Cross-Border Transactions: Southern African Customs Union (Sacu)

0
27

Denis Hyman is a Manager within the International Trade department at PricewaterhouseCoopers. Mr Hyman has 10 years experience in customs planning, cross-border transactions and VAT issues relating to refunds. Part 1 Of 3 Namibia became a member of the Southern African Customs Union (‘SACU’ hereinafter) shortly after her Independence in 1990. At that stage relations within SACU were regulated by the Customs Union Agreement of 1969, which in turn, replaced the Customs Union Agreement of 1910. SACU is the oldest functioning customs union in the world. The members of SACU are Botswana, Lesotho, Namibia, South Africa and Swaziland. Customs unions traditionally share a common external tariff for imports outside the union and customs duties are not levied on intra-union trade. The customs duties collected by the individual member states on imports from non-union countries are deposited into a common revenue pool. The pool is then shared between the member countries. The 1969 SACU Agreement and its Secret Memorandum, however, worked largely in favour of the economically strongest member – the Republic of South Africa. This was so in view of South Africa’s sole prerogative to determine the common external tariff through its Board of Tariffs and Trade (BTT). Other member states were obliged to follow the customs and excise duty structure determined by South Africa and were on many occasions held ransom by South African top bureaucrats approving the share of its country. Shares were distributed from the common revenue pool in terms of the Secret Memorandum. In practice this meant that South Africa’s statistics department would calculate the share of the other member states (Botswana, Lesotho, Namibia and Swaziland or ‘BLNS’) and proposed to the Custom Commission (consisting of senior officials of the member states) to accept the shares. After the shares of BLNS were distributed, South Africa kept the residue of the pool. The process was far from being transparent and led to a highly polarized situation, i.e. South Africa on the one side and the BLNS on the other side. BLNS countries strongly objected to South Africa’s unilateral control over the customs union. Prohibitively high customs, excise and surcharge duties were a trade tool used to protect and develop industries, e.g. the motor industry. By imposing a high (at one stage around 120%) import tax on imported motor vehicles, most importers were forced to buy the local product. BLNS countries were used as a ready market for South Africa’s products, especially during the period of sanctions due to South Africa’s policy of apartheid during the sixties and seventies. Shortly after Namibia’s Independence and normalization of relations in South Africa, all the member states agreed that the 1969 SACU Agreement was undemocratic and outdated. A new democratized and transparent agreement was needed and a process of renegotiation of the SACU Agreement was launched during November 1994 in Pretoria, South Africa. The renegotiated agreement was eventually signed during October 2002 in Gaborone, Botswana. The 2002 SACU Agreement is less complicated and more transparent. Provision is made for a Council of Ministers which would by consensus approve the common external tariff and the new revenue sharing formula which is based on actual import statistics of each member state. Should you have any questions on these issues, please feel free to contact any of the following persons: Windhoek Patty Karuaihe-Martin 061-284-1258, 061-284-1260 Denis Hyman 061-284-1045, 061-284-1260 Walvis Bay Lynette Rautenbach 064-21-7710, 064-21-7800 Copyright ÃÆ’Æ‘ÀÃ…ÃÆ”šÃ‚© 2006 PricewaterhouseCoopers. All rights reserved. PricewaterhouseCoopers refers to the individual member firms of the worldwide PricewaterhouseCoopers organization.