We often hear the phrase “money makes the world go round,” but have you ever paused to consider whose money does that? For the African continent, the answer often points towards foreign currencies. Unfortunately, these aren’t just facilitating trade; they’re silently eroding Africa’s economic potential.

Historically, African nations have predominantly conducted trade—both amongst themselves and with international partners—in U.S. dollars, euros, and to a lesser extent, the British pound and Chinese yuan. This reliance wasn’t born in a vacuum. Rather, it’s a product of colonial legacies, entrenched economic relations, and global trade paradigms that position Western currencies at the helm of commerce.

Yet, beneath the surface of this currency dependency lurk significant concerns. The subtle irony here is that a continent abundant in resources must bear the brunt of transaction fees, delays in trade settlements, and a volatile dance with unpredictable currency exchange rates.

Moreover, such dependence demands that African governments and firms maintain substantial foreign currency reserves. These reserves are often amassed through either borrowing or posting trade surpluses with non-African partners—a scenario that tugs at the strings of economic stability.

Dr. Melaku Geboye Desta, Coordinator of the African Trade Policy Centre (ATPC), shed light on this predicament during the 57th session of the ECA Conference of African Ministers of Finance, Planning and Economic Development in Addis Ababa. “Consider a scenario where we eliminate non-African currencies as intermediaries,” he suggested. An intriguing proposition, isn’t it?

Referencing Afreximbank’s findings, Dr. Desta mentioned to Sputnik, “Trading in foreign currencies costs Africa nearly $5 billion each year.” Now, just imagine redirecting those funds to bolster intra-African development initiatives instead.

Replacing the intermediary role of hard currencies promises a lot: reduced transaction costs, enhanced trade competitiveness, and an expedited trade process. This vision led to the pioneering of the Pan-African Payment and Settlement System (PAPSS)—a testament to Africa’s commitment to nurturing a self-reliant trading ecosystem.

Dr. Desta elaborated, “PAPSS offers vast prospects for minimizing transaction costs and energizing trade activities among African countries.” It’s an ambitious idea, yet ambition has always been the seed of progress, hasn’t it?

This aspiration has already planted seeds across the continent, with some nations exploring local currencies for trade with partners like China and Russia. It’s a shift emblematic of a broader narrative: Africa redefining its engagement with the world.

A notable example is the agreement between Russia and Ethiopia to initiate transactions using their respective national currencies. Such moves are not just strategic; they reflect an emerging confidence in African currencies and economies.

Whether you’re a business magnate or an academic, the implications of Africa reclaiming its monetary agency beckon discussion. In a world interwoven with complex economic relationships, can Africa carve a new path to prosperity? And if so, what would be the next chapters of this evolving story?