PLANS to adopt a single currency for the 15-member Southern African Development Community (Sadc) by 2018 could be overtaken by a much broader regional single currency and customs project that would include two other trade blocs, Industry and International Trade minister Welshman Ncube has said.
Sadc, Common Market for East and Southern Africa (Comesa) and the East African Community are in talks aimed at setting up a single monetary union and a free trade area by 2016.
A tripartite summit is scheduled for South Africa in May. Ncube said it would be wise for Sadc to “slow down towards a common currency”.
“The current roadmap is that we have a target for the common currency by 2016, assuming that all other issues such as the building blocks around the customs union have been achieved.
“But I doubt that route would be pursued with any enthusiasm because of discussions going on around the tripartite free trade area,” he said.
The tripartite was the coming together of Comesa, Sadc and East African community with a view to constructing a bigger regional organisation, said Ncube.
Member states of the Sadc integration project agreed to form a common central bank and adopt a single currency.
In preparation for this, states had agreed to reduce their budget deficits to 5% of gross domestic product and bring inflation to below 10%.
When the Sadc monetary union plan was mooted, 2016 was initially set as the target for a monetary union and a single currency by 2018.
Ncube said with a bigger free trade area, attention would be directed at integrating and consolidating the three bodies.
“If that happens, the movement by any of the three bodies towards a monetary union would be difficult because you do not want to move the three organisations towards completely separate monetary unions which would end up integrated.
“Therefore, it would be wiser to slow down movement towards monetary union and create a three body regional free trade area, a bigger customs union, before moving together towards a single monetary union,” he added.
Currently, Sadc has launched a regional payment integration system which facilitates electronic settlements between banks within the region.
The regional payment system is widely seen as a forerunner towards the single currency initiative. However, some Sadc economies might find it a herculean task to bring inflation down to single digit levels.
There are fears that the integration and the introduction of a single regional currency will tilt balances of trade and investment in favour of the more stable economies in the region that may eventually swallow the smaller economies.
Zimbabwe, Madagascar, Seychelles, Mauritius, the DRC, Swaziland, Malawi and Zambia are also in Comesa along with Burundi, Comoros, Djibouti, Egypt, Eritrea, Ethiopia, Kenya, Libya, Rwanda, Sudan, and Uganda.