A strong and stable banking system is the backbone of an effective economy. Bank loans and Investments divert funds into productive uses, creating businesses, jobs, and a higher standard of living. As the Southern African Development Community (SADC) endeavours to liberalise the economies of the region in pursuit of improved livelihoods for the people of Southern Africa, it strives to build an integrated banking system that will better facilitate Trade among Member States and with the world at large. However, SADC recognises the current volatility in financial systems throughout the world, particularly in Europe. With this issue in mind, SADC has taken steps to ensure legal and regulatory measures are in place to prevent a similar crisis occurring in the region as its markets become more integrated.
Banking and the Protocol on Finance and Investment
Measures laid out in SADC’s Protocol on Finance and Investment encourage cooperation and coordination of exchange controls, information and communications technology, and regulatory and supervisory policies among the Central Banks of SADC’s Member States. It also advises Member States to develop harmonised standards of practice and regulations, thereby ensuring all SADC Central Banks follow common procedures and operational frameworks. A coherent and convergent approach to banking in the region lays a foundation as SADC moves toward Monetary Union and a SADC-wide Central Bank.
The Committee of Central Bank Governors in SADC
To facilitate implementation of the Protocol on Finance and Investment, SADC has assembled two groups: the Committee of Central Bank Governors in SADC (CCBG) in 1995 and the SADC Banking Association in 1998.
The Committee of Central Bank Governors responds to a need for a specialised body facilitating close cooperation among the Central Banks of SADC Member States. Comprised of the governors of each Member State, the Committee is responsible for promoting development of financial institutions and markets through cooperation and consensus on financial, investment, and foreign exchange policies.
Meanwhile, the SADC Banking Association coordinates the cross-border banking activities of its members. These activities include influencing policy, interacting with stakeholders, and initiating projects that can contribute to sustainable banking and investment policies and activities in the SADC region. The Association works closely with the Committee of Central Bank Governors, maintaining dialogue on relevant projects and recent developments in the regional banking environment.
Current Challenges and SADC’s Response
An immediate challenge for the SADC region is the on-going Eurozone crisis, which has affected liquidity on a global scale. Fortunately, the financial system within the region is not deeply integrated with the world economy and has been less affected than other regions. Still, on August 18, 2012, H.E. Donald Kaberuka, President of the African Development Bank, addressed the SADC Summit of Heads of State, advising Member States to mobilise resources for investment in projects that will help Southern Africa move forward despite the global financial situation.
Several projects operated by the SADC Banking Association are already underway. The South African government has invested heavily in developing capacity within its staff to engage with and initiate public-private partnership. These public-private partnerships are an essential tool for building capacity in the region, allowing the building of Infrastructure without diverting scarce public funds away from human development and basic services.
The SADC Banking Association has also taken steps to combat financial crime in the region, advising its members on crime prevention, money laundering deterrence, and other criminal activities that could increase as the region’s economies become more integrated.
Furthermore, the SADC Banking Association has commissioned research on critical weaknesses in banking operations throughout the region. From this research, it is currently drafting a set of standards for credit risk management and mitigation for the use of its members. Harmonised banking operations throughout the region further facilitate the ultimate SADC goal of Regional Integration for its Member States.