SADC Records Notable Progress in Financial Markets and Regional Integration
There has been notable progress in the area of payments systems in the Southern African Development Community (SADC).At national level, all the 16 SADC Member States are implementing Real Time Gross Settlement System (RTGS) which facilitates quicker transactions and brings about efficiency in payments.
In her report to the 40th SADC Summit hosted virtually by Mozambique in August 2020, SADC Executive Secretary, Her Excellency Dr Stergomena Lawrence Tax, said at regional level, harmonisation of payments and clearing systems through the SADC-RTGS is ongoing.
The SADC RTGS supports the modernisation and harmonisation of payments and clearing systems both domestically and regionally with the objective of improving safety of payments and efficient settlement and payment processes in the region.
It is also intended to lower transaction costs as it removes the need for correspondent banks. Where transactions previously took two to three days to clear, with SADC-RTGS they are now settled in real-time, subject to availability of funding at the paying bank.
All Member States (except Comoros) are participating in the SADC-RTGS and a total of 85 central banks and commercial banks are also participating in the system. The SADC-RTGS has performed impressively since July 2013 when the system went live, with more than 1.7 million transactions settled as at end of March 2020, representing 6.87 trillion South African rand.
In the area of financial inclusion, 32 percent of adults in the SADC Region are financially excluded, which is around 45.7 million individuals against the target of 25 percent by 2021. Overall levels of financial inclusion vary considerably across the region, from 97 percent in Seychelles to 40 percent in Mozambique.
As per the decision by the Ministers of Finance and Investment at their meeting in Namibia in July 2019, the operationalisation of the SADC Financial Inclusion Subcommittee is ongoing. The main objective is to coordinate the work on financial inclusion and build synergies among the structures dealing with financial inclusion across the region.
With regard to cross border remittances in the region, which are critical for financial inclusion and poverty alleviation, the main objective is to lower the average price of remittances to the consumer, as well as appropriately increase the use of formal channels.
For instance, the cost of cross border remittances has been reduced by 3.6 percentage points from an average of 13 percent per transaction to about 9.4 percent in the corridor between South Africa and Botswana, Eswatini, Lesotho, Malawi, Mozambique, Tanzania, Zambia and Zimbabwe. The challenge is to further reduce these costs to meet the United Nations Sustainable Development Goals target of 3 percent by 2030.
Furthermore, SADC migrants’ resident in South Africa are estimated to remit approximately R21.9 billion home annually, with R11.3 billion (representing 52 percent) transiting through informal channel. Migrants using formal remittance channels are estimated to send as much as R12,000 annually or R1,000 per month while informal remitters send in the order of R550 per month.
Notable progress has also been achieved towards market integration by ensuring Online Mechanism for Reporting, Monitoring and Eliminating Non-Trade Barriers to Trade in the Common Market for Eastern and Southern Africa (COMESA), East African Community (EAC) and SADC are operational and managed by EAC for Tripartite Member States.
To date, seven Member States have ratified the Protocol on Trade in Services. The first round of negotiations was completed in six priority sectors identified in the Protocol. These are communication, finance, tourism and transport services, construction and energy-related services.
The SADC Industrialisation Strategy and Roadmap foresees an increase in manufactured exports to at least 50 percent of total exports by 2030 from less than 20 percent at present and to build market share in the global market for the export of intermediate products to East Asian levels of around 60 per cent of total manufactured exports.
Currently, 13 SADC Member States participate in the FTA while three – Angola, the Comoros, and the Democratic Republic of Congo – are not yet participating. Efforts are being made to consolidate the FTA by bringing these remaining three Member States into the FTA.