SADC needs to operate its own development fund

SANF 21 no 39 – by Clarkson Mambo
Southern Africa’s ability to be the main driver and funder of its own integration, development and growth agenda is one of the imperatives for the region to attain its goals as envisaged in SADC Vision 2050.

The region envisions “a peaceful, inclusive, competitive, middle-to high-income industrialized region, where all citizens enjoy sustainable economic wellbeing, justice and freedom” in the next 30 years.

One of the key targets in pursuit of this objective is acceleration of resource mobilization and putting in place of mechanisms “to shift away from a previous reliance on international cooperating partners towards a more diversified approach that is better integrated and complementary.”

Back in 2016, the SADC Secretariat estimated that only 9.2 percent of regional projects were funded by Member States, while International Cooperating Partners (ICPs) funded the remaining 90.8 percent.

Such a situation compromises the ownership and sustainability of regional programmes.

For the region’s long-term desire to come to life, it therefore becomes imperative for all SADC Member States to fully support the SADC Regional Development Fund (SADC RDF).

Proposed nearly a decade ago, the SADC RDF is a self-financing and revolving mechanism intended to end the reliance on external support to drive its development agenda.

The Fund will provide a window for financing economic development and sustainable growth through supporting regional infrastructure development, industrial development, integration and economic adjustment as well as social development at concessionary rates.

All these are enablers for economic growth which is critical to poverty eradication and improving the standards of living for SADC citizens.

Despite the good intentions, there have been a number of setbacks over the years, among them the pressing financial commitments caused by climate change-induced droughts and cyclones, energy shortages and most recently the Covid-19 pandemic, which have stalled establishment of the Fund.

Previously, prolonged negotiations on which country will host the Fund were an issue, as well as staffing.

But the most critical has been lack of support by the majority of Member States, who are yet to sign and ratify the Agreement that establishes the SADC RDF.

The number of Member States that have signed the Agreement have remained stuck at nine for more than two years — Angola, the Democratic Republic of Congo, Eswatini, Lesotho, Malawi, Mozambique, the United Republic of Tanzania, Zambia and Zimbabwe.

However, none of the nine has yet deposited instruments of ratification with the SADC Secretariat.

The Agreement establishing the Fund enters into force a month after it has been ratified by at least two-thirds of the 16 SADC Member States.

The SADC Finance, Investment and Customs Directorate (FIC) said in an update to the 41st Summit held in Malawi on 17-18 August that, “The SADC Secretariat is in the process of recruiting a consultancy firm to recommend on the full operationalization of the Fund.”

“The consultancy assignment will review Member States’ challenges in ratifying the SADC RDF Agreement as well as proposing suitable approaches for fast-tracking the operationalization of the fund.”

The consultant’s work will include the development of governance, institutional and organizational frameworks, as well as proposals for alternative funding mechanisms for the Fund.

The FIC is responsible for facilitating trade and financial liberalization and the creation of an enabling environment for investment, contributing to deeper regional economic integration, inclusive growth and poverty eradication.

The 39th SADC Summit held in August 2019 in Tanzania had set August 2021 as the target date for the Fund to become operational.

To inject some impetus into the initiative, SADC Ministers of Finance and Investment met virtually on 15 July and approved the constitution of a Working Group of senior treasury officials supported by other specialists from Member States.

The Working Group will provide leadership and policy guidance in the course of conducting the consultancies on operationalizing the Fund and development of financial instruments to support implementation of integration projects at regional and national levels.

According to the Agreement signed by the nine Member States in 2019, the initial authorized capital for the SADC RDF will be US$13 billion. Each Member State is expected to pay an initial subscription fee of US$120 million.

SADC Member States will hold a majority shareholding of 51 percent in the RDF, with 37 percent allocated to the private sector and 12 percent for international cooperating partners.

Despite the region facing financial challenges, made worse by the Covid-19 pandemic, the establishment of the fund and ensuring its sustainability will ensure that the resource-rich SADC is able to not only drive its own development agenda, but also get full ownership and control of its programmes.

The Fund will also be a big boost for the Revised Regional Indicative Strategic Development Plan (RISDP) 2020–2030 as well as the SADC Industrialisation Strategy and Roadmap.

The strategies require significant long-term and large-scale investment which will make it less financially stressful for the region if Member States access funding for projects at low interest rates.

Going to the world market with a begging bowl for financing that comes with strenuous conditions will become a thing of the past.

As a precursor to the SADC RDF, the SADC Secretariat has been proactive in setting up the SADC Project Preparation Development Facility supported by development partners, which provides project preparation finances, advisory services and technical assistance for Member States.

A number of countries have lined up projects in sectors covering energy, transport and water, among others, that are waiting for funding.

Southern African News Features offers a reliable source of regional information and analysis on the Southern African Development Community, and is provided as a service to the SADC region. 

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