
ESWATINI'S BIGGEST RISK: HOW SHREWD EXPLOITATION OF SACU IS BECOMING OUR VERY OWN RESOURCE CURSE
Let's acknowledge Minister Neal Rijkenberg's impact: under his tenure, the eSwatini Revenue Service has transformed into a formidable entity.
There was a time when SACU revenues were somewhat unpredictable, leaving the nation anxiously awaiting to see if eSwatini (formerly Swaziland) would receive a favourable allocation. During this period, border customs were relatively lax.
Swazis could easily travel to Nelspruit or Piet Retief, load their vehicles with purchases from South African retailers, and return home with minimal interference from customs officials. Businesses in the kingdom were fairly confident that their tax declarations at the border would proceed smoothly.
For the people of eSwatini, this hassle-free arrangement was largely in harmony with our laid-back nature. However, in the eyes of shrewd business minds (like Rijkenberg, perhaps), this was a misstep.
They argued that SACU was a gravy train not being fully exploited. The South African state had entangled itself in a customs union agreement that required it to share roughly 50% of what it would normally retain for its own treasury with the smaller customs union countries (BNLE*, formerly BNLS).
The Swazi Bridge's two-part analysis in 2023 detailed the workings of SACU and how allocations are calculated. Over the past five years, the Eswatini Revenue Service and Ministry of Finance have perceptively realised that while South Africa is the benefactor of the SACU countries, the real competition for resources lies between Botswana, Namibia, Lesotho, and eSwatini.
eSwatini Minister of Finance Neal Rijkenberg
Analysis from the 2019 SACU payouts showed that for every invoice eSwatini submitted that financial year, the country received back approximately 34 times what it contributed to the pool. The SACU formula is intentionally complex, but one thing is clear: if you're a smaller country in the customs union looking to maximise benefits, you must collect every invoice at your incoming border post.
And that's precisely what the ERS has done. The revenue service has embarked on a relentless drive to collect invoices from Swazis and Swazi businesses purchasing goods from South Africa, imposing hefty penalties on those who fail to comply. The 15% VAT payable at the border for un-invoiced purchases is a secondary gain for the ERS, serving more as a punitive measure for depriving the state of the benefits of the SACU formula.
While this might seem like positive news, the inconvenient truth is that South Africa does not view this arrangement as permanent. Over the past decade, it has been attempting to reconfigure the customs union, facing strong resistance from the smaller economy SACU states. In March, the minister will present eSwatini's budget for 2024/2025.
With an anticipated 13 billion emalangeni windfall, it's highly likely that SACU funds will constitute over 50% of the budget. The term 'resource curse' typically refers to a paradox where a country underperforms economically despite possessing valuable natural resources. In eSwatini's case, the 'resource' is the free rands flowing from South Africa.
It's uncertain how long this arrangement will last, or whether the state will have the good sense to use it to strengthen eSwatini's productive economy, but one thing is clear: it's not permanent.