SACU members to experience low revenue inflows
WINDHOEK, 02 APR (NAMPA) - Most Southern African Customs Union (SACU) countries will experience low revenue inflows due to the weakening of the South African Rand, said a local economist.
The Rand weakened around 4 per cent on Friday following President Jacob Zuma’s Cabinet reshuffle.
Zuma sacked nine Cabinet ministers midnight Friday, including Finance Minister Pravin Gordhan.
SACU countries depend on the SACU sharing revenue arrangement, which in turn depends on the value of trade driven by South Africa, Mally Likukela, an economist told Nampa Friday.
Namibia imports between 75 per cent and 90 per cent of its consumables from its neighbour.
South Africa is the largest economy in the region and given that “a weak Rand, is a weak South Africa” all SACU member countries will experience very low revenue inflows, he reiterated.
SACU consist of Botswana, Lesotho, Namibia, South Africa and Swaziland, known as BLNS member states.
The Common Monetary Area (CMA) links BLNS member states into a monetary union.
Although the South African Rand is legal tender in all states, the other member states issue their own currencies: the Lesotho Loti, Namibia Dollar and Swazi Lilangeni.
However, these are exchanged on par with the Rand and there is no immediate prospect of change.
Out of the five SACU member states, only Botswana is out of the CMA, having replaced the Rand with the Botswana Pula.
Likukela is of the opinion that the weakening of Rand will hamper respective fiscal policies and budgeting.
“Poor economic performance in South Africa means poor economic performance in the southern African region in general,” he said.
According to information obtained from the SACU website, the current SACU Revenue Sharing Formula has three components: Customs, Excise and Development.
The Customs share is allocated on the basis of each country's share of intra-SACU imports, while the Excise Component is allocated on the basis of each country's share of Gross Domestic Product (GDP).
The Development Component, which is fixed at 15 per cent of total excise revenue, is distributed according to the inverse of each country's GDP per capita.
The structure of the Revenue Sharing Formula is such that BLNS Member States get a significant share of their revenue from the Customs Component, while South Africa gets more than 90 per cent of its share from the Excise Component.
The Development Component, meant to compensate the least developed economies, is distributed more or less in equal share among all the member states.