Recent discussions about a common currency for South America, initially between Brazil and Argentina and later to include other countries in the region, had me thinking of a bright-eyed mid-career student who once told me, with great confidence and pride, that Africa should have its own currency “called the afro”.
Never one to kill a discussion in class, however unreasonable or absurd it may be, I engaged the fellow, treating him the way the late Richard Feynman would, by pretending to be dumb. I drew a square at the top of the chalkboard and inserted the word “afro” in the square. That, I said, is where you want to be. “What has to happen before that?”
I drew several boxes in about 10 lines across the board. In the bottom left I wrote: “This is where we are, now?” Then, in a dramatic lunge, I asked: “How do you get here,” pointing to the square in the top right-hand corner.
There were some mutterings about “Africa must unite,” accompanied by a shuffling of feet and squirming on seats. Nobody quite knew how Africa would unite, other than ideological or revolutionary reveries and recitations, and nor did anyone have any idea as to how much work, politicking and posturing there would need to be, how impossible it is — at least for the next 50 to 100 years.
Two decades ago the World Bank published Can Africa Claim the 21st century? My answer to the question in the title then, as now, was no. A little more than two decades in, there is already enough evidence to support my claim, from illegal mining in the Democratic Republic of the Congo to oil piracy on the west coast and long-simmering tensions over “who owns the Nile”.
As the recent Brazil-Argentina statement made clear, any talk of a common currency could take longer than the 35 years it did Europe, which had the benefit of strong US financial and economic backing in the aftermath of World War 2.
There is little chance of the US encouraging a common currency in its back yard; it’s difficult to believe that there are no lingering sentiments for the Monroe Doctrine in Washington. Still, before we get to the specifics on Africa it’s worth reflecting more on the Argentina-Brazil initiative.
A common South American currency would make only the slightest dent in the dollar hegemony. It would represent about 5% of global GDP. Other than the fact that Washington wants everything its own way, a common Argo-Braz currency would pose minimal threat. Even the euro area comprises only about 14% of global GDP in dollar terms.
This month’s talks between Argentina and Brazil have not been the first — both countries have wrestled with the issue for some time. The elephant in the room is that Argentina is a serial defaulter on its debt. In May 2020 it failed to put up the $500m it owed foreign bondholders, and in so doing fell into default for the ninth time in its history.
This would be disastrous for Brazil were it to hitch its economy to its perennially volatile neighbour. Argentina has been largely cut off from international debt markets since its 2020 default and still owes more than $40bn to the IMF from a 2018 bailout. According to Alfredo Serrano, a Spanish economist who runs the Celag regional political think-tank in Buenos Aires, a first step for the Argo-Braz initiative might be to find instruments that substitute for dependence on the dollar.
This brings us neatly to Africa. One of the first questions, before the policy of regionalism is initiated — and there are many steps to take before we get to that right-hand square at the top of the blackboard — is why SA would want to hitch its horse to the Zimbabwean wagon. We can focus on Zimbabwe because it’s SA’s closest neighbour, as Argentina is to Brazil, and would probably be our first port of call for regional integration and back-of-the-border policy harmonisation.
NewZWire, a fairly reliable Zimbabwean source, explains: total public and publicly guaranteed debt in December 2021 was $17.2bn, made up of external debt of $13.4bn (77.9%) and domestic debt of $3.8bn (22.1%). This total includes blocked funds of $3.5bn and an obligation of $3.5bn to compensate white farmers for improvements to land that was confiscated.
Not only does Zimbabwe owe principal amounts, it has arrears and penalties arising from not paying its debts on time amounting to $6.6bn. This includes penalties of $2bn as at December 2021. Of the total external debt arrears $4.2bn (63%) is due to bilateral creditors, while $2.4bn (37%) is due to multilateral creditors such as the World Bank.
To answer the World Bank’s question, Africa will not claim the 21st century — it already belongs to India and China. For Africa, a first step would be an honest assessment of the extensive conditionalities that moor the continent to Washington. As for the “afro”: cute name, but it can wait.
• Lagardien, an external examiner at the Nelson Mandela School of Public Governance, has worked in the office of the chief economist of the World Bank as well as the secretariat of the National Planning Commission.
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