Setting up a fund to develop regional infrastructure could assist Southern African countries to speed up regional integration, as a lack of meaningful crossborder infrastructure was holding back faster integration, South Africa's Department of Trade and Industry director-general Tshediso Matona said on Wednesday.

Improved infrastructure such as energy, telecommunications, railways and roads could facilitate trade and cooperation between Southern African Customs Union (Sacu) member States.

Addressing delegates at a South African national conference on Sacu in Pretoria, Matona suggested that a portion of the shared revenue pool of the union could be put into a fund to promote spatial development initiatives and crossborder infrastructure.

A new approach in the revenue-sharing formula, which would lead to the establishment of a fund for infrastructure development, was required.

National Treasury chief director Neil Cole explained that a Sacu council decision was taken in a meeting in January, to undertake a collective review of the revenue-sharing agreement.

Cole explained that a service provider has been appointed to conduct the review and a report to the commission was expected by December. This review would give a status update and indicate exactly what the revenue-sharing arrangement meant for each member state. The second component of the review would look at what the current arrangement could be replaced with, should that be the decision that is taken.

Cole said that stakeholders were starting to look "quite seriously" at the potential of establishing a development fund.

The National Treasury has put forward the proposal of a regional development fund within Sacu to the South African Cabinet.

Cole indicated that Sacu was potentially sitting on a R45-billion development fund from customs and excise duties collected.

He used the example of the European Union, which put customs funds collected into a structural fund to reduce disparities in the region.

A development fund would give considerable leverage to attract further funding to build crossborder initiatives and finance industrial capacity building.

Cole pointed out that South Africa gave almost one-half of what it generated in customs and excise duties to the Sacu revenue pool, and said this could potentially be put into a regional development fund.

He also stressed that an aid programme could be put in place.

Concerns on regional instability have been raised because some Sacu member States relied on the Sacu revenue-sharing arrangement for budgetary funds. Swaziland, for example was dependent on customs revenue for about 70% of the country's budget.

"It is dangerous for a country to be this dependent on customs revenue," said Cole, but added that if customs funds were redirected into a regional development fund, discussions on aid would need to take place, as well as discussions on fiscal reform in Sacu member States.

Trade and Industrial Policy Strategies trade programme manager Mupelwa Sichilima said that a development fund would support industrial development in other Sacu member countries, but implementation would be a big challenge and would take a significant amount of time.

Sacu celebrated its centenary in 2010, and member States have showed determination to extend and transform the union to become more than just a common external tariff union and relaunch it as a developmental entity that would better respond to global challenges.

REGIONAL VALUE CHAINS

Meanwhile, Matona stated that Sacu should implement practical programmes to attract capital through foreign direct investment, and better manage the common revenue to spur industrial growth in the region.

Evidence showed that countries increased exports when they cooperated regionally, and implemented regional production and value chains.

Matona noted that the DTI had identified agriculture and agroprocessing, livestock and food chains, clothing and textiles, tourism and crafts, and renewable energy as possible value chains to develop on a regional level.

He added that individual member States should do work at a national level to identify potential production networks in consultation with the private sector.

Matona also said that the changing patterns of global trade showed that countries like China, India and Brazil accounted for 37% of global trade in 2007, and this continued to grow in spite of the global economic crisis. He said that it followed logically that Sacu should increase trade with these countries, which provided opportunities to develop genuinely developmental approaches to trade.

Matona highlighted that Sacu was not an economic hegemony, and there were very different levels of development between member States. South Africa was clearly the dominant economy.

He said that other customs unions, such as Mercosur in South America, which achieved some level of success, allowed the dominant economy to lead, and the smaller countries locked into the larger country. In the case of Mercosur, this dominant economy was Brazil.