South Africa map with flag
South Africa map with flag

Cabinet ministers and officials of the five-member countries of the Southern African Customs Union (Sacu) will meet in Namibia this week to discuss a funding mechanism for regional integration, development and industrialisation.

This would include the financing of cross-border programmes such as infrastructure projects that support industrial development in the union.

The discussions will form part of the review of the revenue-sharing formula that splits customs revenue between Botswana, Lesotho, Namibia, SA and Swaziland.

SA has long regarded the formula as an unfair burden as it pays out billions of rand to its neighbours, which rely in large part on this income for their national budgets.

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

The Department of Trade and Industry’s deputy director-general for international trade and economic development, Xolelwa Mlumbi-Peter, said on Sunday the first objective of the discussions was to transform Sacu into a "development integration arrangement".

Six-point plan

A six-point plan has been agreed to as the basis for the discussions and includes: the revenue-sharing arrangement; industrialisation; trade facilitation; a unified approach to trade negotiations with third parties; establishment of institutions; and trade in services.

The revenue-sharing form-ula would have to be reviewed so the new agenda could be financed and there was a legal instrument to achieve it.

Mlumbi-Peter said there was no conflict between Sacu and the Africa Continental Free Trade Area, which is under construction. They could co-exist.

Finance Minister Nhlanhla Nene said in reply to a recent question in Parliament by DA MP Choloane Matsepe that the negotiations on the revenue-sharing formula were expected to take two years.

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. In 2018-19 SA will pay R48bn to its fellow Sacu members in terms of the agreement.

The five Sacu countries share a common external tariff and share the proceeds of customs and excise duties. 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.