The Southern African Customs Union (SACU) is faced with serious problems which it has to overcome. Established in 1910, SACU is the oldest customs union in the world.
This constellation has for the past decades benefited its members through annual revenue receipts. But in spite of its historical existence, SACU lacks an industrial policy, operates an unbalanced revenue sharing formula, battles to maintain cohesion, and has for a long time been without key strategic planning documents that spells its vision.
These issues complemented with dwindling SACU revenues to member states prompted heads of member states to convene a first-ever summit in 2010. The heads of states did not only meet for the first time, but they met for two consecutive times within a year. The first meeting took place on 22 April in Windhoek and was followed by another meeting on 15 and 16 July in Pretoria.
What is puzzling is the fact that for a 100 years, the essence of a neo-functional approach seems to have not been well understood in that it was left to steer the SACU with an ultimate consequence of denying it a roadmap. Against this view, it is worth mentioning that until recently, SACU has been stagnant on one stage of the regional integration ladder.
This happened because most of the attention of the SACU member states was taken by other events such as member states’ domestic matters, regional integration activities taking place in other regional economic communities and related political issues happening in and outside southern Africa.
The resultant effect of this divided attention made SACU to lack a neo-governmental influence, a component which could have provided a vision.
This permanence has since backfired as predisposed by three key issues, namely advancement of other regional economic communities in which SACU members hold multiple memberships, the pressure within South Africa to address increasing domestic poverty and unemployment, and the pressure on SACU members to sign Economic Partnership Agreements with the European Union.
In 2010, revenue receipts from SACU to Botswana, Lesotho, Namibia and Swaziland (BLNS) became more problematic and suggested that BLNS engage South Africa which for years has been administering SACU revenues. The shortfall coincided with the still-being-felt impact of the global financial and economic crisis. The move was meant to seek ways of avoiding a serious shortfall.
Before the recent shortfall, SACU had the opportunity to avert fiscal pressure on Botswana, Lesotho, Namibia and Swaziland if a vision for SACU had been paved some years ago.
As a result of a lack of vision, SACU is today faced with problems which, if remain unresolved, will threaten its future existence and probably even cripple economies of especially Lesotho and Swaziland.
The problem of revenue sharing is not new but has over the years not dealt with to the satisfaction of all parties. The SACU Agreement of 2002 provides a better framework for further interaction on the revenue sharing issues. The Revenue Sharing Formula is, however not very realistic and has invited contention from all members with BLNS tallying their views against those of their main economic neighbour – South Africa.
It can certainly be argued that the recent meeting in Pretoria just endorsed the views of South Africa of wanting to turn SACU receipts into donor aid. Unfortunately not all is true that SACU revenue receipts to BLNS are a generous offer.
The BLNS should be entitled to their share on an annual basis and the remaining chunk could then be provided as development fund and not aid. Therefore a distinction between what belongs to BLNS and what is generously offered by South Africa to BLNS should be made and serve as a basis for a future revenue-sharing mechanism.
Furthermore, BLNS should have earlier on developed their production capacities when more SACU revenues were available and that could have prevented the recent pressure by their partner South Africa to replace annual receipts with aid.
Unfortunately BLNS did not see the current consequence as real sometime back when the possibility of dwindling SACU revenues was mooted. The view of a development fund is an ideal suggestion but it comes when revenue stress in BLNS has started. On the research front, research institutions in the sub-region did little in providing the necessary early warning information on the seriousness of the revenue-shortfalls that were likely to occur in future.
That form of awareness was necessary and could have provided more options for member states to pursue.
The question that arises is whether or not BLNS can stand to pressure South Africa to accept to offer them what is rightfully theirs with a top up, and to sustain the receipts for a period of time whilst member states establish revenue mechanisms of bridging for the shortfalls that are ineluctable?
There is a high likelihood of BLNS becoming more indebted when SACU revenues are speedily reduced. This will result due to limited fiscal policy space for BLNS to bridge on dwindling revenue receipts from SACU.
To deny BLNS a gradual phase-down approach would translate into BLNS increasing their external borrowing and doing so will not augur well with the effort to converge on macroeconomic targets and would also undermine efforts to fight unemployment in BLNS states.