Alternatives to Expedite Macroeconomic Convergence of SADC Countries

At the outset this paper clarifies some 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 five countries achieved all four goals set for 2008 already by 2006, five achieved three of the goals and the other four achieved two goals.  In addition, countries in the SADC region have achieved their target for the establishment of a free trade area.
The experience of Europe with monetary unions since 1857 shows that unification can at best be regarded as 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.
This paper suggests four initiatives to enhance progress with the introduction of a monetary union and a regional central bank by 2016 in the SADC region.  First, the macro-economic convergence criteria should be clarified and 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, at a micro-economic level, a monetary union in SADC implies that the legal, regulatory and supervisory framework of financial institutions should be harmonised.  Lastly, SADC countries should consider a suitable monetary framework for a regional central bank in view of the micro-economic advantages of a single currency.

JEL Classifications: E 31, E42, E58, F15
Key words: financial institutions; household savings macro-economic convergence; regulation and supervision of financial institutions; SADC