SACU revenue sharing formula viable – Academic

SHARE   |   Monday, 29 August 2016   |   By Keitebe Kgosikebatho

The successful revenue sharing among member states of the Southern African Customs Union (SACU) is one of the most prominent evidence that the regional trade bloc is working. This observation was made by Professor Clement Ng’ong’ola of the University of Botswana’s Law Department when presenting a paper titled – Evolution and Development of the Legal Framework For The Southern African Union (SACU) – on Wednesday. According to Professor Ng’ong’ola, despite challenges raised by some members states especially South Africa about the revenue sharing formula, SACU has never failed to make pay outs to its member states in the 106 years of its existence. “In my own view revenue sharing is working for SACU and very much viable. If it was to be taken out there will be nothing much left of it (SACU),” said the Professor. The SACU Revenue Sharing Formula was implemented for the first time in December 2004 to calculate 2005/06 revenue shares for Member States.

Sharing Formula
The current Revenue Sharing Formula has three components; namely the Customs Component, Excise Component and the Development Component. The Customs share is allocated on the basis of each country's share of intra-SACU imports. The Excise Component is allocated on the basis of each country's share of Gross Domestic Product (GDP). The Development Component, which is fixed at 15 percent of total excise revenue, and is distributed according to the inverse of each country's GDP per capita. The structure of the Revenue Sharing Formula is such that BLNS Member States get a significant share of their revenue from the Customs Component whilst South Africa gets more than 90 percent of its share from the Excise Component. The Development Component, whilst meant to compensate the least developed economies, is distributed more or less in equal shares among all the Member States.

SA queries
South Africa, according to Ng’ong’ola, is querying the structure of the revenue sharing formula, arguing that as the more developed state in the pack her share should be reflective of such. On the other hand, the BLNS member states have also argued that they deserve what they are getting because they constitute an arguably fair share of the South African market. He said although they were efforts to revise the revenue sharing formula, there is no indication that changes will come anytime soon.

SACU loses innocence
Meanwhile, Professor Ng’ong’ola said the decision by member states to make heads of state/governments the highest making decision body for the institution might have led to the 106 year old trade regional bloc to lose its ‘innocence’.  “Some would argue and say it’s a good thing because Heads of States/government will provide political and strategic guidance to the organisation, but to us academics the decision pose danger and may stall progress. The experience with other regional blocs like SADC have shown that  it is not easy to get all heads of state to meet in one place at the same time,” he said. According to Ng’ong’ola, SACU was prior to the 2002 Agreement perhaps the only regional bloc that had its council of Ministers as its highest decision making body. This, he said, worked perfectly well for the southern African body because unlike heads of states Ministers had flexible schedules and the expertise to present technical presentations and make favourable and informed decisions.

Meanwhile, Professor Ng’ong’ola’s paper is yet to be published. The paper among others reviews the SACU legal framework, as revised and modulated over the years, for elements that may or may not have contributed to its longevity and apparent success. It also takes note of the fact that the last substantial revision of the SACU legal code, in 2002, attempted to remould SACU into a 21st century customs union, aligned with current developments in international trade relations. The paper notes and concludes that SACU has endured, or succeeded, in spite of glaring weaknesses in its legal edifice.