Peace and stability key to SADC economies

Political instability and conflict continue to undermine the economies of the 14 nation Southern African Development Community (SADC). The great disparities in economies means complete regional economic integration, sought by the SADC states, is unlikely unless all the nations are stable and peaceful, economists have warned. "The record speaks for itself," says Samuel Matise, a Johannesburg investment broker who advises clients on where their money might obtain good returns in the region. "When a country is wracked by internal violence or conflict, economic performance suffers so greatly the nation would be like a stone dragging down other economies tied to it." The Democratic Republic of Congo (DRC) and Zimbabwe offer the best illustrations of how nations in crisis suffer economic setbacks that would damage a fully integrated regional economy. Even with the incipient trade links that exist today, the Zimbabwe crisis has contributed to the devaluation of currencies throughout Southern Africa, and exacerbated inflation. "There is no way to get around the need for regional peace and stability, and institutions to ensure this, as prerequisites for economic integration," says Walter Johnson, a consultant with Mozambique's finance ministry. Johnson and other economists note that nations hoping to join the European Union must show their ability to be meet standards of currency stability, decent economic output and manageable inflation. Similarly, nations would join a SADC economic union when their economies' performances met a set of standards. The trouble is, the performance of national economies in the area vary widely. The worst performers are the conflict nations. Mozambique, during its two-decade civil war, disintegrated into the world's poorest nation. But since peace was achieved, last year's nine percent growth rate, the highest in the region, came with relatively modest 8,5 percent inflation, according to World Bank and International Monetary Fund figures. Mozambique's gross domestic product (GDP) of US $3,9 billion was higher than that of Namibia (US $3,5 billion) and mineral-rich Zambia (US $3,2 billion). Stable nations in the area with no history of recent strife seem to be performing comfortably or well, despite a general regional recession. Botswana's US $6 billion GDP was achieved through a 4,7 percent growth rate, and a 6,6 percent inflation rate. Tiny Swaziland's US $1,4 billion economy saw an inflation rate of 7,3 percent despite a national currency which is tied to the South African rand. The rand depreciated nearly 40 percent against the US dollar last year. South Africa managed to keep inflation to 5,8 percent, the lowest in the region but for Tanzania (5,2 percent) and the island nation of Mauritius, whose per capita GDP of US $3,963 is second only to Seychelles in the SADC region. Malawi may be poor, with a US $1,8 billion economy, and is hobbled by a 29,4 percent inflation rate, but the 3,4 percent growth rate achieved last year was encouraging. In Tanzania, the GDP grew five percent last year, although per capita GDP is low, at US $229 per person. If SADC were restricted to the above-mentioned states, regional economic integration would be achievable through multilateral programmes such as a single regional currency, instead of widely fluctuating individual national currencies. Greater regional and extra-regional trade with markets outside SADC would benefit all member nations through shared customs duties. "It is impossible to think of national prosperity without thinking of and planning for regional prosperity," says South African Finance Minister Trevor Manuel, adopting a "no nation is an island" attitude to which most economists subscribe. But SADC has among its members four nations whose economies have been ruined by conflict. While government forces fought rebel movement UNITA last year, Angola's currency dropped 172 percent against the US dollar, prompting the region's second highest inflation rate of 110 percent (down, at least, from 2000's 344 percent). However, growth picked up to three percent, from 2000's anaemic two percent, as insurgent activity diminished. Last week's ceasefire deal between the government and the late Jonas Savimbi's UNITA movement was hailed, by politicians and economists, as the best news to come out of the region so far this year. The war-ravaged DRC saw growth descend into negative territory, declining to -4,3 percent, resulting in the region's lowest per capita GDP - only US $85 per person. Inflation hit 557 percent, while the national currency plunged 950 percent against the dollar. "It is no secret that war completely wrecks an economy," says Swazi investment broker Michael Matimela. "The DRC is this year’s cautionary tale." Street protests rather than civil war shook investor confidence in Zambia last year, along with a presidential election some observers found faulty. In economic terms this resulted in a 21,6 percent inflation rate, a low per capita GDP of US $315 and a 60 percent depreciation of the national currency. International attention was focused on Zimbabwe, where political conflict drove the inflation rate to 74 percent. Real GDP growth dropped to -7,5 percent in Zimbabwe last year. Economists say such poorly performing economies would severely compromise an integrated regional economy, and destabilise a regional currency. The answer, they say, is obvious: ensure peace and stability in all nations. But with most governments loathe to interfere in the internal affairs of other regional states, the solution may come from the formation of South African President Thabo Mbeki's proposed New Economic Partnership for Africa's Development (Nepad). "Nepad calls for African nations to police themselves, monitor human rights violations, ensure political stability and the end of wars, and promote democracy in general," explains Swazi diplomat Prince David Dlamini. "It would be in Southern Africa's interest to make peace and stability a reality ... this is the only way the dream of economic integration will be achieved," says investment broker Matise.