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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

 

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Reality Check

The ongoing global financial and economic crisis affects governments,  organisations and citizens in different ways. It would seem that no individual or any organisation has the proverbial ‘silver bullet’ to normalise the situation either. Today, probably most Customs and Border agencies are undergoing ‘modernisation’ or some form of restructuring. Modernisation in itself implies automation or digitization of information changing the lives of the average customs (border) official as well as the expectations and predictability of service to traders and trade intermediaries around the world. 9/11 forever changed the role of Customs and for most of governments, border regulatory authorities as well. Changes in Customs have since been focussed on alignment to policy, standards and guidelines as advocated by the WCO.

WCO Startegic PlanNational adoption of these remains the foremost critical step in establishing a country’s ability to ‘connect’ with the world. A national administration should seek inclusivity of its trading community lest its modernisation be regarded as self-serving. Simultaneously, regional economic communities also seek radical change, albeit on a regionalisation level. Pressures on national (sovereign) nations develop given high-level political commitment to regionalisation, often without taking into account their respective countries’ state of readiness. This creates a false sense of commitment which results in regional failures. Behind such regional initiatives are normally a host of sponsors, purportedly with the right experts and solutions to rectify the ‘barriers’ which prevent a national state from integrating with its neighbours and global partners. Sound familiar? If so, it wouldn’t do national representatives any harm to refresh themselves with the under mentioned WCO tools and validate this in relation to the direction which their organisation is headed. These form part of the WCO’s Customs’ in the 21st Century Agenda. It is also recommended reading for the various regional economic communities (RECs) – here I refer to the African continent – who are not always au fait or fully appraised on the ‘readiness’ landscape of the member states they represent.

The Economic Competitiveness Package (ECP) (Click the hyperlink for more information) is currently a matter of high priority at the World Customs Organization (WCO). Economic competitiveness starts with trade facilitation and Customs administrations undeniably play an important role in this respect. Indeed, facilitating trade is one of the WCO’s key objectives and the Organization has contributed, through its tools and instruments as well as through technical assistance, to increasing the economic competitiveness and growth of Members.

The Revenue Package (RP) (Click the hyperlink for more information) was developed by the World Customs Organization (WCO) in response to WCO Members’ concerns in regard to falling revenue returns in the light of the global financial crisis and declining duty rates.

Significant progress has been made since the adoption of the WCO Capacity Building Strategy in 2003. However, new and emerging key strategic drivers impact on international trade and the roles and responsibilities of Customs administrations. This requires that all our capacity building efforts remain responsive and needs-driven to ensure beneficiary Customs administrations can obtain the support they need to pursue their reform and modernization. This Organisational Development Package (ODP) (Click the hyperlink for more information) outlines the basic approach of the WCO towards organizational development. It provides a simple and accessible overview of the texts, tools and instruments that relate to this topic. It refers and offers access to these resources but does not purport to capture all knowledge and practices within this extensive area.

The Compliance and Enforcement Package (CEP) (Click the hyperlink for more information) has been developed in order to assist Members to address the high-risk areas for Customs enforcement. The Customs in the 21st Century Strategy calls on Customs administrations to implement modern working methods and techniques. In this context, Customs should be equipped with the necessary tools that allow it to effectively manage supply chain risks and enforce laws and regulations in cases of non-compliance. In discharging this mandate, the WCO, in close co-operation with Members, has created an extensive library of instruments, tools, guidance materials and operational co-ordination activities to support Customs compliance and enforcement actions. These tools new form part of the CEP.

 

Mauritius Customs turns 200

October 16, 2012 — 1 Comment

Mauritius Customs 1st Day CoverOn the ocassion of my 300th post, join me in raising the Portcullis for Mauritius Customs! During September, the Mauritius Revenue Authority (MRA) marked the bicentenary celebrations of Customs services in Mauritius by launching a special First Day Cover with four stamps on the Customs Department to mark the bicentenary celebrations of Customs Services in Mauritius. The issue of these new stamps is an acknowledgement of the significant contribution of the Customs services to the economic and social life of the country for more than 200 years. The four stamps depict the Customs Services in different fields with denotation of Rs 7, Rs 8, Rs 20 and Rs 25 illustrating some of the areas where the customs services are involved in their fight against crime and fraud prevention through the use of people, animals and state-of-the-art technology.

On 18 August 1797, a ‘bureau de Douane’ was established for the purpose of raising revenue in a context of war and blockade. It became a major financial institution contributing towards 50% of total revenue. The British took over in 1811 and installed the first Collector of Customs.British Customs practices were gradually introduced in the colony in line with British commercial law.

In modern times, the MRA Customs Department has set as one of its main objective to combat the illicit trade of drug and other illicit substances. The MRA has a team of 6 drug detector dogs handled by certified dog handlers trained by the French Customs and the South African Revenue Services (SARS). Our dogs have been selected carefully from examined litters and were declared competent drug detector dogs as per SAQA Unit Standard in the handling of a service to detect illicit substances.

Since 2008, our sniffer dogs have detected drugs in 25 instances involving the import of Cannabis, Heroin, Hashish, Subutex and other illegal substances worth around Rs 42,530,543. The Drug Detector Dog squad operates at the courier services, Parcel Post Office, Vehicle Search at Airport, Port and Freight Stations, Port area, Airport (Plaisance Air Transport Services & Luggage on carrousels at SSR Int. Airport and Aircraft search) as well as at the seaport for search of vessels. Source: Mauritius Revenue Authority