Southern African Development Community (SADC) states have agreed in unison to introduce the United States (US) dollar, as a trading currency on the southern African regional payment system by October this year.
Announcing the development in its secretariat monthly newsletter released early this week, the historic development is expected to improve the settlement of transactions among banks within the region.
SADC has pointed out that the adoption of the most sought after greenbacks will not phase out other currencies. In the statement, it is stated that other currencies including SADC currencies will be considered as the payment system progresses.
The current settlement currency for the SADC Integrated Regional Electronic Settlement System (SIRESS) is the South African Rand (ZAR). The system is housed at the South African Reserve Bank.
SIRESS is a regional electronic payment system developed by member states to settle cross-border transactions faster without having to rely on intermediary banks from outside the 17-member bloc.
For example, it is sated in the monthly newsletter that where transactions previously took two to three days to clear, now they are cleared within 24 hours and fees paid to non-SADC clearing banks are saved.
According to SADC secretariat, SIRESS was established in July 2013 and piloted in four countries namely Lesotho, Namibia, South Africa and the Kingdom of eSwatini, formerly Swaziland.
“The system has now been extended to 10 other SADC countries,” read part of the monthly newsletter. Recent figures released by the South African Reserve Bank indicated that around 60 percent of cross-border transactions in SADC are denominated in US dollars, 35 percent in ZAR and the rest in other currencies.
SADC secretariat added in its newsletter: “US dollar transactions are currently settled through correspondent banking arrangements using USD correspondent banks. Since the launch of SIRESS in 2013, the volume of transactions traded on the system has increased significantly, and reached the R1 trillion (about US$81 billion) mark in April 2015.”
Citing some of the achievements already attained before the full adoption of the dollar, SADC said another milestone was achieved in April 2016 when the volume reached the ZAR2 trillion mark, while the ZAR3 trillion worth of transactions was attained by March 2017.
Late March this year, SADC Executive Secretariat, Dr. Stergomena Lawrence Tax told the SADC Council of Ministers that “to-date over a million transactions representing ZAR 4.09 trillion have been settled using the system.”
Elimination of an intermediary, often a US or European correspondent bank means money stays in the region and payments are processed faster. Most banks in SADC member states, except Madagascar and the newest member the Union of Comoros, are part of the SIRESS.