JANNIE ROSSOUW: Sacu and CMA transfers — SA’s most expensive secret

SA is a member of a number of international multilateral bodies — the AU, the Southern African Development Community and Brics come to mind. However, it is our financial and economic relations with neighbouring countries that have piqued my interest of late.  

SA has economic and financial links with its neighbours through two main structures. The bigger structure is the Southern African Customs Union (Sacu), while the Common Monetary Area (CMA) is somewhat smaller. 

Our partners in Sacu are Botswana, Eswatini, Lesotho and Namibia. This customs union is the oldest in the world still in existence, its roots going back to the 1800s when agreement was reached between the Cape Colony and independent Free State Republic. 

The CMA has a shorter history. Before independence Botswana, Eswatini, Lesotho and Namibia did not have their own currencies. SA currency circulated in those countries and banking, bookkeeping and accountancy entries were recorded in SA currency. 

After independence, the countries introduced their own currencies and Botswana elected to introduce an independent financial system, while Eswatini and Lesotho elected to retain a link with the SA financial system within the CMA. The CMA was subsequently expanded with the inclusion of Namibia after that country attained independence and adopted the Namibian dollar as local currency. 

In terms of the CMA agreement the exchange rates of the currencies of Eswatini, Lesotho and Namibia are fixed at par (one to one) with the rand, and against one another. Those countries apply the same or stricter exchange control than SA.

In addition, the SA rand circulates freely in the CMA countries. For this privilege SA taxpayers handsomely reward the governments of Eswatini, Lesotho and Namibia through a CMA compensation agreement. In the 2023/24 fiscal year the compensation amounts to R1.4bn. In other fiscal years the size of the payment has been of similar magnitude. 

The compensation agreement for the CMA countries is in theory structured on the basis of the seigniorage lost by Eswatini, Lesotho and Namibia on rand notes circulating within their respective borders. Seigniorage is the interest earned by a central bank on its currency issuance in circulation. In practice, though, the CMA payment amounts to substantial development aid to those countries.

Although a large amount of money is forfeited by SA through the CMA compensation payments, it pales in comparison to Sacu payments. In terms of the Sacu agreement SA’s payments will amount to R79.8bn in the 2023/24 fiscal year. This is, in any terms and by any comparison, a substantial amount of money. And it is not a one-off payment; it is paid annually. 

Little is known about the actual calculation of the Sacu payments. The amount is simply included in each year’s budget and hardly ever questioned. Most disconcerting, however, is the fact that any effort to get transparency and more information about precisely how these payments are calculated is simply stonewalled. The National Treasury does not publish any details and information is not available upon request. 

The Treasury’s interpretation seems to be that secrecy provisions in the Sacu agreement will be breached if the calculations are published, but I fail to follow this logic. How can SA taxpayers be expected to pay away billions of rand annually to neighbouring countries under a veil of secrecy? 

It is time for SA’s most expensive secret to be exposed. The Treasury should publish the calculations for the annual CMA compensation and Sacu payments. SA taxpayers are entitled to know on what basis their hard-earned tax money is handed over to neighbouring countries. 

If the details of the CMA and Sacu transfers are not published for public scrutiny parliament should do its civil duty and simply withhold approval of these payments until the veil around SA’s most expensive secret has been lifted. 

• Rossouw is visiting professor at Wits Business School.