Welcome to the November tralac newsletter – focusing on the Southern African Customs Union (SACU).
SACU was established, by Great Britain, not as a vehicle for regional integration, but as a practical arrangement for managing the commercial, trade and fiscal matters, among a group of territories under its control in Southern Africa. Since its origins in the colonial era, SACU has evolved into a deeply connected and integrated sub-region in Africa. It remains a customs union with a common customs territory and a common external tariff. Discussions in recent years to expand its agenda to trade in services have not materialised. SACU is also an excise union, adding a dimension of further integration. All but Botswana are also members of the Common Monetary Area (CMA), providing the basis for monetary policy integration among these member states. South Africa’s monetary policy is effectively implemented by Botswana, Lesotho, Namibia and eSwatini.
Although SACU is not recognised by the African Union as a building block of the African Economic Community (AEC), the member states of SACU contribute significantly to intra-Africa trade. The International Monetary Fund recently noted that SACU accounts for more than 50% of intra-Africa trade. South Africa is still the most diversified economy in Africa, and a significant source of foreign direct investment into other African countries, and is the pivot for SACU’s trade and commercial integration.
We are very pleased to include a Blog from the Executive Secretary of SACU, Ms Paulina Elago, providing an update on SACU’s customs modernisation and trade facilitation programmes undertaken with the World Customs Organisation and other partners. Practical border management improvements and trade facilitation are key to an enabling investment, production and trade environment. The programmes support member states’ commitments in the Trade Facilitation Agreement of the World Trade Organisation, as well as SACU’s own regional and global integration and broader development objectives.
The 2002 SACU Agreement, which entered into force in 2004, was expected to usher in a new phase for the customs union. The Agreement provided for new institutions and collective decision making on matters such as the common external tariff. However, key institutions such as the SACU Tariff Board and the ad hoc Tribunal have not been established. Member states are divided on the future trajectory of SACU. South Africa is unlikely to change its stance on tariff-related matters. The import tariff is a key instrument of industrial policy for South Africa, and it will not agree to consensus decision making on this policy instrument in SACU, and hence not to the establishment of the SACU Tariff Board. Other member states are still firm in their expectations that the Tariff Board and other institutions should be established.
Dissent about the revenue sharing arrangement runs deep. The implications of the significant dependence especially by Lesotho and eSwatini on this source of revenue are well documented. By contrast, South Africa, which generates most of the customs revenue, wants to review the revenue sharing formula. Indeed, South Africa is interested in a broader review of the SACU Agreement. This also requires acknowledging what actually works and how to build on the benefits of the customs union. Our collection of Blogs this month examines these issues.
The current Brexit conundrum is testimony to the complexity of undoing, while safeguarding, important benefits of such a deep integration arrangement. Key decisions about SACU’s future are absolutely necessary. 2019 may well be the year to shape a new dispensation for the world’s oldest customs union.
We look forward to your feedback.
The tralac team