Differences remain but SACU ties thaw

MBONGENI MGUNI
Staff Writer | Friday July 23, 2010 00:00

Conciliatory statements emerged from the two-day ministers and heads of state meeting, indicating that the hawks could be losing ground to the doves in intra-SACU politics. Host President, Jacob Zuma said: 'What impressed me personally was that our discussions were guided by the spirit of frankness and a desire to make SACU a vehicle to improve the life of the ordinary people of the region.'

Zuma was quoted in April saying: 'The future of the customs union is undoubtedly in question, if it cannot operate as a unified group.'

Since last year, the union's unity has been tested by external and internal factors, chiefly negotiations with the European Union (EU) on a comprehensive Economic Partnership Agreement (EPA) and the review of the SACU revenue-sharing formula.

Analysts are agreed that the issue of EPAs has largely taken a back seat on the line-up of SACU's challenges, as the member states resolved early this year to prioritise regional cohesion ahead of further talks with the EU next month.

The revenue-sharing formula, however, is gradually emerging as a hot potato, although SACU's political leaders are quick to point out that the union has other more development-oriented ambitions to fulfil.

SACU is due to engage consultants to review the formula, which process will take 12 weeks to complete. Following this, a full renegotiation of the formula will take place, based on the consultant's recommendations.

South Africa, the largest economy in the five-nation bloc, administers and disburses revenues collectively earned and raised within SACU members. All customs and excise collected within SACU are paid into South Africa's National Revenue Fund, with the formula being used to share these revenues annually. Only the revenues owing to Botswana, Lesotho, Namibia and Swaziland (BLNS) are calculated, with South Africa receiving the balance.

South Africa has been agitating for a review of the formula, with other commentators, including Botswana, agreeing that the 2002 document is unfair. In the South African lobby for a formula review, some commentators within and outside that country have pointed out that combined with the EPA divisions, SACU is of little benefit to South Africa.

Government sources, who attended last week's meeting, said such sentiments were roundly dismissed in Pretoria. Discussions on the sidelines of the Council of Ministers' meeting were, rather, focused on the need to respect each member's contribution to SACU's 100-year history of success.

'The BLNS states were wary of a Big Brother attitude being developed by the South Africans; they put across their view points clearly and emphatically on the various issues on the table, including the revenue-sharing formula.

'These sentiments about who would lose the most were SACU to collapse, were not even discussed. It's very clear that each country would lose out greatly should the walls come up between borders,' said one source.

The BLNS states, which represent a healthy proportion of South Africa's export market and the 2002 SACU Agreement, with its various trade, tariff, dispute resolution and other provisions, is highly supportive of this trade. Botswana, in particular, is a key market within SACU for South Africa's private sector, which controls various industries.

Recent data from the Central Statistics Office (CSO) indicates that imports from South Africa to Botswana grew from P13.54 billion in 2005 to more than P25.5 billion for 2009. Prior to the recession (2008), Botswana imported commodities worth P27.6 billion from South Africa. Up to June this year, the CSO has estimated the value of Botswana's imports from South Africa at more than P8.8 billion.

Major imports from South Africa include electricity, fuel, non-industrial diamonds, cement, vehicles, aeroplanes, cigarettes, medicines, a variety of retail, cosmetic, industrial products and numerous other classifications.

Figures for Namibia, Lesotho and Swaziland imports from South Africa largely reflect characteristics similar to Botswana. 'As much as the BLNS states need South Africa for their economies, South Africa also needs these countries for its private sector. They represent a large and growing market right next door.

'No one would benefit from the collapse of a union that safeguards this 100-year-old relationship. The heads of state  [and government]  appreciate that and it is in this spirit that discussions were carried out in Pretoria last week,' another source said.

As Zuma said in closing the heads of state summit: 'SACU must be an organisation that is capable of advancing the promotion of cross-border trade and development. It must be able to forge new partnerships with regional, continental and global trade entities that will contribute to our development priorities.'