7 8 S O U T H E R N 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 international markets, supported by liberal trade policies implementation of the RISDP and eradication of poverty in and easy access to the export markets. the region. Development finance usually pertains to fin- The most important development in international ancing for investments in revenue-generating activities. It financial markets has been the increasing integration of also makes a distinction between capital and recurrent world capital markets. Integration into global markets expenditure with the application of development finance brings potential benefits in terms of increased market largely being confined to the initial capital outlay and the efficiency, access to the worldwide allocation of savings, first cycle of working capital requirements, with future speeding up of the process of financial innovation, the recurrent costs being covered through internal cash gen- development of ways in which countries can hedge their eration from the project or enterprise or through commer- economies against asset-price instability, and allowing for cial working capital arrangements. greater depth and liquidity of financial markets, as well as increased access to foreign capital. Foreign portfolio investment (FPI) is another potential source of finance in the implementation of the RISDP. FPI complements rather than substitutes FDI. Larger and liquid financial and capital markets attract FPI, which is complementing FDI flows. STRATEGIES SADC Development Finance Institutions (DFIs) can offer a range of financial services in the implementation of the RISDP including long-term capital for development projects to stimulate industrial development, promote entrepreneurship and private sector development, capital market development and trade finance. SADC DFIs through their Network have agreed to collaborate to: Attracting foreign investment in a highly competitive a) Mobilise financial and human resources for sustainable environment requires that the region should be able to development and investment and trade finance projects offer investment opportunities with a relatively higher in SADC, and where their establishment agreements and return given a certain level of risk, or alternatively, a lower national legislation permit, to consider issuing bonds for risk associated with investments providing a certain rate balance sheet lending and cross-share holding; of return. What do investors expect to see when b) Harmonise and apply international best practice determining whether SADC has an attractive enabling credit risk management policies, procedures and investment environment? methodologies in the appraisal and approval of cross- • Stable and predictable political environment; border and other sustainable and commercially viable macroeconomic stability; favourable regulatory investment and development projects; and environment; quality of economic infrastructure; c) competitiveness of the regional market; qualified and where their establishment agreements and human resources; efficient financial markets; national legislation permit, to explore, inter alia, the investment protection against expropriation; and use of co-financing, syndication, subordination, or transparent legal system; • other structured finance arrangements. Integration of the national financial and capital markets to create larger regional financial and capital markets with higher liquidity level. The development of the SADC Protocol on Finance and Investment will provide a legal and policy framework for the Cooperate in financing investment projects in SADC, The proposed measures or strategies will encourage risk-taking and sharing by DFIs in cross-border lending and hence facilitate greater flow of funds into the regional development activities. integrated regional financial and capital markets; and • Harmonised investment regime and business environment. STRATEGIES • The creation of an enabling regulatory environment for purposes of developing vibrant financial and 5.2.6 Development Finance and SADC DFIs Development finance can play an important role in the capital markets in the SADC; • The granting of preferred creditor status to DFIs that are engaged in cross-border lending;