Regional investment policy framework on the cards

A regional investment policy framework for southern Africa is expected to be finalized by the end of the year. The Trade, Industry, Finance and Investment (TIFI) Directorate at the SADC Secretariat said in its annual report that significant progress has been made to develop a regional investment policy framework. The regional programme on investment has the objective of strengthening the investment environment in southern Africa.

“The investment policy framework is aimed at harmonizing investment policies and regimes in order to improve the investment climate in the region, working with selected four pillars of tax incentives, infrastructure investment, foreign direct investment restriction and legal protection,” TIFI said, adding that “this exercise is expected to be completed by 31 December 2015.”

The SADC Investment Policy Framework is being developed under the Regional Economic Integration Support (REIS) Programme funded by the European Union. The Secretariat has facilitated the development process of the SADC Investment Policy Framework, which has included the following activities:

• Taking stock of Member State investment policy programmes using diagnostic questionnaires;

• Member State input through questionnaire responses and the drafting of analytical reports that practical recommendations for implementation; and

• Development of common guidelines, together with analytical reports, on the four pillars of tax incentives, infrastructure development, FDI restriction and legal protection.

The SADC region has huge investment opportunities ranging from sectors such as mining, tourism, energy to infrastructure development and agriculture.

The mineral sector alone contributes about 55 percent of the world diamond production while the platinum group of metals contribute about 72 percent.

The region also has an abundance of arable land and vast water watercourses such as the Congo and Zambezi, with the Inga Dam situated on the Congo River. With regard to energy resources, the region has the capacity to produce enough energy for itself as well as export.

According to the African Development Bank, the total hydropower potential in SADC countries is estimated at about 1,080 terawatt hours per year (TWh/year) but capacity being utilised at present is just under 31 TWh/year.

A terawatt is equal to one million megawatts.

Regional payment system reaches R1 trillion mark

In a related matter, more than R1 trillion (about US$79 million) has been traded on a regional electronic payment system that aims to promote the smooth settlement and clearance of payment in southern Africa.

The SADC Integrated Regional Electronic Settlement System (SIRESS) was established in July 2013 and piloted in four countries – Lesotho, Namibia, South Africa and Swaziland. The system has since been expanded to five more SADC Member States — Malawi, Mauritius, Tanzania, Zambia and Zimbabwe.

Therefore, a total of nine countries are now participating in SIRESS, with more expected to so soon. SIRESS is a SADC electronic payment system developed by Member States to settle regional transactions among banks within the SADC countries.

Where transactions previously took two to three days to clear, now they are cleared within 24 hours and fees previously paid to non-SADC clearing banks are saved.

The main benefits of the system is its efficiency and reduction in costs because previously the transactions would go through a correspondent bank.

Therefore, the cutting out of the intermediary – often a United States or European correspondent bank – means money stays in the region.

The establishment of SIRESS has thus facilitated the cross border transactions that are essential for boosting intra-regional trade among the SADC Member States.

Since its launch in 2013, volume of transactions traded on the system has significantly increased, and have reached the R1 trillion mark as of April 2015.

The development of SIRESS is in line with the SADC Protocol on Finance and Investment which aims to improve the regional investment climate through enhanced cooperation among member states on payment, clearing and settlement systems in order to facilitate trade integration. To accelerate the implementation of this objective, the SADC Committee of Central Bank Governors (CCBG) was in May 2009 given the approval to spearhead the initiation of the SADC payment integration system project. In addition to the CCBG, which focuses activities from a regulatory perspective, the SADC Bankers Association (BA) was also established in 1998 to coordinate activities of commercial banks in the SADC region in developing the financial market infrastructure and regional clearing house operations to support the utilization of SIRESS.

The implementation target is to have all SADC countries participating in SIRESS by 2016.

The current settlement currency is the South African Rand, and the payment system is housed at the South African Reserve Bank. However, as the system grows to include other countries, a permanent location will soon be identified. – SADC Today

October 2015
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