Anatomy Of The Southern African Customs Union: Structure And Revenue Volatility

Abstract

This paper studies the evolution of the Southern African Customs Union (SACU), tracing it from its inception in 1889 as the Customs Union Convention, the worlds first customs union, to its current status. While the union has operated under different agreements, which have been negotiated and renegotiated with changing circumstances, the study identifies the agreements of 1889, 1910, 1969 and 2002 as key to the unions transformation. It is observed that SACU has evolved from a geopolitical organisation with a repressive colonial foundation to a well-integrated regional trading bloc that is perceived as a possible springboard for larger regional trading blocs in Africa. The study further explores evidence of declining SACU revenue and investigates its implications on government expenditures in the small members of the union; namely, Botswana, Lesotho, Namibia and Swaziland (BLNS countries). It is found that among the members of the union, Lesotho and Swaziland are the most dependent on SACU transfers and, consequently, the most vulnerable to the current downward trend in SACU revenue. While Namibia has traditionally relied on diamond exports, it has also been receiving large SACU transfers relative to its GDP. In addition, the study observes that the present SACU revenue sharing formula adopted in 2002 exposes the BLNS countries to instabilities arising from global business cycles more than it does South Africa.

The EU-SACU economic partnership agreement: Resultant trends and patterns in SADC intraregional agricultural trade flows

“…As the world's oldest customs union, the origins of the SACU date back to what was called the Customs Union Convention (CUC) of 1889 between the British Cape Colony and the Orange Free State Boer Republic (Ngalawa, 2014). In 1893 the CUC was extended to include Botswana andLesotho, then Eswatini (then Swaziland) in 1903.…”

“…During the series of negotiations, before becoming a dejure member, Namibia was taken to be a de facto member, as its administration was part of South Africa. Following the independence of Namibia in 1990 along with the end of apartheid in South Africa in 1994, the SACU agreement was once more negotiated to start in November 1994, culminating in a new SACU agreement on 21 October 2002 in Gaborone, Botswana, with the primary goal being to promote economic development through the regional coordination of trade (Ngalawa, 2014). McCarthy (2003) highlights the important development in the history of SACU, which is the oldest functional customs union and a building block to the SADC, where South Africa, one of the most powerful economies in the continent, entered into a regional integration arrangement with four much smaller economies, the BLNS.…”

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“…Around 1893, Bechuanaland (Botswana) and Basutoland (Lesotho) were admitted as members, Eswatini became a member around 1903. The three new members were admitted under a separate protocol which categorized them as second-class members with diminished rights (Ngalawa, 2013). It underwent major changes in 1969 (when the EBL states gained independence), 1990 (when Namibia gained independence), and 2002 (when South Africa was democratised).…”