COMESA is committed to upgrading the region’s banking capabilities as an essential platform for cross-border trade and investment.
But progress has been stilted to date, with a large number of local banks remaining below international standards in their service delivery. In an effort to accelerate progress, the COMESA Secretariat has scheduled a session for regional bankers at the AITEC Banking & Mobile Money COMESA Conference scheduled to take place in Nairobi, Kenya from 2 to 3 March. e-comesa talked to Dr Francis Mangeni, director Trade, Customs, and Monitory Affairs to what COMESA will take to the conference
Q: Why did COMESA decide to be actively involved in this conference?
A: COMESA’s overall objective is to promote economic prosperity through regional integration. This agenda addresses the present constraints of LDC countries with small GDPs operating on their own - hence the need to open borders and promote a more competitive business environment. The AITEC Banking and Mobile money conference addresses these issues by creating a sensitization platform for the key operators in the financial sector as well as the SME community, to understand and implement the best practices that make doing business more friendly and competitive across the borders. This platform provides lucrative solutions that address private sector challenges to access to finance in more than one market through the existing and new technologies that support trade and private sector development, such as; e-commerce, mobile banking. COMESA holds a strong interest and support in initiatives such as these, that promote domestic and cross border trade.We see this meeting as a way of promoting cross cutting economic development in the financial sector and complementary sectors within the region.
Q: The COMESA business Council will use the conference to re- launch the COMESA Bankers Association. Would you give us more insights into this? Why is the business council re-launching it?
A: In 1999, The COMESA Bankers’ Association (CBA) was operationalised and moved to Blantyre , Malawi where it operated for a period of 4 years. During this time, the CBA was recognized as one of the official organs of COMESA. It worked to promote and strengthen links between banks in the sub-region and played a major role in providing a forum for exchange of information on banking practices in the sub-region.
The mission of the institution was: To offer a forum of exchange of information and statistics related to the banking sector within the region; promote the creation of a zone of monetary stability with an efficient payment system; to strengthen the relationships between the Association and all organizations concerned with banking and financial activities in the region or abroad; to contribute to the capacity building of banks in the region through education and seminars. Due to fragmentation within the banking sector at regional level, the Association slowly disintegrated.
One of the primary objectives of the COMESA Business Council is to support institutional capacity building of sectoral private sector apex bodies, with an aim of creating a regional platform that harmonizes common policy issues for advocacy and business development initiatives. The COMESA Bankers Association is recognized as the key forum and leading information sources for Banking Community in the 19 member States of COMESA. We envision a key platform for Bankers and other financial institutions to engage on various agendas that promote Domestic and Foreign Investment and create a wider common market. Issues such as trade financing and guarantee schemes will have a platform of discussion amongst the financial minds of the private sector, with an objective of providing lucrative steps in addressing this impediments to doing business in the region.
Q: What has been the banking integration landscape within the COMESA region so far and in Africa in general?
A: Most Regional Economic Communities in Africa have a programme to achieve monetary union. This includes achieving macroeconomic convergence and financial system development and stability. As part of the financial system development and stability they have programmes to harmonise the financial sector on a regional platform.
As regards banking integration, COMESA
i) Established PTA Bank which is a financial arm of COMESA;
ii) Established Regional Payment and Settlement System which enables importers and exporters in the region to pay and receive payment for goods and services through an efficient and cost effective platform;
iii) Has an Action Plan for Harmonisation of Bank Supervision and Regulation which aims to ensure member countries are compliant to the 25 Core Principles of Bank Supervision and Regulation; and
iv) Has an Action Plan for Financial System Development and Stability whose major objective is to promote diversification of the financial system and maintain financial stability.
Q: Have there been any bottlenecks and challenges to banking integration?
A:Yes. These include the following:
(i) Unequal level of financial system development in member countries;
(ii) Undiversified financial instruments and institutions. This retards effective and efficient financial intermediation, including transformation of resources, allocative efficiency, improving access to financial services as well as development of efficient capital and securities markets.
(iii) Differences in achieving macroeconomic convergence; and
(iv) Insufficient human resources.
Q: Any other insights into the role of COMESA in regional banking integration ?
A: COMESA has an Action Plan for Financial System Development and Stability which is endorsed by the COMESA Council of Ministers.. The implementation of the Action Plan is crucial for banking integration in the COMESA region. To implement the Action plan there is need to promote and strengthen links between banks in the sub-region and provide a forum for exchange of information on banking practices in the sub-region. This requires the re-establishment of the COMESA Bankers Association. The Association can contribute in building capacity through education and seminars, promote an efficient payment system; and also contribute for the creation of zone of macroeconomic and financial stability.
Q: In 2008 COMESA-EAC and SADC held the first ever tripartite Summit that agreed to start preparing for a “grand FTA” and eventual merger between the three groupings, what has been the recent development in this area? What are the future plans as far as COMESA is concerned?
A: The 26 Tripartite countries, being members of COMESA, EAC and SADC have agreed to integrate their economies focusing on two areas for a start. These are trade integration and infrastructure development. The Tripartite countries have agreed to establish a Free Trade Area and later, a Customs Union. They have also agreed to develop their infrastructure (roads, railway, telecommunication, energy, ports and harbours, waterways, etc) jointly.
In pursuit of the above agenda, the Secretariats of three regional economic communities (RECs) namely COMESA, EAC and SADC, have drafted the Tripartite FTA Agreement with comprehensive annexes on thematic issues. They have also identified and adopted joint priority infrastructure projects and developed master plans for the development of the priority projects.
In infrastructure, resource mobilization is advanced. A Tripartite Trust Account has been setup and resource contributions from development partners have began flowing in. An Investment Committee to administer and approve funding and monitor progress in infrastructure development has been established and is also fully operational.
In the area of trade, the draft Tripartite FTA Agreement is in its final stages of scrutiny by legal, trade and customs experts of the region and should be presented to the Ministers of the Tripartite countries at the next Tripartite Summit planned for the first quarter of 2011 in South Africa.
At the legal and institutional level, the 3 RECs have signed a Memorandum of Understanding at the level of Chairpersons of the RECs (Heads of State) to show the serious political commitment the leadership of the region accord to the above processes.