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Will EU treaty benefit Lesotho?

by Lesotho Times
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THE problems Lesotho is experiencing in connection with the Southern African Customs Union (Sacu) are not new.

However, the problems appear to have worsened after Lesotho signed the Interim Economic Partnership Agreement (IEPA) with the European Union (EU).

The agreement came at the same time that we also experienced a serious decline in the national budget.

In my opinion people need to be convinced beyond any shadow of doubt that there is no correlation between the advent of the IEPA and declining Sacu revenue.

The purpose of this article is to critically analyse a recent presentation by Finance Minister Timothy Thahane at last week’s Sacu centenary celebrations.

I will look at assertions by the minister that Sacu is not only for revenue generation as well as the prospects of Sacu vis-à-vis the IEPA.

I must first acknowledge that Thahane, unlike many of his colleagues in cabinet, is one government minister who is quite accessible.

He is readily available at all times to engage civil society on government policy issues whether it is one-on-one or at a public forum.

I am confident that the minister can still be engaged even on this platform.

My argument challenges the minister’s thesis that sought to downplay the centrality of revenue collection in Sacu.

My assertion is that revenue collection is Sacu’s main role.

Any other responsibilities are mere ancillaries to the main role.

In my opinion revenue collection is a key characteristic of Sacu.

It separates this customs union from similar customs unions that aspire for economic integration.

I will need to be persuaded to believe that there is anything Sacu will do that will not duplicate the functions of Sadc if revenue collection is not the key function.

I still maintain that revenue collection is the life-blood of this customs union.

For instance, in the last two national budgets of 2009/10 and 2010/11 it was highlighted that Lesotho had a very small chance of survival without Sacu revenue.

Lesotho gets 60 percent of her revenue from Sacu.

If the central focus of Sacu is not revenue collection then the union is nothing but a walking ghost.

Let me now turn to the second part of my argument — prospects of Sacu vis-à-vis the IEPA.

We must recall that the IEPA is a trade agreement between Lesotho and the European Union.

There are a lot of similarities between the IEPA and Sacu of which the latter is frustrated by those commonalities. 

The IEPA just like Sacu has a clause on removal of tariffs and quotas for exports between the European Union and Lesotho. 

In IEPA agreements it is clear that where trade is liberalised, tariffs for products are already pegged at zero percent.

What this means is that certain products are exempted from paying tariffs.

But the people are still puzzled whether Lesotho will really gain anything better than what we used to receive from Sacu.

The Sacu objectives are to facilitate cross-border movement of goods between member states.

It also seeks to create effective, transparent and democratic institutions which will ensure equitable trade benefits to member states.

It also seeks to promote fair competition in the customs area.

The promotion of integration of member states through enhanced trade and investment was one factor that was supposed to hold Sacu together to become an effective economic bloc.

This would happen by propping up smaller economies such as Lesotho.

The 2002 Sacu agreement states that countries should develop common policies and strategies and share revenue equitably.

But the revenue sharing formula was recommended by the Republic of South Africa.

Other countries had no alternative but to accept the formula.

When Thahane presented this statement he sounded so uncomfortable with the formula because it gives South Africa a bigger share with Lesotho getting the smallest part.

I would also be uncomfortable with such a formula.

The government would certainly be justified to look for an alternative to the IEPA.

We all know that international treaties are meant to secure and advance national interests of parties concerned.

Lesotho should not blame South Africa for signing a treaty that is worse than the previous one.

The IEPA might have more problems for us than the treaty that we knew.

Thahane was also asked whether the EU was right to approach individual Sacu members instead of approaching the union as a bloc.

In his response Thahane said he believed there was no malice in the IEPA’s approach.

I am not convinced that Lesotho stands to benefit from the IEPA deal.

I doubt whether we have anything significant that we can export to Europe.

In fact what else can we export to Europe that we have failed to sell within our region?

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