The executive secretary of the Southern African Customs Union (SACU), Paulina Elago, answers questions on SACU payments to Namibia.
New Era (NE): Can we have a figure of how much SACU has overpaid Namibia, and how is Namibia expected to pay back the money?
Paulina Elago (PE): The 2014/15 Common Revenue Pool (CRP), initially estimated at R83.37 billion, was used to calculate member states’ revenue share. The revenue share is determined annually based on a forecast, which means an estimate of how much will be collected during the year. It is not possible to know with certainty the amount that will be collected because by nature economic performance is unpredictable. Thus, at the end of the year an audit of how much was collected is undertaken and is compared with the forecast that was made to share revenue in the previous year. The difference sometimes is positive, implying there is more revenue that was collected than the initial forecast. In other instances the difference between what was actually collected and the forecast may be negative, implying that actual collections of revenue were lower than the forecast. Therefore, in instances of positive difference, the additional revenue is added to member states’ revenue share, and similarly when the difference is negative the amount is proportionately deducted from member states’ revenue share for the following year.
To date, given the current slowdown in the global economic environment, it is most likely that the actual collection will be lower than the forecast, resulting in member states having to pay back into the Common Revenue Pool, inclusive of Namibia. This is the pool where the collection of taxes on goods imported into the region and selected goods produced in the region are deposited; these are customs and excise duties. The actual collections were announced in the South African Medium Term Budget Policy Statement on 21 October 2015. South Africa makes this announcement because it is the manager of the pool as per the decision of Council. Council comprises of ministers of finance and trade and industry in member states. It indicated that the collections were lower than the forecast used to share revenue, thus resulting in a negative balance. Therefore member states will have to pay back into the pool. The exact amount each member state will pay will be considered by the Commission in a meeting scheduled for December 2015 in Windhoek. This will be calculated in line with the revenue sharing formula as contained in the SACU Agreement 2002. The Commission is a committee of senior finance and trade officials from member states.
NE: How would this repayment schedule affect the future payment of receipts to Namibia – would Namibia still be subjected to payouts according to the standing revenue sharing formula, or would the payment be suspended until the refund of previous receipts is complete?
PE: The SACU Agreement, 2002, provides that the difference between the forecast and the actual collection is made good in a maximum of two following years. Therefore, if the difference is negative as anticipated in the case of collections for the 2014/15 financial year, such a difference will be proportionately allocated to member states during the allocation of revenue share for 2016/17, which will be done in December 2015. Similarly, if there is a positive difference between the actual collections and the forecast, the amount will be added to the member states’ allocation of revenue share in December 2015. It can be noted that this period will amount to a maximum of two years into the future as stipulated by the SACU Agreement, 2002.
NE: Can you possibly give us an indication or paint us a picture of how steep is the decline or increase in SACU receipts to Namibia (and other member states) for the next three years?
PE: The 2015 South African Medium Term Budget Policy Statement will provide medium-term forecasts of the pool. However, based on the 2015 Budget and in line with the prevailing global and regional economic slowdown, it is expected that the CRP will increase moderately. However, over a period of three years, which is considered medium term, if the global economy remains the same, it is likely that the pool will be lower and in turn revenue share to member states lower as a result.
NE: Any other comment or clarification is welcome?
PE: Given that the global economy is expected to grow by 3.1 percent this year and different regions of the world are not growing as fast, it is advisable that respective countries take measures that will cushion them against limited financial resources. This may include savings that can be used when needed and cutting down on expenditure that can be postponed or avoided.
The current revenue sharing formula has three components, namely, the customs component, excise component and development component. The customs component is allocated on the basis of each country’s share of intra-SACU imports. Under the excise component, 85 percent of the excise revenue is distributed on the basis of each country’s share of total SACU GDP, a proxy for the value of excisable goods consumed in each country.
The development component, which is fixed at 15 percent of total excise revenue, is distributed according to the inverse of each country’s GDP per capita. The deviation in GDP/capita from the SACU average is reduced by a factor of 10 in order to reduce disparity in the distribution of shares for the development component.
Member states’ revenue shares are calculated based on the CRP forecast provided by the manager of the pool. The calculation is based on the RSF [Revenue Sharing Formula] using the stipulated variables. Revenue shares for financial year (t+1) are calculated and approved by Council in December each year. South Africa as the manager of the CRP makes quarterly payments to the BLNS [Botswana, Lesotho, Namibia and Swaziland] member states in equal instalments, effective 1 April each year