US Dollar-based regional payment system expected to go live in October
By Danai Majaha at the SADC Council of Ministers meeting in Windhoek.
Southern Africa is making progress to create a multi-currency regional payment system, with the United States Dollar expected to become the second currency of settlement after the South African Rand.
The Southern African Development Community (SADC) Executive Secretary, Dr Stergomena Tax said the SADC Integrated Regional Electronic Settlement System (SIRESS) is expected to move from a single-currency settlement system using only the Rand as the currency of settlement, to a multi-currency settlement system.
“Settlement in US Dollars on the current platform is expected to go live in October 2018, while the whole multi-currency platform is expected to be fully operational by December 2019,” Dr Tax said during the official opening of the SADC Council of Ministers Meeting in Windhoek.
She noted that the addition of the US Dollar to the regional payment system is expected to facilitate faster transactions as the bulk of intra-SADC trade is done in the American currency.
“Noting that the facilitation of payments remains a key challenge to intra-SADC trade, the addition of the US Dollar that account for about 60% of intra-SADC cross-border transactions is expected to facilitate greater cross-border trade and investment in the region,” she said.
According to the South African Reserve Bank, around 60% of cross-border transactions in SADC are denominated in US Dollar, 35% in Rand and the rest in other currencies. US Dollar transactions are currently settled through correspondent banking arrangements using US correspondent banks.
SIRESS is a regional electronic payment system developed by SADC member states to settle cross-border transactions faster without having to rely on intermediary banks from outside the region. It was established in July 2013 and piloted in four countries, Lesotho, Namibia, South Africa and Swaziland. The system is now operational in 14 member states except Madagascar and the regional organisation’s newest member, Union of the Comoros.
Since the launch of SIRESS in 2013, a cumulative total of 1,063,306 transactions had been settled by the end of April 2018, representing R4.46 trillion or US$377.14 billion.
The main benefits of the system are its efficiency and reduction in costs by avoiding the services of correspondent banks.
The development of SIRESS is in line with the SADC Protocol on Finance and Investment to improve the regional investment climate through enhanced cooperation among member states on payment, clearing and settlement systems, to facilitate trade integration.
Southern African News Features offers are produced by the Southern African Research and Documentation Centre (SARDC), which has monitored regional developments since 1985. Website and Virtual Library for Southern Africa at www.sardc.net .