A Call to African Unity
“The brighter day is rising upon Africa. Already I seem to see her chains dissolved her desert plains red with harvest, her Abyssinia and Zululand the seats of science and religion, reflecting the glory of the rising sun from the spires of their churches and universities.” Dr. Kwame Nkrumah
Rather than making a historic decision at the AU summit in June, Heads of State decided, once more, to continue to talk unity rather than walk unity. We must be aware that all times are times of transition, but after 500 years of oppression, over 100 years of pan-African revival, 50 years after Ghana’s independence, nearly 40 years of the OAU, and 5 years of the AU, the current moment is not a moment to say let us be cautious, let us be incremental, let us go slow and let us not speed up and get on the slow lane of history. Unless AU Heads of States puts a stop to the slow lane, then it will not be easy to see how qualitatively different it is with respect to other times and institutions.
Africans have had expectations to come together and achieve collective self- respect not by giving what they have and begging from those who have taken their resources and even their agency embedded in the logic of their ‘giving’. This giving of Africa’s resources and begging for donor support can only stop if Africa pursues an African national strategy. Everyone has a strategy on Africa; Africans have yet to evolve a strategy to build the African national home by dealing with a difficult and contradictory world by revealing their freedom, agency and independence.
Recall India during the Cold War. It managed to maintain a democratic national strategy by keeping the Soviet Union happy by accepting planning for the commanding heights of its economy, and by appealing to the USA by its convincing electoral democracy. Africans, on the other hand, got caught in the Cold War and entirely lost national agency and strategy. Today Africans are lured to follow policies and strategies by allying with others such as the USA, China, the EU, and the World Bank rather than with Africa herself. Each of these countries has a strategy on Africa, but Africa’s united strategy is hard to see.
African unity is the rock- base for the production of Africa’s agency and communication with African self-respect. Unity will be the beginning of the end of African common suffering. It will begin our common joy and celebration. There is no doubt the world will not be the same once Africans unite and create a strategy for change of Africa’s current unacceptable condition. There will be indeed an earth-shaking dramatic change when an African strategy towards Africa and the rest of the world is born with protocols and institutional norms and enforcement mechanisms. It means the moment has been seized. No longer will Africans undercut each other to beg others , once they freely and willingly choose to come together, enter into dialogue and work for the people of Africa by aligning, uniting their interests and their aspirations. That is indeed a grand historic moment.
Two obstacles remain as a sore preventing Africa from entering the phase of self-reliant development: irrational fragmentation from a casual tearing up of the continent into incoherent real estates of the African peoples, and dependence on donors to finance African development. The first is a result from monumental historical-political crimes whose only rectification demands a big-bang decision to annul, reject and overcome the boundaries with fierce intellectual, moral and political vision to fulfil the constitutions of the Africa-nation while allowing voluntary free movement of people making the boundaries innocuous to Africa’s peoples. The second requires the creation of a unified African strategy and unified approach to dealing with the outside donor world by neutralising the poison of money as honey that donor aid has come to be in Africa. The two are dialectically linked. Weak and fragmented states depend on external sources of aid largely unable and not often in a position to mobilise internal resources. Political fragmentation has created unviable economic entities. Conversely lack of success in economic development has created weak political structures, developments and so-called failed states that fall prostate with begging bowls. African fragmentation liquidates African agency whilst bolstering donor agency. Africa’s position as a donor recipient accentuates inter-African fragmentation and destroys the chance to evolve a unified African strategy. Donor econocentrism destroys Africa’s logocentric imagination, vision and strategy to evolve a unified and Africa-centred development. The two inter-related challenges confronting the African world includes building the unified African logo and beat back the divisive temptation of succumbing to donor’s econocentric logic, devices and schemes that fragment space and people.
For over half-a century now, it has been proposed that Pan-African political unity is the necessary remedy to overcome fragmentation. It is the only basis for mobilising Africa’s own resources and asserting its exclusive use for Africa’s own development. It is the defence that can potentially prevent internal and external robbery of Africa’s rich mineral and agricultural resources by evolving a common and legitimate African economic strategy that will challenge the problem of having to rely on those external actors that neither have the intention nor the desire in financing Africa’s integrated development. Africa's new relationship with the rest of the world will be born when Africans learn to neutralise the harm that the unholy trinity of loans, aid and debt has done to them.
One key initiative African leaders can take collectively is to establish a dual currency system that can largely self-finance an integrated African development. The currency for the domestic economy should be an inconvertible people's money. The existing state currencies that are not exchanged directly with each other, and whose exchange rate is mediated with the dollar, the frank and the Euro, should give way to direct exchanges based on a fair settlement of the appropriate par value. Naturally, diversities, inequalities, different levels of development, differing attitudes and interests present problems in constructing a workable unified currency system. There are innumerable informal, spontaneous and voluntary cross-border transactions in Africa. Most of those engaged in such transactions would prefer exchanging their goods for hard currencies such as dollars or franks. This is often related to the pegging of local currencies with the US dollar and French frank. An African currency that can be built up to serve as a sort of local dollar or frank will stimulate the domestic market and the communication amongst African regions, peoples, communities, markets and states.
It is precisely to deal with these varied problems that Africa needs a currency system to create liquidity. The direct exchange of local currencies promotes the exchange of private labours across Africa. The exchange of the local-to-local currency via a global currency continues to fragment Africa and integrate discrete interests and regions with the world economy. The key is to find strategies for Africa to integrate with a world economy as a whole and not in parts.
Monetary union is a key strategy to bring about a new relationship. Its proper construction requires bountiful political will that we cannot take for granted exist given the ties and propensity of the existing states not to pursue collective action that matters. Differences in economic size and significance of the existing 53 states cannot be shunned aside. In principle, large and small economies can enter into a unified system without loss. As long as a situation of 'being better off for some without being worse off for all' exists for all those embarking on currency union, negotiations for a peaceful and evolutionary monetary system can proceed. At all costs states should not demand parity between large economies and small economies. The objective is in the end to evolve into a unified market, unified currency area and unified economic zone. However, the move must be sensible and realistic and various domestic constituencies and their external supporters within the existing states have to be brought along by initiating a programme of fair, gradual and transparent African-wide currency or monetary union
African economies continue to import and export vertically and not horizontally with each other. This structure reflects also a largely unchanged trade pattern between Africa's primary products and manufactured products from the western world. Economic diversification is still a job waiting to be done. The weakness of African currencies is tied to the lack of a diversified economic structure. The price of foreign money is high and the price of local money is low. For example, the French frank used to be 100 times the local CFA frank in West and Central Africa. One Euro is CFA 665.957. Now the Frank is dead in France replaced by the Euro and is alive in West and Central Africa! Tourists and real estate dealers with French franks or Euros can purchase services and local assets in Africa with a couple of thousands of these notes. Africans wishing to import French and Western goods will want to get hold of French franks (and now Euros) as their money is too weak to purchase foreign goods. African exports should be cheaper but with so many tariff barriers to Africa's primary and semi-manufactured goods and worsening terms of trade, and unchanging commodity portfolios, the advantage of devalued local currencies is neutralised. Africa in the CFA zone largely loses both in its exports and imports based on the existing arrangements.
Inter-African integration, mobility of money, labour and capital is more difficult than the movement of money, people and capital between African states and the west. This pattern has been reinforced by the system of Africa's dependence on loans, grants and debt. When debt repayment becomes a priority, the political economy of the interest of the International Financial Institutions (IFIs) becomes paramount. When improvement of the standard of livelihood of the population is a priority, social spending will be necessary to bring it about. However, despite the rhetoric by the IFIs as "friends of the poor" following policies of poverty reduction, loans through such schemes as the heavily indebted poor countries schemes (HIPCs), policies of structural adjustment have been followed, in reality, at the expense of social spending for development. Africa has been confronted with a stark constraint: a policy structure that has privileged debt repayment over development. International politics and economics have forced this policy choice over a Pan-African alternative. To maintain or to change this policy structure is an important issue confronting Africa in the 21st century. Debt-repayment distorts African economic policy in the direction of producing the things Africa cannot consume and to consume the things it cannot produce. It leads to the orientation by the domestic elite that revel in luxury consumption unwilling to forgo whiskies, cars and other private comforts for the production and development that service the wellbeing of ordinary people. It leads to a new political economy of the syndicate. The latter designates the symbiotic relation of the domestic elite in relation to the external donors: the international elite centred within the IMF, World Bank and the WTO. Together the syndicate (whatever the misgiving between and within) promotes export-orientation, the economic bible of comparative advantage and competitiveness to solve Africa's piling debt with yet more and more loans based on more and more stringent conditions.
The advice from the international elite is to keep the capital account of African states open and unregulated. This furthers the vulnerabilities of Africa's economies to fall prey to cyclical fluctuations in the world economy. They become easy victims to fast movements of speculative finance that episodically ravishes whole economies like gales. The existing 53 state monetary arrangements in Africa are too fragmented to withstand powerful movements in world finance and business cycles.
Monetary Union is Not New
Prior to the programmatic call by Nkrumah to set up a monetary union on an African scale in May, 1963, there have been a number of attempts to set up monetary unions in different regions of Africa. The origin of the modern monetary unions is traceable to the colonial encounter between Europe and Africa. The most enduring currency union has been that managed by France. France planted the roots of the CFA Frank zone in 1945. This was a result of a decision by the French colonial Government to crowd out the various local currencies and establish the ‘frank’ as the sole legal tender throughout the French colonies of West and Central Africa as of 1948!
France retained its control over the monetary arrangement of its West and Central African ex-colonies in the 60s by creating two regional currencies that retained cleverly the ‘CFA frank’ designation in both regions. The exchange rate between the ‘ CFA franks’ of the West African Monetary Union and the Central African Monetary Area were made equal-both maintaining the same parity against the French Frank and capital can move freely between the two regions. Both monetary areas have since comprised what France calls the ‘African Financial Community,’ where each currency is only legal tender in its own region, despite the currencies being jointly managed by the French Treasury as integral parts of a single monetary union.
Though France was not a member of the CFA itself, its Ministry of Finance held the operational accounts and the foreign-exchange reserves of the Central Banks of West and Central Africa. France insured convertibility of ‘CFA frank’ at a fixed price, set and controlled rules for credit withdrawal and maintained a ratio of 50:1 between the CFA frank and the French frank for half a century. In 1994 there was a devaluation of the ‘CFA frank’ to the ‘French frank’ by a ratio of 100:1. In January 1999, the CFA was pegged to the ‘Euro’ rather than the ‘French frank’, but in all other respects the French Ministry of Finance retained substantive control over the ‘CFA frank’ zones. The Euro seems to have been introduced via France into West and Central Africa two years before twelve of its members began to use it as legal tender this year.
The British also had created a less successful East African Currency Board in 1919 and issued a common currency unit, the East African Shilling, as legal tender in Kenya, Tanganyika and Uganda. After independence in the 60s, the common currency area broke apart. Efforts to mend the break up are still continuing with the re-establishment of the East African Community. In addition during the 1920s the then independent Republic of South Africa collaborated with the colonial powers to create a common monetary area. The Common Monetary Area embraced South Africa, former British colonies Botswana, Lesotho and Swaziland and the then German colony, Namibia. After decolonisation in the late 60s, the ‘Rand Monetary Area’ was formed in 1974, though diamond rich Botswana was not in it preferring to set up the ‘pula’ as national money. The monetary union based on the rand has gradually loosened into an exchange rate union and appears to falter as a sustainable monetary union.
The division of Africa into currency zones has eased largely through the demise of the sterling area. However, the frank zone is still active and the dollar has moved into hitherto sterling areas and even in the CFA frank zones. Both the dollar and the ‘frank cum Euro’ will not easily give up their control of Africa. In particular France will not easily give up its exclusive hegemony over much of West and Central Africa comprising together some fourteen states. The pegging of CFA franks to the Euro has not loosened the French grip over the monetary area. Such continued French grip can affect the effort to create a big-bang evolution into an African monetary system.
It is interesting to note that more efforts were made during the colonial period to create currency unions than in the period of political independence. The fact that Africa was diverted from following Pan-African directions in the post-colonial period meant that projects for currency unions to create liquidity to finance inter-African development were abandoned. Part of the problem was continued pressure from the ex- colonial powers. The British pound in Western Africa was used to punish nationalist regimes like Ghana prompting the creation of the cedi when Britain devalued the West African pound.
Today, a monetary system for the making of free Africa requires a substantially different approach from the process of monetary integration that is taking place within the EU. Unlike the European monetary approach to create an optimal currency area, an African monetary system is a key instrument to forge the completion of Africa’s emancipation. The concept of an African currency union is to be constituted to undo and overcome, reverse and convert the history of Africa’s grand oppression into an autobiography of liberation. It is thus a qualitatively different system differing in purpose, functioning, objective and intention from the pattern of monetary union of Europe where the issue is to unify fairly well functioning currencies in order to exploit the advantage of an enlarged market. Africa’s currency union is part and parcel of the overall struggle to mobilise finance internally in the effort to inter-connect states, peoples, communities, regions, economies, households, and families, individuals and markets across Africa. It is a weapon for eradicating violence and poverty by facilitating political and economic integration. It is a weapon in the democratisation of African politics, economics and public life. It will be used to promote primarily inter-African trade, investment, infrastructure, communication and electrification, the creation of jobs without state enclosures, borders and barriers, and generally to found, build and open Africa as a dynamic, prosperous and independent national economic and social system. Once Africa has an integrated economic and political system, it would create the necessary condition to forge a real partnership with all types of economies and regions of the world.
Necessary Conditions for Monetary Union
It is time to pick up monetary or currency union as part and parcel of the African Union national project. For a monetary union on an African scale, the African Union has to authorise an African Central Bank to issue a currency unit (call it, if you like an 'AFREE') that can serve as a principal medium of exchange, unit of account and store of value for the whole continent. An African monetary union is one important way of moving closer to making the Pan-African vision a reality.
The necessary conditions for making moves towards a Pan-African monetary union are:
· The smooth transition of power from France and the EU to integrate the CFA frank zone to the African Union without breaking up the common monetary area. In addition, to upgrade, adjust and persuade the states in the rand monetary area and other bilateral and multilateral efforts such as the East African common market to join the all-African monetary system.
· A new liquidity creating mechanism backed by Africa’s mineral resources and African Union confidence building measures to support an African currency to circulate freely in the member states.
· A determined effort to re-link with the IMF, countries like France or the European Union on their clear acceptance of Africa’s national developmental priorities and not Africa’s continued indebtedness to them by preventing them to take a leading role in designing an all-African currency union.
· To negotiate the par value amongst the Euro, the dollar and the African currency for the purposes of managing Africa’s foreign trade in the service of African development with the rest of the world.
· To control the authority of adjustment of the African currency to the dollar and Euro in the AU.
· To establish a strict control over the external flow of Africa’s currency by making its sole value to assist the development of Africa.
· To phase out gradually the existing currencies within the 53 African states.
· To create and manage a dual currency system where like the Chinese Yuan, the African currency is inconvertible by becoming a unit of account and means of payment for stimulating inter-African trade and investment. There should be a build up of foreign reserves backed by mineral wealth and the growth of Africa's labour productivities from which a foreign transaction account can be kept for the purposes of trading outside Africa.
The key importance of a currency union and an inconvertible African currency is to make it possible to raise domestic financing by enlarging the domestic market and stimulating a comprehensive and an integrated development of the continent. The currency has to be legal tender across Africa, and requires an African consensus to make it work. Above all, what is needed is a political will to imagine and construct an African general will. The political consensus is overriding to make the compelling economic and organisational case to establish the African currency and monetary union a reality.
The currency should have a shadow as opposed to real foreign exchange price to the dollar, frank/euro, Yuan, rupee, sterling and yen for the purposes of domestic circulation and means of payment. Exchange rate par value and convertibility should be confined for transactions between Africa and the rest of the world through a foreign exchange reserve fund. The AU should create and manage a dual currency system: the domestic currency with the currency for trade with extra-African regions. Such a dual currency system, like the Chinese Yuan in the 1980s, would make Africa respond to the challenges of domestic mobilisation of financing as well as countering external assistance to turn into piles of debt. The convertible African currency stimulates Africa to respond to the global environment positively and the same currency in its inconvertible form stimulates raising domestic finances to make a bottom-up transformation of Africa where Africans learn to appreciate and value products, knowledge, trade and investment in Africa itself.
The foreign exchange reserve account should be managed by an African Central Bank. Foreign money, assistance, borrowing and transactions for import and export should be drawn from this reserve foreign exchange fund. This fund can be built up through a variety of sources: a) international assistance, b) African reserves backed by Africa's mineral wealth, c) Africa's expected rise in labour productivity, d) possible African Central Bank ‘ex-nihilo’ credit creation, and e) the use of a variety of treasury bonds and e-commercial activities. The foreign exchange reserve fund is recommended to allow Africa not to lose and, in fact, benefit from globalisation while neutralising the adverse effect from it. The fund will not be used to purchase luxury items. It is set up to purchase technologies, draw in needed experts, train personnel and implement something like the official Africa’s NEPAD initiative. There must be regulation and oversight over the external flow of Africa’s currency by making its sole value to assist the development of Africa. There should also be a transition period to phase out gradually the existing currencies within the 53 African states.
Such a dual strategy for liquidity generation can, if managed well, insulate Africa from the debt trap. The peoples’ inconvertible money can circulate Africans private activities free from piling up any internal debt. The convertible foreign exchange reserve funding account can be prudently managed to keep at arms-length the IMF and other private bankers from manipulating Africa’s priorities into debt payment. Instead of loans, debt and aid, the main prop for creating liquidity to finance African development becomes Africa’s mineral resources, its labour productivity and African Union confidence building measures.
A determined effort to re-link with the IMF, countries like France or the European Union on the basis of the dual currency system must be made. The latter may not see kindly to this strategy and they will browbeat African leaders for not playing along the globalisation bandwagon. The challenge for African leadership is to make the dual system work by applying law to forestall black market problems and corruption. Financial governance including e-governance is very important. The stakes are high for the choice between the dual currency system and the IMF is whether development or debt wins for shaping Africa's futures.
· A unified African currency must be built as stable so that all those engaged in transaction can benefit without inflation and/or deflationary pressures.
· Acts of discrimination and restrictions on legitimate or lawful transactions in all markets must be forbidden.
· The trade system within Africa must be open, free and fair and the African security environment should sustain this freedom of internal trade and investment.
· There must be an agreement for the leading members of the AU community to guarantee and underwrite the smooth and stable functioning of an African currency. These leading members can be selected from the regions. The selection of the members has to be based on consensus and consent.
.The transition from the state-based currency system to the African monetary system must be based on lawful, non-dislocation and evolutionary strategy. The transition must be voluntary based on principles of persuasion, consent and the pursuit of common objectives.
· The transition from the use of current state -based currency arrangements to a unified one requires that states are willing and committed to co-ordinate monetary, interest and budgetary policies amongst themselves. They understand that currency integration adds to their sovereignty rather than subtract it. Both the dual currency and the currency union will be used for helping to insulate states from borrowing to fall in debt by creating Africans own liquidity to finance Africa’s development.
· The African monetary union will resist existing African monetary arrangements that mirror the breakdown and fragmentation of African economies as they are today. The currency union will also resist the lingering domination of the ties and habits of relations with ex-colonial powers.
· The currency union has to deal with the impact on Africa of the contention and competition of the dollar, the Euro and the yen for global influence. The dollar has an overall overarching influence in the continent today in that in some countries it is freely used as a means of exchange as in the USA. This shows that if there is no unified currency union, Africa will be a battleground between the Euro and the dollar. The Yen may not be as influential as the Euro and the dollar in Africa, but it is there in the wings. These three currencies will compete in Africa and the AU must prepare the ground to found a currency union to protect Africa’s developmental aspirations.
The key constraint is political. If African leadership transforms from governing by force, deception and blackmail to government by permanent consent through the ‘mid-wifing’ by Africa’s own organic intellectuals combining strength and conviction in making Pan-African ideals work for Africa and above all the ordinary people of Africa. The key is the transformation of the quality of leadership- to become and be guided by moral and intellectual power. The leadership quality and the broad framework for making political consensus are overriding to make the compelling economic and organisational case to establish the African currency and monetary union a reality.
Mammo Muchie, on behalf of NES