SACU Centenary: Champagne?

The Southern African Customs Union (SACU) is commemorating its centenary and the theme of the celebrations is “Implementing a Common Agenda towards Developmental Integration in Southern Africa”. As I reflect on the theme, I am reminded that the combined population of the SACU countries is around 55 million with South Africa accounting for some 87% of the total.  South Africa also accounts for over 90% of SACU's aggregate GDP and will continue to maintain its predominant position in the region.

The SACU agreement was formalized in June 1910 between the then Union of South Africa — Territories of Basutoland, Swaziland and the Bechuanaland Protectorate.  The Agreement was renegotiated into the 1969 SACU Agreement, signed by the sovereign states of Botswana, Lesotho, and Swaziland (BLS) and South Africa, on December 11, 1969.  The second SACU Agreement provided two major changes: the inclusion of excise duties in the revenue pool and a multiplier in the revenue sharing formula that enhanced BLS revenues annually by 42 percent.  

With the independence of Namibia in 1990 and the end of apartheid in South Africa in 1994, SACU members embarked on a third round of new negotiations in November 1994, which culminated in a new SACU agreement in 2002. Namibia therefore joined SACU following her independence in 1990 and is the newest Member to the regional community.

Over the decades, intra-SACU trade has intensified but the traditional importance of South Africa as a regional hub has remained broadly unaltered. More than 95% of commercial flows within the customs union involved South Africa as a destination or supplier.  Moreover, South Africa accounts for around half of total BLNS trade, whereas the intra-SACU component of South Africa's total trade is relatively minor, reflecting SA’s greater diversification in terms of export destinations and import sources.

The EC continues to absorb the largest share of overall SACU exports, followed by the United States.  However, similar to the trend in the rest of Africa, the U.S. market remains the single most important single country destination (outside SACU) for exports from Lesotho and Swaziland, mainly due to the preferences granted under the African Growth and Opportunity Act (AGOA).  Exports to China from SACU, although still relatively modest, registered the fastest growth during the period reviewed (2003-2009).  Imports into SACU originate largely from the EC, China, and the United States.  Since 2005, imports from China have exceeded those originating in the United States and SACU's imports consist mainly of machinery and transport equipment, fuels, and chemicals.

However despite the longevity of the agreement, the results of regional integration have been imbalanced and fall far short of a century of progressive progress.  For instance, according to the WTO Third Trade Policy Review of SACU of November 2009, deeper integration is necessary for more balanced development in the SACU region and even though SACU economies have  collectively expanded at an average annual rate of about 4% in real terms since 2003, there is variation in growth rates in each economy and a generally unsteady performance.  The mixed growth record may reflect severe infrastructure bottlenecks, fluctuations in mining output, volatile national currencies, polarisation as well as the global economic downturn in recent years.

According to World Bank Trade data, SACU countries over the period 2006-2009 generally shrunk in average annual growth rate of total trade i.e. exports, imports of goods (merchandise) and services at constant 2000 U.S. dollars. As shown in the chart, Lesotho (the smallest economy of the five) shows to be the only exception to this trend.  

As a customs union, SACU policy harmonization efforts aimed at achieving a more cohesive, integrated regional market with balanced export-led growth is vital.  Considering the centennial theme has been acknowledged by the SACU Heads of State, one can only say "a 100 years later, its about time".