Special e-mail edition!
Things have definitely been on the up for Africa in general, and for Southern Africa in particular -the so-called African Renaissance is showing some sign of becoming a reality, and a new spirit of optimism abounds. In terms of finance and investment, however, SADC countries are also facing new challenges, not the least of which is having to deal with the aftermath of the Asian financial crisis. It will be interesting to see what developments take place over the next few months. For FISCU and the Finance and Investment Sector, the next few months are particularly busy ones - the presentation of the findings of our research project to ministers and governors, the development of a draft sectoral protocol, the preparation of a document for the Southern African Economic Summit of World Economic Forum (to be held in Namibia in May), plus the increasing number of initiatives and projects which are falling under the SADC Finance and Investment Sector umbrella. Not that we mind, of course it s a good sign that progress in SADC is underway in an array of different areas related to finance and investment!
In this edition, you can read about the headway being made with regard to the SADC Committee of Stock Exchanges, the harmonisation of accounting standards project, plans to establish an Association of Commercial Banks, and the Committee of Central Bank Governors in SADC. There s also news from the SADC Council of Ministers meeting, information about the forthcoming Southern African Economic Summit, and a discussion of the recently-released Africa Competitiveness Report.
Once again, we would like to encourage readers to write to us, whether it is to comment on one of the articles, or to propose suggestions. This newsletter is a forum through which those with an interest in the SADC region can exchange information, ideas and opinions, a useful opportunity, since our readership ranges from government officials and donor agencies, to private companies both within and outside the SADC region.
Sir/Madam - We have just come across the December 1997 issue of the Finance and Investment Sector News produced by the FISCU. This is a very good newsletter which provides useful and relevant information to investors etc. We shall be glad if you could include our web site address in your next issue. The EPZDA is a parastatal organisation under the Ministry of Industry and Industrial Technology in Mauritius and we offer a wide array of services to industry. You may find more information on our web site at http://epzda.intnet.mu. Thanks.
The second draft of the Sectoral studies, commissioned by the Finance and Investment Sector to assist in the development of a protocol, were completed in December 1997. The three studies (macroeconomic convergence and the crossborder effects of structural adjustment policies, investment climate and development finance) were then subjected to a review process by FISCU, the European Union (who sponsored the project) and the SADC Secretariat. The studies were finalised in January 1998, after comments from the reviewers had been taken into account. Currently, FISCU is in the process of evaluating the conclusions and recommendations of the studies.
At the time of writing, the Director of FISCU is visiting several of the SADC countries to familiarise Ministers and top officials with the recommendations of Lesotho, which is planning to set up a stock exchange in the near future.
implications thereof. region effortless.
27 March in Johannesburg.
Discussions will take place at found on this webpage.
Central Bank Governors, as Governors will be hosted by well as representatives from the Bank of Mauritius on the regional stock exchanges, 3 April 1998. For an update development finance on the progress of projects institutions and investment and information on any promotion agencies, will be important issues, watch this invited to the workshop. space!
Angola was transformed into requirements.
February 1991 If not, then February, was to provide a you ve probably not visited forum where the stock the Internet website of the exchanges in the region coul?
The history of all SADC taken towards formulating member central banks can be regional policy.
Information. Where representatives from stock possible, a link has also been exchanges in Botswana, created to the Internet Malawi, Mauritius, South webpage of all the member Africa, Swaziland, Zambia central banks. This makes and Zimbabwe.
The clearing and settlement part of the workshop focused especially on the establishment of a centralised depository system (CDS).
What is a CDS?
A CDS is a computerised system which eliminates the need for physical records of securities ownership (scrip) and the manual updating of records in the share registers. Its function is two-fold - it acts as a register of scrip and shareholders, and also enables settlement of trades to occur much quicker and more efficiently. Today, most of the world s stock exchanges work on a CDS system; however, only two SADC exchanges have established CDS s, namely the Stock Exchange of Mauritius and the Lusaka Stock Exchange, while the Johannesburg Stock Exchange (JSE) is in the process of setting up its own system.
Why is it important for all the SADC Exchanges to have a CDS?
The benefits of having a CDS include increased market activity, reduced risk, the enabling of delivery versus payment, shorter settlement cycles, and increased efficiency. Many of the SADC Exchanges rely on foreign capital, and foreign investors tend to prefer to invest in markets with a CDS, for the reasons mentioned above.
Also discussed at the workshop was the harmonisation of listings requirements (the requirements a company must meet before it can list on a stock exchange, and the rules and regulations it must follow). The aim is for SADC exchanges to adapt the listings requirements of the JSE to suit their own needs.
Why should the exchanges harmonise their listings requirements?
Harmonising listing requirements will serve to promote market practices that are of an international standard. It will also make it easier for dual listings to occur, which will allow more capital to be raised on the SADC exchanges.
Many of the SADC exchanges do not have the necessary resources or capacity to develop more sophisticated systems. In the spirit of regional cooperation, both the JSE and the Stock Exchange of Mauritius made proposals to the Committee for the sharing of infrastructure between exchanges in the region.
The JSE offered to make its facilities and systems available to other SADC stock exchanges.
and C the broker accounting system.
Mauritius proposal is for a shared trading and clearing infrastructure for the SADC exchanges. It involves forming a joint-venture company, in which all participating exchanges would be shareholders, and to which each exchange would outsource its data processing. This company would be built around the hardware and software of the CDS in Mauritius. Brokers in each country would have a computer which would be connected to a local communications server at the local exchange. The communications server would be connected, via a satellite link, to the trading and clearing system running on a central server located in Mauritius. All processing would be done in real-time on the central server located in Mauritius. A general meeting of the SADC Committee of Stock Exchanges will be held in April in Namibia, when these proposals, and other issues emerging from the workshop, will be discussed in further detail.
In the December 1997 edition of our newsletter, we mistakenly reported that Darrell Till of the JSE had been elected chairperson of the SADC Committee of Stock Exchanges. Mr Till was in fact elected as representative for the Committee for that particular meeting in Gaborone. Apologies for the error.
As reported in our previous newsletter, efforts are currently being made to set up a SADC committee on accounting and auditing, which will coordinate efforts to harmonise accounting standards in the Southern African region. Since December, the initial business plan for the project has been finalised, and has been sent to the participating regional organisations to obtain their formal approval and nominations for representatives to participate in the project. The business plan is also currently being discussed with the World Bank and other donor agencies in order to obtain funding for the programme.
Institutions participating in the project, besides SADC (under the direction of FISCU), include the Eastern, Central and Southern African Federation of Accountants (ECSAFA), the East and Southern African Association of Accountants General (ESAAG) and the Southern African Development Community Organisation of Supreme Audit Institutions (SADCOSAI).
Such was our confusion with the above long list of abbreviated names that in the previous (December) issue of the Finance and Investment Sector News, we mistakenly referred to ESAAG as the organisation which, in conjunction with FISCU and IPFA, was assisting in the drafting of the business plan document! The institution concerned was, in fact, ECSAFA, and not ESAAG. Apologies to both organisations for this error!
The formative meeting for the SADC Association of Commercial Banks took place on the 6 March in Johannesburg. Representatives from banks and banking associations in the region were present, as well as FISCU and the Secretariat of the Committee of Central Bank Governors. The meeting was hosted by the Council of South African Banks (COSAB) and chaired by Mr Bob Tucker, COSAB's CEO. The purpose of the meeting was to put some ideas on the table as to the objectives and functions of the envisaged Association of Commercial Banks, as well as to discuss some areas of common interest. No hard and fast decisions were taken; instead delegates were asked to confer with their colleagues on the proceedings of the meeting when they returned home.
Why the need for such an Association Modern financial systems cannot exist in isolation, and that bad banking practices in neighbouring countries can impact adversely on a country's domestic banking system. One example given at the meeting was that clearing periods for cheques differ within Southern Africa, exposing banks in the region to the risk of fraud. Banks therefore create systemic risk, both domestically and internationally, which regional cooperation could assist in reducing. Also, bank failures in any one country in the region will serve to discredit the Southern African banking system as a whole. Further, trade between the SADC countries will be further facilitated by cooperation in correspondent areas?
In what areas could cooperation between commercial banks occur Delegates discussed what the role of the Association would be. One of the main ways in which banks could cooperate, it was decided, was by exchanging information. Other areas included networking, payments systems and standards, training, and lobby support in relation to legislation and regulation. The structure and reporting system of the Association was also discussed. It was decided that meetings of the Association should only take place once or twice a year, but that members should keep in regular contact. There was general consensus that COSAB should act as the Secretariat of the Association, at least for the next few years?
The "Year 2000" problem A presentation on the socalled "Year 2000" problem was given by Mr Louis Erlank of the South African Reserve Bank. The presentation brought home the urgency of implementing a Year 2000 programme, and stressed that the problem was not merely an information technology problem, but an organisational problem as well. Banks that are not Year 2000 compliant will create risks to the financial system and it is therefore imperative to the stability of Southern Africa's banking system that all banks in the region are Year 2000 compliant.
No date was set for a second meeting, although the venue has been provisionally scheduled for Harare, Zimbabwe..
Although this information will be familiar to readers who have seen copies of our previous newsletters (all two of them!), there may be those out there who are not quite sure what FISCU or the Finance and Investment Sector is. It s very simple . CMuch of the work done under the umbrella of SADC is performed by various sectors . Each country has one or more sectors which it is responsible for coordinating. CResponsibility for coordinating the Finance and Investment Sector was delegated to South Africa in February 1995 after the country joined SADC. CFISCU is the SADC Finance and Investment Sector Coordinating Unit, located in South Africa s Department of Finance. As the name suggests, we coordinate all the meetings, projects etc. which fall under the Finance and Investment Sector. We also produce this newsletter.
While it is acknowledged that as a world region, SADC has long been at the periphery of global developments, the time has come for the world to review prevalent perceptions about the region in accordance with the structural changes currently being witnessed within the region. The responsibility of changing such perceptions should be borne by the region, however.
In each of SADC economies, long-lasting and fundamental changes have been taking place. These have included reorientation of economic policies, featuring deregulation of prices, interest and exchange rates, and a review of the role of the state in the economy which has resulted in the privatisation of state enterprises. Individual countries have undertaken these reforms with the help of multilateral institutions such as the IMF and the World Bank, in the form of structural adjustment programmes (SAPs).
The reform process that has been implemented by SADC member countries has been painful and accordingly there have been some slippages. In general, however, slippages have been few and scattered and the perseverance exhibited in the process of economic reform has begun to bear fruits in the region. The economic growth rates that have been achieved by SADC recently bear testament to this: in 1996, Africa achieved five percent expansion, the best performance in two decades; the average growth rate in SADC was 1.6 percent higher than this.
2.1 percent a year), while seven countries exceeded the sub-Saharan average of 1.7 percent. What is even more exhilarating is the significant improvement that has been recorded by the SADC region in the post-1995 period.
3.9 percent for 1996, compared with 3.7 percent in 1995 and 3.1 percent in 1994. This figure could have been even higher if South Africa had achieved higher growth rates during the same period.
having growth rates of six percent or more. This trend, of substantially improved economic growth rates is expected to continue during 1998 and 1999.
The recent economic performance of SADC leads up to a major question: Is SADC on the right track?
GDP growth rates are not the only indicator that can be used to assess the success or lack thereof in the SADC context. Other indicators which have a direct bearing on a broader macroeconomic framework -such as inflation, exchange controls, interest rates, exchange rate, and budget deficit - also need to be looked at. While recognising our good economic performance, we should be aware of the major challenges and difficulties that lie ahead for the region, especially in terms of financial, economic and investment matters. Although liberalising our economies is essential, as demanded by global trends, SADC member countries also need to build domestic and regional productive capacity as the basis for their own long-term economic development. The reform policies of SADC countries can only provide sustainable growth levels if they are supplemented by far-sighted policies that emphasise infrastructural, trade and industrial development, allowing the private sector to participate in these and other productive activities.
In recognition of this challenge, a research study was commissioned by the Finance and Investment Sector to find ways to facilitate the convergence of our macroeconomic structures and ensure a systematic coordination of structural adjustment programmes. In line with the objective of improving productivity at regional level the SADC Finance and Investment Sector is seeking to re-design the regional financial sector to cater for global demands. SADC s contribution in this regard is focused on improving the effectiveness and efficiency of the financial sector. The thrust of the projects which have been conducted so far have accordingly been on financial infrastructure (e.g. the SADC payments systems project), financial management (e.g. accounting and auditing profession programme) and economic services (e.g. SADC database of monetary and financial statistics).
SADC will have to create an environment that will allow it to be an active participant in global developments. This will require efficient production structures capable of meeting the demands of international markets. This poses a challenge to SADC, to work coherently to solve the above problems.
Liberalisation alone, although going a long way towards solving these problems, will fall short of addressing the infrastructural deficiencies currently existing in the region. SAPs designed to fit the needs of the region, accompanied by prudent capacity building policies, and the sharing of experiences and technologies will provide a base for sustainable development and growth. It is obvious that in the current environment, the growth rates that have been achieved might not be sustainable.
(un)employment has not been particularly vigorous. Current economic growth rates are not sufficient to impact positively on the poverty levels and unemployment levels of poverty are gradually increasing and, even among the SADC countries that have enjoyed healthy economic growth rates; unemployment levels, too, are rising. We are being too optimistic if we expect that SAPs and stabilisation policies alone can solve the high poverty incidence and unemployment problem. Both SAPs and stabilisation policies are designed specifically to increase growth rates and although there is empirical evidence that economic growth improves the socioeconomic conditions of the people, for SADC, a rather poor response to adjustment highlights the fact that SAPs cannot sufficiently solve the problem of poverty. This is true especially for countries that are currently implementing the IMF s ESAF programme as this institution openly declares that problems such as poverty are the responsibilities of governments. SADC s governments, therefore, cannot afford to sit back and attribute the increasing poverty rates to World Bank and IMF policies - in fact, should they do so, they will be reneging their responsibilities to institutions which do not account to the people of the region.
In conclusion, while reforming our economies, let s endorse productivity and poverty alleviation policies in our overall regional macroeconomic framework, acknowledging that reforms should be supplemented by prudent policies.
FISCU would like to invite comments on the above editorial: see back of newsletter for contact details.
SADC Council met in Maputo, Mozambique, from the 28th to the 30th of January. At Council meetings, events and happenings in all SADC sectors and institutions over the preceding six months are discussed - new projects are approved and new developments are noted. In terms of the Finance and Investment Sector, there were no projects to be approved this time round.
CThe Review and Rationalisation of the SADC Programme of Action: In the last newsletter, it was reported that the issues raised in this report would be debated at a regional and national level, and that final recommendations would be submitted to Council at the January meeting. However, by the end of December 1997 only Botswana, Malawi, Mauritius, Namibia, South Africa, Swaziland and Zambia had held internal consultations on the report, and no second regional workshop had been convened. The final report on the study will therefore be presented at the next Council of Ministers meeting in September.
CReport on the ACP position on the successor to the LomJ Convention after the Gabon summit: The LomJ Convention, the European Union s trade and aid agreement with the African, Caribbean and Pacific (ACP) countries is due to expire in 1999. The ACP countries and the EU will soon begin negotiating a successor to the LomJ Convention, in the light of changes in Europe and in the ACP countries, as well as pressure to comply with World Trade Organisation (WTO) regulations. The ACP Heads of State and Government met in Libreville, Gabon in November last year to agree on a common position for the ACP on this issue. Apart from discussing the LomJ Convention, the ACP Summit also took some steps towards furthering cooperation among ACP States in terms of monetary and financial matters. It was agreed that Finance Ministers of the ACP countries should meet in the first half of this year to discuss, among other things, issues pertaining to debt relief and debt reduction measures, and examining the implications for ACP countries of the EU s planned single currency.
CSADC Industry and Trade Sector: Of relevance to the Finance and Investment Sector is the planned meeting of SADC Ministers of Industry and Trade in preparation for the second WTO Ministerial Conference to be held in Geneva and the 50th anniversary of GATT, both in May. The SADC Ministers of Finance and Investment will also attend this meeting, which will be convened in or before April.
CTranslation of official SADC documents into Portuguese: SADC currently has two official languages, English and Portuguese (pending the attainment of full membership status of the Democratic Republic of Congo, whereupon French will become the third official language). All official SADC documents are supposed to be available in both English and Portuguese; however, due to a lack of capacity and an increase in the volume of work at the SADC Secretariat, this has been a difficult task to manage. This has affected the participation in SADC of the Lusophone (Portuguese-speaking) countries, Angola and Mozambique. The services of a consultancy have been acquired to look into possible ways of dealing with this problem, in particular, ways of reducing the Secretariat s burden. As far as the Finance and Investment Sector is concerned, although thus far our documents have only been printed in English, translation facilities have always been available at our meetings. Furthermore, the executive summary document of our research project will be translated into both French and Portuguese, and it is FISCU s intention to make all of our important documents available in the three languages.
CPromotion of trade and investment between SADC and Europe: Currently underway is an initiative called SAFRI, directed at encouraging trade and investment between SADC and the German business community. Three conferences have been held, aimed at promoting partnerships between SADC and German business houses, enhancing the flow of German investment into SADC and increasing the volume of trade between SADC and Germany. Furthermore, France and SADC have held discussions to explore areas of potential cooperation areas identified include agriculture, construction and energy.
Amongst the international community, Africa has had the image of a continent of famine, disasters, corrupt leaders, and badly managed economies. While it is certainly true that Africa has had more than its fair share of problems, much of this perception arises from ignorance about the continent.
It is therefore encouraging to read the Africa Competitiveness Report, a document published by the World Economic Forum and released for its meeting in Davos, Switzerland (29th January - 3rd February) . The report paints a picture of Africa as a continent which is slowly beginning to emerge from the darkness. It is hoped that this report will go some way towards changing the international business community s perception of Africa, and encourage foreign investors to look at Africa as a possible option.
Report analyses and compares 24 African countries, in terms of statistical data as well as in terms of top African CEO s perception of the business environment. The countries are ranked according to a number of different indices related to competitiveness. Areas are identified which African countries must look at if they are going to become more competitive.
In terms of the Competitiveness Index itself, Mauritius was ranked first out of the 24 countries compared, with Botswana (3), Namibia (4) and South Africa (7) also obtaining good rankings. Zimbabwe, on the other hand, obtained a surprisingly low ranking (20). The report s authors explain that two of the main factors contributing towards competitiveness appear to be good governance and good leadership. Emphasis is also placed on policy stability and transparency as preconditions to competitiveness as well as to the attraction of foreign investment. Further, the report found a significant correlation between the UNDP s Human Development Index and the Competitiveness Index, an indication both of how competitiveness impacts on human welfare, and how a higher level of human development in a country can help its economy to become more competitive. A number of reasons were listed for the position of those who performed poorly, including political turmoil (as in the case of Angola) and new reformers who face particularly challenging situations (such as Malawi).
Lesotho was ranked first overall in a comparison of GDP growth averages from 1994-96, averaging 12.1 percent growth over these years. Mozambique topped the optimism index, which is compiled from direction of change questions in the survey; Tanzania was second in this ranking. Tanzania and Mozambique also scored highly in the improvement index, which measures perceived improvement in the economy over the past five years. The report notes that it was generally the best reformers who tended to obtain high rankings in terms of these two indices. The relatively low rankings of countries such as Mauritius, Botswana and Namibia are explained by contentment with the present situation rather than a pessimistic attitude towards the future.
how the SADC countries fared.
Mozambique (18) 10. Zimbabwe (20) 11.
The Southern African Summit of the World Economic Forum is an annual event held in coooperation with SADC.
It provides an opportunity for African business and political leaders to meet with international businessmen and women, to discuss matters of common interest. This year s Summit will be held in Windhoek, Namibia, from the 17-19 May.
Priorities for Global Competitiveness in the 21st Century and discussion topics include Southern Africa s competitiveness: an in-depth study , Creating a complete economic community by 2008: is this too late , Good governance and best practices , South African corporate giants: can they make a difference and are they welcome , an?
Restructuring the banking sector for growth and development . You can read more about the Summit at http://www.weforum.org/activ ities/regional/zaes. Once again, FISCU will produce a theme document for the Summit. This document will be an updated version of last year s Southern Africa: A New Growth Opportunity, giving country information on, among other things, financial institutions, foreign trade, investment incentives, taxation, investment promotion agencies, privatisation programmes, exchange controls and investment opportunities.
There will also be a special section on this year s theme competitiveness -and a table of statistics for each country.
The Internet version (http://www.budget.gov.za/S ADC) will be updated as well.
6 March: Meeting of the Association of Commercial Banks in SADC, Johannesburg. 27 March: Final Workshop for the Finance and Investment Sector Studies, Johannesburg. 3 April: Meeting of the Committee of Central Bank Governors, Mauritius. April: SADC Committee of Senior Treasury Officials meeting, South Africa. April: Meeting of the SADC Committee of Stock Exchanges, Namibia. 17-19 May: Southern African Economic Summit of the World Economic Forum, Namibia. 16-19 June: UNIDO Investors Forum in Mozambique. Specifically for investors interested in Botswana, Lesotho, Swaziland, Mozambique and Zimbabwe. (For more information and registration contact UNIDO at PO Box 300, A-1400, Vienna, Austria, Tel: +431-211313896/4866; Fax: +43121131-6806/6808).
Phakamani Hadebe, FISCU Deputy-Director, returned to the FISCU fold in January, fresh from a six month internship at the International Monetary Fund (IMF) in Washington. During his stay, Phakamani was part of an IMF mission to Ethiopia, and wrote a paper on the demand for money function in that country. Phakamani contributed the editorial article to this newsletter.
Mr Themba Zulu has recently been appointed as an Economist at FISCU. Mr Zulu holds a B. Com degree from the University of Zululand, with majors in Economics and Business Economics. Themba s interests lie in the field of macroeconomics, particularly in international economics. What Themba has to say about FISCU: I believe that FISCU s mandate is of great importance in that it will assist in rebuilding confidence in the African economies, especially SADC. Also, its role in policy issues enables it to rest at the centre of regional development. FISCU, I think, provides tremendous scope for growth as an individual in understanding - in particular the policy-making procedures and the wide-reaching implications thereof . FISCU hopes that you are going to enjoy working with us, Themba. We re also very glad to have another staff member to help us bear our ever-increasing workload!
Bongi Kunene: +27-123155653 Phakamani Hadebe: +2712-3155651 e-mail: jtr2@cis.co.za Huntly Pringle: +27-123155798 e-mail: hpe1@mweb.co.za Eva Bursvik: +27-123155967 e-mail: evab@iafrica.com Rosalind Mowatt: +27-123155951 e-mail: rmt1@mweb.co.
Newsletter compiled and edited by Rosalind Mowatt.