n AfricaGrowth Agenda - Critical areas of monetary policies implemented in the AU Regional Economic Communities (RECS) Model : case of Southern African Development Community (SADC)

Volume 2009, Issue 10
  • ISSN : 1811-5187


The AU's strategy entails two steps. First build genuine monetary unions in Africa's five existing regional economic blocs. These regional trading communities represent the first stage towards a "full-blown" Economic and Monetary Union (EMU), similar to the creation of the European Union's (EU's) single market and common currency union in 1992. The main benefits are expected to be improved economic growth via growth of a larger market as has been demonstrated by other large trading units. While there are many ways in which the EU members have consolidated trading partnerships and unified currencies, Africa must follow its own course. To enable a SADC Common Monetary Union (Area) to succeed, it is recommended that the remaining SADC states to join this union first. But they should be prepared to accept that South Africa must dominate fiscal and monetary policy if this union is to be successful. Monetary union will impose fiscal and monetary discipline so clearly absent in the SADC member states. This model for monetary union before currency union is a believed to be the most practical approach to the long term objective of the creation of a single currency in Africa. This paper examines the Southern African Common Monetary Area as an example.

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