Single SADC currency sparks heated debate

Single SADC currency sparks heated debate
March 9, 2005

By Sherilee Bridge-David

The establishment of a Southern African Development Community (SADC) monetary union, with a single central bank and a common currency, sparked heated debate among delegates at the African banking congress yesterday.

Cas Coovadia, who was promoted to managing director of the Banking Council on Monday, was flooded with questions over SA Reserve Bank governor Tito Mboweni's intentions to set up the monetary union by 2016 by representatives from regional banks - particularly in Zimbabwe and Namibia - who expressed concern over "a lack of discussion" with commercial banks in the region.

South Africa is considered the economic powerhouse of the 13-member SADC, whose other members are Angola, Botswana, the Democratic Republic of Congo, Lesotho, Malawi, Mauritius, Mozambique, Namibia, Swaziland, Tanzania, Zambia and Zimbabwe.

Mboweni brought up the possibility of a union last week after a meeting of SADC central bank governors in Cape Town.

He said that as part of the effort towards economic integration, countries within the group would all aim to have single-digit inflation by 2008, with an upper limit of 8 percent for 2012 and 5 percent by 2015.

African central bank governors aim to have a central economic and monetary union in place by 2021.

"A move towards a single currency and a single central bank for the region is a move in the right direction," said Coovadia.

Answering questions after his opening address at the congress, Coovadia said he thought it was a discussion that South Africa needed to begin with other members of the SADC.

"But the governor also pointed out that there are certain macroeconomic fundamentals that would have to be in place that would be critical to a movement in that direction," Coovadia said.

Among the challenges facing African banks were divergent standards in both economic development and risk management.

"A single currency and a single reserve bank can only work from the platform of sound banking practice," said Coovadia.

The SADC Banking Association was looking at the possibility of introducing "uniform norms for sound banking practices".

These norms would go some way towards the economic integration of southern Africa, said Coovadia.

The goal of regional integration, which aims to make SADC a powerful trading bloc and economic region, puts more pressure on regional inflation targets.

One of SADC's goals is for all member countries to get inflation below 10 percent. This means SADC member countries must get their houses in order before a single currency becomes a reality.

"I think 2016 is an indicative target that we need to work with," said Coovadia.

"There are other challenges and the governor has given us a target we can all work towards together," he said

from http://www.businessreport.co.za/index.php?fSectionId=&fArticleId=2439684