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Lars Holger Engstrom

trade diversion. In contrast to that study, this chapter offers an estimate of trade creation for SACU—which was not included in her study—and updates the estimation to 2008. The gravity model estimated in this chapter provides evidence supporting the view that SACU has promoted trade: SACU outperforms other African regional trade agreements (RTAs). Although most African trade agreements are trade-creating, the magnitude of trade creation is much larger for SACU. Based on bilateral exports data , intra-SACU trade is 57 times higher than expected compared with

Mr. Joannes Mongardini

areas. With the establishment of a single market, the challenges associated with a new distributional system for customs and excise revenue would arise. Clearly, the current SACU revenue-sharing formula could no longer be applied, given the lack of reliable data on intra-SACU trade. Accordingly, the authorities could consider a move to regional funds, as discussed by Cuevas, Engstrom, Kramarenko, and Verdier in Chapter 3 . Although transitional arrangements would be needed to prevent macroeconomic instability in the smaller members of SACU, these funds could be

Mr. Alfredo Cuevas

for the next fiscal year are usually determined in late December, based on the following principles: The forecast values of customs and excise revenues of the union for the next fiscal year ( T ). Forecast customs revenues are distributed based on shares in intra-SACU trade at FY T − 2. Countries that import proportionally more from within the union receive the largest share of the customs pool, thereby providing implicit compensation for the presumed “cost-raising” effects of the customs union. Monies equating to 85 percent of forecast excise revenues are

Mr. Joannes Mongardini, Mr. Tamon Asonuma, Olivier Basdevant, Mr. Alfredo Cuevas, Mr. Xavier Debrun, Lars Holger Engstrom, Imelda M. Flores Vazquez, Mr. Vitaliy Kramarenko, Mr. Lamin Y Leigh, Mr. Paul R Masson, and Ms. Genevieve Verdier

Abstract

The Southern African Customs Union (SACU) is the oldest customs union in the world, with significant opportunities ahead for creating higher economic growth and increased welfare benefits to the people of the region, by fulfilling its vision to become an economic community with a common market and monetary union. This volume describes policy options to address the barriers to equitable and sustainable development in the region and outlines a plan for deeper regional integration.

Olivier Basdevant

Abstract

Following the onset of the global economic crisis in 2008, Southern African Customs Union (SACU) member countries experienced a significant growth slowdown and deterioration of their fiscal balances. This deterioration came from two sources. First was a considerable reduction in SACU transfers, which account for a large share of total revenue for Botswana, Lesotho, Namibia, and Swaziland (BLNS),1 owing, in part, to the global crisis, which reduced the SACU revenue pool, but also to the procyclicality of the revenue-sharing formula, which aggravated the decline (see Chapter 3). Second, there were increased expenditures prior to the crisis. The decline in fiscal balances underscored the need for fiscal consolidation and a new set of institutional reforms to encourage adherence to prudent fiscal policies and reduce the dependence on SACU transfers.

Mr. Tamon Asonuma

Abstract

The formation of currency unions has always been accompanied by intense debates on their costs and benefits for potential members. Even if monetary integration has an important political dimension, it rarely transcends national interest. “No nation has friends, only interests,” Charles de Gaulle, the late president of France, once observed. And in fact, as soon as serious tensions emerge within existing monetary unions, such as the euro area, existential questions about the potential merits of monetary sovereignty resurface. This chapter proposes a model-based assessment of this particular question in the context of the existing Southern African Common Monetary Area (CMA)1 and hypothetical expansions of it.

Mr. Lamin Y Leigh

Abstract

The Southern African Customs Union (SACU) region is facing an unemployment crisis of enormous proportions. Available statistics indicate that the official unemployment rate in SACU is between 20 and 50 percent and is largely a youth phenomenon (Figure 6.1). To provide jobs for those now jobless and for new entrants to the labor force, SACU members would have to increase employment by an estimated 10 million full-time positions over the period 2012–21. Even this increase would leave the ratio of employment to the working-age population at below 50 percent—lower than that currently observed in many other countries.

Mr. Jorge I Canales Kriljenko, Ms. Farayi Gwenhamo, and Mr. Saji Thomas
Spillovers from South Africa into the other members of the Souther Africa Customs Union (known as the BLNS for Botstwana, Lesotho, Namibia, and Swaziland) are substantial reflecting sizeable real and financial interlinkages. However, shocks to real GDP growth in South Africa do not seem to systematically affect growth developments in BLNS countries as a group. Nevertheless, vector autoregressions, which allow country-specific parameters, suggest some strong spillovers onto the smaller economies.