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.
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.
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.