Harare – The SADC Secretariat is working on modalities to increase the number of settlement currencies that can be used on the regional RTGS platform, which currently is biased towards the South African rand.
In a recent report to the SADC Ministerial Committee, the bloc’s Executive Secretary, Dr Stergomena Tax, said the possibility of low value settlements was also being explored.
Dr Tax added that as of December 2020, nearly two million transactions had been done through the RTGS platform.
“SADC has continued to register positive results in the area of the regional payment system through the SADC RTGS payment system. A total number of transactions settled in the system as of December 2020 was 1,99,355 representing the value of R7,8 trillion (over US$537 million),” he said.
Commenting on the advantages of using the regional RTGS payment system and incorporating other currencies into it, economist Professor Gift Mugano said: “The incorporation of other currencies into the SADC RTGS payment system will lead to ease of doing business across the region with favorable currency conversions rates for cross border trading.”
Prof Mugano said incorporation of other currencies into the system would necessitate establishment of a regional settlement bank to further simplify transactions.
“Other regional organisations such as COMESA have successfully done this, they launched the COMESA Regional Payment and Settlement System for its member states. Similarly SADC needs such a system and to establish a regional settlement bank or a common monetary union to act as the centre and head to the business payment system to manage regional trading activities done using the RTGS payment system.”
Zimbabwe National Chamber of Commerce president Mr Tinashe Manzungu, added that: “The adoption of a settlement system is an important milestone that builds on other progressive developments in SADC. There is efficiency and cost reduction because normally transactions go through a correspondent bank.
“The elimination of an intermediary means money circulate within the region and transactions are processed faster. With strong and secure financial market this will help to increase cross border trade after it had been affected by COVID-19 regulations.
“The pandemic has made it an important initiative to take in that it will help boost integration in telecommunications and financial infrastructure, trade tariffs and border controls.”
The SADC Financial Report indicates that the cost of cross-border RTGS remittances has reduced by 3.6 percent from an average of 13 percent per transaction to about 9.4 percent in the corridor between South Africa and Botswana, Eswatini, Lesotho, Malawi, Mozambique, Tanzania, Zambia and Zimbabwe. The target is to further reduce these costs to meet the United Nations Sustainable Development Goals goal of three percent by 2030.
Launched in October 2018, the SADC RTGS platform has enabled member states to settle payments among themselves in real-time compared to previously when it used to take several days for banks to process cross-border transactions.
There are 83 banks on the SADC RTGS platform, with more institutions ready to come aboard.