New currencies for regional payment platform

SANF23 no 25 – By Clarkson Mambo in Maputo Mozambique

SADC is seeking to deepen financial integration, trade and investment through the expansion of its regional payment platform to include the currencies of more member states.

Initially known as the SADC Integrated Regional Electronic Settlement System (SIRESS) when it went live in July 2013, the system was later renamed the SADC Real Time Gross Settlement System (SADC RTGS).

The new system enabled safe, efficient and less expensive cross-border payments within the region.

The Chairperson of the Payment System Subcommittee of the Committee of Central Bank Governors in SADC (CCBG), Tim Masela said, “We are renewing our RTGS system and there are exciting offers that will come out of that.”

Masela noted that work is underway to include the Angolan Kwanza as one of the currencies to be accepted as a settlement currency on the system. At the moment, the SADC RTGS, which is hosted by the South African Reserve Bank, settles transactions using only the South African Rand.

Four countries – Eswatini, Lesotho, Namibia and South Africa – participated in the pilot of the Regional system before it was extended to an additional six member states by the end of 2016. While the first transaction was between institutions in Namibia and South Africa, by the end of March 2017 a peak of 27,000 transactions had been processed.

“Since its inception up to September 2023, the system has settled over three million transactions and the value is more than 12 trillion Rand (about US$651 billion),” Masela said. “We have 82 banks on the system and nine central banks, making it 91 participants and this is ensuring good coverage in terms of ensuring that payment flows are facilitated within our region.”

Masela spoke during a SADC celebration of the 10th anniversary of this payment system at a ceremony in Maputo, Mozambique on 15 November 2023.

He said a particular challenge being addressed relates to the high use of the United States Dollar for trading in the region.

“The US dollar is still dominant in our region as a settlement currency, it is accounting for more than 50 percent of transactions that we undertake among each other, and that is a reality that needs to be addressed because when transactions are settled in US Dollar, they go through correspondent banking institutions in the United States.”

The vision on establishment of the SADC RTGS, was not just to promote regional trade and investment, but to remove reliance on foreign institutions for the settlement of financial transactions for trade deals conducted in the region. This was not only costly but also time consuming.

Previously, it took two to three days for transactions to be cleared, and now this is happening instantly or at most within the same day, while clearance fees that used to be paid to foreign banks, now stayed in the region.

A representative of the SADC Secretariat, Mario Lionel said the 10-year existence of the regional payment system showed strong commitment to the integration agenda and the “SADC We Want.”

“The system’s further development and use by banks in the region is facilitating deeper financial integration, and this means less money leaving the regional economy due to reduced transaction costs,” he said.

Lionel said the SADC RTGS is a representation of the fulfilment of the SADC Protocol on Finance and Investments and also supports the aspirations of the Regional Indicative Strategic Development Programme (RISDP) 2020-2030 to deepen financial market integration, monetary cooperation, macroeconomic stability and convergence including enhanced investment opportunities.

Implementation of the SADC Protocol on Finance and Investment is facilitated by the Committee of Central Bank Governors in SADC (CCBG) which was established in 1995 and the SADC Banking Association which was set up in 1998.

The CCBG is made up of all central bank governors in the region, and is responsible for promoting the development of financial institutions and markets through cooperation and consensus on financial, investment, and foreign exchange policies, while the SADC Banking Association coordinates the cross-border banking activities of its members.

The CCBG reports to the SADC Committee of Ministers for Finance and Investment, which in turn reports to the SADC Council of Ministers. The Council of Ministers reports to the SADC Heads of State and Government.

Bank of Mozambique representative, Maria Esperança Mateus Majimeja said the Mozambican government was a strong supporter of the financial integration agenda.

“Four more Mozambican banking institutions are in the process of being included on the system,” she said.

Zimbabwe with 15, followed by South Africa with 11, Zambia with 10, Malawi at nine and Mozambique at seven, make up the top five of countries with the most institutions participating on the SADC RTGS.

“We are always looking at on-boarding additional participants on the platform so that we increase the coverage,” said Masela.

Representatives of the CCBG Secretariat, the SADC Banking Association, the SADC Payments System Oversight Committee and member states recounted the laborious processes they had gone through to establish the system and ensuring that it works efficiently.

“Today, the SADC RTGS is considered as a success story and a flagship project for the region,” said Emily Morake, a representative of the CCBG Secretariat.

The system ensures that traders and companies importing and exporting goods do not get to experience delays at the border because their payments are failing to go through, said Maxine Hlaba from the SADC Banking Association.

Representing the member states, Dr Josephat Mutepfa from the Reserve Bank of Zimbabwe said the milestone would not have been attained without the spirit of regional collaboration.

“The payment systems forest continues to change and customers continue to demand more, we must continue to live up to their expectations,” he said.

The SADC RTGS is one of the many instruments that the region has put in place to promote financial and monetary integration in line with the region’s growth and development agenda. Among these is the Financial Inclusion Strategy and SME Access to Finance whose goal is to ensure that as many people as possible are included in formal financial systems.

Investment policies and frameworks for different sectors, which are all aimed at boosting trade and driving the SADC industrial agenda as envisaged in the SADC Industrialisation Strategy and Roadmap 2015-2063 and SADC Vision 2050 have also been put in place.

The 10th anniversary celebrations were preceded by meetings of the SADC Payment System Subcommittee and the SADC Payments System Oversight Committee.

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