Tread carefully on single currency idea

The East African Legislative Assembly [EALA] 6th Meeting of the 1st Session of the3rd Assembly that took place in Kampala from 26th May to 7th June 2013. Photo by Morgan Mbabazi

What you need to know:

  • The Euro has fallen apart on a familiar altar — sovereignty over economic affairs is still confusingly shared.
  • East African citizens have been treated as noisy, but harmless, gnats to be swatted away if they seek to know more than they do about the union.
  • The grand experiment has been conducted at presidential and ministerial level, with very little input from the people who have to live in the brave new world.

In the old days, it used to be said that to be a proper country, you needed to have a national airline, a football team and a national beer.

The criteria evolved to include a stock exchange (even one where the traders sat around desultorily for lack of work) and a currency (however many zeros you needed to enable you to buy a loaf of bread).

Well, all that is being thrown out of the window. The national airlines were taken over by the accountants and shut down. We’re all slavish fans of the English Premier League, so we brush past national team captains without noticing them.

The beer companies have gone multinational, and, with the new laws, who needs beer anyway? The stock exchanges limp along. And now, if the gnomes in Arusha have their way, wave bye-bye to the national currency as well.

Quietly, without fanfare or the usual braying from us in the media, a deal has been negotiated and finalised to get rid of the various flavours of shillings and francs circulating within the East African Community.

The protocol, which is expected to be signed tomorrow, commits the five countries to a near-irreversible 10-year timetable, at the end of which (in the EAC Secretariat’s blandly-worded press release): “National currencies will not be used alongside the East African currency in the single currency area. Indeed, there cannot be two legal tenders in one single currency area”.

There’s nothing intrinsically wrong with the united currency plan. It stitches East Africa closer politically and economically. It will make it easier for the region to do business as one entity when there are no currency worries to take care of.

However, there is much to worry about. The first objection to the plan is the ‘It’s the Euro, Stupid’ argument. The world’s premier experiment in a united currency is in a shambles.

And this is in a region with much closer economic ties than the EAC, and with a much more elaborate plan, developed half a century or longer.

The Euro has fallen apart on a familiar altar — sovereignty over economic affairs is still confusingly shared.

There are complaints that the Eurozone’s strongest economy, Germany, runs roughshod over weaker members. Concurrently, there is contradictory complaint of feckless German leadership on the issue.

The result is a two-speed union that is threatening economies the world over.

The planners in the EAC seem to be proceeding with no regard for any argument against monetary union. Even after this year’s unusual contretemps about the increasing division in the EAC, it is full steam ahead.

It’s the equivalent of continuing your journey despite all the alarming noises coming from your engine.

East African citizens have been treated as noisy, but harmless, gnats to be swatted away if they seek to know more than they do about the union. The grand experiment has been conducted at presidential and ministerial level, with very little input from the people who have to live in the brave new world.

I did not even get to the economic arguments against union (which I will as soon as the first outraged missive comes from Arusha castigating this article for its scepticism, ignorance and naïveté).

So wish the presidents luck tomorrow, and start keeping some shillings and francs in your desk drawers as mementos.

Mr Kantai is NTV’s business editor. ([email protected] Twitter: @wgkantai)

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