Times Of Swaziland: WEAK RAND HURTS SACU PARTNERS – REPORT

WEAK RAND HURTS SACU PARTNERS – REPORT
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BY ASHMOND NZIMA  on 16/11/2020 23:43:00


MBABANE – Eswatini’s SACU counterpart Botswana has warned that the continued
weakening of the South African Rand will pull down the national budgets of the
regional body’s member States.
SACU is the Southern African Customs Union which is made up of Eswatini,
Botswana, Lesotho, Namibia and South Africa. The member States derive key
portions of their revenue from SACU.
Receipts
In a 2021 Budget Strategic Paper, Botswana’s Ministry of Finance and Economic
Development warned that SACU receipts in 2021/22 were now projected to be 6.3
per cent lower than original estimates, mainly due to a slowing of economic
activity amongst SACU member countries.
“This is being made worse by the decline in the value of the South African
Rand - the currency in which SACU distributions are denominated - due to a
combination of global risk concerns and structural weaknesses in the South
African economy.
Consequently, the Pula is appreciating against the Rand, which in-turn
undermines the potential revenues from SACU,” reads a report from the Southern
Times.
Reports suggested that Eswatini, Lesotho and Namibia would also feel the pinch
as they too were beholden to economic developments in South Africa, with their
exchange rates pegged to the Rand.
The Botswana Finance Ministry’s 2021 strategy paper noted there was need to
develop a robust domestic revenue mobilisation initiative as a vital component
for expansion of the revenue base, given the current high level of dependence on
minerals and SACU receipts in that country.
Presentation
Meanwhile, a team from the country’s Ministry of Finance led by Minister Neal
Rijkenberg told senators during a presentation on medium-term fiscal framework
(MTFF) at the Happy Valley Hotel Conference Room last Thursday that SACU
receipts were anticipated to decrease over the medium-term estimated at E6.1
billion in 2021/22. It would be E4.3 billion in 2022/23 and then E5.2 billion
the following financial year.
SACU receipts and the Eswatini wage bill are both expected to decline over the
medium-term, although with substantially different magnitudes.
In the 2020/21 budget, SACU receipts cover close to the total cost of wages and
salaries. In 2021/22, only about half of the wage bill is covered. On average,
SACU receipts cover around 66 per cent of the total expenditure of government
wages. In response to the challenges, there were policy measures and efficiency
gains that were proposed.
They include introducing a turnover based alternative minimum tax at 0.5 per
cent of turnover.
There are also calls to expand the tax base to include items currently exempted
such as diary products and eggs.
There are non-tax revenue proposed measures that include increasing the user
fees and fines, efficiencies in dividend collections and efficiency gains from
transferring all other revenue collection offices to the Eswatini Revenue
Authority (SRA).