Macroeconomic Convergence in Southern Africa Development Community

This paper examines progress and prospects of macroeconomic convergence in SADC. The study uses descriptive analysis and statistical tools to establish convergence. Under statistical tools, we use gap analysis and box-whisker plots to observe the general behaviour of relevant variables over time, as well as convergence at individual level towards the targets. Empirical analysis indicates that performance of SADC countries against macroeconomic convergence targets has been rather mixed, largely because some targets are overly ambitious. The majority of the countries are not converging to the set macroeconomic convergence criteria, although overall performance is better over the years. Performance of public debt against its target has been the best amongst all of the targets, with 12 of the 14 member states within the target in 2011. The worst performance is with regard to import cover, with inflation, fiscal deficit and real GDP growth somewhere in between. There is a clear tendency of convergence in monetary policy across SADC countries, as reflected in substantial decline in inflation rates over the past two decades. Most countries have made good progress in bringing inflation rates towards single digits. Most importantly, for most SADC member states, public finances are in a much better state than previously, with fiscal deficits at manageable levels in many countries, and public debt at sustainable levels. However, despite evidence of the tendency for macroeconomic convergence, this has not led to sustainable economic growth. The majority of the countries are not converging to the set MEC, although overall performance is better over the years. Countries are progressing towards the criteria at different rates, so convergence per se may not be the most important issue.