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SACU IT Connectivity ConferenceRepresentatives from the Southern African Customs Union (SACU) gathered in Johannesburg, South Africa recently to refine requirements towards the development IT connectivity and electronic data exchange to facilitate cross-border customs clearance in the region. The workshop was convened by the SACU Secretariat under the sponsorship of the Swedish government and technical support from the World Customs Organisation.

Work already commenced way back in 2012 on this initiative. Progress in the main has been hampered by the legal agreement which to date not all members of the Customs Union have ratified. One of the features of this initiative, however, has been the continuity of support rendered by the WCO.

This event was indeed fortunate to secure – once again – the services of S.P. Sahu, former head of Information Technology at the WCO. After his secondment to the WCO he is now back in his home country where he is the Commissioner for Single Window based in Delhi, India.

S.P’s years of experience in both the technical and operational spheres of customs and the international supply chain enable him to articulate concepts and solutions in a manner which are practical and simple to understand. The workshop recognised the need to accelerate border processes and to this end the border process should be limited to physical examination, inspection, release; declaration processes should be done away from borders.

While simple enough in theory, the notion of clearance away from borders could pose challenges. Many of Africa’s borders – including those of a ‘One Stop’ kind – have not fully embraced the need to integrate processing and synchronize Customs activities. The challenge posed by ‘regional integration’ is one of surrendering national imperatives for a common regional good. It imposes a co-ordination of and development towards ‘regional objectives’ with the same level of purpose as national states do for their domestic agenda’s. In the case of SACU, it challenges member state’s stance on what real benefits the customs union should aspire to, beyond the mere sharing of the common revenue pool.

The outcome of the workshop resulted in a more refined, do-able scope and objective. With Mr. Sahu’s experience and guidance, the revised Utility Block (UB) speaks to all facets (legal, operational and technical) of the ‘regional agreement’ to the extent it specifies in the required detail the programme of action required on the part of the member stats as well as the SACU Secretariat. Refinement of the UB includes the removal from scope of the Release Message, Manifest Information and bond/guarantee message for the purpose of simplification of customs processes.

What remains are –

  • An Export & Transit Message – which includes the Unique Consignment Reference (UCR) validated and approved by the Export/Exit country.
  • An Arrival Confirmation/Notification Message – where the arrival date time would be when the import country recognises goods as received and places the goods under its customs procedure.
  • A Control Results Message – which includes the results of data matching, inspection and risk assessment based on agreed business rules.

In support of the above, SACU recently agreed on a framework of a UCR which must be further discussed and agreed upon by the respective member states. The UCR is a structured reference number which will be used by customs administrations of the respective member states to ‘link up’ import declaration data with the corresponding ‘export declaration’ data electronically exchanged by the export country.

Regional traders who have electronic clearance and forwarding capability will also play a role in the exchange of data through the exchange of the UCR on export and transit information with their counterparts or clients in the destination country. Once the exchange of data is operational between member states, it will be imperative for the importer to receive/obtain the UCR from the exporting country and apply it to his/her import declaration when making clearance with Customs.

The SACU Utility block will be tabled at a future Permanent Technical Committee meeting of the WCO for consideration and approval. A Utility Block is a concept structure which is proposed under the WCO’s Globally Networked Customs (GNC) initiative which seeks to aid and assist its members in the operationalisation of Mutual Administrative Assistance agreements.

SACU logoPeter Fabricus, Foreign Editor, Independent Newspapers through the Institute of Security Studies writes an insightful and balanced article on the history and current state of the Southern African Customs Union (SACU).

The formula that determines how the customs and excise revenues gathered in the Southern African Customs Union (SACU) are distributed among its members looks, to a layperson, dauntingly complex. But this formula has had an enormous impact on the economic and even political development of the five SACU member states; South Africa, Botswana, Lesotho, Namibia and Swaziland.

The impact has arguably been greatest on South Africa’s neighbours, the four smaller member states that are often referred to simply as the BLNS. But it has also had an impact on South Africa.

SACU was founded in 1910, the year the Union of South Africa came into existence, and is the oldest surviving customs union in the world. Originally it distributed customs revenue from the common external trade tariffs in proportion to each country’s trade..

So, South Africa received nearly 99%. Surprisingly, South Africa’s apartheid government radically revised the revenue-sharing formula (RSF) in 1969 after Botswana, Lesotho and Swaziland had become independent. This gave each of the BLS members first 142% and later 177% of their revenue dues, calculated on both external and intra-SACU imports, with South Africa receiving only what was left. But this apparent economic generosity from Pretoria almost certainly masked a political intention to keep its neighbours dependent and in its fold, as the rest of the world was increasingly turning against it.

However, as Roman Grynberg and Masedi Motswapong of the Botswana Institute for Development Policy Analysis pointed out in their paper, SACU Revenue Sharing Formula: The History of An Equation, the 1969 formula became increasingly unviable for South Africa as it had been de-linked from the common revenue pool. This threatened to burden Pretoria with a commitment to pay out to the BLS states more than the total amount in the pool.

The African National Congress government saw the dangers when it took office in 1994 and soon began negotiations with the BLNS states for a new formula. That was agreed in 2002 and implemented in 2004. But although the 2002 RSF eliminated the risk that the payouts to the BLNS might exceed the whole revenue pool, it actually increased the share of the pool accruing to the BLNS at the expense of South Africa – as Grynberg and Motswapong also observe.

The new RSF was based on three separate components. The first divided the customs revenue pool proportional to each member state’s share of intra-SACU imports. Because of the growing imports of the BLNS states from the ever-mightier South Africa, this meant most of the common customs pool went to the BLNS. This proportion is increasing – but never to more than the entire pool.

The second component of the RSF divided 85% of the pool of excise duties (the taxes on domestic production) in direct proportion to the share of the gross domestic product (GDP) of each of the SACU members. The remaining 15% of the excise duties became a development component, distributed in inverse proportion to the GDP per capita of each member. So the poorest members of SACU would receive a disproportionate share of this element of the excise.

Over the years the BLNS countries have grown increasingly dependent on the SACU revenue. It now funds 50% of Swaziland’s entire government revenue, 44% of Lesotho’s, 35% of Namibia’s and 30% of Botswana’s. Because of its own growing fiscal constraints, Pretoria launched a review of the formula in 2010. But this review got bogged down over major disagreements and seems to have gone nowhere.

In his budget speech this month, Finance Minister Nhlanhla Nene raised the issue again, calling for a ‘revised and improved revenue-sharing arrangement,’ and Parliament’s two finance committees examined it. National Treasury spokesperson Jabulani Sikhakhane told ISS Today that while efforts to reform the SACU formula are ongoing, ‘progress has unfortunately been arduously slow.’

Budget documents show that in 2014-15, South Africa paid out some R51.7 billion to the BNLS countries out of a total estimated revenue pool of R80 billion, and was projected to pay out R51 billion again in 2015-16. Kyle Mandy, a PricewaterhouseCoopers technical tax expert, told Parliament’s two finance committees last week that South Africa was paying about R30 billion a year more than it would otherwise under the SACU RSF. He said South Africa contributed about 97% of the customs revenue pool and received only about 17% of it.

The R51.7 billion payout to the BLNS this year represents about 5% of South Africa’s total of R979 billion in tax revenue, a substantial ‘subsidisation’ that was no longer affordable at a time of growing fiscal constraint, which had forced Nene to increase taxes, Mandy said.

He noted that the SACU revenue had allowed all but Namibia of the BLNS countries to set their taxes below South Africa’s. ‘This means South Africa is subsidising the BLS countries to compete with South Africa for investment with their more attractive taxes,’ he said in an interview.

‘This is not sustainable for anyone. It locks the BLNS countries into dependency on South Africa. They have neglected their own fiscal systems. But the moment that the revenue fluctuates, [as Nene’s budget predicted it would in 2016-17, dropping to R36.5 million], it puts them in a difficult position. When South Africa sneezes, they catch flu.’

But what to do about this? Some, like political analyst Mzukisi Qobo, have called for a total overhaul of the SACU agreement, which would make explicit that SACU is a disguised South African development project. The development aid would become transparent and could be tied to conditions such as democratic government.

That is on the face of it an attractive solution, offering the opportunity of leveraging democracy in Swaziland, in particular, by placing a conditional foot on its lifeline of SACU revenues. But Grynberg warns that a sudden withdrawal of the vital direct budgetary support which SACU customs and excise revenues provides, could implode both Swaziland and Lesotho and provoke economic crises in Namibia and even Botswana.

He also points out that the RSF is not plain charity by South Africa to its smaller neighbours. The formula has essentially just compensated them for the cost-raising and polarising effects of SACU – that the BLNS countries have generally had to pay more for imported goods over the years than they would have otherwise done because of import tariffs designed to protect South African industries; and because the duty-free trade within SACU has tended to attract investment to larger South Africa.

Meanwhile, South Africa has benefitted from a ready market for its much larger manufacturing machine. Grynberg wrote in a more recent article for the Botswana journal, Mmegi, that the South African government was thinking of pulling out of SACU because it couldn’t get its way in the negotiations to revise the RSF; and because the 2005 Southern African Development Community Free Trade Agreement now gave it duty-free access to the BLNS countries without the need to pay the re-distributive SACU customs revenues.

It was only President Jacob Zuma who was preventing this, because he didn’t want to go down in history ‘as the man who crippled the Namibian and Botswana economies and created two more “Zimbabwes” – i.e. Swaziland and Lesotho – right on the country’s border.’ Pretoria’s decision had turned SACU into a ‘dead man walking, just waiting for someone to pull the switch and end its life.’

Grynberg strongly advised the BLNS to prevent this by accepting that the political reality that underpinned the RSF of SACU no longer existed. He says that it should be transformed into a purely development community without the formula, but with mutually agreed spending on development – mainly in the BLNS. He suggested, though, that this radical change would take at least 10 to 15 years to phase in.

All very well. But isn’t that what SADC is supposed to be already? Which suggests that it might be time to take the 105-year-old dead man off life support.

Source: Institute of Secutity Studies (ISS)

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WCO News - Coordinated Border Management Feb 2015Check out the latest WCO News – per usual a wealth of interesting customs and supply chain information:

  • WCO launches IRIS, an application exploiting open source information
  • Harmonized System amendments effective from 1 January 2017
  • Beginning the CBM process: the Botswana experience
  • Inter-institutionality – a distinctive feature of the Colombian AEO model
  • WCO Data Model: the bridgehead to connectivity in international trade
  • Implementing New Zealand’s Joint Border Management System

and a whole lot more…

Source: WCO

CigarettesAn intricate web of smugglers, which reportedly involves manufacturers and middlemen, has been illegally carting cigarettes worth millions of dollars out of the country over the years, prejudicing the treasury of vital revenue.

Cigarette manufacturer, Savanna, has been fingered as one of the main culprits, while multinationals like BAT have also been mentioned in the illicit cross-border trade, mainly to South Africa.

Commonly smuggled brands include Remington Gold, Madison, Sevilles, Magazine Blue, Chelsea and Pacific Blue, manufactured by Savanna – which consistently denies smuggling.

A senior police sokesperson said “Even though we don’t always talk about it, we have managed to make significant arrests and the cases have been taken to court. The arrests include smuggling attempts at undesignated spots along the border and through official exit points such as Beitbridge”

A senior customs official told The Zimbabwean that cigarette smuggling, particularly through Beitbridge and Plumtree border posts, was difficult to arrest because of corruption.

“Policing at the border posts involves several agencies, namely the police, CIO (Central Intelligence Organisation), customs and special deployments from ZIMRA (Zimbabwe Revenue Authority). The problem is that these officers work in collaboration with the smugglers and haulage trucks and other containers carrying the cigarettes are cleared without proper checking. Hefty bribes are involved and the money is too tempting to resist,” said the customs official.

“You would be amazed how wealthy these officers have become. They have bought houses, luxury cars and send their children to expensive schools – yet their regular salaries are so low,” he added.

Immigration and customs officials, who also constantly liaise with their South African and Botswana counterparts and meet physically regularly, pretend to be checking the containers but clear them without completing the task, and know what the trucks and other carriers would be ferrying.

ZIMRA has four scanners for detecting contraband and an anti-smuggling team that also uses sniffer dogs, in addition to guard soldiers posted between the Zimbabwean and South African borders.

There are about 15 regular roadblocks along the Harare-Beitbridge road and 10 between Bulawayo and Plumtree that search trucks, buses and private cars. Despite this, the smuggling continues because of the collusion among the officials, said the source.

In early January, the Ferret team, a joint operation involving Zimbabwean and South African officers, intercepted a truckload of 790 Remington Gold cigarettes worth an estimated $119,000 destined for South Africa along the Masvingo-Beitbridge road. The smugglers were caught and arrested while offloading the cartons into small trucks. Source: The Zimbabwean

SADC organizes a Customs Training of Trainers Course on NTBs in cooperation with the WCO [SADC]

SADC organizes a Customs Training of Trainers Course on NTBs in cooperation with the WCO [SADC]

The Southern African Development Community (SADC) organized a Training Course under its Customs Training of Trainers (TOT) Programme between 17 to 20 November 2014 at its Headquarters (Gaborone, Botswana). The training was conducted in collaboration with the World Customs Organization (WCO), the WCO Regional Office for Capacity Building (ROCB) for the Eastern and Southern Africa Region, and the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ). Forty-two senior Customs officers from 13 of SADC’s 15 Member States, many of whom are active in their administrations’ training departments, participated in the Training Course.

The main objective of the TOT Programme is to provide technical and professional support, particularly in view of the contribution by Customs administrations to the consolidation of the SADC Free Trade Area and the successful implementation of the SADC Protocol on Trade. This will be achieved through the TOT Course on Non-Tariff Barriers (NTBs), which continue to be major stumbling blocks to trade in the region and many of which are Customs-related (or perceived as such). Participants who complete the Training Course will disseminate the knowledge gained, at national level, to relevant stakeholders including Customs officers from their own administrations.

Participants learnt the basic principles and definition of Non-Tariff Measures and NTBs, covering the World Trade Organization (WTO) Agreement on the Application of Sanitary and Phytosanitary Measures (SPS Agreement) and inter-regional initiatives such as the online NTB monitoring mechanism and national monitoring committees. They also gained an overview of the Agreement on Trade Facilitation (TFA) recently concluded under the auspices of the WTO. The WCO gave an introduction to its tools and instruments for applying trade facilitation measures and to the Revised Kyoto Convention (RKC). Particular emphasis was placed on the new Transit Handbook and the TFA Implementation Guidance.

The course was highly interactive and participants shared their views on the importance of global standards to facilitate regional integration and various trade facilitation measures. They discussed how they could promote Coordinated Border Management (CBM) and increase public-private dialogue at national and regional level. Source: WCO

Workers putting the final touches to the entrance to the Botswana dry port. [Photo - Floris Stenkamp]

Workers putting the final touches to the entrance to the Botswana dry port. [Photo – Floris Stenkamp]

The Botswana dry port in Walvis Bay is expected to be operational this week, Botswana Railways’ Commercial Manager Mthulusi Lotshe said last week. The dry port will cost N$60 million.

The Botswana dry port is constructed on land owned by NamPort. The facility would be used exclusively by Botswana Railways for handling both containerised and non-containerised cargoes for import and export to, or originating from this eastern neighbouring country.

Lotshe made the announcement during the Trans Kalahari Corridor (TKC) information session hosted by the Trans-Kalahari Corridor secretariat in Windhoek.

He said the objective of the dry port is to consolidate maritime goods into inter modal and long distance transport flows.

“The other objectives of the dry port include improving cargo processing through coordinated operations; facilitating collection and distribution of local, regional and international transport; and integrating Botswana and the Southern African Development Community region with the Walvis Bay port,” Lotshe said.

He said the port aims to strengthen multi-modal solutions and create opportunities for new services, as well as reduce total transport and logistics costs and journey time. Source: The Namibian

banner4Transport Forex, created by Inter Africa Bureau de Change, a registered bureau de change with the South African Reserve Bank has created an unique online banking system for the transport industry.

With branches at all of South African border posts, the company has expanded operations into Namibia, Botswana, Zimbabwe, Mozambique, Zambia, the DRC and Tanzania with offices on all the major border posts between these countries.

Transport Forex is an online ordering system where the transport manager can deposit money in South Africa into the relevant account therefore ensuring when drivers arrive at the relevant border posts there is enough money for them to pay the relevant duties. At the same time, this ensures enough cash is in the account for drivers to purchase fuel at key petrol stations or even pay for a service on-route in one of the partner countries.

Once the monies have been deposited into the account, an order number is sent via SMS to the driver who then presents it at the relevant Transport Forex office to draw the necessary funds required.

In the same way you can book and pay for diesel for your truck on any of the major transport routes in Namibia, Botswana, Zimbabwe, Mozambique, Zambia, the DRC and Tanzania. Transport Forex has negotiated with partner fuel suppliers for better prices and passes this discount directly to the transport company.

A new Payment Service was introduced in 2013 for clients. Should additional unforeseen funds be required for an emergency while the driver is on the road then monies can be made available for drivers almost immediately. This prevents valuable time from being lost.

Transport Forex is also in negotiations with several government institutions so relevant duties and taxes for operators’trucks can also be paid through the system in advance.

To join Transport Forex simply log onto, and click on “Create Account”. Registration is free, and there are no monthly charges.

Southern_Africa_Panorama_MapSouth Africa is a member of the Southern African Customs Union (Sacu), which consists of Botswana, Lesotho, Namibia and Swaziland (BLNS), the oldest customs union in Africa but apart from this prestige, is Sacu worth the time?

In an article by Professor Roman Grynberg, he asked whether Sacu is a “dead man walking?” and I wish to follow-up on this. A recent article appearing on the World Bank’s website states that even if poor countries are neighbours, it is often more difficult for them to trade with each other than it is for them to trade with distant countries that are wealthy.

The Sacu agreement is principally about the issue of distributing customs revenue earned by the five members on their international trade with other countries. The distribution of this revenue is based on each country’s share of intra-Sacu imports and so favours the smaller members.

South Africa, for example, imports very little from within the region and so ends up paying the BLNS about R15bn to R18bn per year more than it would if Sacu did not exist.

If we are paying R15bn to R18bn per annum to be in a union with questionable benefits, why do we not exit the agreement?

For one, the SADC free trade agreement which was implemented in 2008, gives South Africa a “get out of jail free card” through providing South African exports similar but not identical market access to that available under Sacu.

We could thus “walk away from Sacu at any moment, save R15bn to R18bn and South African exports would still continue to flow across the Limpopo basin in more or less the same uninterrupted way.” (Grynberg, 2014).

Another reason, according to Grynberg, is that an “economic catastrophe” may result if South Africa exits. Swaziland and Lesotho are between 60% to 70% dependent on the Sacu for revenues, Botswana and Namibia are somewhat less dependent at 30% to 40%.

I feel though that this may be the very same reason that there will not be a major reform of the revenue-sharing formula. Would you want to cede even a third of your income?

So what should South Africa do? I think it is firstly important to note that of our SADC neighbours, South Africa earns the most from its exports to Zambia, Zimbabwe and Mozambique – none of which is in the Sacu.

This is perhaps not surprising when considering the findings of the World Bank and realising that nearly all of South Africa’s top trading partners are in the northern hemisphere.

The BLNS countries, interestingly enough, fall in the bottom 5 of our SADC trade partners and so should we worry so much about an “economic catastrophe” in the BLNS when they don’t buy our goods in any case?

What it comes down to, I feel, is that South Africa needs to play hard ball. By this I mean South Africa needs to be committed to actually exiting the Sacu agreement because it is only when the BLNS realise that we are serious and that there is the real threat of them losing 30% to 70% of their revenue that they will agree to a new revenue-sharing formula. After all, something is better than nothing. Source: Fin24

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AmatiThirty-one countries belong currently to the Group of Landlocked Developing Countries: 15 are located in Africa, 12 in Asia, 2 in Latin America and 2 in Central and Eastern Europe. The lack of territorial access to the sea poses persistent challenges to growth and development of these countries and has been the main factor hindering their ability to better integrate in the global trading system. The transit of export and import goods through the territory of at least one neighboring State and the frequent change of mode of transport result in high transaction costs and reduced international competitiveness.

For more details on LLDCs visit – Landlocked Developing Countries (LLDCs)

The 2003 Almaty Programme of Action highlighted the link between the ability of LLDCs to harness their trade potential and the state of the transport infrastructure and the efficiency of trade facilitation measures in neighboring transit countries and called for international support in favor of LLDCs. The United Nations General Assembly in its resolution 66/214 of 22 December 2011 and resolution 67/222 of 3 April 2013 decided to hold a Comprehensive Ten-Year Review Conference of the Almaty Programme of Action in 2014 with a view to formulating and adopting a renewed development partnership framework for LLDCs for the next decade.

It is expected that the ten-year review will provide an opportunity for: (i) assessing progress made in establishing efficient transit transport systems in landlocked developing countries since the adoption of APoA in August 2003, and particularly after the midterm review of 2008; and (ii) agreeing on actions needed to sustain achievements and address challenges in overcoming the special problems of landlocked developing countries around the world.

It would appear that this programme very much supports the creation of inland ports connected to the seaports by means of secure and bonded facilities – within the ambit international law, i.e. WTO (Trade Facilitation Agreement) and the WCO (Revised Kyoto Convention). The question arises as to whether an inland port located in Botswana, Zimbabwe or any adjoining country be able to demand such rights where a ‘corridor’ country or country providing international seaport access to LLDCs does not observe or accept international transit principles?

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South Africa has been courting major player Botswana’s support for changes to SACU.

South Africa has been courting major player Botswana’s support for changes to SACU. (Mail & Guardian)

The Mail & Guardian reveals that South Africa has requested an urgent meeting with members of the Southern African Customs Union (SACU) for as early as ­February next year in what could be a make-or-break conference for the struggling union.

In July this year, a clearly frustrated Trade and Industry Minister Rob Davies told Parliament that there had been little progress on a 2011 agreement intended to advance the region’s development integration, and it was stifling its real ­economic development.

South Africa’s payments to SACU currently amount to R48.3-billion annually – a substantial amount, considering the budget deficit is presently R146.9-billion, an estimated 4.5% of gross domestic product.

In the past, South Africa has had some room to reposition itself, but as Finance Minister Pravin Gordhan has pointed out, the South African fiscus has come under a lot of pressure as a result of factors such as the global slowdown, reduction in demand from countries such as China for commodities, and reduced demand from trade partners such as the European Union.

South Africa, which according to research data, last year contributed 1.26% of its GDP, or about 98% of the pool of customs and excise duties that are shared between union countries including Swaziland, Botswana, Lesotho and Namibia, wants a percentage of this money to be set aside for regional and industrial development.

The four countries receive 55% of the proceeds, and are greatly dependent on this money, which makes up between 25% and 60% of their budget revenue. South Africa has very little direct benefit, except when it comes to exporting to these countries. It receives few imports.

Changing the revenue-sharing arrangement

Efforts to change the revenue-sharing arrangement so that money can be set aside for regional development would result in less money going into the coffers of these countries.

It would also mean that a portion of the revenue that South Africa’s SACU partners now receive with no strings attached would in future include restrictions on how it is spent.

A source close to the department said adjustments to the revenue-sharing arrangement and the promotion of regional and industrial development were issues on which the South African government was not willing to budge.

So seriously is South Africa viewing the lack of progress on the 2011 agreement, a document prepared for Cabinet discussion includes pulling out of SACU as one of its options, a source told the Mail & Guardian.

This could not be confirmed by the government, but two senior sources said South Africa was very aware of the dependence of its neighbours on income from the customs union, in particular Swaziland and Lesotho, and the impact its collapse could have on these economies.

Professor Jannie Rossouw of the University of South Africa’s department of economics believes a new revenue-sharing arrangement is essential for the long-term sustainability of SACU countries.

South Africa’s contribution

He also said that South Africa’s contribution as it presently stands should be recognised as development aid and treated as such by the international community.

Between 2002 and 2013, total transfers amounted to 0.92% of South Africa’s GDP, which exceeds the international benchmark of 0.7% set by the Organisation for Economic Co-operation and Development, he said in his research.

“It is noteworthy that South Africa transfers nearly all customs collections to SACU countries. Total collection since 2002 amounted to about R249-billion, while transfers to SACU were about R242-billion,” Rossouw said. The South African Revenue Service (SARS) recognises that inclusion of trade with Sacu would have a substantial impact on South Africa’s ­official trade balance.

South Africa’s total trade deficit for 2012 was R116.9-billion and, according to SARS, had trade with the union been included, it would have been much reduced to R34.6-billion.

South Africa has budgeted to increase its allocation to SACU from R42.3-billion in the 2012-2013 financial year to R43.3-billion this financial year and in the 2014/2015 financial year.

In 2002, the SACU agreement was modified to include higher allocations for the most vulnerable countries, Swaziland and Lesotho, and it established a council of ministers, which introduced a requirement for key issues to be decided jointly. In 2011, a summit was convened by President Jacob Zuma in which a five-point plan was established to advance regional integration.

Review of the revenue-sharing arrangement

This involved a review of the revenue-sharing arrangement; prioritising regional cross-border industrial development; making cross-border trade easier; developing SACU ­institutions such as the National Bodies (entrusted with receiving requests for tariff changes) and a SACU tariff board that would eventually take over the functions of South Africa’s International Trade Administration Commission (ITAC); and the development of a unified approach to trade negotiations with third parties.

Davies told Parliament that there had been little progress in the past three years on these five issues.

Xavier Carim, the director general of the international trade division of the department of trade and industry, said there had been positive developments regarding agreements on trade negotiations, such as those with the European Union and India on trade, and progress had been made on the development of SACU institutions, but progress was slow on the other issues.

Davies told Parliament it was difficult to develop common policy among countries that varied dramatically in economic size, ­population and levels of economic, legislative and institutional development.

He cited differences over approaches to tariff settings as an example.

“South Africa views tariffs as tools of industrial policy, while for other countries tariffs are viewed as a source of revenue,” Davies said.

A proposal that cause all the problem

“A key problem that led to differences was the proposal by one member for lower tariffs to import goods from global sources that were cheapest, which ultimately undermined the industry of another member. This was primarily an issue of countries who viewed themselves as consumers rather than producers.”

The South African government is trying diplomacy as its first option. A senior government source said issues around SACU made up a large part of talks last week between Botswana and South Africa on the establishment of co-operative agreements on trade, transport and border co-operation.

Catherine Grant of the South African Institute of International Affairs said Botswana had long been considered the leader of the four countries. It would make sense for South Africa to bring Botswana on board before the meeting.

Grant said the SACU agreement needed to be re-examined and modernised.

“There needs to be a review of the revenue-sharing formula that is less opaque and is easier to understand. The present system is complicated, making it hard to work out exactly how much countries are getting. It’s clear that Rob Davies feels hamstrung by SACU and has done for some time, because decisions cannot be made without the agreement of all five members, who have different needs and requirements.”

The trade balance is one of the elements that resulted in South Africa’s current account, which has recorded significant deficits in recent months, coming in as high as 6.5% of GDP in the second quarter of 2013.

Trade between South Africa and SACU has always been recorded, but for historical reasons it has been kept separate from official international trade statistics. Source: Mail & Guradian


handshakeThe Southern African Customs Union (SACU) consisting of Botswana, Lesotho, Namibia, South Africa and Swaziland collaborates with the World Customs Organization (WCO) in a trade facilitation initiative funded by the Swedish International Development Cooperation Agency (Sida). The initiative in which also the SACU Secretariat participates, aims among others at developing a regional Preferred Trader (PT) scheme.

From 30th of September to 4th of October a core team consisting of National Project Managers, audit experts, PT-experts and site managers met in Windhoek, Namibia, with WCO experts to further prepare for the launch of the PT-scheme by developing regional processes to be applied related to the benefits selected and designed for the SACU regional PT.

The selected pilot operators have been engaged, and in the near future also the relevant cross border regulatory agencies and Customs officials at the selected border posts will be sensitized on the regional PT-scheme.

During the intense working week, all participants actively contributed to the preparations for the launch of the PT-scheme, planned for the first half of 2014. Source:

Rob Davies Frustrated with lack of progress (Business Day)

Rob Davies Frustrated with lack of progress (Business Day)

Trade & industry minister Rob Davies did not mince his words when he briefed parliament late last month on the Southern African Customs Union (Sacu), the world’s oldest. The union was formed in 1910 and comprises SA, Botswana, Lesotho and Swaziland.

Exasperated, Davies complained to MPs that SA’s partners were hardly moving in the direction of harmonising trade and industrial policies. He said if this did not happen soon, the viability of Sacu itself might be called into question.

Sacu was initially formed as a colonial-era instrument to control the flow of goods into and out of the then British colonies, an arrangement that was retained with a new agreement in 1969. In essence, SA collects customs and excise revenue on behalf of all four countries and distributes 98% of all this money to the three other members as a form of aid, retaining only 2% that should accrue to itself. It is a formula that has both worked and been fraught with difficulties over the past century.

The agreement was modified with a more distributive formula in 2002 which came into effect into 2004. Under the new agreement the most vulnerable countries, Swaziland and Lesotho, would get a larger share of the excise portion.

The Sacu distributions are also the instrument through which Swaziland was to get R2,4bn in assistance from SA in 2011. Under that agreement SA would have advanced the landlocked kingdom the money from its future Sacu distributions, but it came with fiscal and technical conditions from SA.

In January 2013, Swazi finance minister Majozi Sithole said the loan arrangement was “not working out”. He complained about additional conditions set by SA before the first tranche of R800m could be paid to Swaziland.

The kingdom’s financial woes arose mainly from reduced customs and excise collections in 2010 which reflected reduced trade to and from the region. With up to 60% of Swaziland’s national budget dependent on Sacu funds, the reduction from a total pool of R27bn to just over R17bn left Swaziland cash strapped.

Though he didn’t explicitly say so in his briefing to parliament, Davies’ frustration with the Sacu arrangement was palpable. He took particular issue with the Sacu payments merely serving as a guaranteed source of revenue for the treasuries of Sacu member states. “There are no cross-border development initiatives out of the revenue collected when there are opportunities for the members to invest in joint projects,” he told parliament.

Sacu has other problems. While the 2002 agreement calls for harmonised trade and industrial policies, it also makes provision for the countries to have different fiscal and other regimes. As a consequence Sacu members’ corporate and personal income tax rates are different. This means some members realise lower internal tax revenues than they otherwise could, increasing dependency on the Sacu distributions.

A sense of entitlement has also crept into the arrangement. In a case that generally escaped media attention, in 2009 the other members asked for an international tribunal to seek arbitration on what they believed to be “short” payments from SA. The tribunal convened in the supreme court of Namibia in Windhoek.

The matters in dispute were resolved with the signing of the latest agreement in 2009, but the fundamental complaint demonstrated both the entitlement and the vulnerability of the most dependent members.

At the time SA was expected to make four quarterly distributions which were based on an estimate of revenues collected. As often happened, there was an overestimation which resulted in a payment surplus of just over R2bn, which SA deducted from future payments. This precipitated a dispute which, given the vulnerability of Swaziland and Lesotho, was almost inevitable as their entire fiscal planning for that year had been premised on the inaccurate Sacu estimates.

SA’s counsel in the hearing, Michael Kuper, argued that the arrangement was so inefficient that it forced SA to sometimes look for alternative sources of funding just to fulfil the Sacu revenue-sharing formula.

Officials of the department of trade & industry and national treasury have for some time been unhappy about the disruptive nature of the formula, given the volatility of customs revenue. Davies alluded to this in parliament, using the wild fluctuations in revenue before, during and after the global financial crisis.

Now Davies wants the union to shape up or make a decision on its future. He told parliament that Sacu had to live up to the outcomes of its second summit, held in 2011, where member states undertook to work on cross-border industrial development, development of Sacu institutions, unified engagement in trade negotiations and a review of the revenue-sharing arrangements.

As if to emphasise its historical and present inertia, Davies said that not much work had advanced in this regard – such as the formation of national tariff bodies, a Sacu tariff board, common antitrust regulations and co-operation in agriculture.

“Some members have proposed that the Sacu tariff board be formed even if the states’ national tariff boards have not been formalised yet,” he said, in an indication that some of the members do not have the technical wherewithal to install the necessary institutions.

Lesotho and Swaziland in particular are hampered by structural economic difficulties, including low prospects for meaningful economic growth and reliance on external aid. A recent IMF report on Lesotho complimented the new government on its fiscal discipline and recommended further aid. It also noted new measures to improve supervision over the financial and other sectors.

As Africa’s last remaining absolute monarchy, known for its profligate spending on the comforts of its king, Swaziland remains a political hot potato which has increased pressure on the SA government to attach conditions to any assistance given. Though written in diplomatic language, the 2011 IMF report on Swaziland also listed a number of areas that needed strengthening.

It recommended the cutting of public-sector wages to ease fiscal pressures, a decision that brought the kingdom to the brink of instability, precipitating the appeal to SA for help. MPs raised the Swaziland loan issue with Davies, demonstrating the internal and regional political difficulties of the arrangement.

While SA remains determined to assert its voice over its junior partners in Sacu, it still has to tread carefully lest it be seen as a bully. Providing some cover have been the conditions set by the IMF before Swaziland can receive further assistance. Some of these common conditions include the protection of the peg between the Swazi ilangeni and the rand, the implementation of a fiscal adjustment roadmap and a prioritisation of social spending over the reported excesses of King Mswati III.

Early this month Australian newspapers reported the arrival of several of King Mswati’s queens and their aides in Australia on an apparent shopping trip. It is such extravagance that has put both SA and the kingdom in a difficult position – the former in its internal political environment and the latter through the loss of credibility with international development finance institutions.

It now appears that SA is choosing the route of common economic development over the aid-like structure of the Sacu payments. It remains to be seen whether the partners will be in a position to make good on Davies’ intentions or keep talking as the member states have been doing for over a decade. Source: Financial Mail

tralacZimbabwe is a landlocked developing country with a population of 14 million, sharing common borders with Botswana, Mozambique, South Africa and Zambia. Zimbabwe has 14 border posts, varying in size in accordance with the volume of traffic passing through them. Beitbridge, the only border post with South Africa, is the largest and busiest, owing to the fact that it is the gateway to the sea for most countries along the North-South Corridor. Zimbabwe thus provides a critical trade link between several countries in the southern African regions. The need for the country, especially its border posts, to play a trade facilitative role can therefore not be over-emphasised.

Trade facilitation has become an important issue on the multilateral, regional and Zimbabwean trade agendas, and with it, border management efficiency. Border management concerns the administration of borders. Border agencies are responsible for the processing of people and goods at points of entry and exit, as well as for the detection and regulation of people and goods attempting to cross borders illegally. Efficient border management requires the cooperation of all border management agencies and such cooperation can only be achieved if proper coordination mechanisms, legal framework and institutions are established.

This study explores how border agencies in Zimbabwe operate and cooperate in border management. The objectives of the study were to:

  • Identify agencies involved in border management in Zimbabwe;
  • Analyse the scope of their role/involvement in border management; and
  • Review domestic policy and legislation (statutes of these agencies) specifically to identify the legal provisions that facilitate cooperation among them.

Visit the Tralac Trade Law website to download the study.

Source: TRALAC

sezFree zones are often seen as a cure-all remedy to the problems developing economies encounter when trying to attract FDI. However, the reality is that such projects need careful planning and long-term support if they are to fulfil such wishes. A report published by fDI Magazine, and featured online – – covers the topic quite comprehensively. While the article it is titled ‘Free Zones’ it’s not quite certain whether all developments sited follow the same business model. Nonetheless it provides some interesting insight to developments across the globe. Of particular interest for Africa are references to developments in Rwanda, Botswana, and the Gambia. In the case of the latter, the Gambian government’s decision to legally enable companies to operate as standalone zones, whereby businesses are permitted to enjoy the benefits of being a ‘free zone’ entity without having to establish in the country’s business park, could enable Gambia to attract investors who wish to have a greater degree of choice over the location of their premises.

Some of the key messages of the article come in the form of cautionary’s –

“the ‘build it and they will come’ assumption over SEZs will not guarantee investor interest”

“while governments are quick to launch them with great fanfare, a lack of on-going support afterwards hinders the zone from developing to a competitive and world-class standard…many projects remain just that – a project”

“while the idea of clustering several companies from a few specific sectors sounds promising on paper, in practice this can be detrimental to foreign enterprises”.

Read the full report here!

Enforcement, Risk Management and Preferred Trade come together in the SACU Region

Enforcement, Risk Management and Preferred Trade come together in the SACU Region

A WCO workshop on the topics of Enforcement, Risk Management and Preferred Trader was conducted in April in Johannesburg, South Africa, with the involvement of the WCO Secretariat, UK Customs and the member countries of the Southern African Customs Union – SACU (Botswana, Lesotho, Namibia, South Africa and Swaziland). Capacity Building in the mentioned areas in the SACU Region is part of the WCO Sub-Saharan Customs Capacity Building Programme financed by the Swedish Government through the Swedish International Development Cooperation Agency, SIDA.

An assessment including lessons learned was conducted concerning Operation Auto, targeted at second hand motor vehicles. This first ever regional enforcement operation in the 102 years of history of SACU presented good results as around 250 vehicles were seized by the Customs administrations. The Regional Intelligence Liaison Office contributed actively in the assessment process, ensuring that also future enforcement operations will benefit from the experiences gained.

The development of further risk management capacity is ongoing at the regional level and discussions were held concerning the establishment of common risk profiles. A number of high risk products have been identified and the formulation of profiles to engage illegal trade in these areas is ongoing.

Regarding the Preferred Trader program, progress can also be reported as SACU Members are approaching implementation at operational level. This project component fits very well with the risk management component as the latter is the foundation of the Preferred Trader approach. The process of selecting high compliant, low risk economic operators for the upcoming pilot scheme is well underway while capacity in verification and post clearance audit is being enhanced. A launch of (a pilot of) the regional Preferred Trade program is tentatively envisaged for the second half of 2013. Source: WCO