Africa Region Working Paper Series No. 57

The New Southern African Customs Union Agreement

Abstract

The Southern African Customs Union (SACU)-Botswana, Lesotho, Namibia, South Africa and Swaziland-has been renegotiated to take account of the new socio-political environment in the region following the demise of apartheid. After eight years of negotiations a new Agreement was signed in October 2002. From its origins in 1910 SACU has been characterized by striking asymmetries in policies, levels of development and administrative capacity. In this paper, we outline the main characteristics of the 2002 Agreement and assess whether it meets the negotiators original objectives. The 2002 Agreement clearly addresses the main criticisms of the 1969 Agreement by promoting shared decision-making and allowing for a new revenue sharing arrangement that seeks to support fiscal stability. The varying levels of trade policy capacity along with policy divergences between the members present new challenges. Moreover, the exclusion of Services, Intellectual Property Rights and the Singapore issues gives the 2002 Agreement a somewhat jaded appearance. Nevertheless, the reconstituted SACU could form the core of a larger regional customs union that would facilitate a realignment of the existing regional organizations. This will depend on the ongoing trade negotiations with both the EU and the United States. Moves towards North-South Free Trade Agreements will put pressure on SACU to address the excluded ‘new’ issues as well as the need to reduce cross border transaction costs in order to realize the benefits from economic cooperation.

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