Thursday, May 6, 2021

SACU revenue sharing formula remains in limbo

The government of Botswana has admitted that the debate on the Southern African Customs Union (SACU) revenue sharing formula which has been on the agenda for several years has been on stand still, atleast for the past one and half years.

Trade Ministry Permanent Secretary Peggy Serame told the Parliamentary Public Accounts Committee this week that the world’s oldest customs union has been having issues, some of which are “cross border”.

Serame’s presentation to PAC follows a recent tip off to Sunday Standard that SACU’s previous scheduled meetings did not materialise as some officials of certain countries snubbed the meetings citing various unconvincing meetings.

However Serame told PAC on Wednesday that there is a scheduled meeting between the member states where she hopes the matter will be put to rest. The Trade PS however did not give much detail about the said meeting. SACU comprises of Botswana, South Africa, Namibia, Lesotho and Swaziland.

The five member states of SACU had previously commissioned an Australian company, Center for International Economics Consultants, to undertake the revenue sharing review, but it was agreed that the report was not convincing, which led to an agreement that each of the five members come up with their own proposals. There are three different types of revenue sharing formulas, namely customs, revenue, exercise tax and development formula.

The sharing formula is a contentious issue that has not been resolved and there are worries that should the current format be changed, Botswana could lose large sums of money it gets from the world’s largest customs union.

A paper by Prof Roman Grynberg, formerly with the Botswana Institute of Development Policy Analysis (BIDPA) on SACU Revenue Sharing Formula: The History of An Equation, points out that SACU revenue has become important to the country’s budgeting.

“However, the risk for even Botswana, the country with the highest GDP/capita in SACU, is that SACU revenue, which is used to cover both the recurrent as well development budget of the country, has now become such a significant portion of total government revenue that the macroeconomic adjustment to any change in the formula or movement to another trade regime would be extremely difficult and fiscally destabilising,” said the former BIDPA scholar.

At the same time, the Finance minister, Kenneth Matambo said in February when presenting the 2015/2016 budget speech that the current account of the balance of payments registered a surplus of P13.1 billion in 2014, a moderate increase of 1.5 percent from the P12.9 billion in 2013. He added: “This is attributable to the increase in receipts from the Southern African Customs Union (SACU), which increased from P13.8 billion in 2013 to P15.0 billion in 2014.”

SACU’S CASH COW

An article from the Business Day, South Africa’s top financial newspaper, quoted South Africa’s Finance Minister Nhlanhla Nene as having said that the neighbouring country, which is considered both a regional and continental economic giant is pushing hard for the “unfair” revenue-sharing agreement to be reworked, both in terms of the formula itself and the way in which the money was used once it had been distributed.

SA was the “the cash cow” in the arrangement and had encountered resistance when it raised issues, the minister said.

He said a proposal would be presented to this year’s as yet unscheduled annual meeting of the heads of state of SA, Botswana, Lesotho, Namibia and Swaziland for them to resolve the matter “once and for all”.

“Work is being done but working with five countries that entirely rely on the revenue that comes out of this formula is a difficult task. We are the cash cow so when the cash cow raises issues we always get resistance,” South Africa’s Nene said in March this year.

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