1 2 S O U T H E R N Fig 3: A F R I C A N D E V E L O P M E N T C O M M U N I T Y 2.2.2.5 I N F L AT I O N I N S A D C 2002 Savings and Investment Savings and investments are central determinant of the rate and pattern of economic growth in SADC economies. 120.0% By increasing domestic savings and using the resources in productive domestic investment, SADC economies will 100.0% strengthen the region's prospects for accelerated economic growth, poverty eradication and sustainable development. Between 1980 and 2001, regional Gross National 80.0% Savings (GNS) fell short of regional Gross Domestic Capital Formation (GDCF). In 2001, the average SADC GDCF was 16.75 percent of GDP against a regional GNS of 15.85 60.0% percent of GDP, leaving a resource gap of -0.9. Among individual countries, there were wide disparities between 40.0% saving and investment rates, with most countries recording negative resource balances. As far as FDI is concerned, SADC as a Community 20.0% attracted on average only US$ 691 million in the early 1990s, but FDI to the region quadrupled in the second half TANZANIA SEYCHLLES BOTSWANA MAURITIUS NAMIBIA MOZAMBIQUE LESOTHO SOUTH AFRICA MALAWI SWAZILAND DRC ZAMBIA ANGOLA ZIMBABWE SADC (MEDIAN) SADC (AVERAGE) 0.00% Source: SADC Statistics, 2003 of the 1990s standing on average at US$ 3061 million during 1995-98. This figure accounts for more than half (55 percent) of all FDI flows directed to the SSA region. Individual SADC countries appear to have performed relatively well compared with other Sub-Saharan countries. Six SADC Member-States (South Africa, Angola, factors contributing to the lowering of inflation within the region. In analysing the overall SADC trend in inflation in the 1990’s, it is important to observe that the average inflation rate was negatively influenced by high inflation rates experienced in those countries that were involved in prolonged political turmoil and/or civil wars and, therefore, running essentially war economies. Zambia, Lesotho, Tanzania and Namibia) were among the top 10 recipients of FDI in Sub-Saharan Africa during the second half of the 1990s. Southern Africa has emerged as a strong pole for attracting foreign investment to SSA. From 1995 to date, more than 25 percent of FDI to SubSaharan Africa region was directed to Southern Africa. The outlook for investment in SADC would not be Despite improvements in overall macroeconomic complete without bringing the cross-border regional management, which impacted positively on inflation in the dimension into the picture. South Africa, Mauritius and last decade, as reflected in a significant decline in inflation Zimbabwe are the main sources of cross-border invest- rates, inflation remains one of the major challenges to ment into other SADC countries. Currently, intra-regional national efforts for economic recovery and for regional investments in the SADC-region are concentrated in the cooperation and integration and poverty reduction. following sectors: Mining, Tourism, Transport, Finance, Interest rates remain high in all SADC Member States. There are wide variations between countries with single-digit Manufacturing, Retail, Telecommunications, Agriculture and Fisheries. inflation and interest rates mostly below 20 percent, and high The main avenues for FDI in SADC are privatisation and inflation countries with interest rates ranging from about 40 public-private provision of infrastructural services. Most percent to as high as over 100 per cent. One of the main countries are also attracting resource-seeking foreign reasons that accounts for high interest rates in the region is investment flows. In general, efficiency and market-seeking the tight monetary policy intended to reduce inflation. investment flows remain proportionately small.