Macroeconomic Policy and Trade Integration in Southern Africa: Industrial Strategy Project of the Development Policy Research Unit University of Cape Town: Regional Research Workshop 30-31 August 1999, Irene Country Lodge, Gauteng

"The underlying question in this paper is whether a SADC free trade area requires convergence in macroeconomic variables and policies in the member countries. This question applies both to the initial conditions for getting the free trade area started, and to it being sustainable over time if and when it is established. Behind these questions lie another, namely whether the proposed SADC free trade area requires some mechanism, an agency of restraint in order to force member countries to have compatible macroeconomic policies, and therefore macroeconomic conditions. Section 2 considers the reasons for the enduring popularity of attempts to set up free trade areas in Sub Saharan Africa. Section 3 discusses possible reasons why SADC might be an exception to this record. The leading exception is SACU, so Section 4 examines its long history, and whether compatible macroeconomic policies were significant. Section 5 concludes that macroeconomic policy convergence is not necessary for a free trade area to be established, but that it is necessary for it to be sustained, because several of the non SACU members of SADC need to attract new investment in order to derive positive benefits from the free trade area. Section 7 discusses what type of institutional arrangement would create lasting macroeconomic stability, that would be convincing to investors, throughout SADC."