• August 3rd, 2020

SACU formula concerns Namibia

Albertina Nakale WINDHOEK- Cabinet has strongly expressed concern that the proposed changes to the current Southern African Customs Union (SACU) Revenue Sharing Arrangement (RSA) are not consistent with the guiding principles and highly likely to result in a loss in some member states and gain among others. SACU is on a drive aimed to change the union’s core benefit from a revenue sharing one to a development sharing formula. SACU consists of Botswana Lesotho, Namibia, South Africa, and Swaziland.  Despite the set principles as a guide in the process of reviewing the revenue sharing arrangement, Namibia through Cabinet has expressed strong views regarding the proposed changes. Deputy Minister of Information and Communication Technology Engel Nawatiseb who announced Cabinet resolutions yesterday said Cabinet too knows that “nothing is agreed until everything is agreed, considering the linkage between trade policies and revenue policies.” “Cabinet took note that the work to assess potential impacts of the industrial policy and trade including the use of rebates, refunds and duty drawbacks within the framework of the SACU agreement is underway and, once completed will inform Namibia’s position,” Nawatiseb said. Among the set guidelines in reviewing the RSA, include that no member state should be made worse off than what obtains under the current revenue sharing arrangement; revenue shares should be equitable taking into account political, and socio-economic considerations amongst member states and revenue shares allocations should be developmental and not redistributive. The principles also guide that the revenue sharing arrangement should promote economic convergence, should minimise volatility and the pro-cyclical allocation of member states’ revenue shares; and should be aligned to the SACU vision and mission. He noted that Cabinet approved that Namibia continue with national consultation with the view to refining the country’s position on the SACU RSA. The SACU Revenue Sharing Formula was implemented for the first time in December 2004 to calculate 2005/06 revenue shares for Member States. In practice, member states’ annual revenue shares are determined and approved by Council in December for distribution during the subsequent year. The current Revenue Sharing Formula has three components; namely the Customs, Excise, and the Development Component. The Customs share is allocated on the basis of each country’s share of intra-SACU imports. The Excise Component is allocated on the basis of each country’s share of Gross Domestic Product (GDP). The Development Component, which is fixed at 15 percent of total excise revenue, is distributed according to the inverse of each country’s GDP per capita. The structure of the Revenue Sharing Formula is such that BLNS member states get a significant share of their revenue from the Customs Component whilst South Africa gets more than 90 percent of its share from the Excise Component. The Development Component, whilst meant to compensate the least developed economies, is distributed more or less in equal shares among all the Member States. The implementation of the current Revenue Sharing Formula has a number of challenges, associated with the data that informs the variables in the formula. Furthermore, the recent global financial crisis has exposed some weaknesses in the structure of the Revenue Sharing Arrangement. The process of the review of the revenue sharing arrangement has followed a three-stage approach which entailed firstly, identification of areas requiring further study in the current revenue sharing arrangement; secondly, an independent examination of the identified areas; and thirdly, a process of negotiation to reach consensus on a new revenue sharing arrangement. The University of Namibia’s economics professor and analyst, Roman Grynberg during the session which form part of SACU’s awareness campaign roadshow in Namibia held in March, was quoted by Market Watch saying SACU is currently structured in a way that only benefits South Africa in terms of development, while he sees the billions of dollars that the four BLNS countries (Botswana, Lesotho, Namibia and Swaziland) receive from the union, as a “bribe” for them to keep importing from South Africa. Grynberg referred to the formula as “a subsidy for the four BLNS countries to keep importing more goods from South Africa.” “SACU is not a bad idea, but we need to change its formula from a revenue sharing formula to a development sharing formula,” he was quoted. He reiterated that with the current SACU revenue sharing formula, the more any of the four BLNS countries import from South Africa, the more money they get.
New Era Reporter
2018-07-20 09:35:44 | 2 years ago

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