The uproar over the apparent need for the Southern African Customs Union (SACU) to review its revenue sharing formula came to a screeching halt at last week’s Heads of State and Government meeting in South Africa.
The meeting was attended by the five leaders of the world’s oldest customs union (SACU), being Botswana’s President Ian Khama; Namibia’s President Hikifepunye Pohamba; Lesotho’s Prime Minister Pakalitha Bethuel Mosisili; Swaziland’s King Mswati III and was hosted by current chairman, South Africa’s President Jacob Zuma.
Pundits and sceptics have recently expressed frantic and diverse opinions about the very health of SACU, on the back of South Africa’s call for the review of the formula for the sharing of the Common Revenue. The SACU revenue pool contributes handsomely to the economies of especially the least developed countries in the  nd - and moderately to the two middle-income economies of Botswana and Namibia. The formula is premised on three components, Customs, Excise and Development.
It is currently administered by South Africa (a developed country), in accordance with the revised SACU Agreement of 2002, which came into effect in 2004.  So strident and persistent were the calls for the review that even the combative Confederation of South African Trade Unions (COSATU) had joined the fray. Incidentally COSATU forms part of the tripartite alliance in South Africa’s government. The other partners are the ruling African National Congress (ANC) and South African Communist Party (SACP).
The frosty relations between the member states were provoked by the decision of Botswana, Lesotho and Swaziland to go against the grain of the Southern African Development Community (SADC) configuration that negotiated the Economic Partnership Agreements (EPAs) with the European Union (EU). The trio decided, much to the chagrin of Namibia and South Africa (their SACU compatriots), to initial the Interim Economic Partnership Agreement. When SACU celebrated its centenary anniversary in Windhoek, Namibia in April this year, the air was so tense one could cut it with a knife.
Incoming chairman, Jacob Zuma who was riding the crest of the wave in international limelight as his country prepared to host the first ever FIFA World Cup tournament on African soil, muddied the water further with his curt remarks: “Most urgently, if we cannot pursue the unfinished business of the EPA negotiations as a united group, the future of SACU is undoubtedly in question,” he was quoted saying then.
But after much ado, the leaders got another opportunity to discuss their shared destiny last week to square up with the divisive nuances, which had hitherto kept them at arm’s length. And it was an interesting discourse. That’s if the communiqué emanating from the meeting is anything to go by. Just when all the sceptics expected the divisive SACU formula for revenue sharing to take centre stage, the leaders had other thoughts. Instead, they placed premium on the absolute necessity to strengthen the capacity of the SACU secretariat in Namibia so that it can effectively implement the 2002 SACU Agreement.
On the surface, wisdom seems to have prevailed over the leaders, upon whom the region’s future is placed. Even as neither of them can proclaim any affinity to the intricacies of economies, politically, they wield the power to either make or break the region. Khama succeeded Festus Mogae, an acclaimed economist, who signed the 2002 SACU Agreement on behalf of Botswana. Pohamba succeeded Sam Nujoma, Namibia’s liberation hero, who would have obviously deferred to counsel from his economists when he signed the accord. Lesotho’s Mosilsili and Swaziland’s King Mswati III are the old guards, who signed the pact for their countries respectively. On the other hand, Zuma took over from the Thabo Mbeki, a leader of repute who has left a legacy for himself with the establishment of the New Partnership for Africa’s Development (NEPAD). NEPAD has since succeeded to mobilise funds for regional projects at continental level, something that SACU is only now considering. NEPAD also boasts a Peer Review Mechanism.  Zuma would surely not want to scuttle Mbeki’s legacy.
Finance and Development Planning Minister, Kenneth Matambo told Botswana Guardian on Wednesday as he prepared to jet to Cameroon, that SACU Secretariat has a lot in its plate. The communiqué also makes the point clear. The secretariat is tasked with developing policies and procedures to conclude the establishment of regional institutions, among them the Tribunal and Technical Liaison Committees.
The institutions also include the all-important Regional Tariff Board, which once in place would determine the common regional tariff lines for SACU during negotiations with Third Parties. The board would also be empowered to develop a tariff policy and trade strategy that supports industrialisation in SACU. But under the prevailing circumstances, the leaders have “directed” the Council of Ministers to come up with ‘win-win’ solutions to address these challenges. It’s not only the Tariff Board that is lacking behind, six years after the Revised SACU Agreement came into force. An institution in South Africa continues to administer the Common Revenue Pool, in flagrant contravention of the Agreement, which had recommended a transitional period of two years.
Quizzed why it was taking SACU so long to implement the SACU agreement, Matambo equally feigned ignorance. “Some of us who have just come in are also asking ourselves the same question.” However, he intimated the delay could be attributed to “lots of disagreements” between the member states as well as the disparate levels of development of the member states. But, he would rather not stress negativity, but the progress that SACU is making as a vehicle for regional economic integration. “The Heads of States and Government have given us until October 2010 to give them a progress report on the strategies to address these challenges,” he said.
Among the grey areas, the ministers will be expected to develop deliberate initiatives to promote intra-SACU trade, which presently remains pathetically low; to ensure SACU members speak with one voice and act accordingly (unified engagement); investigate financing options for cross-border projects; explore the “possibility of a review of the 2002 SACU Agreement”: Develop SACU positions on new generation issues taking into account ongoing negotiations.
Matambo explained that the ‘new generation issues’ refer specifically to World Trade Organisation (WTO) issues, such as trade in services. The ministers are also charged with defining a roadmap for moving SACU towards an economic community and monetary union, these being the apex of the customs union.
And last but one, they have to “consider” the sharing of SACU revenue. This latter point is probably informed by latest developments whereby the EU has offered to accommodate the Trade and Development Cooperation Agreement (TDCA) tariffs in the ongoing EPA negotiations. TDCA is the trade pact between South Africa and the EU.
Observers believe this could explain the sudden change of heart from Pretoria. No doubt, Europe’s overtures will curry favour with South Africa, SACU’s big brother. And further, reports indicate that the EC has offered to defer negotiations on trade in services in the ongoing EPA talks for the next five years.
It is on the foregoing that the leaders decided to give SACU the needed lifeline, since they realise its central role as a building bloc to regional integration. Matambo said SACU is far ahead of SADC since it is already a customs union, but that once SADC has transformed into a customs union the smaller one will have to give way. And certainly, SACU has read the text admirably.