By: Nghiinomenwa-vali Hangala and Heedee Walenga
Various reports around the Orange River state that South Africa is determinedly negotiating trade deals with a number of countries and blocks, with analysts saying more such agreements could have been in place had it not been for SACU limitations.
The Southern African Customs Union (SACU) is a customs territory, originally established in 1910, consisting of Namibia, South Africa, Botswana, Lesotho, and Eswatini, allowing for a free movement of goods where tariffs and other barriers are eliminated on all trade between the nations.
According to SACU’s latest publication, the region recorded a collective GDP of R8.08 trillion in 2024, a 4.4% year-on-year increase from the previous year.
However, a number of influencial commentators, including the Chief Economist of the Agricultural Business Chamber of South Africa, Wandile Sihlobo, want the agreement reviewed. The Villager sat down with Sihlobo to get his views on SACU.
Sihlobo is of the opinion that SACU prevents the region from being flexible in the modern geopolitical climate. “We are supposed to be looking for new friendships and signing a number of trade agreements. To an extent, SACU is constraining,” he stated.
Sihlobo, who is a Senior Lecturer at the Department of Agricultural Economics at Stellenbosch University and member of President Cyril Ramaphosa’s Presidential Economic Advisory Council, also expressed that a pressing issue with SACU is the fact that the member nations do not follow the rules of the Union.
“Countries block exports from other SACU members and I find that to be problematic,” he expressed. Namibia is guilty of the practice, too.
The Namibian Agronomic Board (NAB) periodically closes the Namibian borders for the importation of certain items when local producers can meet domestic demand.
The most recent notice came in January, when the NAB announced nine crops, including butternut, carrots, English cucumbers, pumpkins, jam tomatoes, round tomatoes, watermelon, and sweet melons were closed for importation for the whole of January.
The African Continental Free Trade Area (AfCFTA) also presents challenges for SACU, seeing that the AfCFTA essentially offers what SACU offers at a certain level, but on a continental level.
To this, Sihlobo called for SACU to allow its members to have flexibility.
“If Namibia wants to negotiate a trade agreement with a particular country themselves, they should have the flexibility to do that,” Sihlobo told The Villager.
As it stands, no individual member state is allowed to negotiate or enter into new preferential trade agreements, or amend existing ones, with third parties without the consent of the other SACU members.
Whilst calling for reform, Sihlobo also cautioned against totally abandoning the agreement due to the revenue sharing model of the agreement. Namibia has a 26% percentage share of intra-SACU imports. Due to the SACU revenue forming part of the sources funding the Namibian national budget, analysts indicate that this adds to the sensitivity of the conversation around reviewing or potentially leaving the Union.
These payments are made to Namibia for trading within SACU, as most of Namibia’s imports flow from South Africa, according to trade statistics – a phenomenon described as “paid to import more from South Africa.”
THE NAMIBIAN VOICES
Emilie Abraham, Horticulture Manager at the Agronomic Board of Namibia, explained that any form of agreement or union should be based on a partnership where involved parties see clear benefits. She suggested that should any party not adhere to the set rules, “we should sit around the table, identify the underlying issues, and understand what is causing the current situation. There may be factors we are not aware of, and it’s important to explore how we can assist and guide towards a mutually beneficial resolution.”
She added that in many cases, the points of contention are not always what they appear to be on the surface. Speaking on Namibia, Abraham noted that the nation’s horticulture industry as still in its infancy.
“Therefore, at this stage, a growth-at-home strategy is essential to develop the industry until the value chain actors have the strength and capacity to compete efficiently,” she explained.
On exiting SACU, Abraham expressed disagreement with the notion, instead saying: “I support reforming SACU to introduce some exemptions for selective sensitive goods or industries.”
She explained that reforming would allow struggling or emerging industries in specific countries to gain a foothold and strengthen their positions, enabling them to compete with all members without facing economic vulnerabilities or cut-throat competition.
Abraham added that other a number of nations have done it before, and that SACU members can also implement the hybrid approach of sensitive industries being exempted and non-sensitive industries being open for market.
Economist Achilese Shifidi stated that leaving SACU or implementing reforms would require Namibia to make bold moves as part of said preparations. He said Namibia would, importantly, need to achieve fiscal independence by radically reducing reliance on SACU by broadening the tax base to replace lost revenue.
Secondly, Shifidi recommended that Namibia becomes a regional hub by transforming Walvis Bay and Lüderitz as major logistics gateways, while leveraging green energy and oil to create a new export and logistics-supported economic pillar.
He also suggested that if the thought of withdrawing became widely entertained, the country would have to build economic sovereignty. This, he suggested, would by fast-tracking value addition efforts to its minerals and agricultural outputs, and securing direct trade deals with big markets for the country to reduce its dependence on South Africa.
Shifidi also noted that given the country’s infant agricultural sector, it must secure critical supply chains to develop resilient channels for agricultural inputs and boost climate-smart food production to ensure stability.
“Such bold moves will help the country to avoid overly depending on South Africa, and start the process of reforming SACU anyhow or leave,” Shifidi explained.
Abraham Iita, also an economist, said the call to reform SACU makes a lot of economic sense, however, South Africa’s analysts shifting blame to Botswana and Namibia misses the real issues on the ground.
He explained that SACU was initially built around South Africa’s large economy, “so smaller members naturally use the little policy space they have to not only protect jobs, but continuously support their local industries. What looks like rule breaking is often just sensible economic self-preservation.”
In SACU’s statement sharing it may place some limitations on South Africa’s export ambitions, Iita said it most likely stems from bigger obstacles in the South African economy, such as high transport costs, energy constraints (load-shedding), weak infrastructure, and policy uncertainty.
On reforming SACU, he said any serious reform should acknowledge the current economic imbalances and focus on cooperation, industrial coordination, and building regional value chains.
“Especially with the countries perceived not to be playing by the rules rather than shifting the costs of adjustment onto smaller economies to benefit the larger South Africa economy,” Iita added.
Another economist, Meameno Henok shared his views that SACU’s current structure creates long-term vulnerabilities.
“Heavy reliance on SACU revenue discourages domestic industrialisation and export diversification. With Namibia opening new markets in the oil and gas industry, it would be best to set its long-term goals individually despite the high probability of being exposed to external shocks,” he explained.
He said Namibia’s limited policy flexibility under the customs union constrains the country’s ability to support emerging sectors and pursue tailored trade partnerships, adding that as SACU revenues fluctuate, fiscal stability and development planning in Namibia becomes increasingly uncertain.
