Wake up call

PRESIDENT Jacob Zuma was in Maseru last week to discuss the Southern African Customs Union (Sacu) with the Lesotho government.

The specific details of what Zuma discussed with Prime Minister Pakalitha Mosisili are not yet clear. A vague statement from Zuma’s office said the discussions focused on turning the 105-year-old customs union into a vehicle for regional development “which will benefit all the SACU members”.

The statement further said the discussions laid the groundwork for the Ministerial Retreat of Ministers of Finance and Trade and Industry.

“At the retreat, Ministers will look at how this can be done and the economic activities that would need to take place. Some of the economic activities could include building regional infrastructure, supply-side capacities, industrial development and value chains to stimulate regional growth and development”.

To understand the real meaning of those words you must read between the lines and appreciate a bit of history. For years the South African government has been seriously considering pushing for a drastic change in the way the union functions.

They believe Sacu’s revenue share method is heavily tilted in favour of smaller members like Lesotho, Swaziland and Namibia. They have come to view the Sacu arrangement as a means for South Africa to subsidies the smaller members.

And that is largely true especially when viewed in the context of what the smaller members get and what they really bring to the table.

Swaziland, for instance, relies on Sacu revenues to fund half of its budget.

It’s a similar case with Lesotho, although Sacu’s contribution to its budget has been coming down in recent years.

At one time 65 percent of Lesotho’s budget was funded by Sacu revenues. That number has since come down to around 40 percent and could slide to as low as 30 percent next year.

Yet Sacu revenues remain the cornerstone of our budget. We are already feeling the impact of the drop in the revenues from the union. When South Africa talks about turning the customs union into a vehicle for regional development it is saying lets channel the revenues towards building the blocks for development rather than funding recurrent expenditure in member states.

Until we see the detailed plan of how South Africa wants to transform the world’s oldest customs union Lesotho must fear for troubled times ahead.

South Africa is looking after its own interests and if we are to go with its view that small members are gaining at its expense then we can only expect the worst.

The revenues from Sacu will continue to decline and Lesotho will face catastrophic financial crisis. This means Lesotho should start preparing for the worst.

That means looking for new ways to generate revenue to close the gap left by Sacu. The options are limited. We could jerk-up the taxes but that will hurt people.

Austerity measures are an option but might cut deeper than acceptable and affect the most vulnerable.

Perhaps the only viable option is growing our own industry. We have become too reliant on Sacu revenues and in the process have neglected the goose that lays the eggs.

We should give more attention to our industry, attract more foreign direct investment and nurture the small to medium enterprises.

Government should walk the talk on supporting the manufacturing sector. We need to start exporting more than we import. We can start by producing our own food.