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Abstract

The 14-member Southern African Development Community (SADC) has a long-term goal of becoming a full common market. A major component of fuller integration would be a common currency arrangement. The states of southern Africa, however, face a dilemma: While the region already sustains a successful and long-running monetary union, the Common Monetary Area (CMA, known as the "Rand Zone"), the region's leading economic integration organization, the SADC, is opposed to joining the union.

The Common Market for East and Southern Africa (COMESA)—a less successful, but rival economic organization—favors, for its part, a monetary union. Is the SADC ready for monetary integration, whether in the CMA or through a new arrangement? The conclusion of this paper is twofold. First the necessary convergence criteria for a viable monetary union appear to be lacking. Until and unless there is more convergence, the chances for a successful monetary union are low. Equally important, until SADC countries produce a more diverse set of goods and services that will allow increased trade with each other, reaching the goal of a monetary union remains unlikely, and even unnecessary. Second, in the light of what has been done in the Euro Zone, political aspects of economic integration should be strengthened. Europe built itself through economic convergence and monetary stability. But it also achieved ambitious political projects, like the Common Agricultural Policy, that supported increased economic integration. It is in the interest of Southern Africa to devote more time and resources in building a more unified political entity.

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