1. Introduction

The Committee of Governors of the central banks of the member states of the Southern African Development Community (SADC) provides the forum for financial co-operation and the harmonisation of monetary policies in Southern Africa. This Committee meets twice a year, has a small Secretariat in the Reserve Bank in Pretoria to co-ordinate its activities, and works mainly through a number of sub-committees and working groups that were assigned special tasks and projects for development and implementation.

The Heads of State of the SADC countries decided at a summit meeting held in Maseru, Lesotho, in 1996 to work towards the establishment of a Southern African Community by the year 2004. Taking account of this objective, the Governors Committee decided to work towards this goal by immediately starting to improve at ground level the basic financial structures in each one of the participating countries. Projects are now in progress to modernise, upgrade and improve the quality and capacity at the level of the central banks, the private (or commercial) banks, the various financial markets, the national payment and clearing systems, and cross-border financial relations. These actions are intended to work towards some standardisation and harmonisation in basic financial policies such as bank regulation and supervision, exchange controls, stock exchange rules and regulations, and the functions and responsibilities of central banks.

The approach of the Governors Committee is that, taking account of the divergent stages of development of the financial sectors of each country, it is premature at this stage to talk of macroeconomic policy integration, or even of meaningful harmonisation at this level. Basic structures, capacity and skills must be developed and improved in the first phase, before actual financial integration and harmonisation can be pursued.

2. The work programme of the Governors Committee

During the past two years, the Governors Committee made good progress with the following special projects:

A monetary and financial statistical data base was established for all participating countries. This information has been published in book form, is regularly updated, and has recently been published on the Internet.

A data bank with information on issues such as legislation, relationships with governments, functions and responsibilities, management, policy objectives, procedures and instruments of monetary policy, and internal administrative structures for each central bank, has been compiled in an information data base and is now available to all Governors.

The central banks are involved in a major study on the development of national payment, clearing and settlement systems in SADC countries.

Some progress has been made in the introduction of more compatible information and technology systems. There is now a Website on the Internet for SADC central banks, and an E-mail communication system amongst the participating banks.

In the area of bank regulation and supervision, harmonisation is encouraged on policies such as bank licensing, minimum prudential requirements, regular auditing of banking institutions, and internal risk management. Bank regulators and supervisors meet regularly as the East and Southern Africa Banking Supervisors Group (ESAF), which includes more countries than just the thirteen members of SADC.

The South African Reserve Bank has introduced a specialised Training Institute for Central Banking, and provides specialised courses in central banking and financial management for its own staff and officials of other central banks in the region.

The removal of remaining exchange controls in SADC countries is another important priority of the Governors Committee.

During the course of 1997, the Governors Committee extended its activities to the level of private (commercial) banking operations in the region. A sub-committee for private bankers in member countries was established.

There is now also a Sub-committee of Stock Exchanges in SADC countries to give attention to matters such as the harmonisation of listing requirements, facilitation of dual listings and the introduction of depository receipts, procedures for clearing and settlement, and initiation of electronic communications between members of the various stock exchanges.

At its last meeting held in April this year, the Committee commissioned a study of the legal and operational structures and frameworks of all SADC central banks.

3. Future work of the Governors Committee

The work on the improvement of basic financial structures in each one of the 13 SADC member countries is intended to prepare the way for greater financial co-operation in the region. So far the Committee has given some attention to the harmonisation of certain aspects of monetary policy, and preliminary discussions were held on:

exchange control policies in the region; and

exchange rate policies followed by each one of the countries.

It is obvious that much more work will have to be done in future on issues such as interest rate policies, inflation objectives, monetary policy instruments, and regional relationships between SADC and similar regional structures in other parts of Africa.

It should also be pointed out that the Draft Protocol for the Finance and Investment Sector of SADC provides for the establishment of a Southern African Development Fund, a Southern African Payments Union, and a Unit of Account to be used in intra-regional payment and settlement transactions. The Governors Committee will obviously also be involved in the development of these projects.

4. Conclusion

The establishment of SADC created an opportunity for the central banks of the region to co-ordinate the development of the financial systems of the participating states. The Governors Committee, consisting of the heads of the 13 central banks of SADC, has embarked on a programme, in a first phase to upgrade national financial systems and structures in each one of the countries, but to do it on a basis of compatibility.

The next phase in this programme of greater financial co-operation in Southern Africa will be extended to the financial policy level, and to harmonising monetary policy objectives in the interest of the whole region.

Finally, the longer-term objective of the Heads of State, that is the formation of a Community of States in Southern Africa, will be pursued.