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Web Exclusive: Southern African Customs Union faces extinction
September 3, 2009
By Florence de Vries
The Southern African Customs Union (SACU) faces serious challenges that threaten its very existence.
This point was reiterated by several speakers at the opening of the Trade Law Centre's (tralac) annual conference on Thursday.
Revisiting the issue of regional integration, Colin McCarthy, a tralac associate, said one of the key barriers to attaining proper integration between the members of 99 year old SACU was the fact that the member states were still largely economically unequal. South Africa, Botswana, Lesotho, Namibia and Swaziland are the four members of SACU.
Of the member states, South Africa contributes 94 percent of SACU's gross domestic product (GDP) with the other three countries bringing in the remaining 6 percent contribution.
McCarthy explained that this is the product of unique historical developments in each country and that SACU was formed to accommodate the economic integration of politically separate territories.
“These need to adapt to political changes in each country, which has not been the case,” McCarthy said.
SACU was first formed in 1910, and then reformed in 1969, to maintain the free interchange of goods between member countries and providing for a common external tariff and a common excise tariff in the common customs area.
But since 1969, the union has been plagued with disagreements by members over the role that the union should play, McCarthy said.
While there had been a revised agreement between SACU members in 2002, some key issues highlighting the distinct differences between a customs union and free trade agreements, needs some reconsideration.
“One of the distinct features of the former is that it focuses exclusively on the trade of goods which leaves a gap for the trade in services,” McCarthy said.
Another issue was the weight attached to revenue and on the distribution of the customs revenue as being fair.
Customs and excise collected in the common customs area are paid into South Africa’ national revenue fund, which is shared among members according to a revenue-sharing formula as described in the agreement.
South Africa is the custodian of this pool. Some commentators pointed to the unfairness of its revenue sharing formula, while others questioned the value for South Africa’s continued SACU membership.
Gerhard Erasmus, a tralac associate, said at the conference, that SACU had to take matters into its own hands by adopting new annexes which would become legally binding.
“Many of the debates around this issue tend to be too backward-looking. Literature about regional integration has shown that very serious political commitment is needed in order to renegotiate a balance of power in any region,” he added.
He said that the 2002 agreement was merely an enabling framework for members and that the implementation of certain mechanisms, such as a tariff board and a tribunal, would still have to come to fruition.
Erasmus also believed that there needed to be an integrated decision-making model within SACU, but that the members needed to address its own capacity constraints in this regard first.
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