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Namibia projects US$2 billion in revenue from Southern Africa Customs Union

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Namibia’s revenue inflows from the Southern African Customs Union (SACU) pool are set to improve drastically from the N$13b [US$2 billion] recieved in the last financial year, Minister of Finance Saara Kuugongelwa Amadhila has revealed.

The least Namibia got from SACU in the last three years was N$7.1b in 2010/2012, N$10b in 2011/2012, N$13b last year and the trend seem to be continuing on an improving path.

This comes after protracted negotiations of close to a year by member states to have the SACU revenue sharing formula looked into as most of the smaller countries Botswana, Lesotho, Namibia and Swaziland (BLNS) felt that South Africa was taking the larger share of the cake.

The improved projections come after a meeting of the SACU Ministers of Finance held late December and will be deliberated in cabinet just before Kuugongelwa-Amadhila announces her next medium Term Expinditure FrameWork next March, which will run until 2016.

“Comparatively our earnings from SACU are set to go up from the last figure of N$13b that we recieved last year and this is because the revenue pool of SACU has been doing pretty well in the past year. The improved perfomance in the SACU pool actually stimulated better earnings for the country. However government will continue reforming its tax system to broaden our revenue base. Value Added Tax(VAT) alone contributed about N$8b last year and it continues to grow which means we can get more from that side and cut down on over-reliance on SACU which is prone to negative effects from the global economic perfomance,” Kuugongelwa-Amadhila said.

Last year the country got slightly above what had been projected from the SACU revenue pool because of adjustments which were paid to the country by the unified revenue collection system.

According to her, the improved SACU revenue inflows will allow the country to continue its expansion budgetory trend albeit at a lesser extent than two years ago when the fight to clamp down on unemployment and grow the economy was coined.

“I am still of the idea that we should continue to expand because the improved SACU revenues and the perfomance of the economy in general gives us the space to keep growing. However I should maintain also that the budget deficit within the forthcoming MTEF is set to shrink significantly. We expect the budget deficit that had reached close to 10% in the current financial year to have shrinked to atleast 0.1% by 2015/2016 when the forthcoming MTEF lapses.

The Minister also expressed concern that at one point last year SACU financed 45% of the country’s total expenditure, a move that she terms unreliable and needs to be relooked into as it will expose the country to outside forces.

“SACU as a revenue source alone is not enough because it remains closely linked to the volatile international economic movements. So as a Goverment we need more options and we will continue to open more doors to look for the extra money,” she said.

SACU to date remains the world’s oldest unified revenue collection system among five nations and has been in existence for over 100 years.

Dr. Sehlare Makgetlaneng, the head of Governance and Democracy Research programme at the Africa Institute of South Africa in Pretoria undertook a fieldwork research on SACU in Namibia in October 2011 and his research concurs with Kuuogongelwa-Amadhila’s statement that over-reliance on SACU can expose Namibia to outside forces.

“Eighty percent of products consumed in Namibia are made in South Africa.  Namibia has a limited capacity to produce finished goods. It remains in a situation where it consumes what it does not produce. It is used by South Africa as its captive market. South Africa has a high ability to produce finished goods. Other SACU member countries (Botswana, Lesotho and Swaziland) are also its captive markets. This is a key challenge Namibia in particular should confront and solve. It should create its own value chain based on its raw materials. Namibia exports beef to South Africa. It imports the very same beef from South Africa back into its national economy. It has a significant fish industry,

“It exports its beef to Spain where it helps to create thousands jobs. It should ensure that it produce this fish internally within itself and then export it as a finished products.  It exports copper. It does not transform copper into finished products.  It exports all its manganese without any form of transformed manganese into finished products. Briefly, Namibia is a typical African country just exporting its raw materials and importing finished products.  This state of affairs must be brought to an end.  Namibia’s creation of its own value chain based on its raw materials will enable it to substantially substitute some of its imports with its own products. This is critical for it to make a significant progress in its socio-economic agenda particularly in creating sustained employment opportunities, economic development and substantial poverty reduction,” he said.

Through its businesses – including Checkers, Clicks, Games, O.K. Bazaar, Shoprite – being active in Namibia, Namibians contribute to socio-economic development in South Africa, Makgetlaneng argues.

To him, through their consumption of the South African goods, Namibians help to create and maintains jobs in South Africa. Directly related to this is the fact that these goods are expensive in Namibia.  In other words, Namibians are paying more for these goods.

“One senior official in Namibia told me that when the current revenue sharing formula was negotiated, the question was raised as to whether BLNS are overcompensated or undercompensated. The outcome was that if this question was not satisfactorily answered, then the fact will remain that they are not overcompensated, but slightly undercompensated,” he said.

Makgetlaneng concluded that it is possible that  South Africa is going to be told by its partners that its national interests should not lead it into the position which is biased towards them and that its advantages from the revenue pool should not be at the expense  of its partners.

“It is inevitable that the revenue sharing formula is going to be changed. It cannot remain static. The issue is that it should be equitable. Its change should lead to a win-win situation. Other SACU members are going to insist that its change should lead South Africa being a winner taking all. South Africa’s call for a change in the revenue sharing formula is interpreted as its means to reduce its contribution which will lead BLNS loosing. This is a structural problem,

“The point is that the way the revenue sharing formula is structured is a zero sum game process in that if one member gains more other members obtain less. My position is that a change within the formula is not going to be substantial. The balance of forces on this issue is already against South Africa. BLNS are going to unite against South Africa on this issue. South Africa’s determination to contribute towards a further development of its SACU partners is also going to a contributing factor.”