THE MAGIC SACU STOKFEL WONT LAST FOREVER (PART I of II)
It is an unfortunate truth that, historically, Swazis have shied away from confronting difficult problems. It has taken the majority of us more than 50 years to come to the realization that the 1973 decree by King Sobhuza II was a wholesale coup d’état by the royal aristocracy.
Now that the government in eSwatini has fallen foul of many in the international community, progressive organizations have started to think about economic interventions such as sanctions, and in particular, the form of economic sanctions that could be used to mount pressure on the Tinkhundla regime to come to the table and work out a plan for a transition to democracy.
One major weakness across all our political party formations is that they simply haven’t expressed a grounded understanding of the dominant economic issues affecting our country. Of late, there has been the idea that sanctions on individuals such as the King, his family and his acolytes could have a meaningful effect and contribute to bringing him to the negotiation table.
A brief review of this approach in the southern African region, specifically with respect to Zimbabwe, will show that it has largely been ineffective and has instead resulted in a great amount of confusion regarding the nature of the restrictions, and whether it is indeed possible to have sanctions imposed on individuals who hold state power without imposing sanctions on the wider state and general population itself. Every year the Minister of finance’s budget report is the allocation we will receive from SACU. Our reliance on SACU revenues is so integral to our government’s fiscus that it accounts for approximately 50% of our annual expenditure.
The chairpersonship of the Customs Union was recently passed from eSwatini to Lesotho in June this year. This year’s R11 Billion bumper allocation from SACU has been heralded as some sort of financial wizardry by the government indicative of a strong economy. The reality, however, is that the SACU scheme is a deck of cards heavily stacked in the favour of Botswana, Namibia, eswatini and Lesotho (in that order) against our larger neighbour, South Africa.
If we had been paying attention, we would have noticed that for at least the past 10 years South Africa has been quietly seeking a harmonious departure from the current revenue sharing formula partly motivated by the fact that its own finances have been stretched to the point where dolling out close to R50 billion per annum to the BLNS countries is becoming increasingly untenable.
Unfortunately, the current leaders in the Mass Democratic Movement (MDM), who often posture in the media as potential replacements for the current undemocratic government, do not seem to express an awareness of the significance of SACU, even at opportune moments. Their only expression during this year's SACU summit was to appeal to the heads of state, and in particular South African President Cyril Ramaphosa, not to attend the summit in support of isolating the Tinkhundla government. It didn’t occur to the leaders of the MDM to consider seeking an alignment with South Africa’s own agenda for the customs union.
The indifference of our progressive leaders to this issue is a far cry from a previous generation of MDM leaders such as Mario Masuku and Jan Sithole. In 2013 Sithole penned an article in the Times of Swaziland stating, “SACU is the single most worrying national risk hanging on the heads of all Swazis”. He was right about SACU then, and he still is now.
The origins of the current scheme may require a dedicated article. However, the gist of it is that for one reason or another, the apartheid government in South Africa saw it fit to disproportionately reward the smaller member states of the customs union in the distribution of the shared customs revenue pool. The smaller states referred to at the time were the BLNS (Botswana, Lesotho, Namibia and Swaziland) are the annual beneficiaries of one of the most generous regional stipends in Africa.
In simple terms, customs collections refer to the money that goes to taxes when goods bought from outside the customs union, enter into any country within the union. The SACU arrangement means that imports of cellphones, laptops and all sorts of consumer goods manufactured in countries such as China will be taxed at the same rate for any country within the union and that the monies collected from this taxation will be stored in a shared pool and distributed to each member country annually.
The Bridge has added, at the end of this article, a commentary on the working details of how the revenue sharing formula works but for the purpose of ease of reading. I would like to quote from Statistics South Africa’s 2018/19 annual report regarding the contributions and benefits from the customs union. “Member countries contributed approximately R108 billion to the SACU revenue pool in 2018/19, according to data from the South African Revenue Service (SARS). South Africa, with the biggest economy, contributed the most (97% of the total),” reads the report.
SACU itself reports that the other countries contributed much less than South Africa: Namibia (1.4%), Botswana (1.0%), Lesotho (0.4%) and Eswatini (0.2%). Having dealt with the contributions half of the revenue sharing system, which in the case of eSwatini, can be thought of as more symbolic than anything else. We should look at the real magic of the result.
Somehow, after contributing less than three percent to the revenue pool, the BLNS countries emerge with more than 48 percent revenue while the South African state retains only about half of what it had contributed to the pool.
Through the title of this article, I suggested that the SACU could be thought of as a stokfel that is meant to benefit the smaller BLNS countries. However, this is an unfair and mischaracterization of Stokfels. SACU is more of a rigged Mulasport operation which favours the smaller SACU countries. In this scheme, the winners and losers are certain about the outcome, and they have a rough guarantee of estimations of their takings and their losses beforehand.
Country SACU takings multiplier
Botswana X 20.
Eswatini X 34.
Lesotho X 16.
Namibia X 13
South Africa X 0.48
It cannot be unclear from the table above who the winners and losers in this scheme are. The question that remains, is how long are the losers going to accept this arrangement? Amilcar Cabral in his essay, “Tell no lies, claim no easy victories…” made it clear that revolutionaries are not fighting for ideas that exist in their heads, but for material benefits for the people.
For the democratic forces in eSwatibi who are bandying about the idea of sanctions, we need to get very clear about where we are going and what the future holds for our people. The parties wishing to bring about change in our country should acknowledge that the transition to democracy will not be enough to resolve the issues raised by Amilcar Cabral.
It may be in this respect necessary but not a sufficient requirement for the country to become prosperous. Unfortunately, time is against the pro-democracy movement because the magic SACU stokfel won't last forever. The birth of democracy in our country may very well coincide with the end of SACU; it would be wise to prepare for its inevitable end now.
NB: Read part two of this article here