25 Jun 2018

The contentious issue of reviewing current Revenue Sharing Formula (RSF) among member states is once again on the agenda of the sixth Southern African Customs Union (SACU) institution meetings that started on June 25.

In an interview, SACU secretariat executive secretary, Ms Paulina Elago said the current RSF was implemented for the first time in December 2004 to calculate revenue shares for member states.

The revenue shares are determined and approved by Council in December for distribution during the subsequent year. Ms Elago said the sharing formula had three components; Customs, Excise and Development. 

She explained that the customs shares were allocated based on each country’s share of intra-SACU imports while the Excise component was allocated based on each country’s share of Gross Domestic Product (GDP). 

“The Development component, which is fixed at 15 per cent of total excise revenue, is distributed according to the inverse of each country’s GDP per capita,” she said.

With the current RSF, eSwatini, Lesotho and Namibia get a significant share of their revenue from the Customs component while South Africa gets more than 90 per cent of its share from the Excise component. 

“The development component is biased towards the least developed countries,” she said. 

She said for the past five years, South Africa had received on average 44.3 per cent of the total revenue shares followed by Botswana (22 per cent), Namibia (19.6 per cent) and Lesotho (6.7 per cent).

Talking about the review of the current RSF, she said it was initiated in 2010, but the work was not concluded. 

Ms Elago said the process was revived as part of the Work Programme for the Ministerial Task Teams which was approved on June 22 by SACU Council of Ministers and endorsed by the 5^th Summit of Heads of State or Government on June  23 last year held at Lozitha, eSwatini. 

She said the review of the RSF aimed at addressing some challenges that were identified by the member states and these included the volatility in SACU revenue shares. 

The current RSF is such that member states’ revenue shares are determined and paid based on a forecast, which is subsequently reconciled against actual and audited data, she said. 

During the days of economic boom, actual revenue collections exceed the forecasts, resulting in positive adjustment payments to member states.

However, Ms Elago said in times of low economic activity, actual revenue collections could be below the forecast which resulted in negative adjustment in the revenue shares.

She said this was more visible post the global financial crisis experienced around 2008 and member states agreed to review it.

Ms Elago said SACU also recognised that its common revenue provided a potential source of financial programmes that supported its Vision. 

She said the review would also ensure that the RSF was aligned with the SACU vision to promote competitiveness, industrial development, intra-regional trade and deepening regional integration. 

It will also ensure that revenue shares are equitable among the member states and consider their socio-economic circumstances. ENDS