“The South African Customs Union (SACU) Revenue Sharing Formula (RSF) has
been revised substantively twice; once in 1969 and in 1994-2002 since the creation
of the customs union in 1910 and each time the changes in the treaty were a reflection
of the historic changes occurring in Southern Africa. The apartheid regime created a RSF that served to increase the share of revenue of Botswana, Lesotho and Swaziland (BLS), leaving the South African share as a residual of revenues. As this made
South Africa a residual claimant it was unsustainable and required reform in the
post-apartheid era. The 2002 formula increased the share to the Botswana, Lesotho,
Namibia and Swaziland (BNLS) and removed South Africa as a residual claimant but
did not change the fundamental economic relationship between members. While the
International Monetary Fund (IMF) supports orthodox fiscal adjustment imbalances
this paper argues that the order of magnitude makes those adjustment implausible
and a new political arrangement is needed between South Africa and Lesotho and Swaziland to create a viable way forward for Southern African Development Community (SADC). It is argued that even in the case of Botswana and Namibia a new developmental formula, based on investing SACU revenues for regional and national development projects is needed to relieve those countries that have suffered the effects of polarization.”
