In a post on his LinkedIn profile, Dr. Moeketsi Majoro, Lesotho’s former Prime Minister and a seasoned finance expert, raised concerns over an impending shift in the financial landscape of Southern Africa.
The central banks of Eswatini, Lesotho, Namibia, and South Africa are set to implement changes that will significantly impact how citizens of these countries transact across borders.
Dr. Majoro’s insights delve into the potential economic repercussions and question the motivations behind this decision, highlighting a looming disruption in the Common Monetary Area (CMA). As these changes take effect in the next nine (9) days, the region may witness the unraveling of a financial integration that has long benefited its 67 million people.
Dr. Majoro views below:
In the next 10 days, central banks of the southern African countries of Eswateni, Lesotho, Namibia and South Africa will take away a privilege that the 67 million people of the common monetary area (CMA) enjoyed under their currency union. In the past, citizens transacted across borders as if there was one currency. They used electronic funds transfers (EFT) to pay for goods and services, debit orders, and salaries as if this was one currency market. The cost of transacting was kept low and predictable. Equally, remittance transactions were concluded within hours. It was truly a reflection of advancement in the integration of SACU.
It is however notable that this servide skirted the Society for World Wide Financial Telecommunications (SWIFT), with its onerous requirements, higher and unpredictable costs, and longer completion times.
One of the Lesotho bankers charged with implementing this change has expressed concern that this change will affect the ease and speed of transferring money. He is further concerned that this new arrangement is likely to disrupt the current arrangement where South African mines pay miners into their accounts held here in Lesotho. They may now resort to paying them in South Africa and thereby reduce remittances to families in Lesotho! So the decision also has economic redistributive effects between countries.
So why the change? One of the overriding concern for central banks seems to have been the risk of money laundering under the CMA arrangement. The question though is whether this risk was found to trump the evident benefit of the CMA international money transfer (IMT) system. The communication on this has focused more on likely changes than on reasons for change!
There are other considerations: the central banks have not really publicly justified their decision and directive. One hopes that political leadership is ahead of this change, as it is politicians that are going to have to defend it and not the hallowed bankers.
The geo-politics of both money laundering and SWIFT is complex. Both are seen by the global south as a stick with which the West beats the countries of the South! Global money laundering is facilitated and enjoyed by western countries far more than the CMA countries. Both have been used to saction or to threaten punishment for “errant” countries. So was this a voluntary decision by the CMA bankers? Did they act to avert an imminent threat of exclusion from global money platforms?
Have your say. Do you agree with former PM?
