In the past, opening a bank account in Kenya was an elaborate and tedious affair. It was akin to applying for a job: you presented your “curriculum vitae” to bank officials who would determine your fitness as a financially serviceable client. There were forms to be filled (in duplicate) that captured details such as date of birth, schools attended, employment history, reasons for choosing that particular bank and referees to vouch for your suitability. Some banks even asked whether you had spent nights in a police cell and whether you had a criminal record. It was like joining an exclusive members’ club – the odious scrutiny made it look like it was a privilege to be allowed to join the “banking club”.
The procedure for getting a loan was even more stringent and punitive: you would be asked to deposit a valuable item, such as a log book, jewellery or a title deed, as collateral. Money matters were serious business.
That was then. Today technology, particularly smartphones, has revolutionised the financial sector, so much so that traditional banks must be ruing the day smartphones became second nature to humanity. These days getting a personal loan online is easier and faster than calling your nearest bank or micro-finance lending facility. Thanks to mobile banking, a smartphone owner can borrow from as little as Sh500 to as much as Sh70,000 without breaking into a sweat. All he or she needs is to be social media savvy. Having a social media account, such as a Facebook account, is understood by both the online loan apps and the borrowers to be an unstated primary requirement for accessing a loan. There are at least 50 mobile phone lending apps operating in Kenya.
A FinAcess (financial access) survey done in 2016 by the Central Bank of Kenya, the Kenyan National of Bureau of Statistics, FSD-Kenya and the Consultative Group to Assist the Poor found out that 77.5 per cent of Kenyans own a mobile phone. Out of this group, according to a 2018 digital credit survey, 35 per cent, or roughly six million people, have taken at least one digital loan. In essence, the survey found that digital credit had become a leading source of credit in Kenya. Using a sample size of 3,000 Kenyans, the survey showed that digital credit appeals to younger customers, out of which 55 per cent are male and from urban areas. The study also found that by far the most common reason for taking a loan is to meeting day-to-day needs. Financing education also drives use of credit while just over a quarter of users take loans to support their business and agricultural activities.
However, many of these borrowers struggle to pay back their loans. According to a survey by Microsave, a financial services consultancy, 2.7 million borrowers have been negatively listed by the Credit Reference Bureau (CRB) in the last three years, 15 percent of them for amounts of less than Sh200. (CRB is the body charged with the task of flagging or blacklisting all loan defaulters and ensuring that they are barred from borrowing from or transacting with any financial and legal entity, including the government.)
Eliud Njoroge, a financial risk management and private equity fund consultant, told me that mobile phone lending firms financed by venture capitalists were taking advantage of the vulnerability of impressionable youth. “The youth of today want instant gratification – they want it now and here. The notion of delayed gratification, that is, the idea of being patient and thinking through your financial needs, wants, opportunity costs and apparent risk considerations are alien concepts to them,” said Njoroge. “The ‘Java’ generation lives for the moment and developers of these digital apps are exploiting this social phenomenon in the epoch of social media, where the imagined reality of life is being played instantly.” (By Java generation the private equity fund manager, who himself is a millennial, was alluding to the Java restaurants in Nairobi that are popular among the city’s slick young urbanites.)
According to a survey by Microsave, a financial services consultancy, 2.7 million borrowers have been negatively listed by the Credit Reference Bureau (CRB) in the last three years, 15 percent of them for amounts of less than Sh200.
“The crux of the matter is that today the aggressive marketing gimmicks by the owners of these apps are singularly directed at the post-millennials – guys barely out of their teens and who have zilch idea of what constitutes a financial budget, leave alone a plan,” notes Njoroge. “Because they still solely rely on their parents, guardians, benefactors, relatives and friends for their upkeep, they have no qualms misusing and squandering money. Hence, the apps have specifically been developed largely with this group of people in mind. They are ready and willing to spend, but most importantly, borrow money to feed their peer-driven lifestyle habits.”
Njoroge’s opinion is based on his wide experience in advising multinational banks and international financial corporations and, more specifically, financial start-up companies that are being funded to loan cash to young people (read anybody below 33 years of age). Njoroge has worked as a financial risk management consultant in Ethiopia, Rwanda and the United Kingdom. Now based in Kenya, he currently works with start-up companies on the look-out for potential big and small loan risk takers. “I will tell you for free that these online apps will explicitly not come out to state that they are targeting these young adults, but I know it from experience and interactions with today’s bankers and venture capitalists that this is the case.”
However, the 2018 digital credit survey found that “digital borrowers are more likely than average to run their own business or be employed” and “less likely to be … dependent on family or government transfers”.
Njoroge says that the apps make young people believe that they can both save and borrow money, but this is not the case. “There is no saving. The apps exist solely for ensuring that you borrow endlessly.” He says another lie being perpetrated by these apps is that they promote small business enterprises. “A complete lie. These apps would like to masquerade as micro-finance entities. They like to market themselves as tools that reduce the cost of borrowing through technology. But I can tell you for a fact that micro-financing is a different financial ball game, technology or no technology. If indeed there are times when they will provide loans for micro-financing, it is because they must be seen to do so, and therefore, it will be incidental and not the primary intended goal.”
The tragedy of these apps, says the financial consultant, is that the cost of repaying these loans can be very punitive. “Firstly, their interest rates are way above the rates charged by banks. The Java generation is impervious to these high interest rates – they borrow and spend money that they have not sweated for. The developers of these apps figured this a long time ago.”
In addition, “if today you default, your name is immediately forwarded to the CRB. If that happens, trust me, you will not even be allowed to borrow from Okoa Jahazi (a platform for borrowing airtime from Safaricom, the biggest mobile network provider in Kenya).”
CRB has to date blacklisted half a million people, according to the Transunion Credit Bureau’s CEO, Billy Owino, Just three years ago, there were only 150,000 loan defaulters in Kenya. Woe unto you if you are ever blacklisted. You are not off the hook even after you have repaid your loan. CRB still considers you a credit risk for seven years. What this means is that for seven years financial institutions will be wary of you when you approach them for a loan. “Most of the borrowers don’t know that they got blacklisted. We get 200 calls daily from individuals in this category, asking how they ended up in the blacklist.”
Twenty-year-old Charles, a University of Nairobi student, says that he took the trouble to compare the interest rates of the various online money lending apps. He eventually settled for KCB-M-Pesa because it had the best rates.” He says that on average he borrows between Sh2,000 and 3,000 twice a month.
“What do you borrow the money for?” I asked him. “I use the money to finance my Sport-Pesa (gambling) expeditions. I bet for big matches.” Although Charles is a college student, he has not yet outgrown indulging in play-station games. “Apart from betting, I also borrow money to afford my play-station games escapades.”
The digital credit survey found that only 3 per cent of borrowers get a loan in order to gamble. It is possible that this number is an underestimate given the finding that “digital borrowers are almost twice as likely to have tried mobile betting at least once in their lifetime”.
Sports betting has become big business in Kenya and ensnared an entire generation. A GeoPoll survey done in March 2017 found that 76 percent of young people in Kenya are into betting and that these youth spend more money on betting than their Ugandan and Tanzanian counterparts. The survey also identified mobile phones as the preferred tool for sports betting among young people.
SportPesa, a sports gaming company that was established about five years ago, is today the biggest sports betting platform in Kenya. It is among the dozen or so sports gaming companies that have sprouted in the country recently. These sports gaming companies have developed an impassioned craze among millennials and zillennials (the post-millennial teenage youth born after 2000) who have taken to betting as a way of life. The GeoPoll survey found that Kenyans gambled more frequently than their fellow Africans, spending an average of Sh5,000 a month. Charles has yet to win big cash (most people have never won more than Sh5,000) but feels that he has to keep on feeding his craving, which started as a hobby.
A GeoPoll survey done in March 2017 found that 76 percent of young people in Kenya are into betting and that these youth spend more money on betting than their Ugandan and Tanzanian counterparts. The survey also identified mobile phones as the preferred tool for sports betting among young people.
According to Banker Awards held in the UK in December 2017, Kenya Commercial Bank (KCB) is the largest bank countrywide in terms of asset size and has 12 million customers registered for the KCB-M-Pesa mobile service. The KCB M-Pesa loan app, which started in 2015 as a savings account, charges between 4 per cent and 6 per cent interest rate. Its phone loan service rose from 35 per cent between January and March 2016 to 41 per cent in the same quarter in 2017. Because of the success of mobile money borrowing, financial transactions at the branch level fell to 20 per cent from 31 per cent previously. Said KCB Group CEO and Managing Director, Joshua Oigara, in an in-house 2017 KCB newsletter: “We’ve seen a sharp rise in loan requests on all our mobile loans following the decrease in interest rates.” The newsletter stated that the average value of loans per customer was Sh1,800.
Like Branch International Inc., an international online money lending consortium that has its headquarters in San Francisco in California, and which launched its services in Kenya in 2015, KCB M-Pesa, vigorously advertises on Classic FM’s most popular morning radio show. Its target audience, just like Branch’s, is post-millennial youth who have just turned 18, who are college-bound and who have just acquired a national identity card. Branch is giving loans of up to Sh70,000, and according to the radio promos, it claims to have up to a million Kenyan borrowers. “You do not need any collateral, any bank account or a referee, all you need to do is download the Android app and you will receive your loan in 10 seconds flat,” proclaims the ad.
The advertising language used to sell the online borrowing apps is deliberate and intentional, targeted at a generation that is just starting to discover itself and excited about owning a gadget that, to them, seems to unlock hitherto unimagined infinite possibilities. The one-minute radio promos of these online lending apps are couched in language that would appeal to young adults. “Unlocking your growth potential” and other slogans are targeted at a generation that had little or no financial knowledge.
Ken, like Charles, borrows to finance his gambling habits. “So I will borrow every time there are big matches being played on the English Premier League,” admitted Ken. “I bet on Sport-Pesa and I borrow between Sh1,500 to 3,000. He said his favourite app was Tala because, “it is very prompt when relaying the money. I wanted an app that does not waste time in giving me instant cash.”
Dates and other emergencies
The online app of choice for 19-year-old Steve, a Technical University of Nairobi student, is M-Shwari. “I opted to use M-Shwari because it is a solid brand that works together with KCB, another solid brand.” Steve said he borrows between Sh1,000 and 3,000 a month to finance his college lifestyle habits. “Cut a brother some slack,” he said. “I need to enjoy some good life while I’m a student.” Steve said he relies on his parents for pocket money “but can what they give me be enough? I oftentimes have to deal with emergencies, hence the need to have a channel where you can quickly run to for fast cash.” These “emergencies” include impressing and winning over impromptu dates.
Steve told me it is not just once that he did not have the cash to entertain some girl in a fancy restaurant. “On several occasions I have had hot dates, but trust me, I did not have a penny. But tell me, would you let slip a date you’ve been chasing like there’s no tomorrow just because you’re not liquid?”
Steve said he relies on his parents for pocket money “but can what they give me be enough? I oftentimes have to deal with emergencies, hence the need to have a channel where you can quickly run to for fast cash.” These “emergencies” include impressing and winning over impromptu dates.
Steve said he has walked confidently into a Java restaurant a couple of times with a “beautiful catch” with not a single penny in his pocket because he knows he can borrow money from M-Shwari “of course, without her knowledge”. The instant loan is deposited into his M-Pesa account, which he uses to settle his bill. Meanwhile, the Java generation belle will not have the slightest hint that her expensive lunch treat was financed by a loan and that the young man will have to figure out how to repay it later.
By 2017, the M-Shwari (shwari means to be calm or peaceful in Kiswahili) online loan portfolio had 420,000 applications every day; of that, 70,000 are processed daily for repayment every 30 days. It has more than 80,000 agents countrywide and processes US$20 million daily payments, according to a study done by Tamara Cook and Claudia McKay. M-Shwari is operated by Safaricom, the biggest mobile network operator in Kenya, and is considered to be the mother of mobile phone lending apps, largely because it was the first mobile phone loan application in Kenya.
Started in 2012, M-Shwari has to date 21 million customers in Kenya. The minimum threshold required of an M-Shwari borrower is to possess a Safaricom sim card and to be registered as an M-Pesa user. Therefore, technically speaking, anyone with an M-Pesa account qualifies to borrow from M-Shwari. The beauty with M-Shwari, its users tell me, is that you can borrow offline so long as you are on the M-Pesa platform. M-Shwari charges a one-time “service fee” of 7.5 per cent on all loans.
M-Shwari is actually a creation of a partnership between Commercial Bank of Africa (CBA) and Safaricom, who split the revenue accrued from the lucrative business. According to the How M-Shwari Works: The Story So Far report written by Tamara Cook and Claudia McKay in 2015, Safaricom provides access to customers and transactional data on mobile phone and mobile money usage. CBA, on the other hand, develops credit scoring algorithms that analyse the transactional data to make credit evaluation decisions. The actual lending is done by the bank. One of the single biggest reasons why the M-Shwari app is preferred is because money is promptly credited to your phone immediately. But just as you receive money on the spot, you must also pay it back on time. Deferment and delayed payment can be costly and punitive. “I have always endevoured to pay back on time,” said Steve.
According to a Safaricom manager, M-Shwari is busiest from 3am to 5am and from 8.30pm to 10.30pm, not because of the nocturnal spending habits of young men like Steve, but because of the business acumen of women vegetable hawkers (known as mama mboga). From as early as 3 in the morning, the women vegetable sellers begin to borrow money from M-Shwari because they need to go their respective markets to buy their wares, fresh and in good time. These women are experts in M-Shwari borrowing. By the evening, when they are reconciling their figures, they will begin repaying their loan, usually from between 8.30pm and 10.30pm, in preparation for the dawn borrowing. The women borrow anything from between Sh3,000 and Sh5,000 daily. On a good day, the mama mboga will repay her M-Shwari debt and still remain with a tidy sum as profit. However, these women, who are M-Shwari’s most loyal customers, are the exception rather than the rule when it comes to paying back their loans.
According to a Safaricom manager, M-Shwari is busiest from 3am to 5am and from 8.30pm to 10.30pm, not because of the nocturnal spending habits of young men like Steve, but because of the business acumen of women vegetable hawkers.
Chebet, a student at the University of Nairobi, does not even care to know the interest rates charged by these mobile phone apps. She told me that she borrows between Sh1,500 and Sh3,000 per month. And she was very forthright on why she borrows the money: “I borrow to satisfy my spendthrift behaviours. I am always buying shoes, bags and clothes that my meagre allowance that I am allowed by my parents cannot satiate.”
The 19-year-old said her favourite borrowing app is Tala. “I got used to Tala because it is advertised a lot on mobile smartphones. Tala is truly one of the money-lending apps that is advertised 24/7 on Android smartphones. The pop-ups are constantly in your face every time you navigate through the phone.” (Tala was previously known as Mkopo Rahisi, Kiswahili for “easy loan.” The app has devised a system where it rewards referrals: for every person you recommend Tala to, you are paid Sh200. Users of Tala, nonetheless, have to part with an additional charge in the form of M-Pesa transaction fees because the app uses a Pay Bill number. I asked her whether she paid her debts in time; she said she had defaulted a couple of times.
Tasha, like Chebet, has no clue how much interest rate she is charged by Tala. Blandly honest, the 20-year-old student told me she told me she borrows “to buy myself make-ups.” Hence, every three months she will borrow between Sh1,500 and Sh3,000 from Tala.
Tala, which was started in March 2014 by Shivani Siroya, a former United Nations employee, began by dishing out Sh10,000 loans in Kenya; today it gives loans worth up to Sh50,000. The app has the highest interest rate among its competitors – between 11 per cent and 15 per cent. (Branch charges 8.4 per cent.) Tala charges 11 per cent if you pay your loan weekly and 15 per cent if you choose to pay monthly.
Tala has also come up with a system that can detect when customers change their mobile phone number. It has a default message that reads: “Your account is linked to another device.” It is a polite warning from Tala that it would be improper and risky to run away with their money, for example, thinking that by changing your sim card, you will be off the hook insofar as repaying your loan is concerned. Chebet, in not too many words, confirmed to me Tala’s tightening of its lending procedures: “You can run, but you cannot escape.”
Mariam, another 19-year-old, is hooked to Tala. Although not a spendthrift like Chebet, she nevertheless said a good thing will not pass her simply because she cannot afford it. “That’s why these apps came about; to be rescuing some of us when we are stuck.” Getting stuck often means not being able to do things, like going to concerts with your peers, because you don’t have the money. “The first time I borrowed money from my phone was when there was a big music show in town and I just could not afford to miss it. All my friends were going there. How could I be left behind?” Mariam uploaded the Tala app and in the blink of an eye she had money in her M-Pesa account. “I resorted to Tala because it’s really advertised on the phone, plus my friends invited me to use it.” Mariam says Tala’s interest rates are high, yet she opted to stick and continue using the app because she finds it convenient. She borrows between Sh1,000 and 2000 every month.
In an interview she had with the Business Daily in January, Siroya said that Tala’s association with the M-Pesa platform had given her company access to 27 million users. Worldwide Tala has given out 4.5 million loans worth Sh25 billion to clients in the Philippines, Mexico, Kenya and Tanzania. Ninety-five per cent of her clients are repeat customers.
George, 20, a student at the Jomo Kenyatta University of Science and Technology (JKUAT), was as candid as a college student can be. “What do you borrow the money for?” I asked. “To finance dates at fancy restaurants that I know very well I can hardly afford with my own meagre cash.” George also said he borrows to patronise expensive pubs, which ordinarily he would not afford. “How often do you borrow?” Often enough was his curt answer. “Which app do you usually use?” The student said he does not have a specific app and therefore did not also care to find out their respective interest rates. “I will use any as long as it gets the job done. But I have noticed, by and large, I tend to rely mostly on Tala and M-Shwari.” I also asked him whether he repays the loans, if at all. “I do, although I am always falling behind schedule.”
Just like her fellow college mate George, Barbara, 19, a student at the University of Nairobi, does not care about interest rates. “All that I care for is there is money coming my way.” She said she borrows “to get through to the end of the month, as well as to buy my writing books for assignments after squandering my allocated pocket that my parents give me for every month.” Barbara said she religiously borrows between Sh1,000 and Sh2,000 every month. “I use Tala simply because of peer influence – many of my friends use it and they recommended it to me.”
Perhaps it is because of his age that I found Joe’s reason for resorting to the online borrowing money apps reassuring. Joe is 21 and has almost completed his studies at JKUAT. He therefore is already thinking about what he will do after exiting college. He currently runs a mitumba (secondhand clothes) business, selling contemporary clothing to his fellow students. So when I asked him what he borrows the money for, he promptly told me that he borrows it to replenish his stock and to keep his business afloat,“because oftentimes, I’m not paid on time by my customers”. Every month he borrows a standard Sh2,000 from Tala, which he repays promptly.
Chomba, also a university student, borrowed just once because he had a real emergency. His sister’s child, who he was looking after when he was on recess, became sick and needed urgent treatment. “I had heard about KCB-M-Pesa and its reasonable interest rates, so I downloaded the app and borrowed Sh4,000. I later opened an account with KCB.”
Njoroge, the financial expert, pointed out to me that online loans are approved on the basis of the applicant’s reputation, “what they call reputational collateral”. Reputational collateral is dependent on such habits as how many times you make your calls and how often you transact on your M-Pesa account. “The apps’ engineers have developed algorithms that compile your personal data: your social media activities – the kind of Facebook messages you post, your type of friends, how many there are, the sites you like visiting, among other analytics.” He said all this was part of the data analytics that CRB also collects on individuals’ financial habits, which CRB uses to advise whoever requires the data.”
Danson Muchemi, CEO of Jambo Pay, the IT company that collects revenue on behalf of Nairobi County, especially revenue relating to parking charges, praises the online borrowing apps “because they brought down banking barriers. There is no more profiling. The technology has enabled the creation of ‘digital assets’ that approximates what type of a person you are. Armed with this information, the apps are able to sketch your character and identify your spending habits, needs and wants, even though there is a thin line that separates the two.”
“The apps’ engineers have developed algorithms that compile your personal data: your social media activities – the kind of Facebook messages you post, your type of friends, how many there are, the sites you like visiting, among other analytics.” He said all this was part of the data analytics that CRB also collects on individuals’ financial habits, which CRB uses to advise whoever requires the data.”
Unlike the banks, which depended on your “CV” to arrive at a decision about whether or not they will advance you a loan, the power of technology is such that it can, with near precision, detect whether or not you will be a defaulter. By analysing your social media profile, the apps can sum up your personality and your willingness or ability to pay back. “Technology, as opposed to traditional banking methods, which took ages deciding on whether you qualify for a bank loan or not, allows mobile banking financiers to make that decision fast and instantly.”
“Old habits die hard” is an English idiom that explains acquired habits that later become difficult to get rid of. When a loan is just a click away, it is not hard to imagine a future where online borrowing will become a habit, or maybe even a harmful addiction, among Kenyans.
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The Axis-of-Evil Coalition in the Horn of Africa
The “Tripartite Agreement” signed between Ahmed Abiy of Ethiopia, Mohammed Abdullahi Farmajo of Somalia, and Isaias Afwerki of Eritrea is a “Trojan Horse” deal that could eventually destabilise the entire Horn of Africa region.
The political dynamics in the Horn of Africa have always been tense and volatile. Being a geographically strategic region, it has historically attracted competition among the big powers, with the region’s diversity in terms of population, norms, politics, and history rendering it susceptible to proxy politics emanating mainly from Western countries.
The countries of the Horn of Africa are Ethiopia, Somalia, Eritrea, Djibouti, Sudan, South Sudan, and by extension, Kenya, and Uganda. In this article, we focus on Ethiopia, Somalia, and Eritrea. More specifically, we shall examine how the incumbent leaders in Ethiopia, Somalia, and Eritrea have created a coalition to extend their terms of office under the pretence of “Horn of Africa Integration”.
The Horn of Africa region has been vulnerable to multipolar politics ever since, at the Berlin Conference of 1884-5, 13 European countries laid claim to Africa’s territories: Britain signed the Rodd Treaty with Menelik II of Ethiopia in 1897 that dominated the country’s administration, Djibouti came under French control while Italy took Somalia, Italian Somaliland, and Eritrea. By 1914, with the exception of Ethiopia and Liberia, all other African countries were under colonial rule.
Russia joined the race during the Cold War and supported the regimes in Somalia and Ethiopia, with President Siad Barre of Somalia and Prime Minister Mengistu Haile Mariam of Ethiopia becoming close allies of Russia. But despite their allegiance to the former Soviet Union, the two countries fought a vicious war from 1977 to 1978.
From 1960 to 1969, Somalia was a fledgling democracy led by civilian governments established through peaceful transfer power. The military seized power in 1969, led by Siad Barre who ruled with an iron fist until he was ousted in 1991, leaving in his wake a civil war that killed thousands of Somalis, and pushed thousands more into exile. In 2000, Djibouti called a reconciliation conference that brought together civil society groups and culminated in the formation of the first government since the beginning of the civilian war. The new government was short-lived, however, as the warlords who controlled most of the south-central regions resisted and revolted. In 2004, the second government was formed under the Transitional Federal Government of Somalia under the leadership of the late President Abdullahi Yusuf.
However, this government made the same mistakes as its predecessor, calling on the African Union to send troops to support President Yusuf’s government and escort him to the capital, Mogadishu. The new government and the Islamic Courts Union (ICU)—which controlled most of the south-central region—held several meetings in Sudan to try to reach an agreement, but the talks failed. A military confrontation between troops of the Islamic Courts Union the Transitional Federal Government backed by Ethiopian forces ensued and, after a bitter fight and great loss of life, the TFG entered Mogadishu. Following a political fallout between the president and his prime minister, President Abdullahi Yusuf resigned, and the leader of the ICU, Sheekh Sharif, succeed Yusuf after negotiations between the leader of the ICU and the international community.
The first elections since the outbreak of the civil war were held under President Sheekh Sharif and Hassan Sheikh Mohamud, a civilian and veteran academic, was elected. Somalia became a federal state with five federal member states under President Hassan who oversaw the implementation of the provisional constitution which had been adopted in August 2012.
Although there were allegations of corruption, President Hassan’s government was relatively stable. One person one vote elections were scheduled to take place in 2016, but they were postponed for various reasons, including the insecurity caused by the Al-Shabaab and disagreement between the federal government and the leaders of the federal member states and others. Despite the challenges, however, President Hassan Sheikh’s administration pioneered indirect parliamentary elections where 51 delegates from each clan would each elect the members of parliament. Although the process was not considered a fair fight, the transition was smooth. In February 2017, Hassan Sheikh lost his re-election bid, and President Mohamed Abdullahi Farmajo became his successor. President Farmajo received a warm welcome from the public and many accolades from the international community and the neighbouring countries. Indeed, many Somalis believed that he would be better than his predecessors and would deliver the one person, one vote in 2021.
The situation turned when the government extradited Ogaden National Liberation Front (ONLF) commander Abdikarim Qalbi Dhagah to Ethiopia, leading to a public backlash, protests, and fierce criticism of the government. It was the first time that a Somali person had been extradited to Ethiopia, a country that many Somalis consider the archenemy. Since then, public support for the government has plummeted. Intimidation, attacks, smear campaigns, extrajudicial actions, and incarceration have become the modus operandi of the current government and the Somali people’s hope in Farmajo’s government has declined dramatically. Meanwhile, Farmajo’s government declared the UN Ambassador to Somalia persona non grata and expelled him, leading to international condemnation of his government. The government of Somalia also cut ties with Kenya, a country which has hosted the largest number of Somali refugees since 1991.
It was the first time that a Somali person had been extradited to Ethiopia, a country that many Somalis consider the archenemy.
The mandate of the sitting president ended on 8 February 2021 without elections being held for a successor government. In March 2021, the Somali parliament unilaterally extended the term of the president for another two years, which resulted in a confrontation and a split within the National army. After two weeks of chaos, the parliament reversed its decision.
The long-awaited one person one vote elections became a pipedream and indirect parliamentary elections were maintained albeit with an increase in the number of the delegates from 51 to 101. The May 2022 parliamentary elections were been mired in fraud, favouritism, rigging, and massive irregularities and the country has been plunged into uncertainty.
Historically, Ethiopia has never held free and fair elections. On the contrary, the country has lived under a political dynasty and patrimonial leadership interspersed with coups. There has always been a power struggle between Ethiopia’s diverse communities. The Amhara, who collaborated with the colonial powers, enjoyed the support of the British Administration under the Rodd Treaty of 1897 agreement, and dominated the country’s politics. Both Menelik II and Haile Selassie marginalized other communities, especially the Oromo, the Somali, and Tigrayans. In 1974, Mengistu Haile Mariam overthrew Haile Selassie in a coup d’état and moved the country’s allegiance away from the West to the Soviet Union, leading to a proxy war in Ethiopia between the US and Russia. Mengistu was ruthless to his critics, especially the Oromo, Tigray, and Somali; he was known as the “Butcher of Addis Ababa” and the “Red Terror.”
Led by Meles Zenawi, the Tigray People’s Liberation Front (TPLF) ousted Mengistu’s regime in 1991 and Ethiopia adopted federalism under the Ethiopian People’s Revolutionary Democratic Front (EPRDF) coalition party made up of the TPLF, Amhara, Oromo, and the Southern Nations and Nationalities. The first mistake committed by the Zenawi regime was to disregard other communities, particularly the Somalis, who are the third largest community in terms of population. The second mistake was to nullify the results of the elections in the Somali region where the Ogaden National Liberation Front (ONLF) had won by a landslide, resulting in a confrontation between the Zenawi regime and the ONLF. After three years of demonstrations emanating from the Oromo region and spreading to the Amhara region, Prime Minister Haile Mariam Desalegn resigned in 2018. It was the first time in Ethiopia that a public office holder had resigned due to pressure from the citizens. Abiy Ahmed took over as prime minister in April 2018.
Eritrea was an Italian colony before World War II, but after Italy was defeated in the war in 1952, the United Nations tried to federate Eritrea to Ethiopia to as a compromise for Ethiopia’s claim of sovereignty and Eritrea’s desire for independence. Unfortunately, after nine years, Haile Selassie dissolved the federation annexed and annexed Eritrea.
As a result, the Eritrean Liberation Front (ELF), which was created in 1961, revolted against Haile Selassie. When Haile Selassie was dethroned by the Derg regime, former Prime Minister Mengistu Haile Mariam, who had led the revolution, tried to reach a settlement with the Eritrean Liberation Front (ELF) and the Eritrean People’s Liberation Front (EPLF) without success and insurgencies against his rule increased. In 1991, when Mengistu was ousted by the rebel movements led by Tigray People’s Liberation Front (TPLF), Prime Minister Meles Zenawi tried to keep Eritrea as part of Ethiopia, leading to renewed conflict with the rebel groups. After two years of fierce fighting Eritrea gained its independence in 1993 but the country has never held an election since; Isaias Afwerki, the first president, is still at the helm. After five years of a territorial dispute between Ethiopia and Eritrea, the Badme War erupted in 1998, lasting until 2000 and claiming more than 100,000 lives.
Mengistu was ruthless to his critics, especially the Oromo, Tigray, and Somali; he was known as the “Butcher of Addis Ababa” and the “Red Terror.”
Several peace agreements were brokered, including by the United Nations Mission in Ethiopia and Eritrea (UNMEE), the Algiers Comprehensive Peace Accord (ACPA), the Eritrea-Ethiopia Boundary Commission (EEBC), all culminating in deadlock, and Addis Ababa and Asmara remaining at loggerheads.
Horn of Africa Integration Project
With the exception of April 2018, when the former Prime Minister Haile Mariam Desalegn resigned following three years of demonstrations against EPRDF rule, Ethiopia had never experienced a peaceful transition of power. Abiy Ahmed, who was part of the EPRDF rule, succeeded Desalegn.
In the beginning, under Prime Minister Abiy, Ethiopia enjoyed relative press freedom, there was greater inclusion of women in politics, and the 20 years of animosity between Ethiopia and Eritrea came to an end, paving the way for Abiy to receive the Nobel Peace Prize in 2019. Abiy Ahmed visited Mogadishu in June 2018, where he met his counterpart President Farmajo. In a joint statement, the two leaders talked about strengthening diplomatic and trade relations between their two countries, with Ethiopia pledging to invest in Somalia’s port facilities. But apart from that brief statement, nobody knows precisely what the agenda of Abiy’s meeting with Farmajo was. President Farmajo has also visited Addis Ababa several times, but has not informed Somalia’s parliament what has been agreed between the two leaders. In December 2018, Eritrean president Afwerki visited Mogadishu and had talks with president Farmajo; the agenda of the meeting between the two leaders remains unknown. Somalia’s president also paid a visit to Asmara in July 2018.
Eritrea used to supply weapons and ammunition to the ICU during its conflict with the Somali government of the late President Abdullahi Yusuf, leading the Somali government to accuse Eritrea of supporting the extremist Al-Shabaab rebel group and as a result, the United Nations imposed an embargo on Eritrea in 2009. The UN lifted sanctions on Eritrea in November 2018 after the country reconciled with Ethiopia and Somalia. The leaders of the three countries, Abiy, Farmajo, and Afwerki, signed a little-known “Tripartite Agreement”. In hindsight, Abiy’s reconciliation with Afwerki was to enable Ethiopia to ostracize Ethiopia’s Tigrayan community and launch an attack on the Tigray region. Abiy’s secret agenda came out into the open on 4 November 2020 when he attacked the Tigray region backed by Eritrean troops. The coalition forces have committed gross human rights violations in the Tigray region, which has led to international condemnation against the brutality of the coalition troops and calls for Eritrean forces to withdraw from the Tigray region.
In hindsight, Abiy’s reconciliation with Afwerki was to enable Ethiopia to ostracize Ethiopia’s Tigrayan community and launch an attack on the Tigray region.
Meanwhile, although there is no smoking gun, there is a strong possibility that the Somali troops being trained in Eritrea are involved in the Tigray war. The Somali government had denied that Somali soldiers were sent to Eritrea for training but later confirmed this.
Despite the ongoing civil war and the political discontent in Ethiopia resulting from the delayed polls that were supposed to take place in September 2020, Abiy has decided to remain at the helm by hook or by crook.
The regimes in Addis Ababa, Mogadishu, and Asmara that I have called the axis-of-evil coalition have led the region astray through lack of an adequate response to the protracted drought, the unbridled corruption, the instability, and the internecine conflicts. The reasons behind the “Tripartite Agreement” between the three leaders were not and never have been to serve their respective people, enhance the trade relations, or improve security, but to keep a hold on power through their “Trojan horse” deal. This may lead to a revolt by the oppositions in the three countries that could finally destabilize the entire Horn of Africa region.
Moving or Changing? Reframing the Migration Debate
The purpose of the mass and civilizational migrations of Western Europe was the same as now: not simply to move from one point to another, but also from one type of social status to another, to change one’s social standing in relation to the country of origin.
Do we move to change, or do we move to stay the same?
That seems to depend on who we were, to begin with. In most cases, it seems we move in an attempt to become even more of whatever we think we are.
A good Kenyan friend of mine once (deliberately) caused great offense in a Nairobi nightspot encounter with a group of Ugandans he came across seated at a table. There were six or seven of them, all clearly not just from the same country, but from the same part of the country.
“It always amazes me,” he said looking over their Western Uganda features, “how people will travel separately for thousands of miles only to meet up so as to recreate their villages.
He moved along quickly.
“Most African Migration Remains Intraregional” is a headline on the Africa Centre for Strategic Studies website:
Most African migration remains on the continent, continuing a long-established pattern. Around 21 million documented Africans live in another African country, a figure that is likely an undercount given that many African countries do not track migration. Urban areas in Nigeria, South Africa, and Egypt are the main destinations for this inter-African migration, reflecting the relative economic dynamism of these locales.
Among African migrants who have moved off the continent, some 11 million live in Europe, almost 5 million in the Middle East, and more than 3 million in America.
More Africans may be on the move now than at any time since the end of enslavement, or perhaps the two large European wars. Even within the African continent itself. They navigate hostilities in the cause of movement—war, poverty and environmental collapse.
The last 500 years have seen the greatest expression of the idea of migration for the purpose of staying the same (or shall we say, becoming even more of what one is). The world has been transformed by the movement of European peoples, who have left a very visible cultural-linguistic stamp on virtually all corners of the earth. It is rarely properly understood as a form of migration.
It took place in three forms. The first was a search for riches by late feudal Western European states, in a bid to solve their huge public debts, and also enrich the nobility. This was the era of state-sponsored piracy and wars of aggression for plunder against indigenous peoples. The second form was the migration of indentured Europeans to newly conquered colonial spaces. The third was the arrival of refugees fleeing persecution borne of feudal and industrial poverty, which often took religious overtones.
Certainly, new spaces often create new opportunities, but only if the migrants concerned are allowed to explore the fullness of their humanity and creativity. The historical record shows that some humans have done this at the expense of other humans.
A key story of the world today seems to be the story of how those that gained from the mass and civilizational migrations of Western Europe outwards remain determined to keep the world organised in a way that enables them to hold on to those gains at the expense of the places to which they have migrated.
We can understand the invention and development of the modern passport—or at least its modern application—as an earlier expression of that. Originally, passports were akin to visas, issued by authorities at a traveler’s intended destination as permission to move through the territory. However, as described by Giulia Pines in National Geographic, established in 1920 by the League of Nations, “a Western-centric organization trying to get a handle on a post-war world”, the current passport regime “was almost destined to be an object of freedom for the advantaged, and a burden for others”. Today the dominant immigration models (certainly from Europe) seem based around the idea of a fortress designed to keep people out, while allowing those keeping the people out to go into other places at will, and with privilege, to take out what they want.
Certainly, new spaces often create new opportunities, but only if the migrants concerned are allowed to explore the fullness of their humanity and creativity.
For me, the greatest contemporary expression of “migration as continuity” has to be the Five Eyes partnership. This was an information-sharing project based on a series of satellites owned by the United States, the United Kingdom, Australia, New Zealand and Canada. Its original name was “Echelon”, and it has grown to function as a space-based listening system, spying on telecommunications on a global scale – basically, space-based phone tapping.
All the countries concerned are the direct products of the global migration and settlement of specifically ethnic English Europeans throughout the so-called New World, plus their country of origin. The method of their settlement are now well known: genocide and all that this implies. The Five Eyes project represents their banding together to protect the gains of their global ethnic settlement project.
In the United States, many families that have become prominent in public life have a history rooted, at least in part, in the stories of immigrants. The Kennedys, who produced first an Ambassador to the United Kingdom, and then through his sons and grandsons, a president, an attorney general, and a few senators, made their fortune as part of a gang of Irish immigrants to America involved in the smuggling of illicit alcohol in the period when the alcohol trade was illegal in the United States.
Recent United States president Donald Trump is descended from a German grandfather who, having arrived in 1880s America as a teenage barber, went on to make money as a land forger, casino operator and brothel keeper. Franklin Delano Roosevelt, the 32nd president of the United States was the paternal grandson of a trader named Warren, a descendant of Dutch settlers who made his fortune smuggling opium into China in the 1890s.
While it is true that the entire story of how Europeans came to be settled in all the Americas is technically a story of criminality, whether referred to as such or not, the essential point here is that many of the ancestors of these now prominent Americans would not have passed the very same visa application requirements that they impose on present-day applicants.
The purpose of migrations then was the same as it is now: not simply to move from one point to another, but also from one type of social status to another. It was about finding wealth, and through that, buying a respectability that had not been accessible in the country of origin. So, the point of migration was in a sense, not to migrate, but to change one’s social standing.
And once that new situation has been established, then all that is left is to build a defensive ring around that new status. So, previously criminal American families use the proceeds of their crime to build large mansions, and fill the rooms with antiques and heirlooms, and seek the respectability (not to mention business opportunities) of public office.
Many of the ancestors of these now prominent Americans would not have passed the very same visa application requirements that they put to present-day applicants.
European countries that became rich through the plunder of what they now call the “developing world”, build immigration measures designed to keep brown people out while allowing the money keep coming in. They build large cities, monuments and museums, and also rewrote their histories just as the formerly criminal families have done.
Thus the powers that created a world built on migration cannot be taken seriously when they complain about present-day migration.
Migration is as much about the “here” you started from, as it about the “there” you are headed to. It is not about assimilating difference; it is about trying to keep the “here” unchanged, and then to re-allocate ourselves a new place in that old sameness. This is why we go “there”.
This may explain the “old-new” names so common to the mass European migration experience. They carry the names of their origins, and impose them on the new places. Sometimes, they add the word “New” before the old name, and use migrant-settler phrases like “the old country”, “back east”. They then seek to choose a new place to occupy in the old world they seek to recreate, that they could not occupy in the old world itself. But as long as the native still exists, then the settler remains a migrant. And the settler state remains a migrant project.
To recreate the old world, while creating a new place for themselves in it, , such migrants also strive to make the spaces adapt to this new understanding of their presence that they now seek to make real.
I once witness a most ridiculous fight between three Ugandan immigrants in the UK. It took place on the landing of the social housing apartment of two of them, man and wife, against the third, until that moment, their intended house guest. As his contribution to their household, the guest had offered to bring a small refrigerator he owned. However, when the two men went to collect the fridge in a small hired van, the driver explained that traffic laws did not permit both to ride up front with him – one would have to ride in the back with the fridge. The fridge owner, knowing the route better, was nominated to sit up front, to which his friend took great and immediate exception; he certainly had not migrated to London to be consigned to the back of a van like a piece of cargo. After making his way home via public means, and discussing his humiliation with his good wife, the arrangement was called off – occasioning a bitter confrontation with the bewildered would-be guest.
There must have been so many understandings of the meaning of their migration to Britain, but like the Europeans of the New World, the Ugandans had settled on replicating the worst of what they were running from in an attempt to become what they were never going to be allowed to be back home.
A good case in point is the ethnic Irish communities in Boston and New York, whose new-found whiteness—having escaped desperate poverty, oppression and famine under British colonial rule on what were often referred to as “coffin ships” —saw them create some of the most racist and brutal police forces on the East Coast. They did not just migrate physically; they did so socially and economically as well.
It starts even with naming.
The word “migrant” seems to belong more to certain races than to others, although that also changes. When non-white, normally poor people are on the move, they can get labeled all sorts of things: refugees, economic migrants, immigrants, illegals, encroachments, wetbacks and the like.
With white-skinned people, the language was often different. Top of the linguistic league is the word “expatriate”, to refer to any number of European-origin people moving to, or through, or settling in, especially Africa.
According to news reports, some seven million Ukrainians fleeing the Russian invasion were absorbed by their neighboring European countries, most of which are members of the European Union. Another 8 million remain displaced within the war-torn country.
This is an outcome of which the Europeans are proud. They have even emphasized how the racial and cultural similarities between themselves and the Ukrainian refugees have made the process easier, if not a little obligatory.
This sparked off a storm of commentary in which comparisons were made with the troubles earlier sets of refugees (especially from the Middle East and Afghanistan) faced as the fled their own wars and tried to enter Western Europe.
And the greatest irony is that the worst treatment they received en-route was often in the countries of Eastern Europe.
Many European media houses were most explicit in expressing their shock that a war was taking place in Europe (they thought they were now beyond such things), and in supporting the position that the “white Christian” refugees from Ukraine should be welcomed with open arms, unlike the Afghans, Iraqis and Syrians before them.
Human migration was not always like this.
Pythagoras (570-495 BC), the scholar from Ancient Greece, is far less well remembered as a migrant and yet his development as a thinker is attributable to the 22 or so years he spent as a student and researcher in Ancient Egypt. The same applies to Plato, who spent13 years in Egypt.
There is not that much evidence to suggest that Pythagoras failed to explain where he got all his learning from. If anything, he seems to have been quite open in his own writing about his experiences, first as an apprentice and later a fellow scholar in the Egyptian knowledge systems. The racial make-up of Ancient Egypt, and its implications, was far from becoming the political battleground it is today.
Top of the linguistic league is the word “expatriate” to refer to any number of European-origin people moving to, or through, or settling in, especially Africa.
Classic migration was about fitting in. Colonial migration demands that the new space adapt to accommodate the migrant. The idea of migrants and modern migration needs to be looked at again from its proper wider 500-year perspective. People of European descent, with their record of having scattered and forcibly imposed themselves all over the world, should be the last people to express anxieties about immigrants and migration.
With climate change, pandemic cycles, and the economic collapse of the west in full swing, we should also focus on the future of migration. As was with the case for Europeans some two to three hundred years ago, life in Europe is becoming rapidly unlivable for the ordinary European. The combination of the health crisis, the energy crisis, the overall financial crisis and now a stubborn war, suggests that we may be on the threshold of a new wave of migration of poor Europeans, as they seek cheaper places to live.
The advantages to them are many. Large areas of the south of the planet are dominated physically, financially and culturally, by some level of Western values, certainly at a structural level. Just think how many countries in the world use the Greco-Latin origin word “police” to describe law enforcement. These southern spaces have already been sufficiently Westernized to enable a Westerner to live in them without too much of a cultural adjustment on their part. The Westerners are coming back.
This article is part of a series on migration and displacement in and from Africa, co-produced by the Elephant and the Heinrich Boll Foundation’s African Migration Hub, which is housed at its new Horn of Africa Office in Nairobi.
The Iron Grip of the International Monetary System: CFA Franc, Hyper-Imperial Economies and the Democratization of Money
Cameroonian economist Joseph Tchundjang Pouemi died in 1984, either poisoned or by suicide. His ideas about the international monetary system and the CFA franc are worth revisiting.
Despite being one of Africa’s greatest economists, Joseph Tchundjang Pouemi is little known outside Francophone intellectual circles. Writing in the 1970s, he offered a stinging rebuke of orthodox monetary theory and policy from an African perspective that remains relevant decades later. Especially powerful are his criticisms of the international monetary system and the CFA franc, the regional currency in West and Central Africa that has historically been pegged to the French currency—at first the franc, and now the euro.
Pouemi was born on November 13th, 1937, to a Bamiléké family in Bangoua, a village in western Cameroon. After obtaining his baccalaureate and working as a primary school teacher, Pouemi moved to France in 1960, where he studied law, mathematics, and economics at the University of Clermont-Ferrand. Pouemi then worked as a university professor and policy adviser in Cameroon and Cote d’Ivoire. In 1977, he joined the IMF but quit soon after, vehemently disagreeing with its policies. He returned to Cameroon and published his magnum opus, Money, Servitude, and Freedom, in 1980. The recently elected president of Cameroon, Paul Biya, appointed Pouemi head of the University of Douala in August 1983—then fired him a year later. On December 27th, 1984, Pouemi was found dead of an apparent suicide in a hotel room. Some of his friends and students argue he was poisoned by the Biya regime (which still governs Cameroon), while others believe that harassment by Biya’s cronies drove Pouemi to suicide.
International Monetary System
Writing in the turbulent 1970s after the breakdown of the Bretton Woods regime of fixed exchange rates, Pouemi anticipated the three “fundamental flaws” with the international monetary “non-system”: one, using a national currency, the US dollar, as global currency; two, placing the burden of adjustment exclusively on deficit nations; and, three, the “inequity bias” of the foreign reserve system, which makes it a form of “reverse aid.” All three issues have been highlighted by the economic impact of the COVID-19 pandemic.
Long recognized as a problem, the challenges with using the US dollar as the world’s currency have once again become apparent. Low- and middle-income countries (which include essentially all African countries) have to deal with the vicissitudes of the global financial cycles emanating from the center of the global capitalist system. As the Federal Reserve raises interest rates to combat inflation by engineering a recession—because if borrowing costs rise, people have less money to spend and prices will decrease—they are increasing the debt burden of African governments that have variable-rate loans in US dollars. Already, the World Bank has warned of a looming debt crisis and the potential for another “lost decade” like the 1980s. Moreover, higher interest rates in the US lead to the depreciation of African currencies, making imports more expensive and leading to even higher food and oil prices across the continent.
Pouemi viewed the IMF’s attempt to create a global currency through the 1969 establishment of the special drawing rights (SDR) system as an inadequate response to the problems created by using the US dollar. The issuance of SDRs essentially drops money from the sky into the savings accounts of governments around the world. The IMF has only issued SDRs four times in its history, most recently in August 2021 in response to the COVID-19 pandemic. With African governments dealing with falling export earnings and the need to import greater amounts of personal protective equipment—and, eventually, vaccines—there was a clear need to bolster their savings, i.e., foreign reserves. The problem is that the current formula for allocating SDRs provides 60% of them to the richest countries—countries that do not need them, since they can and have borrowed in their own currencies. Of the new 456 billion SDR (approximately US$650 billion), the entire African continent received only 5% (about US$33 billion).
Decades ago, Pouemi had slammed SDRs as “arbitrary in three respects: the determination of their volume, their allocation and the calculation of their value.” Instead, Pouemi advocated for a truly global currency, one that could be issued by a global central bank in response to global recessions and that prioritized financing for the poorest countries. Such a reorientation of SDRs could provide a way of repaying African nations for colonialism and climate change.
Secondly, unable to get the financing they need, African governments with balance-of-payments deficits (when more money leaves a country than enters in a given year) have no choice but to shrink their economies. Pouemi strongly criticized the IMF, which he dubbed the “Instant Misery Fund” for applying the same “stereotypical, invariable remedies: reduce public expenditures, limit credit, do not subsidize nationalized enterprises” regardless of the source of a country’s deficits. Devaluing the currency is unlikely to work for small countries that are price takers in world markets and instead improves the trade balance by lowering domestic spending. The IMF has become “a veritable policeman to repress governments that attempt to offer their countries a minimum of welfare.” The current international monetary non-system then creates a global “deflationary bias,” since those countries with balance-of-payments deficits must reduce their spending, while those with large surpluses—like Germany, China, Japan, and the Netherlands—face little pressure to decrease their surpluses by spending more.
The third major issue with the current international monetary non-system is that developing countries have to accumulate foreign exchange reserves denominated in “hard” currencies like US dollars and euros, which means they are forced to transfer real resources to richer countries in return for financial assets—mere IOUs. Pouemi claimed that “if the international monetary system was not ‘rigged,’ reserves would be held as other goods like coffee or cocoa, gold for example. But the system is ‘rigged’; coffee reserves are quantified as dollars, pound sterling or non-convertible francs.” Instead, in the late 1970s, governments like that of Rwanda effectively lent coffee to the United States by using export earnings to purchase US treasury bills, whose real value was being quickly eroded by high inflation in the US. Hence, we live in a world where developing countries like China and Brazil lend money to rich governments like that of the US. As Pouemi explains: “The logic of the international monetary system wants the poor to lend to—what am I saying—give to the rich.”
Pouemi was also a harsh critic of the CFA franc, since maintaining the fixed exchange rate to the euro implies abandoning an autonomous monetary policy and the need to restrict commercial bank credit. Pouemi also argued that the potential benefits and costs of currency unions are different for rich and poor countries, and that therefore it is inappropriate to analyze African monetary unions through a European lens. His thoughts are especially relevant at a moment when the future of the CFA franc and West African monetary integration are up for debate.
In theory, by fixing the exchange rate to the euro, the two regional central banks that issue the CFA franc—the Banque centrale des états de l’Afrique de l’ouest (Central Bank of West African States) and the Banque centrale des états de l’Afrique centrale (Central Bank of Central African States)—have relinquished monetary policy autonomy. They have to mimic the European Central Bank’s policy rates instead of setting interest rates that reflect economic conditions in the CFA zone. The amount of CFA francs in circulation is also limited by the amount of foreign reserves each regional central bank holds in euros. Therefore, “the solidity of the CFA franc is based on restricting M [the money supply], a restriction not desired by the states, but one proceeding from the very architecture of the zone.” As a result, the economies of the CFA franc zone are starved of credit, especially farmers and small businesses, hindering growth and development. In Pouemi’s words, “There is no doubt, the CFA remains fundamentally a currency of the colonial type.”
When discussing the possibilities for a single currency for the Economic Community of West African States (ECOWAS), Pouemi stressed that the potential benefits and costs of currency union are different for rich and poor countries. “There is not only a difference of perception of the mechanisms of cooperation” between Europe and Africa, “there’s a difference of the conception of common life. Economic cooperation as it is conceived in the industrialized West is the Kennedy Round, North-South dialogue, the EEC, etc.—in other words, essentially ‘customs disarmament’ or common defense; armament is the rule, disarmament the exception.” In Africa, however, economic cooperation is a positive-sum game. Conventional economic theory argues against monetary integration among African countries, since they trade little with each other. But to Pouemi, the goal of monetary integration is precisely to get these countries to trade more with one another. He also questions the view that monetary integration should come last, following the same sequence as the European Union from free trade zone to customs union to common market and, finally, to currency union. “This view is not only imaginary, it is practically non-verified; we have seen examples. Theoretically, it is indefensible: a 10% decrease in tariffs could be … offset by a devaluation of 10%.”
Pouemi also dismissed arguments that Nigeria would dominate the proposed ECOWAS single currency as another example of the classic colonialist tactic of “divide and conquer.” While he acknowledged that “monetary union between unequal partners poses problems,” these are “only problems, open to solutions.” They do not make monetary integration unviable. Such integration need not limit sovereignty. In a regional or continental African monetary union, no “currency would be the reserve of others. Each country would have its own central bank, free to conduct the policy that best suits the directives judged necessary by the government. The only loss of sovereignty following such a union would be the respect of the collective balance. It would not be appropriated by anyone; it would be at the service of all. It would be, for that matter, less a loss of sovereignty than the collective discipline necessary to all communal life.”
Pouemi advocated for an African monetary union with fixed exchange rates between members, the pooling of foreign reserves, and a common unit of account—like the European Currency Unit that preceded the euro. He thought that the debate over whether the CFA franc is overvalued is misguided, since there is no a priori reason for its members to have the same exchange rate. Fixed but adjustable exchange rates—as in the Bretton Woods system or European Monetary System—would allow each nation greater monetary and exchange rate policy autonomy. Settling payments using a common unit of account instead of foreign exchange reserves would help economize on the latter. Moving toward the free movement of capital, goods and labor—as envisioned by the African Continental Free Trade Area—would help diffuse shocks through the monetary union. Finally, such a union would need to have a common policy on capital controls or at least collective supervision of international capital flows.
As Pouemi so eloquently lamented: “History will hold on to the fact that all of [Africa’s] children that have tried to make her respected have perished, one after the other, by African hands, without having the time to serve her.” We do not know what Pouemi could have accomplished had he had the time to serve Africa for longer. All we can do is heed his call that “in Africa, money needs to stop being the domain of a small number of ‘specialists’ pretending to be magicians.”
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