HomeBusiness DigestProposed African monetary union a tall order

Proposed African monetary union a tall order

SOUTHERN Africa faces an uphill battle to achieve a proposed monetary union similar to the EU as it battles to emerge from conflict and widespread poverty, regional bankers said on Wednesday.

Arial, Helvetica, sans-serif”>South African Reserve Bank governor Tito Mboweni last month announced that the 13-member Southern African Development Community was targeting a single currency by 2016.

Mboweni said after a meeting with his southern African counterparts that targets would be set for inflation, budget deficits and foreign exchange reserves, with penalties for countries that did not meet those goals.

But given the region’s recent history of conflict and vastly divergent economies, this would be no mean feat.

“We have to accept that for some countries it will be harder to achieve the targets,” Tom Alweendo, governor of the Bank of Namibia, said on the sidelines of an African banking conference.

“Countries such as the Democratic Republic of Congo and Angola have just emerged from civil wars and are still reconstructing while Zimbabwe is experiencing an economic collapse.”

Alweendo said although a programme of action had already been agreed on, the 2016 target could be missed. Similar sentiments were echoed by Richard Wilde, chairman of the Commercial Bank of Zimbabwe, who said while the move would be a “logical step” in line with world trends, the process would be “delicate”.

“The downside of the whole thing is the dominance of South Africa in development terms because many smaller economies will be concerned about the survival of their industries when they compete with much larger companies in that country,” he said.

It is envisaged that all Sadc countries will aim for single-digit inflation rates by 2008, with an upper limit of 8% for 2012 and 5% by 2015.

Inflation rates within the bloc vary widely at present, with the annual increase in South Africa’s headline consumer price index at 3% in January compared with about 134% in its smaller neighbour Zimbabwe which goes to its parliamentary poll on March 31. — Reuter.

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