Nhlanhla Nene. Picture: BLOOMBERG/SIMON DAWSON
Nhlanhla Nene. Picture: BLOOMBERG/SIMON DAWSON

Negotiations on the review of the Southern African Customs Union (Sacu) will start in April and are expected to take two years, says Finance Minister Nhlanhla Nene.

The two ministerial task teams set up by the Sacu summit in Swaziland in 2017 — one for trade and industry and the other for finance — will oversee and manage the review.

The Sacu heads of state from SA‚ Botswana‚ Lesotho‚ Namibia and Swaziland agreed to a comprehensive review of the 2002 Sacu agreement at the summit.

"The review of the revenue-sharing formula was identified and agreed upon as one of the key areas that should form part of the review process," Nene said on Thursday in a written reply to a parliamentary question by DA MP Choloane Matsepe.

"The review of the revenue-sharing formula was to be conducted in such a way that it not only supports the institution and member states in attaining their respective developmental objectives but also does not negatively impact [on] the socioeconomic stability of Sacu member states. The review of the agreement is expected to take place over an indicative period of two years, during which various options that can achieve the developmental objectives of Sacu will be considered."

SA believes the revenue-sharing agreement is unfair as it pays out substantial sums in customs revenue to neighbouring states each year. In 2018-19 SA will pay R48bn to its fellow Sacu members in terms of the agreement. It has been pushing for several years to have the formula changed but has faced resistance from its neighbours, who rely on the revenue for a large chunk of their national budgets.

The five Sacu countries share a common external tariff and share the proceeds of customs and excise duties in accordance with a separate revenue-sharing formula for each element. In addition‚ a developmental subsidy is built into the excise duty formula so SA can aid its poorer neighbours. This results in significant revenue flows to the other four countries in the union.

Critics believe SA is oversubsidising its neighbours to its own detriment, paying in the region of R30bn a year more than it should because of the way the Sacu formula works.