As calls grow for the change in the revenue sharing formula to the Southern African Customs Union (SACU), a body that drafted trade law and policy capacity in east and southern Africa, has warned for caution.
In a letter in the South African press and e-mailed to Sunday Standard, Tralac or Trade Law Centre wrote that the oldest customs union is the envy of many and should not be broken apart.
Executive Director of Tralac, Trudi Hartzenberg and Gerhard Erasmus argue that great care should be taken not to unravel a stable region and a secure trade arrangement.
“An unstable SACU region will bring about many undesirable consequences. We might then need to spend the gains from a different revenue formula on improved border controls and finding new markets for our exports. SACU can be improved,” said the authors.
“The present agreement promises several additional building blocks, including common policies on agriculture, industrial development, competition and unfair trade practices”.
“Elsewhere in Africa, SACU is viewed as a success story. This region is probably the most integrated one on the continent.┬áThe national markets of the five SACU member states (South Africa, Botswana, Lesotho, Namibia and Swaziland) are effectively integrated in terms of domestic legal arrangements which facilitate commerce, banking and financial matters,” Tralac said, adding that SACU is also an excise union; resulting in closer fiscal cooperation.
According to Tralac, the BLNS states (Botswana, Lesotho, Namibia and Swaziland) argue that these policies have not been adopted and the SACU Tariff Board remains a dead letter because South Africa wants to control SACU tariff policy to support its industrial development.
The comments follow the calls for the revision of revenue sharing formula this week with new suggestions that South Africa should push for the commencement of talks on a new arrangement.
One expert said there are huge concerns about the SACU revenue-sharing formula, particularly insofar as customs duties are concerned.
South African Institute of Chartered Accountants’ Piet Nel was quoted in Business Day arguing that: “That formula is heavily weighted against SA and the result is that, in effect, SA is giving away its customs duty tax base to the extent of about R30bn a year to the other SACU members”
Hartzenberg and Erasmus, however, say the SACU Revenue Pool collection and payments are governed┬áby an international agreement and South Africa ratified that agreement.
They revealed that to change the revenue sharing formula, the SACU agreement will have to be amended.┬áThis has to be done in terms of the agreement’s amendment clause.
South Africa is also a party to other regional agreements which will then be affected. “The Lesotho Highlands Water Project Agreement for example, links the payment of royalties to Lesotho to the stability of its income under the SACU agreement,” the authors revealed.
“SACU is pictured as a burden. However, it is an important destination of South African exports, services and investment.”
Recent trade data released by the South African Revenue Services indicate that Botswana and Namibia feature in South Africa’s top ten export Destinations. SACU revenue has now become such a significant portion of total government revenue competing only with income from diamonds. SACU receipts increased from P13.8 billion in 2013 to P15.0 billion in 2014.