Sunday, July 3, 2022

SACU obstructs formation of SADC customs union – analyst

The Southern Africa Customs Union (SACU) remains an impediment to the deepening of integration between Southern African Development Community – an analyst says.

Senior Research Fellow at the Botswana Institute for Development and Policy Analysis, Professor Roman Greynberg, tells the Sunday Standard that while SACU is not a barrier to free trade, it is nevertheless a barrier to the formation of the SADC Customs Union.

“From the point of view of revenue SACU is very vital to Botswana but it must change and become relevant to the development needs of southern Africa in the 21st century. This would be a very painful change for Botswana and the other BLNS. All we can do is delay but in the end this is just not sustainable. As a development, it is sustainable and makes sense,” says Greynberg. ┬á
SADC was to have had a customs union for all Member States by 2011 but was postponed to this year.

“This failed because there cannot be two external tariffs and, more importantly, if the SADC Customs Union went ahead Botswana, Lesotho, Namibia and Swaziland would have to share their revenues with the other 9 SADC members. This will not happen. So while SACU is not a barrier to free trade, it is a barrier to the deepening of integration between SADC countries,” says Greynberg.
The regional body has cited capacity constraints within the Secretariat as the reason behind the delay which is expected to also have a bearing on the envisaged common market and a monetary union.

A free trade area between SADC countries, including the five SACU members, Comesa and the East African community in Greynberg’s opinion “is certainly proceeding” well.

“This will give South Africa access to markets fulfilling an age old dream of aces from the Cape to Cairo. The problem is that SACU cannot expand to have more members as Botswana, Lesotho, Namibia and Swaziland would lose revenue,” he observes.

 What can be done to correct the current SACU revenue imbalances?

“I have long advocated that the formula should be transformed into a development formula where the money from SACU is used for the development of the whole region. This would cement the relationship between SA and the other BLNS members. Right now it is a situation where Pretoria sees itself as losing revenue of about R20 billion and the BLNS see no prospect for development,” says Greynberg.

The analyst is of the view that the SACU revenue sharing formula is an apartheid era relic that benefits Botswana financially in terms of its development.

Greynberg says SACU simply helps some countries like Swaziland and Lesotho to bloat their public service and pay excessive salaries which are unsustainable without the transfers from Pretoria.

 Can S.A.C.U be revamped?

┬á“This is difficult because it needs political will for such a very big change that will cause so much pain. Someone needs to accept that the SACU formula only gets changed when countries recognize the need for change. It has only been changed twice and each time was a result of Botswana, Lesotho and Swaziland independence post -1969 and then with the end of apartheid in 2002. Lesotho and Swaziland get some 60-70% of government revenue from SACU. The IMF seems to think that standard belt-tightening would do the trick. I think with this level of dependence on Pretoria all the BLNS, but in particular Swaziland and Lesotho,┬áneed to renegotiate the nature of the economic relationship with Pretoria. The sooner the better,” says Greynberg.

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