How Single Currency Policies Can Empower African Family Businesses

Kenyan President William Ruto, in early June 2023, called for the introduction of a single African currency to ease trade on the continent during the 22nd Common Market for Eastern and Southern Africa (COMESA) Heads of State and Government Summit in Lusaka, Zambia. Ruto emphasized that regional integration would be enhanced if citizens did not have to worry about which currency to use for trade. Malawi’s President Lazarus Chakwera also stressed the urgency of achieving regional integration and highlighted the enormous potential for intra-COMESA trade. Meanwhile, COMESA Chairman Abdel Fattah al-Sisi urged member states to collaborate in building infrastructure that would facilitate the movement of goods and people in the region, promoting integration. These developments are crucial for African family businesses, which stand to benefit significantly from single currency policies that break down borders and enable cross-border trade. In this article, we explore the potential benefits of single currency policies for African family businesses and examine the challenges and opportunities that lie ahead.

One of the most prominent advocates for continental integration in Africa is President Paul Kagame of Rwanda. He has called for increased cooperation among African countries in various areas, such as trade, infrastructure, and security. Kagame has been a vocal proponent of African integration and has called for the creation of a single currency for the East African Community (EAC). He has argued that a single currency will help promote trade and economic growth in the region and has urged other African leaders to support its implementation.

Overall, many African leaders recognize the importance of continental integration and are working toward increased cooperation and integration among African countries.

There have been several African heads of state who have been talking about single currency policies for African trade, both in the past and recently, and they have supported continental integration. These include:

1. Mahamadou Issoufou – Former President of Niger: Issoufou has been a strong advocate for the creation of a single currency for the West African Economic and Monetary Union (UEMOA). He has argued that a single currency will facilitate trade and economic growth in the region and has pushed for its implementation.

2. Macky Sall – President of Senegal: Sall has emphasized the importance of regional integration and has called for increased collaboration among African countries to promote economic development and security.

3. Cyril Ramaphosa – President of South Africa: Ramaphosa has expressed support for the creation of a single currency for the African Union (AU). He has argued that a single currency will promote economic integration and facilitate trade within the continent and has called on African leaders to work together to make it a reality.

4. Alassane Ouattara – President of Cote d’Ivoire: Ouattara has been a strong advocate for the creation of a single currency for the Economic Community of West African States (ECOWAS). He has argued that a single currency will help promote trade and investment in the region and has pushed for its implementation.

5. Muhammadu Buhari – Former President of Nigeria: Buhari expressed cautious support for the creation of a single currency for ECOWAS. He has called for a careful and gradual approach to its implementation and has emphasized the need for broad consultation and consensus-building among African leaders.

Overall, there have been many African heads of state who have been talking about single currency policies for African trade in recent years. These leaders recognize the potential benefits of a single currency for promoting trade and economic growth within the continent and are working toward its implementation in various regional blocs. In August 2003, the Association of African Central Bank Governors announced that it would work for a single currency and common central bank by 2021.

A single currency policy focused primarily on trade can help family businesses doing business in Africa in a number of ways, even if it is restricted to trade. Here are some examples:

– Reduced transaction costs: A single currency policy can help reduce transaction costs for family businesses doing business in Africa. With a single currency in place, businesses will no longer have to worry about exchange rate fluctuations, which can be a significant source of uncertainty and cost.

– Increased trade: A single currency policy can promote increased trade within the African region. By eliminating currency risk, businesses will be more likely to engage in cross-border trade, which can help expand their customer base and increase revenue.

– Improved access to finance: With a single currency in place, family businesses in Africa may find it easier to access finance from banks and other financial institutions. This is because a single currency can provide greater financial stability and predictability, making it easier for lenders to assess risk and provide loans.

– Enhanced competitiveness: A single currency policy can help enhance the competitiveness of family businesses operating in Africa. By reducing transaction costs and promoting increased trade, businesses will be better positioned to compete with larger, multinational companies.

– Greater regional integration: A single currency policy can help promote greater regional integration, which can lead to increased collaboration and innovation among family businesses in Africa. This can help create new opportunities for growth and expansion and help family businesses to remain competitive in an increasingly globalized economy.

A single currency policy focused primarily on trade can indeed help strengthen the African Economic drives such as ACFTA. Here are some global success stories that demonstrate the potential benefits of a single currency policy for trade:

1. European Union: The EU is a prime example of a successful single currency area. The introduction of the euro in 1999 facilitated trade and investment within the region, leading to increased economic growth and stability.

2. East African Community: The East African Community (EAC) is also working toward implementing a single currency area to promote trade and economic integration within the region. The EAC hopes that a single currency will facilitate cross-border trade and investment, reduce transaction costs, and promote regional development.

3. Caribbean Community: The Caribbean Community (CARICOM) is another example of a successful single currency area. The Eastern Caribbean Currency Union (ECCU) was established to promote economic integration and facilitate trade within the region. The ECCU has been successful in promoting intra-regional trade, reducing transaction costs, and promoting economic growth.

4. West African Economic and Monetary Union: The West African Economic and Monetary Union (UEMOA) is a monetary union of eight West African countries that share a common currency, the CFA Franc. The UEMOA has been successful in promoting trade and economic growth within the region, as well as providing stability and predictability for businesses operating within the region.

There are several reasons why there is no overall support for a continental single-currency policy in Africa. Here are some possible reasons:

1. Economic disparities: African countries have varying levels of economic development, which means their economies are not integrated enough to support a single currency. Some countries may have stronger and more stable economies, while others may be struggling with inflation, high debt, and other economic challenges.

2. Political instability: Many African countries have experienced political instability and conflicts, which have hindered progress toward regional integration. This has made it difficult to establish trust and cooperation among countries, which is necessary for a successful single-currency policy.

3. Limited fiscal and monetary policy coordination: Most African countries have independent fiscal and monetary policies, which means they have control over their own currencies. This can make it difficult to coordinate policies and implement a single currency across the continent.

4. Lack of infrastructure: There is a lack of infrastructure, such as financial institutions, payment systems, and legal frameworks, needed to support a single currency policy. Building this infrastructure takes time and resources, which can be a challenge for countries with limited budgets and competing priorities.

5. Resistance to ceding sovereignty: Some African countries may be reluctant to cede control over their monetary policy to a central authority, which is necessary for a successful single-currency policy. This is because they may feel that such a move would undermine their national sovereignty and limit their ability to pursue their own economic interests.

Overall, these factors and others have contributed to the lack of support for a continental single currency policy in Africa. However, efforts toward regional integration and cooperation continue, and progress may be made toward a single currency policy in the future.

In conclusion, a single currency policy focused primarily on trade has the potential to strengthen economic drives such as ACFTA by promoting regional integration, reducing transaction costs, and providing stability for businesses operating within the region. The success stories of the EU, EAC, CARICOM, and UEMOA demonstrate the potential benefits of a single currency policy for trade and economic growth.

Overall, a single currency policy focused primarily on trade can provide a range of benefits for family businesses doing business in Africa. By reducing transaction costs, promoting increased trade, improving access to finance, enhancing competitiveness, and promoting greater regional integration, family businesses can be better positioned to succeed and thrive in the African market.

Tsitsi Mutendi is a co-founder of African Family Firms, an organization that aims to facilitate the continuity of African family businesses across generations. She is also the lead consultant at Nhaka Legacy Planning and the host of the Enterprising Families Podcast.