20100716
reuters

PRETORIA (Reuters) - Leaders of the Southern African Customs Union (SACU) agreed on Friday to reconsider how they share their trade duty revenues, a move that could hit Botswana, Namibia, Swaziland and Lesotho very hard.

Tensions have been mounting within the 100-year-old SACU, the world's oldest customs agreement, because of a perception in South Africa, easily its biggest economy, that its customs receipts are bankrolling its four smaller neighbours.

According to the International Monetary Fund, SACU revenues account for nearly two thirds of official revenue in landlocked Swaziland and Lesotho, just over a third in Namibia and 25 percent in diamond-rich Botswana.

A communique issued at the end of a two-day summit of SACU leaders in South Africa was thin on detail, but said governments would address the "challenge" of the "sharing of SACU revenue".

The issue has become sharper in South Africa since last year's global slump tipped Africa's biggest economy into recession, putting pressure on the budget and forcing the Finance Ministry to look for cash in hidden places.

For SACU's smaller members, however, any adjustments to the union's complex revenue-sharing formula are going to be hard to swallow.

"There are big political pressures on the South African Treasury to revise the revenue formula," said Keith Jefferis, an economist and former deputy central bank governor in Botswana.

Revenue sharing was officially devised as a way of compensating southern Africa's smaller economies for South African tariff policy and its virtual monopoly on attracting external investment because of its sheer size.