n AfricaGrowth Agenda - The financial market integration in SACU : a cat and mouse game?

Volume 2010, Issue 7
  • ISSN : 1811-5187


SACU which comprises South Africa, Lesotho, Namibia, Swaziland and Botswana, provides duty-free flow of goods and services between member countries with a common external tariff and an arrangement of sharing the tariff revenue. Four members of the SACU, Lesotho, Namibia, Swaziland and South Africa are also part of the Common Monetary Area (CMA. Currencies of Lesotho, Namibia and Swaziland (LNS) are pegged 1:1 with the South African rand which also serves as legal tender in these countries. The peg allows for the SA inflation regime to serve as a nominal anchor for inflation in the LNS countries. However, there is a possibility of industrial polarisation since South Africa is more developed than the other member countries. The argument behind integration of small markets with larger ones is that the former can develop from access to more sophisticated financial markets of the latter. The question is : Do the smaller SACU members benefit from their integration with the giant SA financial markets, or is the arrangement just a cat and mouse game?

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