TRADE-SOUTHERN AFRICA: “Parochialism” Stymies Integration Efforts

By Stanley Kwenda Reprint | | Print |

Stanley Kwenda

HARARE, Oct 13 2010 (IPS) - The Southern African Development Community (SADC) has set ambitious targets for regional integration. But the goal of creating a customs union by 2010 has been postponed and the adoption of a single regional currency by 2018 may be missed due to national concerns.

At its formation in 1980, SADC set out to create a regional community based on the progressive elimination of obstacles to free movement of capital and labour and goods and services.

SADC states agreed to the formation of a SADC free trade area (FTA) in 2008 at a meeting held in Johannesburg, South Africa. The SADC FTA would create a regional market worth 360 billion dollars with a total population of 170 million people.

The agreement included establishing a customs union by 2010, a common market by 2015, monetary union by 2016 and a regional central bank and a single currency by 2018.

Proponents of the single currency believe the move will remove regional constraints to the promotion of economic growth, investment and infrastructural development.

Showers Mawowa, a doctoral candidate at the University of KwaZulu Natal in Durban, South Africa, believes regional integration and a single currency will help bring financial and economic stability to the region.

To achieve a single currency and a common monetary area, SADC countries were required to reduce their budget deficits to five percent of gross domestic product and bring inflation down to below 10 percent. Many are on track.

But rising food prices and the global financial crisis have pushed the timeline targets out of reach for most countries in the region. Also, by August only 11 out of 15 member states had joined the protocol establishing the FTA.

A high-level expert team has to report back by Dec 2011 on ways to improve progress with the customs union.

A meeting of the region’s central bank governors in Zimbabwe’s capital of Harare at the beginning of October did not reveal much in the way of movement on the outstanding issues.

Reserve Bank of Zimbabwe governor Gideon Gono reiterated that the adoption of a single currency would eliminate distortions associated with exchange rate movements and facilitate intra-regional trade and cross border investment.

He also confirmed that “the adoption of a single currency by 2018 will largely depend on the expeditious establishment of a customs union, which is currently lagging behind” schedule.

One of the reasons for the delays is fear that a single currency will tilt the balance in trade and investment in favour of bigger regional economies, such as South Africa’s.

Nairobi-based economic and social activist Thomas Deve is of the view that the adoption of a single currency by 2018 is still possible but “governments parochially use national sovereignty as an excuse for not moving fast”.

“All it needs is for the people concerned to come up with monetary codes, harmonise macro-economic fundamentals and subject national currencies to regional ones,” Deve continued. He gave the example of the use of a common currency in West Africa that makes it easy to transact throughout the region. “The central bank governors should help provide technical assistance to make this possible,” said Deve.

Mawowa differed from Deve, arguing that there “is political will but the fear is that integration should not be rushed because of the economic unevenness in southern Africa”.

Integration under the current set-up will no doubt benefit South Africa because it will reduce its transaction costs and increase the trade balance in its favour. He said the region should draw lessons from the European Union and insist on particular financial standards as a condition for joining.

Deputy Prime Minister of Zimbabwe Arthur Mutambara, an ardent supporter of regional integration, confirmed what Deve said. He told IPS that there is a need to cede some political and economic sovereignty for the dream to come true.

“We should come together as a region to safeguard our political and economic interests. We don’t want aid or donations but workable regional collaborations. Let’s concentrate on that which binds us together, rather than that which divides us,” Mutambara told IPS.

But Zimbabwean economic analyst Alec Chiswa, working on regional integration issues, expressed skepticism: “SADC countries are growing at different speeds and every country puts its own interests ahead of regional targets. That creates endless delays.

“The other problem is that of membership to multiple regional economic blocs. Member states have to revisit some of their obligations to other regional economic communities before committing themselves to this.”