Proposed changes to revenue sharing within the Southern African Customs Union (SACU) are unacceptable because they place an unfair burden on its poorer members, a senior Namibian official said on Friday.
Deputy Finance Minister Calle Schlettwein said the changes, which would mean much lower revenues for Swaziland, Namibia and Botswana and a slight increase for South Africa, would polarise the region and have very serious political implications.
No one should be worse off under a new revenue sharing formula, but this proposal doesn't give that, he told Reuters.
South Africa gains, while the (smaller countries) are losing. The gain is not evenly spread.
SACU, the world's oldest customs union which celebrated its 100th birthday last year, is in the throes of reforming a revenue-sharing formula that now sees South Africa transferring a large portion of its customs receipts to its neighbours.
The transfers, which are meant to compensate the smaller countries for South Africa's desire for high import duties on things like cars, have historically accounted for nearly two-thirds of government revenue in Swaziland and Lesotho, just over a third in Namibia and 25 percent in diamond-rich Botswana.
Under proposed revisions outlined in a document obtained by Reuters this week, Swaziland's share of SACU receipts would fall to 3 percent in 2019 from 9 percent in 2012, dealing a crippling blow to its budget and economy.
A sharp drop in SACU revenues due to a 2009 recession in South Africa has already put the landlocked absolute monarchy in dire financial straits, with the central bank having to dip into reserves last year to pay civil servants.
If Swaziland was a company, you would say it was bankrupt, said Christie Viljoen of NKC Independent Economists, a Cape Town-based consultancy. Last year, Swazi reserves fell a third to $640 million, or three months import cover, Viljoen said.
BOTSWANA, NAMIBIA SQUEEZED
Lesotho, a mountainous kingdom surrounded by South Africa, would see its share rise to 9 percent from 8.5 percent, but Botswana's would fall to 6.7 percent from 17 percent and Namibia's to 9 percent from 15 percent.
The redistribution formula was devised as a way of compensating the smaller states for South African tariff policy and its virtual monopoly on attracting external investment because of its sheer size.
However, the white-minority apartheid government that led South Africa until 1994 also painted it as an altruistic subsidy to deflect global criticism of its attitude towards blacks.
Now South Africa has a democratically elected government, that argument no longer applies, and a recession in 2009 piled pressure on Pretoria to halt what many South Africans see as a bank-rolling of its neighbours.
Despite the desire for increased revenues, revision of the SACU formula presents South Africa with a conundrum, since it will have to pick up the pieces if Swaziland, which already has one of the world's highest HIV/AIDS rates, collapses.
Schlettwein said Namibia, which relies heavily on mining, was looking to cut its reliance on SACU funds, which are estimated at 6.6 billion Namibian dollars out of a budget of 25 billion Namibian dollars.
We already brought the SACU share of the budget down from 35 percent to 25 percent. We will continue this by deepening and broadening the tax base, he said.
This doesn't mean Namibia will accept the proposed cuts. We have our position and we will fend for it.