1. The historical background
Before 1994, formal economic co-operation in Southern Africa was restricted to the Republic of South Africa (including its "Homelands"), the former British controlled countries of Botswana, Lesotho and Swaziland, and South West Africa (now Namibia).
Multinational economic co-operation was embodied in various agreements amongst the governments of these countries, for example, the Customs Union Agreement and the Common Monetary Area Agreement. Certain bilateral economic co-operation agreements, e.g. on trade, also existed with a few other countries.
After the Government of National Unity was elected in April 1994, opportunities opened up for South Africa to participate in much wider regional and multinational arrangements, stretching indeed from Cape Town to Casablanca. Initially, the new situation was a bit overwhelming. There were more than fifty countries on the African continent and numerous existing regional arrangements for economic co-operation. South Africa had to find a place for itself in this maze of institutional arrangements that, at various levels and with different objectives, covered almost all aspects of economic activity.
As it turned out, South Africa joined a number of these regional associations, for example, the Africa Development Bank, the United Nations Economic Commission for Africa, and the English speaking Group of countries jointly represented on the Executive Boards of the International Monetary Fund and The World Bank. South Africa also entered into negotiations with the European Commission on joining the Lomé Convention or entering into a Lomé-type of bilateral arrangement with the European Union.
From the Reserve Bank's point of view, one of the most important decisions the South African Government took in this regard was to join the Southern African Develop-ment Community (SADC), which included ten other countries in the more familiar Southern African region. Mauritius subsequently joined this group and, together with South Africa, the twelve member countries now have a total population of about 125 million people and, we believe, a great potential for accelerated economic growth in the next decade.
SADC is, of course, a much older institution, which was established already on 1 April 1980 in Lusaka, Zambia, with the principal objective of reducing members' external economic dependence on South Africa. The aims and objectives changed with the metamorphosis of the South African political situation in the late eighties and early nineties. A new declaration entered into in August 1992 transformed the original Southern African Development Co-ordination Conference (SADCC) into the new Southern African Development Community (SADC), to pave the way for the absorption of a new and fully democratic South Africa in the organisation. The objectives of the revamped organisation were now focused more directly on economic development, economic co-operation and even economic integration in the region.
2. Institutional framework
SADC has a fairly complex institutional framework. The workforce of the organisation is very small and most of the work has been decentralised and allocated to its twelve member states. South Africa has been tasked with responsibility for the Finance and Investment Sector. The following component bodies of the institutional framework can be distinguished:
Summit of Heads of State -- the ultimate policy-making body of SADC meets once a year and decides on overall policy directions, and controls the various functions of SADC.
Council of Ministers -- the executive body of SADC responsible for overseeing the functioning and development of SADC objectives, and ensuring that policies are properly implemented. The Council advises the Summit on policy matters and approves SADC policies, strategies and work programmes.
Sectoral Committees of Ministers -- are the operational bodies of SADC, and comprise Ministers responsible for various sectors. Ministers of Finance and Economic Planning will, for example, be members of the Sectoral Committee for Finance and Investment. The South African Minister of Finance chairs this Sectoral Committee.
Sectoral Committees of Senior Officials -- being the advisory bodies of SADC. Heads of government depart-ments are members of the Sectoral Committees of Senior Officials, and these Committees report directly to their respective Sectoral Committees of Ministers.
Committee of Governors of Central Banks -- is an "independent" central bank Governors' Committee that also reports to the Sectoral Committee of Ministers for Finance and Development. The Committee of Governors is chaired by the Governor of the South African Reserve Bank.
To assist the small Secretariat of SADC, operating from its offices in Gaborone, Botswana, there are in each country National and Sectoral Contact Points, and also a very important Sectoral Co-ordinating Unit.
I will now concentrate on the work of the Committee of Governors of Central Banks.
3. The Committee of Governors of Central Banks
This Committee met twice during the past twelve months and has agreed on the following terms of reference for its activities (still to be approved by the Council of Ministers at its next meeting):
Terms of reference
In support of the principles and objectives of the Treaty and in order to contribute to achieving the broad objectives of the Finance and Investment Sector, the Committee of Governors shall:
(a) establish closer co-operation among the member central banks through a regular exchange of views on the philosophies, structures, functions, objectives and strategies of central banking;
(b) compare and analyse the basic differences in the organisational structures and legal frameworks, internal administration procedures, accounting and financial management practices of member central banks, and their relationships with governments, and explore ways and means of achieving comparability and compatibility in these areas;
(c) develop a centralised and readily accessible data base including macroeconomic, monetary and financial statistics of member states;
(d) exchange views on the main objectives and efficacy of monetary policy and the monetary policy instruments used by members, with a view to better co-ordination, co-operation and harmonisation in the future;
(e) examine the role of central banks in the estab-lishment of sound and well-managed banking institutions, including the responsibilities for cross-border bank licensing, regulation and supervision, and direct participation in private banking and other financial activities, where applicable;
(f) define the role central banks should play in the development and operation of money and capital markets;
(g) explore the involvement of central banks and determine areas of possible co-operation in international financial relations, such as the management of foreign reserves, exchange rate regimes and exchange controls and conditions for currency convertibility, with a view to closer financial co-operation in the region;
(h) investigate the present structures for the repat-riation of bank notes and coin within the SADC region, in order to eliminate any shortcomings;
(i) co-ordinate the development of national clearing, payment and settlement arrangements with a view to facilitate financial transactions among SADC members;
(j) promote training and public education in the fields of central banking and financial policies and systems by inter alia making use of facilities of institu-tions within the region; and
(k) co-ordinate ways and means to combat money laundering and other cross-border banking and currency frauds.
The South African Reserve Bank has established a small specialised research unit in its Economics Department to assist the Committee of Governors in its pursuance of these objectives. The Reserve Bank also provides secretarial services to this Committee.
4. Work programme
At its two meetings, the Committee of Governors gave approval to the immediate development of the following projects:
(i) The development of a SADC economic, financial and central bank information data base to be managed by the South African Reserve Bank;
(ii) a study on the implications of exchange controls (still applied by members) for the investment and economic development objectives of the region;
(iii) co-operation on a concerted action in the region against money laundering;
(iv) an investigation into the clearing, payment and settlement systems applied in each country with the view to the harmonisation, the development of more compatible systems, and the eventual integration of cross-border inter-regional and external clearing, payment and settlement arrangements;
(v) a co-ordinated programme for training and human resource development of central bankers in the region. The South African Reserve Bank invited the other members to nominate candidates for partici-pation in the various courses on central banking presented by the Bank's Training Institute;
(vi) support for and co-operation of the work on bank regulation and supervision that is already being done in another forum, namely the East and Southern Afri-can Banking Supervisors Group (ESAF);
(vii) a study of relationships with other bank associations on the African continent, for example, the Associa-tion of African Central Banks and the Association of Commercial Banks of the Common Market for Eastern and Southern Africa within COMESA.
The Committee is of the opinion that these more basic issues should be addressed first, before it can proceed with its longer term objective of closer co-operation with, and the harmonisation of, macro-economic monetary policies in the region. Taking account of the great divergencies that exist at this juncture between the stage of development of the economies of the twelve member countries, it is premature to attempt any form of integration of the economies now.