25 Jun 2018

The Southern African Customs Union (SACU) is to establish a stabilisation fund to address the volatility challenges of revenue shares for member states.

In an interview, SACU secretariat executive secretary, Ms Paulina Elago explained that the Common Revenue Pool (CRP) experienced a lot of fluctuations which caused revenue shares of member states to also fluctuate.

Further explaining that SACU revenue was collected from imports into the region and remitted into the CRP, Ms Elago said the pool’s the performance was largely driven by economic performance.

She said fluctuations in the revenue shares brought fiscal challenges which affected government planning.

Ms Elago said member states were currently engaged in negotiations on the establishment of the fund.

“The benefits to the member states are that they will be able to utilize the Stabilisation Fund when the CRP forecast is lower than the actual revenue collected, and revenue shares will not be negatively adjusted,” she said.

Ms Elago said SACU, the world’s oldest customs union, had also identified the need to establish a regional financing mechanism to support SACU-wide infrastructureal projects and industrialisation.

“In that regard, the member states have agreed to undertake an assessment on the feasibility of establishing such a regional financing mechanism,” she said.

The Ms Elago said the study would assist member states to better understand how a regional financing mechanism could be established and managed.

“The study will also present options on the suitable structure and modalities to operationalize this mechanism, which will facilitate their decision on the best option,” she said.

On international trade, particularly the trade war initiated by US President Donald Trump, Ms Elago said the imposed tariffs could put the entire global trading system at risk.

The only solution, she said, was the return to, and respect of, the multilateral trade rule-making system under the World Trade Organisation (WTO).

In the SACU region, South Africa is the only country that produces steel and aluminium products with aluminium exports to the US accounting for only 1.6 per cent and 0.9 per cent in the case of steel.

“Despite the small contribution South Africa makes to this US import market, the tariff hikes are likely to negatively affect the 7 500 jobs currently involved in the steel export to the US,” she said.

Talking about intra-SACU trade, she said it had grown over the past five years.

“Goods exported have increased by 10.2 per cent reaching the value of R188 billion (P143 billion) in 2017,” she said.

Ms Elago said the structure of intra-SACU exports had remained relatively the same over time with South Africa accounting for most of the goods traded within SACU.

She said in 2017, South Africa accounted for 71.3 per cent of intra-SACU exports followed by Namibia (11.6 per cent), eSwatini (9.1 per cent), Botswana (5.7 per cent) and Lesotho with 2.3 per cent.

On imports, she said the intra-SACU they had increased by 6.9 per cent during the same period.

“The intra-SACU import bill stood at R171 billion in 2017. The structure of intra-SACU import has remained relatively the same during the past five years with Botswana, Namibia and South Africa being the dominant players,” she said.

She said in 2017, Namibia accounted for 29.3 per cent of intra-SACU imports followed by Botswana at 29 per cent, South Africa (21.7 per cent), Lesotho (10.5 per cent) and eSwatini (9.5 per cent).

“This is a positive trend in terms of trade creation effect of the Customs Union but the dependency on South Africa as the dominant player has at times put the BENL Botswana, eSwatini, Namibia and Lesotho at risk of high input cost to industrial inputs,” Ms Elago said.

The four countries had however raised their concerns which were now being attented to under the public policy intervention stream. ENDS