The Upcoming Africa
The African continent as a whole is increasingly marked by the need for the transition from an extractive economic model to manufacturing as an engine of development. The reason is primarily demographic: Africa’s demographic growth, characterized by extremely low medians and therefore by an extremely high unemployment potential, will make the traditional model based on the primary sector, where mineral and agricultural raw materials are exported with minimal processing, no longer sustainable.
To the extent that such transition to manufacturing occurs, it will inevitably lead to a tendency modifying the continent's position in world trade, with an increase in trade and the division of labor within the continent, and a modification of the terms of trade with the rest of the world. Since real movements presuppose an adequate infrastructure in terms of payment systems and monetary arrangements, this will also have effects on the monetary and financial side.
However, despite Pan-Africanism ostensibly informing the African Union, the continent is by no means homogeneous, so that it is necessary to start from current economic and institutional fragmentation.
In West Africa, ECOWAS (Economic Community of West African States) has had a single currency project in the works for some time. With two alternatives. The official option is that of a single currency on the model of the CFA Franc. The second option involves a common currency with partially common fiscal policy.
The first project aims to extend the monetary structure of the CFA Franc to ECOWAS. In turn, the CFA Franc has periodically been targeted by criticism, especially due to its pegging to the euro, considered by many to be an obstacle to the development of local economies. The current situation, however, is characterized by the turbulence caused by the exit of Mali, Burkina Faso and Niger from ECOWAS (and probably soon also from the CFA Franc), which calls into question all prior political balances.
In East Africa and the South of the continent, only (formal and informal) sub-regional agreements exist. On the one hand there is the Rand area, the South African currency used for cross-border trade in the region. On the other hand, in East Africa there are regional trading areas that weave institutional ties without giving rise to monetary unions.
If we consider broader geopolitical trends, two tendencies are relevant: the steady increase in requests to join the BRICS, and the acceleration of the implementation of the AfCFTA (African Continental Free Trade Area).
Since South Africa's accession in 2010 to the international bloc bringing Brazil, Russia, India and China together, the attraction of BRICS for African countries has kept increasing. In 2023, Algeria, Egypt, Ethiopia, Nigeria and Senegal applied to join, and since January 1, 2024, Egypt and Ethiopia have been official members. The list of formally interested African states is much longer: Angola, Comoros, DR Congo, Gabon, Guinea Bissau, Ivory Coast, Libya, South Sudan, Sudan, Tunisia, Somalia, Uganda, Zimbabwe.
The AfCFTA has been signed by 54 of the 55 countries that compose the African Union. Among its historical objectives there are the establishment of a customs union and the creation of a continental payment system. The latter is now official: the Pan-African Payment and Settlement System (PAPSS) was launched in 2022, managed by Afreximbank, a regional multilateral financial institution originally created in 1993 that has been gradually recapitalized since to meet its growing institutional commitments. In perspective, both these dynamics suggest a shared long-term strategy aimed at increasing intra-African trade, changing relations and terms of trade with the rest of the world, and decreasing Africa’s dependence on the dollar as a currency for trade and finance.
