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tralac Newsletter • Issue 6 • November 2018
The Southern African Customs Union
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

Regional Roundtable – Cape Town, 5 February 2019 (by invitation only)

tralac Annual Conference – Nairobi, 21-22 March 2019

tralacBlog is a forum to share and engage with the views of tralac researchers and Associates, as well as guest contributors, on pressing regional integration and trade policy issues affecting African countries in order to encourage relevant, topic-related discussion and debate.

Questions and Answers (FAQs)
Southern African Customs Union

Q: What exactly is SACU?

SACU is a customs union – a legal arrangement for liberalizing trade in goods among the five member states: Botswana, eSwatini, Lesotho, Namibia and South Africa. A customs union has two important technical features: a common customs territory (goods are traded duty free among the member states), and a common external tariff (CET). The latter means that goods imported from countries that are not members of SACU will attract the same tariff irrespective of the port of entry into the customs union.

SACU is WTO notified, as WTO members are required to do under Article XXIV of the General Agreement on Tariffs and Trade (GATT). All SACU members are members of the Southern African Development Community (SADC) and are participating in the Tripartite Free Trade Area (TFTA) and the African Continental Free Trade Area (AfCFTA) negotiations. They have also concluded external trade agreements such as the SADC-EU Economic Partnership (EPA) Agreement along with Mozambique.

Q: What does SACU do and what are the benefits of having it?

The main benefit is duty free trade in goods among the member states. SACU has a unique additional feature; it is also an excise union. South Africa determines the rates of excise duty which are implemented by all member states. All customs and excise duties are paid into a common revenue pool and are then annually shared among the member states. This happens in terms of a formula linked (in the case of customs duties) to the value of intra-SACU trade in goods.

Intra-SACU trade also benefits from the fact that four of the five member states belong to the Common Monetary Area (CMA), which is a separate arrangement, but which contributes to important aspects of SACU’s integration. Botswana’s currency is linked to a basket of other currencies, of which the South African Rand forms part.

SACU is a well-integrated commercial space in which common rules apply with respect to many vital aspects of trade and doing business across internal borders. More than 50% of all intra-African trade takes place within SACU.

Download the Q&A
Publications and Analysis

Gerhard Erasmus provides an update on the UK’s withdrawal process from the EU following this week’s confidence vote to keep Theresa May in power.

Ron Sandrey examines the geographical profile for the top eight African agricultural products by country, and then a further eight products for general interest.

This 15th edition of the MRI yearbook provides a comprehensive review of the manifold transformation process that the southern African region has been through since 2001.

All the states in the region share a common quest for economic growth and the desire to be more present and involved in the global market, in order to draw a more positive balance from their trading activities. However, new challenges and choices arise and need to be taken into consideration in these modern and often complicated times.

Intra-Africa trade and tariff profiles

tralac has prepared a series of individual country Trade Data Updates to provide an overview of the intra-African trading relationships of individual African countries as we move towards the AfCFTA. Each country update is accompanied by an infographic.

Selected data from the Data Center

Key trade stats for AGOA beneficiaries to end October 2018

  • Aggregate exports to US: Year to Date to Oct 2018: $20.96 billion
  • Exports under AGOA (incl. GSP): Year to Date to Oct 2018: $10.4 billion
AGOA exports by product sector

Since crude oil is included under AGOA as an eligible product, it accounts for the vast majority of trade under AGOA, which tends to distort the overall trade picture. The chart above shows leading exports under AGOA, on a sector basis, from eligible African beneficiary countries (year-to-date to October 2018).

Latest AGOA news updates
AGOA and related resources
Access a wide selection of web resources related to AGOA, including national chambers of commerce, export promotion agencies, development and finance agencies, regulatory authorities and trade resources. Click on the various section headings for specific web links.

Other resources include information on AGOA product eligibility, country eligibility status, rules of origin (general and for apparel).

An extensive range of AGOA FAQs can also be accessed on For example: what are the rules of origin requirements? What are the AGOA trade benefits? Where do I find the text of the legislation?
Copyright © 2018 Trade Law Centre, All rights reserved.

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