SACU and the revenue pool explained
The Southern African Customs Union (SACU) is the oldest functioning customs union in the world.
The first union was formed in 1910, which makes the current union 110 years old. Current members benefitting from the union are: Botswana, eSwatini (previously Swaziland), Lesotho, Namibia and South Africa.
Following the normalisation of relations in South Africa in 1994, the member countries agreed that a democratic arrangement should be negotiated. The renegotiations commenced in 1994 and a new SACU Agreement was signed during October 2002 in Gaborone, Botswana.
Impact of SACU on trade
The main feature of a customs union is that customs and excise duties are not levied by a member on products which are manufactured, produced, grown or otherwise originate in another member state.
Namibian products exported to Botswana, for example will not be subject to customs duties on importation into Botswana. Goods imported from South Africa by Namibia are likewise not subject to customs duties in Namibia.
This supports the principle of duty-free movement of goods between the SACU member states. Import value-added tax (VAT), however, is a domestic tax and remains payable on importation, whether from another SACU member state or beyond.
SACU revenue pool
The customs union Agreement provides that all customs, excise and additional duties must be paid in a common revenue pool.
South Africa has been appointed to manage the pool. All transactions in and out of the pool must be reported to the SACU Secretariat (in Windhoek) and are audited on a regular basis.
Revenue-sharing formula
The SACU agreement provides for transparent revenue sharing formula. The formula consists of three components, namely:
The customs component:
The customs component further consists of customs duties collected or leviable on goods imported into the common customs area.
The share of member countries is calculated on the value of imports from other SACU member states as a percentage of total intra-SACU imports for a specific year.
The excise component:
The excise component consists of all excise duties collected or leviable on excisable goods produced or manufactured in the common customs area.
Each member country’s share is based on the gross domestic product (GDP) of each country as a percentage of the total GDP on all SACU member countries.
The development component:
A fixed percentage of the excise component is withheld to fund the development component.
Each member country receives a share of the development component, but the distribution is weighted in favour of least developed members.
Details on how each member country’s share of the revenue pool is set out in Annex A to the SACU Agreement, 2002.
* Chantell Husselmann is the country senior partner at PwC Namibia.
The first union was formed in 1910, which makes the current union 110 years old. Current members benefitting from the union are: Botswana, eSwatini (previously Swaziland), Lesotho, Namibia and South Africa.
Following the normalisation of relations in South Africa in 1994, the member countries agreed that a democratic arrangement should be negotiated. The renegotiations commenced in 1994 and a new SACU Agreement was signed during October 2002 in Gaborone, Botswana.
Impact of SACU on trade
The main feature of a customs union is that customs and excise duties are not levied by a member on products which are manufactured, produced, grown or otherwise originate in another member state.
Namibian products exported to Botswana, for example will not be subject to customs duties on importation into Botswana. Goods imported from South Africa by Namibia are likewise not subject to customs duties in Namibia.
This supports the principle of duty-free movement of goods between the SACU member states. Import value-added tax (VAT), however, is a domestic tax and remains payable on importation, whether from another SACU member state or beyond.
SACU revenue pool
The customs union Agreement provides that all customs, excise and additional duties must be paid in a common revenue pool.
South Africa has been appointed to manage the pool. All transactions in and out of the pool must be reported to the SACU Secretariat (in Windhoek) and are audited on a regular basis.
Revenue-sharing formula
The SACU agreement provides for transparent revenue sharing formula. The formula consists of three components, namely:
The customs component:
The customs component further consists of customs duties collected or leviable on goods imported into the common customs area.
The share of member countries is calculated on the value of imports from other SACU member states as a percentage of total intra-SACU imports for a specific year.
The excise component:
The excise component consists of all excise duties collected or leviable on excisable goods produced or manufactured in the common customs area.
Each member country’s share is based on the gross domestic product (GDP) of each country as a percentage of the total GDP on all SACU member countries.
The development component:
A fixed percentage of the excise component is withheld to fund the development component.
Each member country receives a share of the development component, but the distribution is weighted in favour of least developed members.
Details on how each member country’s share of the revenue pool is set out in Annex A to the SACU Agreement, 2002.
* Chantell Husselmann is the country senior partner at PwC Namibia.
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