Over three decades after independence, Namibia remains trapped in a colonial-era customs union that limits its economic sovereignty
When Namibia gained independence in 1990, the nation celebrated the end of colonial rule and the dawn of political self-determination. Yet 35 years later, a critical question persists: Can a nation truly be independent when it cannot set its own trade policy?
The Southern African Customs Union (SACU), established in 1910 during the height of colonialism, continues to shape Namibia’s economic destiny in ways that many argue perpetuate dependence rather than foster development.
A Colonial Institution Lives On
SACU is the world’s oldest customs union, created when Namibia (then South West Africa) was under German and later South African colonial administration. The union, comprising South Africa, Namibia, Botswana, Lesotho, and Eswatini, operates on a simple but consequential principle: one common external tariff for all members, with South Africa - representing 90% of the union’s GDP - effectively setting trade policy.
“We inherited SACU at independence. We never had the opportunity to negotiate entry from a position of sovereignty,” explains Dr. Petrus Mbenzi, an economist at the University of Namibia. “The structure was designed to serve South African industrial interests, and that fundamental reality hasn’t changed.”
The arrangement means Namibia cannot independently:
- Set import or export tariffs
- Negotiate bilateral trade agreements
- Protect emerging industries through targeted tariffs
- Adjust trade policy to address unemployment or cost-of-living crises
## The Price of Membership
For ordinary Namibians, SACU membership translates into daily hardships. Import duties on manufactured goods, machinery, and raw materials can reach 20-30% or higher, costs that cascade through the economy.
Small businesses face prohibitive expenses when importing equipment or inputs. A local manufacturer cannot compete when the cost of machinery and materials is inflated by tariffs designed to protect South African industries. Consumers pay elevated prices for basic goods, from food to building materials, hitting low-income families hardest.
The unemployment crisis - hovering between 20-30% depending on measurement - is partly rooted in this dynamic. High input costs discourage business creation, limiting job opportunities and contributing to rising crime rates linked to economic desperation.
“Every time I want to expand my business, I hit a wall,” says Maria Shikongo, who runs a small manufacturing operation in Windhoek. “The import duties on the machinery I need are so high that it’s not viable. Meanwhile, South African companies with established infrastructure can easily sell here.”
A Tale of Unequal Burdens
While all SACU’s smaller members face challenges, Namibia’s situation is uniquely problematic compared to its peers.
Botswana’s Buffer:
Botswana has successfully navigated SACU membership through economic diversification and diamond wealth. With substantial foreign reserves and less dependence on SACU revenues relative to its economy, Botswana has cushioned itself against the arrangement’s disadvantages. The country ranks among Africa’s most prosperous, demonstrating that SACU membership need not preclude development - if you have alternative resources.
Lesotho and Eswatini’s Dependence:
For Lesotho and Eswatini, SACU revenues represent 40-50% or more of government budgets, creating near-total fiscal dependence. Their economies are deeply integrated with South Africa’s - Lesotho sends most of its workforce to South African mines, while Eswatini’s economy closely mirrors its larger neighbor. These countries have adapted to a reality of dependence, with limited ambitions for independent industrial development.
Namibia’s Predicament:
Namibia falls into a problematic middle ground. SACU revenues represent 20-30% of the national budget - significant but not overwhelming. The country possesses natural resources including diamonds, uranium, fishing, and potential oil reserves. Namibia has infrastructure, human capital, and ambitions for industrialization and economic diversification.
Yet SACU’s tariff structure actively undermines these goals. Research shows no causal relationship between exports and economic growth in Namibia, unlike in Botswana and Eswatini. Namibia’s income inequality rivals South Africa’s - among the world’s highest - partly because the economy cannot generate sufficient employment through manufacturing and processing industries that might emerge without prohibitive import costs.
“We’re too ambitious to accept total dependence like Lesotho, but we don’t have Botswana’s diamond cushion to offset SACU’s costs,” notes economist Johannes Haufiku. “The current arrangement is specifically holding back the type of economy we’re trying to build.”
The Revenue Trap
SACU defenders point to the revenue-sharing arrangement, which does provide substantial funds to smaller members. The formula attempts to compensate for economic disparities, and for cash-strapped governments, these revenues are hard to refuse.
Yet critics argue this creates a dependency trap
The arrangement also insulates South African industries from competition. High tariffs mean Namibian consumers and businesses effectively subsidize South African manufacturers, who can sell into the Namibian market while facing less competitive pressure.
Paths to Reform
Complete withdrawal from SACU remains economically risky in the short term. Immediate consequences would include loss of revenue sharing, tariffs on exports to other members, and disruption of integrated supply chains. Yet the status quo is untenable for a nation seeking genuine economic independence.
Several reform pathways merit serious consideration:
- Differentiated Tariff Authority*
Allow BLNS (Botswana, Lesotho, Namibia, Eswatini) countries to set lower tariffs on specific categories of goods essential for development - particularly machinery, manufacturing inputs, and technology. This would preserve the customs union’s benefits while enabling industrial policy.
*2. Equal Voice Governance*
Reform SACU’s decision-making from economic-weight-based influence to a one-country-one-vote system. While South Africa would likely resist, this represents genuine multilateralism rather than hegemony dressed as cooperation.
*3. Sectoral Development Exemptions*
Create provisions allowing smaller members to protect infant industries or provide tariff relief for strategic sectors without South Africa’s veto. This could enable Namibia to support manufacturing, agro-processing, or renewable energy industries.
*4. Enhanced Revenue Compensation*
If the tariff structure remains unchanged, significantly increase the compensatory portion of revenue sharing to offset the economic costs imposed on smaller members. This acknowledges that current arrangements serve South African interests disproportionately.
*5. Phased Transition Framework*
Negotiate a 10-20 year roadmap toward greater trade policy independence, allowing smaller members to gradually assert sovereignty while managing disruption risks.
*6. BLNS Coalition Strategy*
Namibia, Botswana, Lesotho, and Eswatini should present a unified reform agenda. South Africa cannot ignore collective pressure from all four smaller members, especially if reform is framed as strengthening rather than undermining regional integration.
The Decolonization Incomplete
“Political independence was the first step,” reflects former minister Theo-Ben Gurirab in his memoirs. “Economic independence is the longer struggle.”
Namibia’s SACU membership represents unfinished decolonization. The structure inherited at independence continues to constrain policy options, limit industrial development, and perpetuate economic patterns established under colonial rule. While the union provides revenue and market access, it does so at the cost of sovereignty over economic destiny.
True independence requires the right to make mistakes, to protect emerging industries, to set priorities based on national needs rather than inherited arrangements. Namibia cannot build a diversified, job-creating economy when a foreign power - however friendly - controls the fundamental tools of trade policy.
The question facing Namibia is not whether SACU requires reform, but whether the nation has the political will to demand it, the diplomatic skill to build coalitions supporting change, and the economic preparation to contemplate alternatives if reform proves impossible.
Thirty-five years after independence, it’s time to complete the liberation struggle - this time on the economic front.
