Lecture by Dr Chris Stals, Governor of the South African Reserve Bank, presented to the Harvard Institute for International Development Boston.  1. Background to the formation of SADCThe Southern African Development Community found its origin in 1980 when nine*1 countries in Southern Africa decided jointly "to pursue policies aimed at economic liberation and integrated development of our national economies". One of the main objectives of the association at that stage was to make the economies of these countries less dependent on South Africa -- a country that was then an unwanted ally because of its unacceptable internal political and social policies.After major political and social reforms in South Africa led to the fully democratic election of a Government of National Unity in April 1994, South Africa also joined SADC, to become the eleventh member, after a newly-independent Namibia already joined in 1990. Mauritius was the next country to join SADC, which now has twelve members with a total population of about 136 million people.In August 1992, a revised Treaty for SADC was approved by a Summit Meeting of the Heads of State of the participating countries. Included in the main objectives of the Community are the following economic goals: To achieve development and economic growth, alleviate poverty, enhance the standard and quality of life of the peoples of Southern Africa, and support the socially disadvantaged through regional integration;To promote and maximise productive employment and utilisation of resources of the region, andTo achieve sustainable utilisation of natural resources and effective protection of the environment. To achieve its objectives, SADC shallHarmonise political and socio-economic policies and plans of member States.Mobilise the peoples of the region and their institutions to take initiatives to develop economic, social and cultural ties across the region, and to participate fully in the implementation of the programmes and operations of SADC and its institutions.Develop policies aimed at the progressive elimination of obstacles to free movement of capital and labour, goods and services, and of the peoples of the region generally among member States.Promote the development of human resources.Promote the development, transfer and mastery of technology.Improve economic management and performance through regional co-operation.The Treaty provides for other political, social and cultural objectives which are not of direct relevance for the enhancing of financial co-operation in the region. 2. South Africa's position within SADCThe South African economy is by far the most advanced in the region. Although the total South African population of 42 million people accounts for but 31 per cent of the total population of all SADC countries together, the South African economy contributes about 80 per cent of the total gross domestic product of about $170 billion produced in the twelve member states. South Africa also accounts for almost 70 per cent of the combined total exports of $43 billion of the SADC region.South Africa's dominance is even more pronounced in the financial markets. South Africa is about the only country in the region with well-functioning and independent specialised financial institutions such as banks, long- and short-term insurers, private sector pension funds, mutual funds, participation mortgage bond schemes and mining and industrial finance houses. With a total market capitalisation of about $280 billion, the Johannesburg Stock Exchange dominates the capital markets of the region, and with a daily turnover of about $7 billion, the foreign exchange market in Johannesburg is providing an increasing service for international settlements for a number of other countries of the region. With a turnover of more than $700 billion last year in the South African bond market and a growing market for derivatives, South Africa is in a favourable position to provide sophisticated financial services for the whole SADC region.This dominating position of the South African economy has certain advantage