The Ministry of Finance has confirmed that negotiations of the Southern African Customs Union (SACU) revenue sharing formula will resume this month and are likely to take over a year to be completed.
The announcement comes a little over six months since the then Vice President Mokgweetsi Masisi, attended a SACU summit which endorsed a Work Programme which focuses on a number of essential issues that includes the review of the Revenue Sharing Formula and the long-term management of the Common Revenue Pool.
In the 2016/17 financial year, the revenue sharing formula for member countries was: 20 percent for Botswana, 50 percent for South Africa, 18 percent for Namibia, 6 percent for Lesotho and 7 percent for Swaziland. However, most member countries have expressed unhappiness over the percentage that South Africa gets arguing that it is too high.
Oddly, South Africa also says the revenue-sharing agreement is unjust as they pay large amounts in customs revenue to other member states every year. In 2018-19 South Africa paid SACU members a total of P38.5 billion. The contentious revenue sharing formula has three parts, that is, customs, development and excise. Allocation of customs is based on each member country’s share of intra-SACU imports, while excise is derived from each member’s share of the gross domestic product.
In the 2018/19 financial year, Botswana will receive more than P15 billion from the customs union. According to SACU Council of ministers, this figure was derived based on the current revenue sharing formula for the five member states. Still in the 2018/19 financial year, economic powerhouse South Africa will receive the largest share of P34.1 billion, Namibia will receive P13.5 billion, Swaziland will receive P4.6 billion and Lesotho will receive P4.36 billion.
The customs union is the oldest functioning customs union in the world. Sadly because of the volatility of revenue stream, SACU revenue is expected to nose dive by between 8 and 10 percent between the financial years 2017/2018 and 2018/2019. This is likely to affect smaller members of SACU such as Namibia, Swaziland and Lesotho and even Botswana which do not have a healthy secondary industry.
