- Africa is self-sustainable; the continent has every resource it requires without any need for importation
- The stock markets in the world are run by products from Africa; gold, diamonds, copper, electric-car Lithium, iron ore and uranium
- The continent uses over 5 billion dollars in currency conversion, monies that could have been directed to other economic development projects
Unity.
This is the only weapon that Africa has in its quiver to attain its political and economic freedom.
Clearly, Africa is self-sustainable; the continent has every resource it requires without any need for importation. Unity can be in many forms ranging from financial integration to boundary dissolution. These two variables have already been explored but have not been implemented to completion.
“Unite we must. Without necessarily sacrificing our sovereignties, we can forge a political union based on defence, foreign affairs and diplomacy, common citizenship, an African currency, a monetary zone and a central bank. We must unite to achieve the full liberation of our continent.” – Kwame Nkrumah, the first President and Prime Minister of Ghana.
Financial integration in Africa
One of the ways that Africa can achieve this unity is through financial integration.
To do that, there must be unification in the monetary system throughout the continent or in several African regions. The stock markets in the world are run by products from Africa; gold, diamonds, copper, electric-car Lithium, iron ore and uranium. With all this power that Africa has, the West has ensured total control to regulate the continent’s full sovereignty and economic freedom.
Read: A common Africa currency and CBDC’s unlikely future
Among the ways that the colonizers slowed down the growth and unity of Africa is through the demarcation of boundaries 60 years ago. These boundaries gave birth to over 41 different currencies on the continent that have complicated intra-African trade.
The continent uses over 5 billion dollars in currency conversion, monies that could have been directed to other economic development projects. African countries’ attempts to form a common regional currency have proven futile precisely because of all the frameworks of laws that need to be revised and harmonized in the different countries.
Furthermore, leaders in the continent are reluctant to embrace avenues that will increase Africa’s power on the world’s economic stage precisely because of the fear of a possible sovereignty dilution.
A financial integration success case example
The euro has propelled the European Union to become a world giant economically and politically. Nineteen of the countries in the EU sacrificed their national currencies to use the euro, which has positively impacted trade in the region.
However, African leaders have been fighting or delaying efforts to create a common currency out of their interests. Most of the 42 currencies are valueless outside their country of use, making it almost impractical to trade within different African currencies.
Nigeria and Ghana are against the eco
Nigeria and Ghana have launched their Central Bank Digital Currencies, the e-naira and the e-cedi. The formation of these two currencies has poured West Africa’s dream to create a common currency, the eco–that would serve the same purpose in the region as the euro in the European Union- into the drain.
The initiatives by these two countries to create their own CBDCs proves that they have little or no belief in the eco’s workability compared to their digital currencies. Some experts argue that the two countries feel economically superior to the others in the region, and the integration into one regional bloc feels like a downgrade to their economic power.
On a long-term goal, however, the eco would have had far more reaching economic benefits than each country on its own.
The eco would have restored the region from tagging their currency to that of their colonizers, the Franc. West Africa has vast mineral resources and agricultural wealth, housing the wealthiest country in the continent (Nigeria) and the fastest-growing economy (Ghana).
Another significant project in Africa whose success is pegged on sufficient financial inclusion is the African Continental Free Trade Area (AfCFTA).
Financial integration holds the success of the AfCFTA
In 2018, 54 AU members signed a free trade agreement that would birth the world’s largest trading bloc after the world trade organization. Since then, one of the critical challenges frustrating the realization of the AfCFTA is the transaction of cross-border payments within Africa, which are slow and costly.
Without a uniform and a continentally accepted payment network, the AfCFTA is unlikely to succeed. There is an already existing financially inclusive currency that could save Africa. Regional acceptance of bitcoin is possible and easy to adopt as a means of exchange in the African Continental Free Trade Area.
Read: Ghana, Nigeria digital currencies sabotaging West Africa’s Franc
Bitcoin could hasten the success of AfCFTA
Bitcoin would begin operation in facilitating cross-border payments immediately as traders only need a crypto wallet. Bitcoin wallets are interoperable and are not geopolitically limited.
The digital currency is decentralized and does not require harmonizing fiscal and monetary policies of the 55 countries on the continent. Traders will be able to transact with each other across their bitcoin wallets at a much faster and cheaper rate than traditional modes of payments.
The free trade area will awaken the untapped potential and increase prosperity through increased intra-African trade. Currently, intra-African trade is meagre, contributing to only 14.4 per cent of Africa’s total exports.
The United Nations Conference on Trade and Development (UNCTAD) says that the AfCFTA has the potential to increase intra-African trade by up to 33 per cent and cut the continent’s trade deficit by 51 per cent. AfCFTA aims to create a new borderless market that connects 55 different countries with a combined GDP of US$3.4 trillion and a population of about 1.4 billion people.
The UN Economic Commission for Africa (ECA) indicates that cargo transported by vessels would increase from 58 million to 132 million tonnes by 2030 with the implementation of AfCFTA. The trade area will lift more than 30 million people out of poverty and add at least US$450 billion to Africa’s potential income.
Financial inclusion delays the formation of the East African Federation
The East African Community has been in active talks about creating a regional bloc that operates similar to the European Union since the early 1960s.
In 2018, the EAC member states appointed a delegation to begin the process of drafting a constitution to govern the confederation. Among the key challenges that have slowed down the process is the harmonization of the currencies in the region.
The proposed inclusive currency for the EAF is the East African shilling which has been debated as a common currency in the region for the last ten years. Harmonizing fiscal and monetary policies in the seven countries to converge the currencies in East Africa into one is problematic for two reasons;
- Each country in the region has its currency
- Each currency continues to experience wildly fluctuating exchange rates
The process has now become more complicated with the inclusion of the Democratic Republic of Congo in the EAC, considering that the country uses the Franc as its national currency.
Features of the East African Federation
The joining of the seven EAC member states would create the fourth largest country in the world.
The gross domestic product for the region will sum up to US$250 billion, the fourth-largest in Africa and the 34th biggest globally. The EAF would become Africa’s largest superpower precisely because of the weaker nations surrounding the region. Among the languages official languages suggested in the region will be English and Swahili.
The proposed capital city is Arusha, Tanzania, which is the current headquarters of the East African Community.
To overcome the limitations of trade, Africa must put selfish interests aside and agree to harmonize monetary systems in the different regions if the continent desires economic freedom.
Read: Kagame emphasizes on EAC trading with local currencies, scrapping dollar
