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2007 AEC - Macroeconomic Convergence in Southern Africa Development Community (SADC)

15-Nov-2007

Southern African Development Community (SADC) has set its member countries four macro-economic convergence targets (Rate of inflation, the ratio of the budget deficit to GDP, the ratio of public and publicly guaranteed debt to GDP taking into account the debt sustainability index, and the balance and structure of the current account) as outlined in Finance and Investment Protocol. These are benchmarks that are used to assess a trend towards more integration and unification of the region. The analysis also attempts to highlight some differences in some of the sub-groupings within SADC namely the Common Monetary Area (CMA) and the Southern African Customs Union (SACU). The paper found out that there is still policy divergence in the rest of SADC, and there is divergence in output. The contribution of this finding is that while acknowledging the importance of convergence as an integral part of regional integration, but highlights that such as attempt is likely to be undermined by lack of comprehensive undertaking of factors that drive growth in respective countries. Therefore divergence found in the countries is at best explained by differences in underlying disturbance factors. This indicates that while the countries may generally be stable due to the anchor role played by South Africa, the countries may not be highly integrated because of the underlying structural differences.

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