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Masondo punts common currency as key to intra-African trade

With AfCFTA as the springboard to mitigate against economic nationalism in the post-pandemic global economy.
Export dependence. According to Unctad, exports from Africa to the rest of the world ranged from 80% to 90% between 2000 and 2017. Image: Waldo Swiegers, Bloomberg

A post-Covid-19 global economy could deepen the trend of economic protectionism, and Africa should seize this moment to build intra-continental regional value chains and trade, which will only succeed through the introduction of a common currency, says Deputy Finance Minister David Masondo.

Read: Single market could be a game changer for Africa (or not)

Masondo was speaking in a webinar hosted by the University of Johannesburg on Wednesday, which focused on how Covid-19 will influence the emerging global world order. 

Making it clear that he was speaking in his personal capacity and not advancing an official government position, Masondo said the United States has lost its “hegemonic” power as a country that is able to influence and set rules on the global stage due to weakened manufacturing and militaristic capabilities.

He said the US’s weakened position is behind President Donald Trump’s increased focus on limiting imports and encouraging Americans to support local manufacturing and hire citizens. 

New regional powers

In a post-Covid-19 global state, said Masondo, the world is more likely to see new regional leaders such as China emerging to a position of power in Asia and Germany in Europe. 

In Africa, Masondo said in addition to tackling the transport infrastructure and other capacity issues that have been a barrier to facilitating more intra-African trade, the continent needs to introduce a common currency. 

He said the African Continental Free Trade Area (AfCFTA) agreement was “a good base to respond to the regionalisation and economic nationalism” across the world but if trade were to take place in multiple currencies it would introduce “exchange rate risks” that would restrict the number of imports and exports that can be facilitated.

Read:
Unlocking the free trade opportunities across Africa
Prowling lions and corrupt officials block roads to Africa trade

Trading under AfCFTA had been expected to commence on July 1, leading to a new engine of growth on the continent where intra-African exports only accounted for 16.6% of total trade in 2017, compared with 68.1% in Europe, 59.4% in Asia, and 55% in the US. 

However, with the advent of Covid-19, which has seen South Africa and several African countries institute travel restrictions to slow the spread of the virus, this date has been postponed indefinitely. 

“The continent has very small nation states and we need to build on our population. But [we won’t] as long as we continue with these boundaries that make it difficult for us to exchange,” said Masondo.

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The only thing that is common about his so called common currency is its lack of common sense. It is just as good as free-travel or passportless travel.

Both ideas are just terrible and nonsensical. The reality is that I don’t wan’t to be a member of a block of countries or individual countries that cannot be held to be exhibit fiscal responsibility. What if president X decides to start printing, let’s say that currency called Phinda Futhi without regard to the concerns of block member states.

That’s a headache we can do without. There is nothing wrong with the rand, except for being weaker than I like, so let’s keep the rand. Y’ll go ahead and make an AU currency, no thanks.

First, clean up every single corrupt customs official who wants something every time a product crosses borders thereby increasing prices. And remember the foot soldiers merely collect for their bosses sitting in the offices. Africa’s single biggest problem is that people have no values. In Africa, laws are not intended for the good of society but to facilitate bribery and corruption.

This Masondo guy seems to have lost touch with reality with flights of ANC fancy instead of working while the country burns.

Sadly, Africa is the most corrupt place on the planet.

Wrong. Africa has the least corruption convictions but as far as corruption goes it exists everywhere equally.

This Masondo guy is a dreamer that we do not need in a position of power to influence!
We have had problems as SA with illicit goods coming from our neighbors. Poaching for Asian countries. Cars and other goods being stolen in SA and moved easily through the boarders without much assistance with our neighbors to control.
He is not also touching on how we as Africans are going to make sure that the Chinese who have moved in are not going to take advantage of moving goods from China easily through the boarders without paying taxes.
Chinese are already getting away with false declaration of goods in containers at the our sea point of entry.
Africa just does not have the will,the capacity, skill and influence to correctly benefit themselves.

Although this article merely brushes the matter, this issue is the guts of the potential South Africa and our fellow African economies have to expand our economies and provide anything near full potential.

Inter-regional trade is very low compared to other continents- like Europe and America where the rates are in the ’80s of percentiles.

Here the figure is below 20 percent.

I admire Masondo for speaking out, even if it is “off the record”.

Gadaffi wanted to merge Libyan and Nigerian oil interests with SA resource fat assets and form a single “United States of Africa” currency.

Like him, we could have been paying students a wage and subsidising their housing by now if we had pulled finger.

Instead, we left him out in the cold to push out daisies as our friend Killary “came, saw and he died”. Now look at that hodge podge mess up North.

Politics and corruption aside, make room for far more pragmatism and dynamics, such a venture would enable the economies of scale for rapid expansion of infrastructure, such as railways and manufactuing production volumes and bring costs across the continent rocketing down.

SA and Nigeria could have the diversity to pull this off and help get Libya back on board even. It would be fantastic!

As ever, the devil is in the details but on the top of it, this is where the call to internovate, cooperate and disrupt conventional politics and socio-political static is vested.

I urge our youth to do so as we face deteriorating governance, declining infrastructure and hopelessly inferior terms of trade as we become more and more subordinated to our soon to be Western-centric masters at the IMF and World bank.

Problem on the continent is you put a hat or doek on anything it goes off at a tangent on its own mission.

Example.

The ANC has a top 6 and you would think each has its own party.

That’s a nice picture of a ship representing intra african trade. Rather more apt would be a picture of a land border post with a 2km long queue of trucks waiting for the opportunity to bribe an official, while the railway next door with is stolen rails quietly rusts away.

Not a bad idea

Hahah where did they find this guy. He is so out of touch with reality.
Just look at the mess that is the Euro then multiply by a million to see the problems Africa would have.
They cannot even get Visa free travel working properly ….

Come on, don’t be so hard on this guy. I’m sure he is an expert. I’m sure he spent countless hours contemplating that a new currency, the Afro, has a really cool ring to it and that it sounds much more grandiose to tell an American that you will give him a hundred billion Afros for one of his dollars than, say R17,71..

End of comments.

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