Estimation of the potential economic welfare gains to SACU from trade facilitation

Trade facilitation is important for the South African Customs Union (SACU) countries because the expansion of international trade is a priority for enhancing their economic growth. Unfortunately, the high trade compliance costs facing importers and exporters operating in SACU conflict with this objective. This article aims to quantify the annual economic welfare gains that the member countries of SACU could realise from reforms that would reduce the documentary and border compliance time and costs. We use a partial equilibrium welfare economics framework that uses up-to-date sets of general equilibrium estimates of import demand and export supply elasticities by country. The impacts on the volume of trade flows and economic welfare are quantified to reduce documentary and border compliance time and trade compliance costs. The economic welfare changes from reducing the documentary and border compliance time and costs for imports and exports would be between US$2.2 billion and US$3.7 billion (2018 prices) or between 0.54% and 0.90% of GDP of the SACU countries. The economic welfare gains from reducing the excess administrative costs for imports and exports of SACU members would be between US$2.2 billion and US$3.7 billion (2018 prices) or between 0.54% and 0.90% of the GDP of the SACU. The most important reforms needed to realize these cost savings include a Single Window administrative structure. In this case, both customs, health, welfare, and controls and the payment of all duties, taxes, and licenses are handled by a single administrative office. Failure to move fast on such changes would have a negative impact on the well-being of SACU members.