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The Global Economic Governance (GEG) Africa programme was created to strengthen the influence of pro-poor African coalitions at global economic governance for a through policy research and stakeholder engagement.
Friday, 27 July 2018 12:02

The Suitability of a Stabilisation Fund for SACU

Written by  Yash Ramkolowan

GEGAfrica Policy Briefing, July 2018

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GEGAfrica Theme 3

The most recent – 2002 – Southern African Customs Union (SACU) Agreement revised the customs and excise revenue sharing formula for SACU member states. Since this revision, some SACU member states have seen significant volatility in their receipt of revenues from the SACU revenue pool. Given this, one of the focus areas of SACU’s work programme is the establishment of a regional SACU stabilisation fund, primarily to counter volatility in the common SACU revenue pool. This policy briefing summarises the rationale for and feasibility of such a fund in SACU. A review of existing stabilisation funds finds no evidence of one established at a regional level. This may be because, at the very least, individual country participants would need to agree to a set of common regional fund deposit and withdrawal rules, which would impact their own revenue and expenditure dynamics. For SACU, the establishment of a regional stabilisation fund is premised on the common SACU revenue pool being the root cause of the revenue unpredictability and volatility for member states. However, an analysis of SACU member state revenues highlights that the scale and source of revenue volatility differ for each. Receipts from the common SACU revenue pool are the main drivers of overall revenue volatility only for Lesotho, Namibia and eSwatini (Swaziland). The lack of historical precedent for a regional fund with a stabilisation objective –and the fact that SACU member states have significantly different revenue and expenditure profiles –demonstrates the potential difficulty in establishing a regional stabilisation fund for SACU. Where regional funds do exist, they are typically established for broader development and infrastructure investment purposes.

Author: Yash Ramkolowan