Jannie Rossouw, MCom;, MBA, Executive Management Department, SA Reserve Bank and Economics Department, University of Pretoria, PO Box 427, Pretoria, 0001, South Africa and Johan Fourie, Ph.D., South African Reserve Bank, PO Box 427, Pretoria, 0001, South Africa.
At the outset this paper aims to clarify any uncertainty about the macro-economic convergence criteria and goals of countries in the Southern African Development Community (SADC). Countries in the region show satisfactory progress with the achievement of the goals in as much as six countries achieved all four goals set for 2008 already by 2005, one country achieved three of the goals, three achieved two of the goals, another two achieved one goal and Madagascar, who joined SADC only in 2005, and Zimbabwe did not achieve any of the goals for 2008 by 2005.
The experience in Europe since 1857 shows that monetary union and the adoption of a single currency is a challenging prospect for any region. Judged in terms of the European experience, SADC does not face insurmountable challenges in its quest for monetary unification and a single central bank.
In the interest of the introduction of a monetary union and a regional central bank by 2016, this paper suggests five initiatives to enhance progress with convergence in the SADC region. First, the timely publication of macro-economic data should be ensured. Secondly, the measurement of inflation should be harmonised between countries and the credibility of inflation figures should be assessed. Thirdly, SADC countries outside the Common Monetary Area (CMA) should consider fixing their exchange rates to the South African rand. Fourthly, the macro-economic convergence criteria should be clarified. Lastly, at a micro-economic level, the implications of a monetary union in SADC for the financial services sector should be considered. The legal and supervisory framework of institutions such as banks and credit unions will require serious reconsideration. The regulatory framework within a single monetary arrangement will impact on the savings habits of households, thereby impacting on their accumulation of wealth.
JEL Classifications: E 31, E42, E58, F15
Key words: financial institutions; household savings macro-economic convergence; regulation and supervision of financial institutions; SADC