CMA countries mull central bank

Mboweni, who was in Namibia last weekend where he addressed business leaders, among them Bank of Namibia governor Tom Alwendo, said a study had already been done but could not give a time frame as to when the central bank could be established.

The CMA has the region’s economic powerhouse South Africa, Namibia, tiny Lesotho and Swaziland as its membership.

Member states have their own currencies, which are pegged on a 1-to-1 to the South African rand. Member countries also apply similar exchange control measures. The SARB sets the monetary policy for the rest of the CMA and the South African inflation rate corresponds with rest of the CMA partners. Except for Botswana, which opted out of the CMA in 1976, all the member countries also come together under the Southern Africa Customs Union (SACU).

Mboweni pointed out that countries such as Namibia have reaped benefits with the inflation rate going down from 9.3 percent in 2000 to 2.3 percent in 2005.

The idea for a central bank for the CMA member countries had already been discussed.

“The possibility of establishing a central bank for the CMA countries is raised from time to time. A study was conducted in 2005 under the auspices of the CCBG (Capital City Bank Group) outlining the costs and benefits of the creation of a common central bank for the CMA countries,” Mboweni told Namibian leaders of commerce.

“However, decisions in this regard will be taken by the political leaders of the CMA countries, rather than by central bankers,” Mboweni added.

He reminded Namibia business leaders that financial market developments in South Africa have significant implications for financial markets in the region.

The Namibia Stock Exchange (NSX) is the first bourse in the region to use the Johannesburg Stock Exchange’s electronic trading system and the existence of dual listings improves the liquidity and turnover on the NSX, Mboweni said.

Standard Bank South Africa group economist for Botswana, Lesotho, Namibia, Swaziland Jan Duvenage and a Democratic Republic of Congo (DRC) delegate said that there is probably growing pressure from CMA member countries to have more say in monetary policy affairs.

Duvenage told The Southern Times in a telephone interview that a central bank for the CMA

would give more clarity to the process of consultation in formulating economic policies for the member states.

“What they probably want to do is to formalise the whole thing into a single one because all along SARB has been setting the policies.

“There has been concern that member states do not have a say into South Africa monetary policy. Member countries want to field their opinion to South Africa’s central bank,” said Duvenage.

He however said that whatever talks which have been going on have been happening behind closed doors.

“There is a lot of duplications going on. Functions which easily be centralised and there are mutual benefits which could be exploited but more importantly, these countries want to have their voices heard,” Duvenage added.

South Africa’s influence has been growing in the region and the whole continent sometimes drawing resentment.

About 92 firms of South Africa’s top 100 listed companies do business in the continent investing close to US$4.2 billion in 2003, the SARB say.

Mining giants like Anglo American from South Africa, which accounts for a third of the continent’s gross domestic product, create thousands of jobs, spurring small African economies and boosting government tax revenue.

But despite all this, Africans are increasingly accusing South Africa’s corporate juggernauts of exploiting their resources, abusing their workforces and behaving just like the western colonial powers before them, said a report carried by Reuters news agency this week.

October 2006
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