What’s Up With This…Bank?

**pull through this read all ye future leaders, get in touch with structures and institutions that greatly influence the waking realities of millions, that way…the process of breaking through installed illusions of ignorance is initiated. no ‘savior’ is coming.**

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The turn of the millennium brought forth the decision among governments on the African continent to set out a framework through which the African Union will conduct itself. Togo was the location; July 2000 was the date. The Constitutive Act of the African Union came into force after two-thirds of the 53 signatory states ratified the convention. Within the Act, the objectives of the African Union are listed out in articles and are related to the various spheres of African activity (economic, sociopolitical, etc.). In this article, the focus will be on the financial institutions -especially the African Central Bank- whose establishment was mandated in Article 19 of the Constitutive Act of the African Union.

The Constitutive Act of the African Union mandates the creation of the African Central Bank, the African Monetary Fund, and the African Investment Bank as the major institutions to promote monetary cooperation and manage the financial policies with the aim of encouraging economic integration. According to the Joint Strategy for the Establishment of the African Central Bank, the driving force behind the Article 19 mandate is to facilitate and establish an African Monetary Union through the integration of the regional monetary zones with the final vision of a single African currency.

As stated by the African Union, the primary purpose of the African Central Bank will be to promote, build, and maintain a common monetary policy and currency for Africa. Additionally, the bank’s objectives would include but are not limited to; promoting the establishment of a multilateral system of payments with respect to transactions between AU member states, thereby eliminating foreign exchange issues that disrupt trade, also promoting exchange rate stability to avoid competitive exchange rate depreciation.

In February 2018, an African Union Commission (AUC) led a delegation to Dakar, Senegal, where a so-called First Ordinary Meeting of the Bureau was held with the Association of the African Central Banks (AACB). The delegation informed the attendees that recommendations from the Joint Strategy on The Establishment of the African Central Bank will be implemented starting in 2018. It was also stated that the AUC was building a draft Headquarters Agreement to be negotiated with Nigeria. Furthermore, the AUC delegation and the AACB expressed commitment to working together towards achieving the AU’s continental agenda. The establishment of these financial bodies is a key aspect of the African Union’s Agenda 2063 program. The institutions are considered the spearheads in the economic integration of Africa as expressed in the Abuja Treaty (1991 Treaty Establishing the African Economic Community) and the agreed timeframe for the establishment of the African Central Bank is 2028~2034. Similarly, the African Monetary Fund and the African Investment Bank are expected to be established by 2023 and 2025 respectively, according to the Agenda 2063 timeframe.

Why is an African Central Bank Required?

The whole point behind the creation of the African Union was that a critical mass of governments had realized that a unified position was required to effectively deal with dire economic conditions, poor living standards, and degraded social conditions that plague the African continent. Additionally, it was understood that the development of inter-African relations was a crucial factor in achieving solidarity and unity at a fundamental level. It can then be deduced that modern trade and payments could be made more efficient with the presence of financial institutions dedicated to fostering sustainable inter-African trade.

With major stumbling factors to development such as odious debt, neo-colonialism, and persistent insecurity, member states of the African Union will have to be innovative when considering strategies to bring structural relief in the face of daunting problems. History has shown that debt rescheduling only ‘kicks the can down the road’, NGO-supported aid hardly ever addresses fundamental needs and in many cases funds provided for assistance are co-opted, leaving the vulnerable with the help required in the first place. One can observe the situation in Haiti, where a corrupt government with international support essentially fails to address socio-economic adversity even though billions of dollars were provided in aid.

The debt problem is contradictory, media reports and international financial organizations consistently label African countries are poor credit performers and persistent debt relief seekers, which subconsciously garnishes the devious stereotype of the ‘lazy people in Africa’. This stands in stark contrast with the fact that research from the Political Economic Research Institute (PERI) and the Global Financial Integrity (GFI) has proven that Africa is a net creditor to the global economy.

Following the context above, innovative solutions to the seemingly infinite debt crisis plaguing the continent would rightly involve programs that exclusively cater to the economies of Africa with international obligations as secondary. Institutions like the U.S. Federal Reserve and the European Central Bank readily serve their respective regional interests and influence global trade through currency hegemony, for factors of realpolitik there is no reason why Africa should not take concrete steps towards ‘levelling’ the playing field. An African Central Bank in conjunction with sister-institutions will serve to facilitate trade within the continent, which has the run-off effect of keeping economic value circulating within Africa. Admittedly, the Joint Strategy document details potential costs in unilateral adoption of unified monetary policies.

Conversely, no financial system is perfect at inception, and judging by the African status quo, seeking total benefits while expecting no costs or shortfall, is unrealistic and is increasingly an excuse for inaction. The AU was formed for the improvement of the material realities of the indigenous population of the continent, although differences abound in the form of culture et al., actions leading to collective benefit should be the intuitive decision. This position does not naively ignore the possibility of detractors because countries like D.R. Congo and Nigeria are clear examples of governments that benefit corrupt interests due to bad governance and poor/incoherent economic policies. In support of the previous statement, multi-national corporations benefit from a politically unstable D.R. Congo by extracting natural resources at cheap prices using what amounts to slave labor in many cases, just as trade mis-invoicing serves to drain millions of dollars as capital flight from many African countries.

Multiple African countries have been expressing an inability to keep up with the interest that has accumulated on debt, strangely there is little to no attention paid to the conditions under which the debt was incurred. With international armies stationed all over the continent under the self-granted mandate of tackling insecurity, African countries rarely have the chance to apply solutions that are not prescribed by outsiders. The suffering becomes two-fold, in that people are still killed and displaced by perpetrators of mass violence and the military methods in many cases have been shown to further radicalize more people into taking violent action.

There is little support or confidence in the ‘novel’ idea that African issues can and should be solved exclusively by Africans. Complaints of lack of funding or endemic corruption as stated earlier are voiced by many that benefit from the terrible status quo or are afraid of change. An effective and focused African Central Bank could be the first of many steps toward positive and structural change on a continent-wide basis. Bad governance is an obvious culprit, preventing true development but one must consider the ‘carrot and stick’ methods that lock many African governments into unpayable debt.

In 1987, in an OAU speech by Thomas Sankara in Ethiopia titled ‘A United Front Against Debt’, he is quoted as saying “It is our duty to create an Addis-Ababa united front against debt. That is the only way to assert that the refusal to repay is not an aggressive move on our part, but a fraternal move to speak the truth”. He went ahead to state the importance of producing in Africa, transforming, and consuming in Africa. Financial organizations that imbibe such principles vis a vis the structural economic development of Africa, will demonstrate a commitment to prioritizing the interests of Africans.

The Lusaka Times reported that Zambia’s debt will go beyond 110% of its Gross Domestic Product, further stating that the credit rating agency Moody’s, expects that a large budget deficit and persistent exchange rate depreciation will cause the debt rate to surpass 110% debt-to-GDP ratio by the end of 2020. Furthermore, Bloomberg news reported similarly that investors were wary of significant losses in relation to Zambia’s crippling debt issues after the southern African country asked for breathing space in the form of debt restructuring. Figuratively speaking, if a country asked for breathing space, it can be deduced that such a country feels it is suffocating, and to extend the metaphor, if the debt is the reason for perceived suffocation, restructuring is akin to temporarily loosening the means of suffocation. Economic development or recovery cannot happen under such conditions.

The International Monetary Fund (IMF) reflected investor worries and stated that Angola negotiated ~$6billion in debt relief seeking to extend the amount from other creditors if oil prices fell further and Chad sought delays in debt repayment from Glencore Plc and other creditors while Kenya was at risk of default because borrowing costs had risen faster than foreign revenue. Evidently, countries of Africa have faced the same financial issues for decades while simultaneously supporting the international financial system, meaning a chain-debt-default among African countries will cripple the global economy. Machiavellian Realpolitik will see such a position as a wildcard in negotiating for leverage or structural changes, it is naïve to ignore methods of unified diplomatic brinksmanship. As far as coherent geopolitics is concerned, African-centered strategies seem strangely absent while the continent plays the resource-laden chessboard upon which Asian and Euro-American imperial plans are expressed.

The Constitutive Act of the African Union expresses the determination to “take up the multifaceted challenges that confront our continent and peoples in the light of the social, economic, and political changes taking place in the world;”. Calls for the abolishment of odious debt still sound nightmarish to those more worried about political posting and terrifies those that indirectly benefit from the unending debt cycles. The legacies of colonialism and imperial plunder haunt all entities involved, including Africans. An upright and self-reliant Africa will mean governments around the world lose wanton access to resources that support industries facilitating the continued exploitation of the global south. Commitment to organizations like the African Central Bank (an indicator of desired self-reliance) will introduce a unique caveat that could take Africa into a state of proactivity and initiative as opposed to continuous reaction. Statements and policies that directly or indirectly maintain the structural status-quo should be queried.

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