Preferential Trade Agreement, Review of the SACU-EFTA Free Trade Agreement, and the SACU, Mozambique and UK Economic Partnership Agreement.

Another presentation titled “Understanding the mechanics of Revenue Sharing Arrangement in SACU Member States” was given by SACU’s deputy director of revenue management, Donald Ndwandwe, who highlighted that South Africa is the currently the manager of the Common Revenue Pool (CRP).

In determination of revenue, member states submit intra-SACU imports to the secretariat, among other things, he said.

“South Africa as the manager of the CRP provides a forecast of the CRP for the following financial year,” he said.

Importance

On the importance of SACU to the Namibian economy, Bank of Namibia’s deputy director of policy research and international affairs, Erwin Nainhwaka, said SACU is important to the Namibian economy as the revenue sustains various government expenditure programmes. He added that Namibia’s exports to SACU have been growing, albeit slower than imports from SACU.

“SACU remains key to industrialisation and regional integration and there is potential to increase benefits from SACU in line with our NDPs. We need to invest SACU revenue in developing domestic production capacity creation,” he said

He also said that the private sector is crucial to ensuring Namibia is net trade creator from SACU and regional integration.