co-authored by: Breanna Moore, Rodney L. Smith, and Kayla Torrero from the Africa Research Team, International Relations Program, University of Pennsylvania
For at least the last thirty-five years, Africanists and international policy analysts have considered whether economic integration is the necessary next-step toward broader monetary unification in Africa or conversely, whether regional monetary unification is a necessary step toward full economic integration. The subtlety is significant. In the former, nations with different agendas will seek to set in place legislation, trade, and educational practices that will gear citizens of cooperating nations with policy to live, work, and exchange peacefully for the good of all. The latter philosophy compels policy makers to push tirelessly toward the creation of one currency, which will place the fate of large and small nations together and challenge regions to work to get policies and people to recognize the long-term objective of one currency – a stronger economic bloc that can move beyond meeting basic needs and duplication of efforts to attract foreign direct investment.
Scholars who look to the Eurozone – established in 1999 to empower smaller European countries with weakened national currencies to thwart the dominance of the USD – bear witness to European economic and monetary union that set clear prerequisites to nations that opt into a Eurozone. They bear witness to the second stage of a process that begins conceptually from an African leader and scholar. Osagyefo Dr. Kwame Nkrumah returned from studies in the U.S. and work in the U.K. to Gold Coast to lead its transition into leadership as Ghana and subsequently implement the Union of African States between 1958 and 1963, which included Guinea and Mali. While this decision was centered around political unification and African independence, it was the ideological prototype for the European Union and the African Union, the latter in which Nkrumah’s role in establishing is pivotal.
In the film, African Independence, University of Pennsylvania Sociology and Africana Studies Professor Tukufu Zuberi interviews former Ghanaian President & former Chair of the African Union, John Kofour, who pays homage explicitly to Osagyefo for his foresight to unify the African continent. Furthermore, in his own words, Ghana’s first President speaks of freedom:
‘Divided we are weak; united, Africa could become one of the greatest forces for good in the world. I believe strongly and sincerely that with the deep-rooted wisdom and dignity, the innate respect for human lives, the intense humanity that is our heritage, the African race, united under one federal government, will emerge not as just another world bloc to flaunt its wealth and strength, but as a Great Power whose greatness is indestructible because it is built not on fear, envy and suspicion, nor won at the expense of others, but founded on hope, trust, friendship and directed to the good of all mankind.’ – Kwame Nkrumah, I Speak of Freedom (1961)
Today, the African Union continues as the macro level de-facto polity through which foreign policies of member nations are sourced. What the Africa Research Team looks to determine is what is the state of affairs across regions pertaining to economic integration and monetary unification. Nineteen percent (19.06%) of Africa’s reported GDP in 2012 came from South Africa, and an additional 13.33% came from Nigeria. Accordingly, all regional blocs that include these sub-Saharan nations should be considered at a minimum.
Economic Community of West African States (ECOWAS): The West African Monetary Agency (WAMA) works as an umbrella organization to usher in the establishment of a single currency in accordance with the ECOWAS Monetary Cooperation Programme (EMCP), where the West African Monetary Zone and the UEMOA eventually synchronize and merge two sub-regional currencies into one. Presently, the single currency seems more distant than present in one scenario, while the second sub-regional currency within ECOWAS utilizes the West African CFA. Currently, eight of fifteen nations that comprised French-speaking nations use the French Franc-pegged currency. Since 2000, the remaining seven nations began steps as the West African Monetary Institute to move the region toward a dual currency platform until such time that the two could feasibly be merged into one regional currency. Plans have preceded implementation, and the second largest economic bloc in Africa continues with powerful, yet unrealized trade potential. This familiar scenario for the Continent has not gone without notice in Ghana, which is the twelth largest contributor to Africa’s 2012 nominal GDP at 1.93% of the total. The esteemed former Ghanaian diplomat, Professor S.K.B. Asante, founded The Center for Regional Integration in Africa (CRIA), which was inaugurated in 2013 by President John D. Mahama in Accra with a primary vision to “direct the surge of interest on the subject of economic cooperation and integration into constructive and productive channels and provide programmes and guidelines for action.” CRIA was originally founded in 2009 according to its website, which suggests that President Mahama’s inauguration served highly to symbolize top-level support for regionalism and Pan-Africanism in the same spirit of Dr. Nkrumah.
CRIA has listed multiple publications addressing African regionalism through the West African perspective, but they also produced “A Critical Review of a study on the East African Experience of Regionalism in Africa,” which implies that although the EAC is further along the road than ECOWAS in establishing one regional currency for all, the grass is not 100% greener heading from Atlantic Ocean to Indian Ocean.
East African Community (EAC): The East African Community has received significant attention for its leadership in developing a Common Market and Legislative Assembly that are pushing forward with a Customs Union. When compared to the Eurozone, the EAC displays two critical components the serve as precursors to accommodating one currency – 1) an EAC passport or identity card that enables nationals cross-border travel and 2) the EAC common market and customs union, which works to facilitate intraregional trade. Think tanks within the region like IPAR-Rwanda are actively monitoring the impact of new EAC policies upon the national bottom line. For example, IPAR-Rwanda issued a policy report on tax incentives provided by the Republic of Rwanda for EAC member nations to conduct business through Rwanda (click here). The concern is that larger nations may reap the lion share of gains from operating as one consolidated market, which is one that smaller nations may face in regional integration. In the case of the EAC, notorious and systemic corruption is reported by international investors to organizations such as the IMF and the World Bank as noteworthy. Rwanda emerges as a beacon for investment amidst this background, and it becomes more clear why it’s largest partners in trade are EAC nations with whom it posts a trade deficit. However, the complexity of encouraging actual trade across national borders bring forth hurdles over which the region will gradually come if it were to at some point trade in divergent currencies for a regional one. For those wondering if that is merely a dream, it was reported toward the end of September that East African nations have initiated agreements that place the region on a ten-year journey to a single currency, making it the second region to develop such synchronization after ECOWAS. Legislators will put ink to paper in November 2014 to formalize the journey and to plan proper protocol.
Southern African Development Community (SADC): In 1980, the Southern African Development Co-ordination Conference convened in order to eliminate the economic stronghold of the Apartheid regime within South Africa. The conference eventually spawned in 1992 into Southern African Development Community (SADC), and SADC carried a focus on integrating development efforts across fifteen member nations. The fifteen member nations contribute the most to Africa’s GDP with 35.90% of total GDP*, followed closely by COMESA and ECOWAS with 35.82% and 34.24%, respectively. As of 2010, the GDP of the Southern African Development Community totaled US $575.5 billion with a population of 277 million. Sadly, Southern African Development Community trade within Africa is the smaller than trade with the Asian Pacific and European Union; the the majority of such intra-continental trade is is intra-SADC trade. This substantiates the notion that Africa has not begun to tap the well-spring of trade potential that rests within the continent. It is ultimately that wellspring of wealth that stood second to political liberation in the mind of Kwame Nkrumah before regionalism began. A customs union with external tariffs may help drive trade inward, and has been suggested by SADC-Secretariat.
In Addis Ababa, the Institute of Security Studies closely examines African regionalism, which they describe as “building blocks to the [African Economic Community]” established in the Abuja Treaty. In 2008, ISS commented in “Rationalising regional economic communities and implementing the treaty establishing the African Economic Community: The role of Parliaments” Towards a Union Government for Africa, and concluded that the viability of economic regionalism rests squarely in garnering support of national and regional parliaments so that they harmonize policies that facilitate the African Economic Community Treaty. Since 2008, each region has born witness to practical delays along their proposed timelines due to national or regional obstacles in creating common markets, customs unions, and/or public support for moving forward towards full-scale implementation.
The Southern African Development Community Free Trade Agreement launched August 2008 with about 85% tariff liberalization at zero rates of the merchandise trade flows. While the minimum conditions were met, maximum tariff liberalization was attained by January 2012 when the tariff phase down process for sensitive products was completed. Twelve out of fifteen SADC Member States are part of the Free Trade Area, while Angola, Democratic Republic of Congo and Seychelles remain outside. It is important to note that in the Desk Assessment of the Regional Indicative Strategic Development Plan 2005 – 2010, SADC-Secretariat calls for investigation of ways to foster its ‘think-tank’ function in close cooperation with research institutions and resources from member states and other regional stakeholders. Such a new coordinated approach would allow the development of new strategies for the sustainable development of the regional integration agenda.
Common Market for Eastern and Southern Africa (COMESA): COMESA was formed in December 1994 to replace a Preferential Trade Area which had existed since 1981. Today, COMESA consists of nineteen member nations after late intakes – Egypt (1999), Eritrea (1994), Seychelles (2001), Libya (2005), South Sudan (2011) – replace earlier departures from among the inaugural fifteen nations. Originally, COMESA slated the year for one common currency to initiate in 2025; however, in 2006, leaders pushed the year forward to 2018. Between that time, COMESA established a continental Trade Insurance Agency (ATI). Additionally, the COMESA Monetary Institute launched in 2008 to drive the process of regional monetary unification through 2018. Central banks throughout Africa are working to harmonise in the advent of utilizing a single currency. Essentially, steps are in place, but the Africa Research Team looked to Kenyan think tanks for initial inquiry into advocacy to the Central Bank of Kenya, which hosts the Monetary Institute. The initial inquiry included some of those organizations within the 2012 Global Think Tank Index – Agency for Cooperation and Research in Development, African Centre for Economic Growth (ACEG), Institute of Economic Affairs (IEA Kenya), Inter Region Economic Network, Kenya Institute for Public Policy Research and Analysis (KIPPRA), and Regional Centre for Socio-Economic Studies and Development (RECSSAD). Economic integration is definitely a concern in Kenya. For example, ACEG is currently conducting a research project entitled “EAC-COMESA-SADC Tripartite Free Trade Area (FTA) Roadmap”. KIPPRA addresses regionalism within its Trade and Foreign Policy Programme.
We highlight Kenyan think tanks only because the Central Bank of Kenya is host institution for the coordination of COMESA Monetary Institute; however, if one looked in South Africa, Egypt, and Tanzania, there are a number of think tanks throughout Eastern and Southern Africa researching and analyzing the trend toward unification.
Conclusion: Upon reviewing the works of various think tanks across sub-regions of Africa, the conclusion found by the Africa Research Team is that the road to one African currency is many years away, but that single regional currencies are visible in the nearer horizon of ten to fifteen years. The impetus is upon parliaments and regional legislative agencies to create policies that drive African traders toward one another before looking beyond the world’s second largest continent in land and population.
* – GDP: 2004