Can macro-economic convergence in SADC result in the successful establishment of a monetary union and a central bank in the region?
Macro-economic convergence leading to monetary unification and a single central bank is one of the goals of the Southern African Development Community (SADC). To this end macro-economic convergence criteria were set, the first of which countries in the region should achieve by 2008. Further aims are to establish a free trade area also by 2008; a customs union by 2010; a common market by 2015; and monetary union and a SADC central bank by 2021. SADC is not alone in setting such criteria in Africa. As part of a broader strategy of the African Union for macro-economic convergence of all countries on the continent, similar goals were also set by the Economic Community of West African States (ECOWAS) and the two CFA franc zones in Africa. However, a recent publication (Masson & Pattillo 2005) based on experience with and prospects for current currency arrangements in Africa, casts doubt on the possibility of successfully achieving macroeconomic convergence, monetary union and central banks for all the regions (including SADC) in Africa. This article aims at examining this doubt purely from an economic perspective. Although the achievement of the convergence criteria and the establishment of a monetary union and a regional central bank are major challenges facing SADC, these challenges would not be insurmountable if South Africa assumes the leading role in convergence.