Scoping plan to strengthen financial integration in SADC

Genesis was commissioned by an international aid agency to define the scope for the design of a new Regional Financial Integration (RFI) programme aimed at improving financial integration within SADC.

Few economists would disagree that the small and often landlocked states of Southern Africa, with their deep historical links to South Africa, would be better served by deeper regional integration, or that such integration should include the free flow of capital within the region, particularly from South Africa’s developed capital markets.

Little progress has, however, been made in achieving regional financial integration. A study conducted by Genesis in 2011 showed that, while some progress had been made at the level of country preparation and cooperation, not much headway had been made on the more difficult harmonisation commitments required at regional level.

The intention of developing a new programme was therefore to extend the reach of the existing RFI programme, while simultaneously adopting a fresh and more effective approach that would support other DFID focus areas, such as migration and the strengthening of cross-border infrastructure.

The market diagnostics and stakeholder engagements conducted by the project team revealed that there remained important challenges or ‘gaps’ in a number of areas, including exchange control policies; payment, clearing, and settlement systems; anti-money laundering measures; controls related to combatting the financing of terrorism; remittance flows; and trade finance. The project team therefore recommended that a number of key areas and approaches to intervention should form the core of the new programme.

The team’s recommendations were accepted and incorporated into the design of the new programme.