The paper seeks to determine the challenges SACU may face in working towards achieving a monetary union objective. Given that SACU by itself has no criteria for evaluating macroeconomic convergence – a key prerequisite for realising a monetary union – the paper uses criteria formulated by the Southern African Development Community to answer this fundamental question. The study finds that it would be beneficial for SACU to establish a monetary union. In such a case, the South African Reserve Bank could continue formulating a monetary policy for a possible SACU monetary union. A key challenge in obtaining this goal is the disparity across SACU member states and their poor macroeconomic performance over the years. Further studies would help to provide deeper insight on SACU’s readiness for a monetary union. These include a cost-and-benefit analysis of the possibility of a monetary union using the conventional criteria of optimal currency areas; and further statistical tests on the significance of the marginal macroeconomic convergence so far realised within SACU.
