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‘High production will boost Sacu revenue for Lesotho’

by Lesotho Times
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MASERU — Lesotho will have to increase its production capacity significantly if it wants to boost its share of Southern African Customs Union (Sacu) revenue, a senior government official has said.

Motena Ts`olo, the chief executive of economic policy in the Ministry of Finance, told the Lesotho Times that under the terms of the new Sacu agreement signed in 2004 Lesotho’s share will increase if production is boosted.

The agreement specifies that a country with a higher gross domestic product would have a larger share of revenue.

GDP is one of the primary indicators used to gauge the health of a country’s economy.

It is a measure of a country’s overall economic output.

Ts`olo said under the new Sacu terms, the excise component will increase if production in Lesotho rises.

Sacu revenue makes up 60 percent of the total government revenue.

This financial year Lesotho received M2.2 billion from Sacu but this figure is set to decline significantly to below M2 billion in the next financial year.

“The value of the intra-Sacu trade determines the shares that each country receives based on the customs component and then the excise component made of excise tax charged on locally produced goods and consumed in the country,” Ts`olo said.

“It has been argued however that the use of GDP per capita in the development component needs to be reviewed and the need to determine whether this component has actually been used for the development of those countries.”

She said the five countries that make up Sacu had agreed to include the development component fixed at 15 percent of the excise component.

“If production in the country increases it will also result in more tax revenue that is collected within the country which can be utilised for the economic development of the country,” she said.

T`solo said statements that South Africa as the largest member of the union that contributed most to the union is not benefiting from the union had the effect of undermining the customs union.

“Other countries have become a market for South Africa; in the case of Lesotho we import about 90 percent of our products from South Africa.

“Such statements are meant to undermine the customs union,” T`solo said.

She said a committee of principal secretaries is currently engaged in a comprehensive process to review charges for services to increase the non-tax revenue collections.

Sacu, which is the world’s oldest customs union, has had its fair share of problems in recent years.

Botswana, Lesotho and Swaziland recently signed the economic partnership agreement with the European Union triggering a spat with its other partners, South Africa and Namibia, who refused to sign the controversial agreement.

Heads of state from the five Sacu members are expected to meet in July to determine the role they can play in the administration of the union.

Lesotho will in August host a national conference under the theme: “Implementing a common agenda towards regional integration in the southern Africa context.”

The national conference is expected to involve stakeholders in the business sector who will share their views on the Sacu agreement.

Sacu was formed in 1910, and the agreement was reviewed in 1969.

After 1994, members of Sacu called for a review of the agreement which saw all revenue being distributed by South Africa.

A new agreement was signed in 2002, and was implemented in 2004.

The new agreement allows joint policy formulation and decision-making by all the members of the union.

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