The SACU hot potato

SHARE   |   Sunday, 05 April 2015   |   By Ditiro Motlhabane
Dr Nyamadzabo Dr Nyamadzabo

• SA not subsidising partners - Nyamadzabo
• SA enjoys R90 billion exports to partners
• Botswana share plummets 30 per cent 
• SA stalled negotiations for new revenue sharing formula

Botswana has dismissed as misinformed and unfortunate, growing calls by South Africans and other commentators who claim that their government is exporting jobs and subsidising economies of other Southern African Customs Union (SACU) members.
Dr. Taufila Nyamadzabo, secretary of economic and financial policy in the Ministry of Finance and Development Planning, told The Patriot on Sunday that those making the allegations are looking at the issue from one angle of revenue and disregarding the different forms of benefits accruing from the relationship. "We hope that their government officials could explain to them the benefits they are enjoying from the BNLS partners to put this issue to rest," said Dr Nyamadzabo.
Dismissing the "biased viewpoint" Dr Nyamadzabo said the alleged P30 billion subsidisation is a fallacy as SA enjoys exports worth over R90 billion annually to the other SACU member states - Botswana, Namibia, Lesotho and Swaziland (BNLS). SACU member states assess, collect and pay all customs, excise and additional duties into a common revenue pool. The funds are then shared among the five member states using a revenue sharing formula. Dr Nyamadzabo said SA collects 97 per cent of import duties at ports and get 45-50 per cent of the SACU revenue, which is the largest share.
Enumerating the benefits Dr Nyamadzabo said by being major export destinations for SA produced goods BNLS countries – who consumed finished products from SA, are financing industrialisation, creating employment and increasing production levels in that country. He said SA is highly protective of their industries and assembly points, thus placing high tariffs like the 33 per cent duty on their goods and those imported through their ports. This results in BNLS countries in turn paying unreasonably high tariffs than they would if they were to import directly from international markets. Being the administrator of the SACU revenue pool, SA has the sole mandate to change tariffs that accrue to union in the process of collecting duties on behalf of other member states.
Although SA finance minister Nhlanhla Nene recently called for a revised and improved revenue-sharing arrangement to stabilise and safeguard the flow of resources, Dr Nyamadzabo places the blame for the stalling of negotiations on SAs door. He said negotiations on the revenue sharing formula had made good progress until they were adjourned in November 2013 when SA requested to be given time to discuss some trade related issues of concern to them, which were not related to the matter. Although he declined to reveal what the SA government wanted it has emerged that the discussions have to be at the highest level between heads of state before they are cascaded to ministers and the lower structures of SACU. "We are waiting for SACU meetings to be convened. We don't know when they are going to meet. ," he said, when asked if there is a time frame to the adjournment.
As uncertainty continues over the resumption of negotiations over the SACU revenue sharing formula, Nene said payments to the BNLS members in SACU are estimated to drop by 30 percent from R51.7 billion in 2015/16 to R36.5bn in 2016-17 due to falling trade and the lower collection of customs duties. SACU revenues - which contribute 30 percent to Botswana total revenues, are estimated at P16.3 billion in the 2015/16 fiscal year.


Dr Nyamadabo's views are supported by Keith Gottschalk, a Fulbright Scholar and former Head of Department of Political Studies at the University of the Western Cape. He observes that from when the Afrikaner nationalist government swept to power in 1924, until the 1990s, SA imposed huge protective tariffs to start and sustain industrialisation. These were also unilaterally imposed by the nationalists onto the BLNS countries.One consequence was that residents of BLNS nations, for 70 years, paid much higher prices for everything from clothes to cars, to subsidise SA’s industrialisation — with no benefits for their own countries. "The present treaty should be viewed as reparations for this history," he wrote.
His views were supported by Gerhard Erasmus and Trudi Hartzenberg of the Trade Law Centre – South Africa.
Development Policy Analyst, Economist Professor Roman Grynberg commented thus:  "The customs union is an excellent building block for the Southern African region but the revenue-sharing formula is an economic disaster with continental consequences. It retards African integration and continues an apartheid-era relationship that should have ended two decades ago. Although R30-billion is a lot of money for some, it is peanuts to a South African government that expects tax revenues of R1.1-trillion in 2015 and needs no more Zimbabwean-style basket cases on its border. South Africa will bear the cost of customs union revenue sharing because removing it would result in an economic catastrophe for its neighbours. The revenue-sharing formula will only really be reformed when South Africa can no longer afford the luxury".
In a recent commentary about tax proposals for the 2015 South African budget, accounting firm PwC slammed the revenue-sharing formula agreed to by the SACU member states arguing that “a more equitable sharing of the customs revenue pool would see South Africa entitled to at least 80% of the pool. The cost to South Africa is therefore at least R30-billion.”

Related news