More than 600 economists and academics from around the world are calling for Africa to gain monetary sovereignty in order to jump-start its development after Covid-19.
While Africa was spared the worst health effects of the coronavirus pandemic, the ensuing economic downturn has exposed its economic deficiencies and structural vulnerabilities.
As a resource-rich continent, Africa has the capacity to provide a decent quality of life for all its people. Africa is able to provide universal public services such as health care and education, guarantee employment for those who want to work, and provide social safety nets that ensure a decent income for those who cannot work. However, decades of colonial and post-colonial socio-economic dislocation, exacerbated by economic liberalization policies, have plunged African countries into a vicious circle fueled by several structural problems, including
lack of food sovereignty
lack of energy sovereignty
low value-added manufacturing and extractive industries.
This « unholy trinity » puts painful downward pressure on the exchange rates of African countries, which increases the import bill for basic necessities such as food, energy and vital medical products. In order to protect their populations from this type of imported inflation, African governments borrow in foreign currencies to keep their currencies artificially « strong » against the US dollar and the euro. This artificial makeshift solution forces them into a one-way steering of economic activity, focused exclusively on obtaining dollar/euro revenues to service external debt. In the end, African economies are trapped in a pattern of austerity often imposed by the implementation of International Monetary Fund (IMF) conditionalities and constant pressure from other creditors equally concerned with protecting their political and economic interests, further impinging on the economic, monetary and political sovereignty of African countries.
IMF and international creditors’ conditionalities generally focus on five problematic and unsuccessful economic strategies:
export-led growth
liberalization of foreign direct investment (FDI)
excessive promotion of tourism
privatization of state-owned enterprises
liberalization of financial markets
Each of these strategies is a trap disguised as an economic solution.
The export-led growth strategy increases imports of energy, capital goods and high-value-added industrial components, as well as land and resource grabbing, but at best it generates only low-value-added exports. And, of course, not all developing countries can follow such a model simultaneously. If some countries want to run trade surpluses, there must be others willing to run trade deficits.
The FDI-led growth strategy increases energy imports and forces African countries into destructive competition to attract investors through tax breaks, subsidies and weakened labor and environmental regulations. It also leads to financial volatility and large net transfers of resources to rich countries, some in the form of illicit financial flows.
Tourism increases energy and food imports, in addition to the considerable environmental cost of the industry in terms of carbon footprint and water use.
Most public enterprises have already been privatized since the 1990s (e.g., telecommunications, power companies, airlines, airports, etc.). Any further privatization will shrink the remaining social safety nets under public control.
The liberalization of financial markets generally requires the deregulation of finance, the reduction of capital gains taxes, the elimination of capital controls, the artificial increase of interest rates and the overvaluation of exchange rates, all of which guarantee an attractive environment for the world’s largest financial speculators. They rush in with their speculative capital to « buy low and sell high » and then withdraw it, leaving behind a depressed economy.
Finally, all free trade and investment agreements are designed to accelerate and deepen these five strategies, which pushes African economies further into the doldrums.
This type of flawed economic development further exacerbates the African brain drain, which in some cases tragically takes the form of death ships and death roads for economic, health and climate migrants.
These five pseudo-economic solutions often appear attractive because they bring short-term gains in the form of job creation and give the illusion of contributing to modernization and industrialization. In reality, these jobs are increasingly precarious and are at the mercy of external shocks to the global supply chain, global demand and global commodity prices. In other words, Africa’s economic destiny continues to be driven from the outside.
The coronavirus pandemic has highlighted Africa’s fundamental economic problems. Therefore, post-pandemic recovery can only be sustainable if it addresses pre-existing structural deficiencies. To this end, given the impending climate crisis and the need for socio-ecological adaptation, economic policy must be based on alternative principles and proposals.
We call on African states to develop a strategic plan focused on regaining their economic and monetary sovereignty, which must include food sovereignty, (renewable) energy sovereignty and an industrial policy focused on higher value-added manufacturing content. Africa must put an end to the race-to-the-bottom type of economic development in the name of competition and efficiency. Regional trade partnerships within the continent must be based on coordinated investments aimed at forming horizontal industrial linkages in strategic areas such as public health, transportation, telecommunications, research and development, and education.
We also call on Africa’s trading partners to recognize the failure of the extractive economic model and adopt a new model of cooperation that includes technology transfer, genuine research and development partnership, and sovereign insolvency structures – including sovereign debt cancellation – that preserve production and employment.
African states must develop a clear and independent long-term vision to build resilience to external shocks. Economic and monetary sovereignty does not require isolation, but rather a determined choice in favor of economic, social and ecological priorities; for it requires the mobilization of national and regional resources to improve the quality of life on the continent. In other words, we need to be more selective with regard to FDI, exports and extractive industries. Priority should also be given to ecotourism, cultural heritage and local industries.
Mobilizing Africa’s resources begins with a commitment to full employment policies (a job guarantee program), public health infrastructure, public education, sustainable agriculture, renewable energy, sustainable natural resource management, and an unconditional dedication to youth and women empowerment through participatory democracy, transparency and accountability.
It is time for Africa to move forward and aspire to a better future in which all its people can flourish and realize their full potential. That future is within reach, and it begins with Africa reclaiming its economic and monetary sovereignty.
Signatories:
Fadhel Kaboub, Denison University, Ohio, USA
Ndongo Samba Sylla, Dakar, Senegal
Kai Koddenbrock, Goethe University, Frankfurt, Germany
Ines Mahmoud, Tunis, Tunisia
Maha Ben Gadha, Tunis, Tunisia
You can consult the complete list of signatories here, and add your name here
