Will a single African currency succeed?

There has been much talk recently about creating a monetary union within the African Union that would lead to all members having one single currency. The question is: Would Africa benefit? I must be honest. I don’t think so — at least not right now; not within the next decade or two.

There is a push for a single currency because it stands for an Africa of unity, integration and strength. And although I think it’s important to dream big and tightly cooperate on the continent, I am extremely wary of the potential failure of a single currency if implemented too hastily — and the harm it would cause, not only for Africa’s global image but also for individual countries’ economies and, ultimately, the people.

A single currency has severe economic and political consequences. The goal of a monetary union would be higher economic growth and lower inflation — but can we achieve that right now, despite poor infrastructure and low investment? What if it rendered African economies even more unstable? A monetary union is only feasible if we have stable macro-economic policies throughout the continent — but few AU member countries can claim to have these right now.

Establishing a monetary union would also mean that, as in the EU, economically stronger countries carry the economically weaker ones, as fiscal decisions affect all members. This has always been a major point of debate within European Union member countries (which are, comparatively, almost all rich and have well-oiled economies). But overcoming the gaps between the rich and the less rich countries in Europe is relatively manageable.

No how would this look in Africa, where numerous countries have shot through the deficit ceiling? What would it mean for AU member countries to be obligated to support fiscally a country like Zimbabwe, to use an extreme example, with an ever-increasing inflation rate that last year surpassed the 1 000% mark?

How would South Africa’s economy (and our personal lives) — as one of the richest and economically most stable countries on the continent — be affected if we were thrown into a monetary union with the AU’s poorest? Would the single currency not suffer from continual depreciation and thereby weaken the AU’s standing in the global marketplace rather than strengthen it?

Don’t get me wrong. I am not anti-monetary-union per se, and sincerely hope Africa’s marginalisation on the global economic market will end one day. I just think we are not ready for it yet. Although the success story of the euro has fuelled interest in a single currency in the AU, we mustn’t forget that the euro came a long way — European countries cooperated closely for more than 60 years before they launched their single currency.

I believe it would make more sense, for now, to strengthen the regional economic groupings that are already in existence, such as SADC in Southern Africa or Ecowas in West Africa. We should also make sure that Nepad delivers on its peer-review mechanism and in that way achieve economic growth, good governance and strong fiscal policies. Once all of this is in place, and only then, can we look at implementing a single African currency.