1. The global financial environment

The ongoing process of economic globalisation is creating a more complex environment for the smaller and less-developed economies of the world. The integration of financial markets, the multilateralisation of financial and other corporates, and the liberalisation of trade and services contribute to more competitive global circumstances. It becomes more difficult for small and economically less-developed countries to find a foothold in this complex and highly competitive environment, to keep pace with the technological revolution, to introduce fast-changing high-cost electronic and satellite communication systems, and to switch to sophisticated new production processes.

The smaller countries with less-developed economies are, however, in most instances very dependent on the rest of the world for the support of their economic development programmes. In particular, they need transfers of surplus savings from the more developed economies to supplement their own scarce resources. They need assistance in the form of technology, skills and experience. They need markets where they can sell their minerals and other raw materials, and the manufactured goods that they can produce on a competitive basis in their own countries. In other words, they can not for ever live in isolation from the unstoppable process of economic globalisation.

For understandable reasons, the rules for participation in the economic globalisation process are made mainly by the industrial countries. These countries, after all, are the major players in this game. The rules, however, do not always fit conditions in, and aspirations of, the smaller countries. Governments in some of these smaller countries are therefore often frustrated by the harsh conditions for macroeconomic management set by the international investment community, and by the severe penalties for not abiding by the rules. Clear signs of such frustration recently came from countries in East Asia that apparently managed their economies with great success for many years, but failed to satisfy the standards for macroeconomic management demanded by global financial markets.

South Africa is a country that still struggles with the development of its internal economy, and with the task of creating sufficient jobs for the continuous growth in its total labour force. At the same time, South Africa has a very well-developed financial sector with financial markets that are rapidly being integrated into the global system. This country cannot afford to ignore the massive needs of its own people, but can also not disregard the minimum standards for macroeconomic management laid down by the international investor community.

In the short term, there may seem to be conflicts in the two objectives: can the international demands for prudent economic management be reconciled with the urgent national demand for more jobs, and immediate economic development? It is true that, in the longer term, both objectives will be served best by applying the economic disciplines demanded by the global financial markets. It is, however, difficult to explain to people already living in poverty that things must get worse before they will get better.

It is also difficult for the smaller countries with less-developed economies to change the philosophy of, or to alter the models for, macroeconomic management already accepted by the global markets and firmly established as preconditions for full participation. For the time being, the only sensible approach for the smaller countries is to try to understand these minimum requirements better, and to decide what they can do on a case-by-case basis to implement suitable policies. At the same time, they must continue to negotiate on a multinational basis, for a better understanding of the political and social implications for the smaller countries of the globalisation process.

Keeping pace with change therefore requires of Africa to recognise the realities and the complexities of the on-going process of economic globalisation. The challenge is gradually to make the African economies, and the macroeconomic policies followed by African countries, compatible with the requirements of the global markets. This focuses the attention therefore on internal economic policies followed by African countries, and on the longer-term effects of economic restructuring on the continent.

2. Financial co-operation in Southern Africa

The foregoing philosophy was endorsed in framing the work programmes of the Committee of Governors of the Central Banks of the Southern African Development Community (SADC), a Committee that was tasked with the responsibility of enhancing financial co-operation in the region. The Heads of State of the fourteen countries now participating in SADC accepted a longer-term goal of establishing full economic integration in the region. A number of Protocols were created to work towards this goal, for example, on Finance and Investment, Tourism, Industry and Trade, Human Resource Development, and Transport and Communication. The Governors Committee functions as a Sub-committee of the Finance and Investment Protocol.

Since its inception in the second half of 1995, the Governors Committee concentrated on an analysis of the existing structures and the development of internal financial systems and policies followed within each one of the participating countries. To this end, a database was established in the computer system of the South African Reserve Bank to compile a series of important financial statistics from each country. This database is updated regularly, is accessible to all the central banks of the region, and is published on a special Internet website. Continuous work is being done to improve the quality of the statistics, and to standardise underlying definitions.

Secondly, a databank was established with information for all the central banks on issues such as legislation, relationships with governments, management, policy objectives, procedures and instruments of monetary policy, and internal administrative structures. A technical working group is now busy with a more detailed study to analyse the legal and operational structures of each one of the central banks in SADC. The group will propose possible steps that can be taken in each country to reach greater compatibility and convergence amongst the central banks of the region.

Thirdly, a need exists for the standardisation of bank regulation and supervision in the region, and for the development of the quality of, and the capacity for, proper monitoring and control systems. Bank regulators in the region united themselves in an East and Southern Africa Banking Supervisors Group and a lot of work has been done in harmonising bank supervision and regulation policies, and in training bank regulators and supervisors of the region.

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

Fifthly, special attention has been given to the removal of remaining exchange controls in SADC countries. Arrangements have already been introduced for the unrestricted repatriation of bank notes and coin issued by other member countries. Movement towards a situation where there will be no exchange controls on the flow of capital in the region is being promoted. A special study was undertaken by a sub-committee on all the remaining exchange controls still applied by each country in the region. Information gathered with this study now serves as a guideline for the further removal of restrictions.

Sixthly, the Governors Committee extended its activities to the level of private (commercial) banking in the region. A recently established Commercial Banking Association of SADC countries is now working with the Governors Committee to promote on a co-operative basis the development of the banking systems in the region.

Seventhly, on the initiative of the Governors Committee, a SADC Committee of Stock Exchanges was established with the objective of promoting closer co-operation amongst the stock exchanges of the region. This very active Committee has already made important contributions to the recent relaxations of exchange controls by South Africa. It is now working on a programme for a better and extended utilisation of available clearing and settlement facilities for securities transactions, and the harmonisation of listing requirements.

Eighthly, extensive work has been done on a programme for the synchronised development of the information technology architecture used by each one of the member central banks. In the process, an E-mail communication system is being developed between all the central banks, a joint SADC Central Bank website has been introduced on Internet and a regional strategy for training and capacity building in information technology applications is being implemented.

Finally, an ambitious project has been launched for the improvement and further development of national payment, clearing and settlement systems in the region. A survey has been completed on the existing payment systems applied in each one of the twelve original members, and this information will be published soon in a so-called Green Book on the payment systems in SADC countries.

South Africa has recently introduced an upgraded national payment system with the introduction of the South African Multiple Option Settlement (or SAMOS) system to provide for the eventual real-time on-line settlement on a gross basis for large transactions, and an end-of-day settlement on a net basis for all other transactions. The South African Reserve Bank and the Bank of Mauritius are now involved in a joint venture to convert the SAMOS system into an appropriate platform for implementation in Mauritius. If successful, this could set a model for the upgrading and eventual integration of all national payment systems and for effecting cross-border payments in the whole region, through an inter-linked electronic payment system.

The challenge for the Committee of Governors of SADC is to prepare the way in the financial sector for an eventual integration of the economies of the countries of the Southern African region. Taking account of the great divergencies that exist at this juncture in the stage of economic development reached in each one of the fourteen countries in the group, it is indeed a very daunting challenge. The Committee's approach so far has been to analyse the basic framework of the financial systems and to identify major structural deficiencies that must first be addressed before any meaningful discussion on multi-national financial integration can begin.

Starting with a discussion on exchange control policies, the Committee has already ventured into the arena of monetary policy harmonisation. In a next phase, the Committee's work will have to be extended to co-operation amongst the central banks on other macroeconomic policies such as exchange rate, interest rate, and anti-inflation policies.

3. Southern Africa and the global environment

The process of economic globalisation in many cases follows the route of regionalisation. The European Community, Mercosur and the North American Free Trade Area provide a few examples of this primary process of globalisation. SADC must also be developed within the environment of the wider globalisation process. It will be difficult for the world to continue to marginalise Africa once regional arrangements such as SADC, and eventually the whole continent with its more than 700 million people, can become a joint economic force.

In keeping pace with change, SADC and Africa cannot ignore the on-going process of globalisation, facilitated by easy communication, electronic data processing, and the multi-nationalisation of all economic activity. The functions of the SWIFT organisation, with the services it provides in world-wide financial processing and communication, are representative of the challenges facing each one of our countries in this new borderless and competitive world of global economic integration.

The Governors Committee of SADC took up the challenges of the development of basic financial infra-structures in each of its participating countries with the determination to prepare this part of Africa for participation in the global market. The Committee's present programme, however, represents but a small step towards preparing the region for the greater challenge of becoming a full member of the global community where many countries, much more advanced than most of the African countries, are already preparing themselves for the so-called "next generation" environment of the 21st century.

In this "next generation" environment, countries will have to participate in:

electronic commerce, that is electronic transactions executed internally and on a world-wide basis;

electronic payments, that is world-wide payments for goods and services over SWIFT, Internet and other private networks; and

electronic money -- to be distinguished from electronic payments -- that will serve as a store of value, and as a means of payment, and that will be provided for in electronic data processing systems.

Each one of these three areas requires intensive preparation on, for example, legal implications, such as the admissibility of electronic records in legal proceedings, the recognition of signature substitutes, and the effective collection of consumer-based taxes. Countries will also not be able to participate in these developments without substantial investments in high cost electronic data processing equipment.

For SADC, and for all its participating members, keeping pace with change will not end with the completion of the work load of the existing and approved projects. Many of the further challenges, as those referred to above, will be covered in the programme of this Conference over the next few days. We, with responsibilities for financial management within SADC and in other parts of Africa, will follow the deliberations at this Conference with great interest.