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Namibia to oppose Sacu shake-up plan

Feb 04 2011 12:23 Reuters

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Windhoek - Proposed changes to revenue-sharing within the Southern African Customs Union (Sacu) are unacceptable because they place an unfair burden on the region's poorer countries, a Namibian official said on Friday.

Deputy Finance Minister Calle Schlettwein said the proposals, which would mean drastically lower revenues for Swaziland, Namibia and Botswana and a slight increase for South Africa, would polarise the region and have "very serious" political implications.

"No one should be worse off under a new revenue-sharing formula, but this proposal doesn't give that," he told Reuters.

Sacu is considering a major revenue-sharing overhaul that will see South Africa keeping a far bigger slice of pooled customs receipts, according to a policy document.

Conversely, landlocked Swaziland will see a "substantial" drop in its overwhelming source of revenue and could ultimately be driven into bankruptcy.

The review paper drawn up by an Australian consultancy and obtained by Reuters on Thursday recommended an eight-year adjustment period for the new revenue-sharing formula, starting in 2012, to minimise the shock to already vulnerable economies.

According to the International Monetary Fund (IMF), Sacu revenues account for nearly two-thirds of official receipts in Swaziland and Lesotho, just over a third in Namibia and 25% in diamond-rich Botswana.

The world's oldest customs union, which celebrated its 100th birthday last year, is still debating the proposals, under which South Africa's share of pooled customs receipts would rise to 72% in 2019 from 50% in 2012.

South Africa accounts for about 85% of Sacu takings, but pays out much of that to its smaller neighbours under a complicated revenue-sharing formula that dates back to 1969.

Swazi squeeze

Under the proposed revisions, Swaziland's share of Sacu receipts would fall to 3% by 2019 from 9% in 2012 - cuts that will go down well with opponents of King Mswati III but which could herald disaster for an already ailing economy.

Botswana's share would fall to 6.7% from 17%, and Namibia's would drop to 9% from 15%.

However, Lesotho would see its share rise to 9% from 8.5%, the document said.

Despite the desire for increased revenues, the revision of the Sacu formula presents South Africa with a conundrum.

A drop in funds could mean bankruptcy for Swaziland, which already has one of the world's highest HIV/Aids infection rates, and South Africa would be likely to find itself picking up the pieces as migrants flood across the border.

"Unfortunately it may be pretty short-sighted for South Africa - squeezing the other countries for something that doesn't ultimately matter that much for South Africa," said Razia Khan, head of Africa research at Standard Chartered.

"If there are countries that are in better economic shape on its borders, that ultimately is good for South Africa."

Last April, credit rating agency Fitch cut its long-term outlook on Lesotho to negative from stable, citing lower Sacu receipts as a result of South Africa's recession.

imf  |  customs  |  sacu
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