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SA faces strong resistance to its customs plan

United front: Trade & in­dus­try min­is­ter Rob Davies told com­mit­tees that he wants par­lia­ment’s sup­port to push for a change in the rev­enue­shar­ing for­mula.

The government is pushing for a bigger slice of the customs and excise revenue generated by the Southern African Customs Union (Sacu), but is facing a wall of resistance from its neighbours. Finance minister Nhlanhla Nene and trade & industry minister Rob Davies briefed the finance and trade and industry committees on Tuesday about this.

The government is pushing for a bigger slice of the revenue generated by the Southern African Customs Union (Sacu) but is facing a wall of resistance from its neighbours.

Restructuring the revenuesharing formula which sees the lion’s share of revenue going to SA’s neighbours could release badly needed funds to meet the country’s dire fiscal challenges.

The ministers of finance and trade & industry said on Tuesday that they wanted parliament’s support to push for a change in the revenue-sharing formula and to resist attempts to fundamentally restructure the tariff-setting mechanism.

Finance minister Nhlanhla Nene and trade & industry minister Rob Davies briefed parliament’s finance and trade & industry committees on Tuesday about the deadlocked negotiations. The committees resolved to support their stance and to submit their decision to the National Assembly for endorsement. This will strengthen the position of SA’s negotiators during the talks.

Nene told MPs that very little progress has been made in discussions to review the revenuesharing formula despite intense engagements. The major difficulty was the underlying principle of the negotiations, which was that no-one should be made worse off by any agreement. This meant no-one should be better off either.

“A review which will see us being put on a better footing will be very difficult to arrive at,” Nene said.

SA contributed about R30.3bn (98.3%) of the Sacu revenue pool annually on average between 2007-08 and 2016-17 but took out R26.4bn (45.8%) while Botswana, Eswatini, Lesotho and Namibia contributed R510m (1.7%) but took out R31bn (54.2%).

This was a source of concern, Nene said. SA’s share of Sacu revenue has steadily declined. Sacu revenues, which are drawn from customs and excise duties, contribute 27% of Botswana’s total revenue; 45% of Eswatini’s; 40% of Lesotho’s; 32% of Namibia’s; and 3% of SA’s. None of the revenue is used for common development to promote the region.

In terms of the 2017 medium term budget policy statement, SA’s projected payments from the revenue pool have been revised down by R14bn in 201819 and R19.8bn in 2019-20.

The drivers of the lowered budget estimates are a shrinking common revenue pool due to the poor economic climate, which affects trade and results in lower revenue collections.

On the deadlock over the architecture for tariff setting, Davies said SA’s Sacu partners insist on implementing a 2002 agreement, which would see each country have its own tariffsetting board.

The board would make recommendations to a Sacu tariff board, which would make decisions by consensus and make recommendations on tariffs to the Sacu council of ministers.