Falling SACU revenues a concern for Manuel

Ensor, Linda (Business Day, Johannesburg) 2009-02-16 

South African Minister of Finance Trevor Manuel has expressed concern about the effect the global recession will have on countries that derive a large part of their national income from the revenue pool of the Southern African Customs Union (SACU).

SACU members – SA and Botswana, Lesotho, Namibia and Swaziland (BLNS) – combine their customs and excise revenue into a common revenue pool that is then divided under a revenue-sharing formula.

South Africa’s transfers to the rest of SACU are forecast to fall by R1 billion in the coming fiscal year to R27.9 billion and by a further R1.5 billion in the following year. Lesotho, a least developed country (LDC), and Swaziland will be most vulnerable to the contraction as they derive up to half their national revenue from the customs union.

“The impact of the falling revenues on Lesotho is very worrying”, Manuel said. Revenue from SACU contributes more than 20% of the total budget revenue for Botswana and Namibia.

In reply to questions on the national budget tabled last week, Manuel said that the revenue pool would shrink with the decline in imports. New car imports, which tend to be cyclical, are expected to drop sharply, as are imports related to the construction of soccer stadiums.

The budget review noted that revenue from customs duties is “extremely volatile”, performing above expectation when the economy is growing strongly but poorly when the economy slows.

“Customs duties for 2008-09 are expected to be R7 billion less than expected. Where member states rely on this revenue to finance a significant part of their expenditure, falling import growth will present a substantial challenge to coming budgets.”

Between 2000-01 and 2006-07, revenue transfers paid from the revenue pool to the BLNS members grew by 22% a year as a result of strong growth in imports and growing demand for high-tariff imports such as cars.

In 2006-07, the revenue pool amounted to R41.3 billion, of which 98% derived from SA and only R790 million from the other four countries.

Issues of sustainability will be discussed at the next SACU meeting in April 2009.