Wednesday, 18 August 2010

Customs revenue as aid

In a week in which Dfid announced that they plan to meet just 8 of their more than 90 existing aid commitments (including, among many others, their pledge to support free healthcare in the world’s poorest countries), one can’t help but wonder what South Africa’s equivalent contribution is. A quick look at the available stats for funding from South Africa suggests that that the government’s contribution to Africa in 2007, for example, was roughly UD$45 million for projects ranging from election support and land-mine clearing to government admin assistance and emergency relief.

In the wake of the recent flurry of SADC and SACU meetings around a EU EPA, among other things, an interesting point was made in an article I read today. The article began by questioning (in a most un-PC manner) whether Lesotho and Swaziland could continue to exist independently without the SACU. The way the SACU is set up, revenue flows disproportionately to the smaller states. This means, for example, that 75% of Swaziland’s budget is drawn from customs revenue. For Lesotho, the figure is 65% of government spending and roughly 30% for Namibia and Botswana. Approximately 90% of this income is generated by South Africa. Not that we necessarily want this to end. As several people suggest in this article, there are definite advantages to keeping the SACU.

From an aid perspective, though, it is an interesting set-up. Apart from the fact that some of the main the reasons for keeping the union are humanitarian (with economic spin-off benefits in that we avoid a broader Zim-style melt-down in the region), it has implications for the true calculation of South Africa’s humanitarian contribution in the region. Roughly UD$ 3.7 billion is directed to Namibia, Botswana, Lesotho and Swaziland through the SACU. That is 1.15% of South Africa’s GDP - money that is generated almost exclusively by South Africa and could easily be spent by the richer nation on its own priorities. If this were to be considered as a form of aid, South Africa would become the largest foreign aid donor in the world, overtaking the USA, Japan and Britain who each spend less than 1% of their GDPs. The SACU recipient countries (because that is really what they are) are starting to flex their (largely theoretical) muscles against South Africa, so it may all become rather messy in the near future but it is interesting to consider South Africa’s position in the region and her response to massive influxes of refugees in light of this kind of thinking.

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