The idea of an Association of African Central Banks (AACB) was first introduced on 25 May 1963 at the Summit Conference of African Heads of State. African heads of state and government unanimously agreed to set up a preparatory economic committee to study a large range of monetary and financial issues in collaboration with governments and in consultation with the Economic Commission for Africa (ECA).
The first meeting of Governors of African Central Banks was held in Addis Ababa in February 1965. It was agreed that sub-regional committees (as defined by the ECA) would be set up, composed of members of the AACB or their representatives.
Today, the AACB has an Assembly of Governors (the governing body of which consists of the governors of all African central banks), a Bureau (composed of the Chairperson and Vice-Chairperson of the AACB and Chairpersons of sub-regional committees), and sub-regional committees (composed of governors of the central banks of the five sub-regions as defined by the African Union).
The Statutes of the Association were amended and adopted at Malabo, Equatorial Guinea, on 14 August 2015 during the 38th Ordinary Meeting of the Assembly of Governors.
A continental seminar of the AACB was held from 5 to 7 May 2014 in Algiers on “The Imperatives for Improvement and Integration of Payment Systems in Africa”. The represented central banks reviewed the situations of their respective countries and shared experiences and ideas on integrating payment systems. The main recommendations were to:
Participants noted the need to set up a continental body to coordinate efforts to modernise and integrate payment systems on the continent.
In 2018, the AACB revisited the discussion on a pan-African payment system integration following a proposal by the AACB Chairperson and SADC payment system subcommittee. It approved the decision that a central task force would be formed to oversee the implementation of this initiative.
Workshops were held in May 2019 in Cairo, Egypt, to explore the development of an interregional payment system integration framework and an integrated mobile payment strategy. The conclusion was that a task force should be formed to oversee the implementation of both initiatives. The terms of reference for the task force were approved at the annual meeting in Kigali, Rwanda, in August 2019.
The Southern African Development Coordinating Conference (SADCC), established on 1 April 1980, was the precursor of the Southern African Development Community (SADC). The SADCC was transformed into SADC on 17 August 1992 in Windhoek, Namibia, where the SADC Treaty was adopted, redefining the basis of cooperation among member states from a loose association into a legally binding arrangement.
The SADC Mission Statement is “to promote sustainable and equitable economic growth and socio-economic development through efficient, productive systems, deeper cooperation and integration, good governance, and durable peace and security, so that the region emerges as a competitive and effective player in international relations and the world economy”.
The Regional Indicative Strategic Development Plan and the Strategic Indicative Plan for the Organ remain the guiding frameworks for SADC regional integration, providing SADC member states, the SADC Secretariat and other SADC institutions with consistent and comprehensive programmes of long-term economic and social policies.
The institutional arrangements include the SADC Summit, the Summit Troika of the Organ, the SADC Administrative Tribunal, the SADC Council of Ministers, Sectoral and Cluster Ministerial Committees, the Standing Committee of Senior Officials, the SADC Secretariat, SADC National Committees and the SADC Parliamentary Forum.
Currently, SADC has 26 protocols, including those that have not yet entered into force. The Protocol on Finance and Investment promotes harmonisation of financial and investment policies of the state parties in order to make them consistent with SADC objectives and ensure that any changes to financial and investment policies in one state do not require undesirable adjustments in other states. Chapter 5 of the Protocol addresses cooperation among central banks, with article 8 stating that all member states shall ensure cooperation among their respective central banks in relation to payment, clearing and settlement systems as set out in annexure 6.
Annexure 6 articulates cooperation by member states relating to payment, clearing and settlement systems within each state party (and for the region), and states that parties agree that the application of this annexure is intended to culminate in convergent national payment system features, policies, practices, rules and procedures within the region. The annexure states that the central bank of each state party shall, in cooperation with other central banks, define and implement a cross-border payment strategy for the region. It also gives the Committee of Central Bank Governors, which is a subcommittee of the SADC Committee of Ministers responsible for Finance and Investment, responsibility for implementing this annexure.
The SADC Integrated Regional Electronic Settlement System was created in July 2013. It is an automated interbank settlement system that settles payment obligations between participating banks on a real-time or delayed basis. The current system settles payments denoted in South African rand (ZAR).
The SADC real-time gross settlement system is operated by the SARB as appointed by the participating SADC central banks. Participants include central banks and financial institutions (banks and non-banks) in SADC that are authorised by the central bank in the country of origin to participate in that country’s settlement system.
The Common Market for Eastern and Southern Africa (COMESA) was formed in 1994 and consists of 21 African member states. It replaced the Preferential Trade Area for Eastern and Southern Africa, which was formed in 1981. COMESA is the largest regional economic community in Africa with a population of over half a billion people and a global trade of goods worth US$235 billion.
Due to COMESA’s economic history and background, its main focus is on the formation of a large economic and trading unit that is capable of overcoming some of the barriers faced by individual states. Its vision is “to have a fully integrated, internationally competitive regional economic community with high standards of living for its entire people, ready to merge into the African Economic Community”.
Chapter 10 of its treaty covers monetary and financial cooperation. Article 72(a) addresses strengthening the clearing and payment system in order to promote the use of national currencies in the settlement of payments for all transactions among the member states, thereby economising on the use of foreign currency.
Scope of Co-operation
The Member States undertake to co-operate in monetary and financial matters in accordance with the approved PTA monetary harmonisation programme in order to establish monetary stability within the Common Market aimed at facilitating economic integration efforts and the attainment of sustainable economic development of the Common Market by:
(a) strengthening the clearing and payments system in order to promote the use of national currencies in the settlement of payments for all transactions among the Member States thereby economising on the use of foreign currency;
(b) taking measures that would facilitate trade and capital movement within the Common Market;
(c) the realisation of greater harmony in economic policies, particularly in fiscal and monetary policies, the management of the foreign sector and in the development policies of the Member States;
(d) the integration of the financial structures of the Member States; and
(e) the mobilisation of financial resources for the expansion of trade and development projects and programmes.
Settlement of Payments
For the purposes of sub-paragraph (a) of Article 72 of this Treaty, the Member States undertake, until a common central bank is established, to settle all payments in respect of all transactions in goods and services conducted within the Common Market through the Clearing House.
Unit of Account
Establishment of a Payments Union
Monetary and Fiscal Policy Harmonisation
(a) remove all exchange restrictions on imports and exports within the Common Market;
(b) make necessary adjustments in their exchange rates towards free market rates in order to improve their balance of payments positions and enhance the level of their international reserves;
(c) adjust their fiscal policies and domestic credit to the government and private sector designed to ensure monetary stability and the achievement of sustained economic growth;
(d) liberalise their financial sectors by freeing and deregulating interest rates or their equivalent with a view to achieving positive real interest rates or their equivalent in order to promote savings for investment and to enhance competition and efficiency in the financial system; and
(e) harmonise their tax policies with a view to removing tax distortions affecting commodity and factor movements in order to bring about a more efficient allocation of resources within the Common Market.
Establishment of Currency Convertibility
Formation of an Exchange Rate Union
Regional Macro-economic Co-ordination
Banking and Capital Market Development
The Member States undertake to implement a region-wide capital market development programme to be determined by the Council and shall create a conducive environment for the movement of capital. To this end Member States shall:
(a) take steps to achieve wider monetarization of the region's economies under a liberalised market economy;
(b) establish national stock exchanges and an association of national stock exchanges to enable objectives to be pursued in a concerted and coordinated manner including promotional activities, training, standardisation and harmonisation of operational rules and regulations;
(c) establish a Common Market rating system of listed companies and an index of trading performance to facilitate the negotiation and sale of shares within the Common Market and also external to the Common Market;
(d) develop a region-wide network of national capital markets, with the purpose of facilitating the flow of information on national stock exchanges and their functioning, listed companies, availability of stocks, bonds, securities, treasury bills, notes, and other monetary instruments for the cross-border marketing of such instruments; and
(e) ensure adherence by their appropriate national authorities to harmonised stock trading systems, promotion of monetary instruments, and permission for residents of the Member States to acquire and negotiate monetary instruments.
The Member States shall, permit the free movement of capital within the Common Market and integrate their financial structures. In this regard, the Member States shall:
(a) ensure the unimpeded flow of capital within the Common Market through the removal of controls on the transfer of capital among the Member States in accordance with a timetable to be determined by the Council;
(b) ensure that the citizens of and persons resident in the Member States are allowed to acquire stocks, shares and other securities or to invest in enterprises in the territories of the other Member States; and
(c) encourage cross border trade in government securities such as treasury bills, development and loan stocks within the Common Market.
Joint Project Financing
The Council may approve measures designed to remedy any adverse effects a Member State may experience by reason of the implementation of the provisions of this Chapter, provided that such a Member State shall furnish to the Council, proof that it has taken all reasonable steps to overcome the difficulties, and that such measures are applied on a non-discriminatory basis."
Article 73 states that, until a common central bank is established, member states undertake to settle all payments for transactions in goods and services conducted within the Common Market through the COMESA Clearing House. The Clearing House enables member states to use local currencies in their intra-COMESA trade.
A Regional Payment and Settlement System (REPSS) has been introduced, to enable central banks to transfer funds across borders within COMESA. Settlement is done on a net basis with a single currency. Central banks may use the United States dollar or the euro. The REPSS is built on open standards and is accessible to non-member states. The vision is to make REPSS the single gateway for central banks within the region to effect payments.
The East African Community (EAC) is a regional intergovernmental organisation of six partner states. It has a combined population of about 177 million citizens and a GDP of US$193 billion (EAC Statistics for 2019). It was founded through a treaty signed on 30 November 1999 and entered into force on 7 July 2000.
As one of the fastest-growing regional economic blocs in the world, the EAC is widening and deepening cooperation among the partner states in key political, economic and social spheres. The regional integration process is in full swing, as reflected by the encouraging progress of the East African Customs Union, the establishment of the Common Market in 2010 and the implementation of the East African Monetary Union Protocol.
The main organs of the EAC are the Summit, the Council of Ministers, the Co-coordinating Committee, the Sectoral Committees, the East African Court of Justice, the East African Legislative Assembly, and the Secretariat.
The creation of the East African Monetary Union (EAMU) is an important stage in the process of EAC regional integration. The EAMU Protocol was adopted in accordance with the EAC Treaty and signed on 30 November 2013. It lays the groundwork for a monetary union within 10 years and allows the EAC partner states to progressively converge their currencies into a single currency. Article 15 of the Protocol provides that partner states shall develop and implement secure, efficient, reliable and integrated payment and settlement systems. Partner states undertake to adopt an integrated trading and security depository, and harmonise and integrate the payment and settlement system financial market infrastructure with other systems.
It was in this context that the East African Payment System was created to facilitate the transfer of funds across borders within the region. The system uses the existing real-time gross settlement infrastructure to achieve safe and efficient cross-border transfers. It uses the currencies of the partner states: Tanzanian shilling (TZS), Kenyan shilling (KES), Ugandan shilling (UGX), Rwandan franc (RWF), Burundian franc (BIF) and South Sudanese pound (SSP).
On 10 June 2015, the heads of state and government of the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and Southern African Development Community (SADC) all met at the Third Tripartite Summit in Sharm El Sheikh, Egypt, to officially launch the COMESA-EAC-SADC Tripartite Free Trade Area (TFTA).
The Common Market for COMESA-EAC-SADC comprises 26 countries with a combined population of nearly 600 million people and GDP of approximately US$1 trillion. The main objective of the COMESA-EAC-SADC TFTA is to strengthen and deepen economic integration of the southern and eastern Africa regions. This will be achieved by harmonising policies and programmes across the three regional economic communities in trade, customs and infrastructure development. Creating an enabling environment for trade will promote economic growth in the regions.
The COMESA-EAC-SADC Memorandum of Understanding underpins the legal and institutional framework for the Tripartite process, and establishes the Tripartite Coordination Mechanism. A revised Draft Agreement and Annexes were finalised in December 2010, with the text of the Agreement and Annex on Negotiating Principles further revised in June 2011.
The Memorandum of Understanding establishes organs such as the Tripartite Summit; the Tripartite Council of Ministers; the Tripartite Sectoral Ministerial Committee on Trade, Finance, Customs, Economic Matters and Home/Internal Affairs; the Tripartite Sectoral Ministerial Committee on Infrastructure; the Tripartite Sectoral Ministerial Committee on Legal Affairs; and other Ministerial Committees. Article 26 of Part 7 of the Memorandum states that Tripartite member/partner states may cooperate and strengthen coordination in financial and payment systems, and in developing capital market and commodity exchanges. There are efforts to develop an interregional payment system integration framework and an integrated mobile payment strategy.
If you have further questions about regional and continental initiatives, please do not hesitate to contact us.