1. SADC Road to Financial Integration
AACB Conference – Cairo 2019

2. Agenda Where the region started When the integration agenda got going
Strategic approach to integration
Where are we now
Where to next
Questions

3. SADC – Financial Integration Foundation
SADC region is made up of 16 Southern African Countries (Angola; Botswana; Comoros; DRC; Eswatini; Lesotho; Madagascar; Malawi; Mauritius; Mozambique; Namibia; Seychelles; South Africa; Tanzania; Zambia; Zimbabwe).
Heads of State and Government of SADC signed the SADC Treaty. Articles 21 and 22 became the instruments used to establish the SADC Finance and Investment Protocol.
Committee of Central Bank Governors of SADC (CCBG) working on the Regional Indicative Strategic Development Plan (RISDP) which originally mapped out the phased strategy to achieve a monetary union by Free Trade Area by 2008, Customs Union by 2010 and a Common and Monetary Union by 2016 and a SADC currency by Global and regional events caused a number of these dates not to be met.
The FIP has been ratified by member states therefore it is legally binding on all SADC countries.

4. 2003 The work began
The SA Reserve bank as chair of the Committee of Central Bank Governors (CCBG) Payments sub-Committee initiated a project, funded by the World Bank, to introduce financial market infrastructures in the SADC countries.
These infrastructures are payment clearing houses, securities depositories, real time gross settlement systems etc.

5. SADC – RTGS Implementation
Source: SARB: SADC 2018 Opportunities and Issues Presentation to the SADC Banking Association – October 2009

6. Overview of Payment Infrastructure in SADC at that time
RTGS
SADC COUNTRY B
RTGS
CHEQUE/EFT
CLEARING HOUSE
CARD SWITCH
ATM SWITCH
BANK
CHEQUE/EFT
CLEARING HOUSE
BANK
CARD SWITCH
BANK
RTGS
CHEQUE/EFT
CLEARING HOUSE
CARD SWITCH
ATM SWITCH
CSD
BANK
CMA
ATM SWITCH
CSD
SADC COUNTRY A D
SADC COUNTRY
CHEQUE/EFT
CLEARING HOUSE
CARD SWITCH
BANK
CHEQUE/EFT
CLEARING HOUSE
CARD SWITCH
ATM SWITCH
BANK C
SADC COUNTRY
Common Monetary Area in SADC
Source: SADC Banking Association

7. When the integration agenda got going
As can be seen from the previous slides much progress has been achieved in getting domestic financial infrastructures established
Using this situation as a base the CCBG then decided to move to the next phase in 2010
The next phase entailed inter-linking the financial infrastructures of the SADC countries
This phase commenced in 2010

8. Key Strategic Principles
Project focus: cross border & intra-SADC transactions
Use of existing infrastructures wherever possible – banks choose providers
Use of international standards to ensure interoperability
Invest for straight through processing
Each country will keep its own currency and financial infrastructure
Regional settlement currency to be the ZAR (South African Rand)
Start with Common Monetary Area and build out
Cross-border cheques to be phased out

9. Proposed Infrastructures
The following key infrastructures were proposed for the SADC region:
A regional inter-bank settlement system to be run by the CCBG – SADC RTGS (formally SIRESS)
A regional clearing capability for EFT credits and debits
A regional clearing capability for Card/ATM transactions
A clearing and settlement capability for cross border securities transactions

10. CCBG ROAD MAP

11. Learning from Europe SADC focussed on the non-competitive space
Mobile
ATMs
Internet
Branch Banking
3rd Party Outlets (retailers)
Postal Networks
Ecommerce Providers

12. Following Work Streams Identified
Focus Area
HVP
Immediate settlement of high value transfers
Securities DVP
Payment leg of stock market transactions
Forex/Fin Markets
Forex, money market and bond settlements
Bank Notes
Bulk ordering and repatriation
Cheques
Elimination of cross border purposes
ATMs
Linking for required customer reach
Card
Achieving interoperability of schemes
EFT Debit
Needs Assessment for cross border purposes
EFT Credit
Develop mechanisms & Interfaces
P2P
Reduce regulatory requirements – make transfers easier

13. SADC Banking Association Organization
The SADC Banking Association was given the mandate to develop the various payment processes and standards as well as self regulatory framework
The SADC BA obtained funding from its members
Members committed resources for each payment stream
Each participating SADC country lead the work in a particular payment stream

14. SADC-BA Resourcing for the Payments Project
CCBG Payments Sub-Committee
SADC-BA
In Country Payments Leader
In country standards expert
Retail Payment Expert
RTGS Experts
Sec DVP Expert
Card/ATM Group
Legal Group
Cheque
Elimination
Bank Notes
P2P

15. Stakeholders Stakeholders were identified
Strategies were put in place to deal with each stakeholder group
Excellent relationship with the CCBG sub-Committee
Others have been more challenging – other overlapping regions for example

16. INTERACTION WITH STAKEHOLDERS
CCBG: Payments & Financial Markets Sub-committee
Road Map
Legal Implications
Decisions & Principles for linkage to settlement
Standards
Governance
EAC, COMESA
SADC-BA
CCBG
Banks in SADC
3rd parties
SAD
SADCBA: Project Execution
Dedicated Project Team
Funding in place
Project plan Approved
EAC COMESA Position Paper on implications and solutions for banks with multiple regional membership
SADC SEC: Trade Facilitation
Trade Barrier payments
trade finance,
infrastructure finance
SADC Banks Securing
Participation
Business rules
Governance
Funding
SADC Secretariat
ISO/SADC STAN
COSSE
3RD PARTIES: ECB, EPC, PCH’s, CSD’s, SWIFT, World Bank, etc.
Best practices
Advisory
Information Sharing
COSSE MOU
Cooperation in the post trade settlement space (DVP)
ISO/ SADCSTAN: Standards Adoption
Setting up TC to drive standards adoption (ISOTC68) in SADC

17. Challenges of Regional Integration
Lack of political will
Fear of loss of sovereignty
Countries at different levels of infrastructural development.
Countries at different levels of institutional capacity.
Larger economies marginalising smaller ones – “Big Brother syndrome” or perception thereof.
Challenges observed in other regions e.g. Euro-Zone

18. SADC BA Approach & Progress
SADC Central RTGS
Test with SADC Central RTGS & Operators
Banks test with each other
Select operators/ methods
Agree message standards, rules
Agree business flows
Settlement
P2P
RTGS
Cash
EFT
Card/ATM
Cheque
Forex
DVP
Set up payment stream groups

19. Where are we now?
The SADC Integrated Real-Time Electronic Settlement System (SIRESS) went into production on 21 July 2013
The CMA countries i.e. Namibia, Lesotho, South Africa and Swaziland went live in 22 July 2013
System is stable and values/volumes have far exceeded expectations
The process is simple and banks are now investing to Straight Through Processing (STP) into/out of core banking applications
Cross-border cheques have been eliminated, four other payment streams incorporated in the SADC-RTGS settlements.

20. SADC Inter-bank Transfer System
A copy function is used in the process to ensure immediate settlement
SIRESS - Now SADC -RTGS
Debit sending bank
Credit receiving bank
Copy of settlement
detail sent to SADC-RTGS
Advice of settlement
BANK
SWIFT MT103/MT202
BANK
Payment instruction from sending bank to receiving bank

21. Low value credit transfers
This payment stream is now in implementation phase
An important point for the audience to note is that it allows for interoperability between banks and non-banks
If all goes to plan the first transfers should take place in July 2019
We had hoped to do a presentation on this payment scheme but unfortunately the agenda does not allow for that

22. SADC Low Value Credit Transfers Cleared on an immediate basis via a RCSO operating model
Bank can have various roles;
-Send own payments
-Manages Trust account
-Settlement Bank
-Nostro settlement bank for non-SIRESS currencies
-FX provider
SADC RTGS
RTGS being a multi-currency settlement system
Advices of DR or CR
Daily
Settlement
Direct or via local ACH
Direct or via
Local ACH
Bank
Regional
CSO
Bank
Direct or via PPSP
ISO20022
Non-bank
For CICO
Non-bank
SMS Notifications/exchange of payment detail
For
CICO
Interoperability Agreement
Agent
Agent
PPSP = message switch – FX provider –AML/KYC - operations

23. Card based transactions
Once the TCIB system goes live and the SADC-RTGS moves to a new platform work will commence on the card project
Here SADC is working with VISA/MasterCard etc. to introduce regional settlement of their branded card transactions

24. Cash leg of securities transactions
SADC BA and a work group from the Committee of SADC Stock Exchanges (COSSE) have worked on the operating model and related agreements, rules etc. for the settlement of the cash leg of securities trades.
This project will be taken further should progress be made at an African Stock Exchange level to promote greater intra-African trading between markets on the continent.

25. Ideas for African intra-regional transacting
Consider a intra-regional central bank settlement infrastructure using existing networks and methodologies e.g. SWIFT network and Y copy.
Consider linking of regional clearing houses for low value payments with settlement via central bank settlement infrastructure above
Obtain commitment from Visa and MC for lower cost intra-African settlement via the central bank settlement platform above for intra-African card transactions
Standardise on applicable International standards for financial market infrastructures and messaging etc.
Establish a best practise and harmonised framework for KYC/AML processes for intra-African payments using a risk based approach with suitable guidelines

26. Questions?