Following on our article titled; “USD or ZAR? What makes sense? we re-iterate our call that randisation cements the case for regional cooperation and integration in the broader Southern African Development Community (Sadc) region.
The SADC was founded in 1992 and aims to achieve development and economic growth through cooperation of member states.
While creating a regional currency is not one of the immediate objectives of the Sadc, it is to be expected that more attention will be given to the possibility of pursuing monetary integration.
Joining the Common Monetary Area (CMA) has been put forward among a range of options available to solve the currency crisis in Zimbabwe, which worsened when the country moved from a multi to a mono-currency regime.
For a developing economy like Zimbabwe, the benefit is that the development of sound financial structures will go a long way in driving macroeconomic development.
However, to gain admission to the CMA, a member country must mobilise sufficient reserves equivalent to its issued local currency, backed by prescribed assets in rand or US dollar terms so as to conform to the fixed exchange rate of 1:1 with the rand.
In addition, member states are also bound to contain sovereign debt within an agreed debt-to-GDP ratio and have consultations with the South African Reserve Bank (SARB) on monetary policy alignment as well as inflation targets.
We note that the present close monetary cooperation between South Africa, Lesotho, Namibia and Eswatini is based on the Multilateral Monetary Agreement (MMA) creating a common monetary area between these countries.
This agreement has had a long historical development which started even before the Union of South Africa was formed in 1910. After the establishment of the SARB in 1921, the South African pound became the sole circulating medium and legal tender in the geographical area that is today called the CMA but including Botswana.
In this article, we focus on some of the important features of t
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