Revamping Africa’s Current Financial Architecture – OpEd
Finance is the bloodstream of any economy, without which no economy rises, no educators or skills or innovators work to produce. Governments cannot build the necessary infrastructures and cannot do research. In Africa they do not do any research in general, anyway! They still mostly buy what others have strived and sweated for to produce.
Africa’s financial architecture is still tied to the colonial systems which created it, in the first place, and needs to be revamped. The continent relies on foreign aid, some foreign direct investments and indeed, expensive loans from multilateral financial organizations, with some adventurous financing from international commercial and investment banks.
Africa is a rich continent. It enjoys a large youthful population with many years of working life ahead of them, natural resources, that appear to have been depleted in other continents, large arable lands for the production of its won food and for others as well and its is surrounded by oceans and seas, which can feed its populations and others and which can also produce immense blue economies involving not only tourism but also other resources such as oil and gas and other forms of energy (oceanic, solar, and wind).
It is where the need for an autonomous, creative and integrated financial architecture, sourced from within becomes essential for the continent. This could be in the form of creating continental capital markets, continental settlement systems, and indigenous continental finance development institutions all supported by independent telecommunications and hence digital financial independence.
Africa currently owns some 30 stock exchanges and many of them are small and not only insignificant, but illiquid too. Africa could have pooled all these markets into one giant stock exchange that would enable major firms of the continent to raise capital from within the continent. Such a platform could be supported by the African Continental Free Trade Area (AfCFTA). It could be a major platform enabling national wealth funds of the various countries to invest, without exporting the hard earning wealth of the poor continent to other continents as has been going for far too long now.
A major obstacle to Africa’s economic rise involves the limited intra-African trade. They mostly produce the same commodities, be they agricultural and/or mineral extractions. Very limited industrial production takes place in the continent and it is why even tea cups and plates are imported from far off countries such as China. Why shouldn’t the continent finance production of transformative industries converting many of its mineral to semi-finished or finished products? It can if the necessary financing was available from within the continent. Africa could then be buying from each other and could then need to develop a Pan-African- payment system as was recently proposed by Afreximbank – the Pan-African Payment and Settlement System (PAPSS).
Africa’s pan-African financial institutions such as the Africa Development Bank Group, Afreximbank and other continental financial organizations such as the African Central Bank (ACB), the African Monetary Fund (AMF), the African Investment Bank (AIB), and the Pan-African Stock Exchange (PASE) all seem to be funded by non-African parties in the main. Africa would need continentally-financed financial organizations, whose sole objective is to mobilize funds from within the continent and invest in the continent in transforming the continent’s natural resources into commodities that are need by humanity – food, household goods, building materials, transport and medical equipment and others.
If the continent’s finances have to become productive contributors to Africa’s economic growth, it has to be independent first through the development of local funding mechanisms, both private African entrepreneurs and governmental institutions. It does not have to rely on foreign funding. Institutions like the AFDB and Afreximbank and others need to be revamped completely to become truly African financed organizations and if this cannot happen, new institutions doing better jobs than these politically motivated institutions, should spring up from the continent.
Many inter-continental organizations rely on African governments, which are generally corrupt, less transparent and donors which have other goals. They should be replaced by African private entrepreneurs who will deploy the latest technologies not only in surveillance and auditing but also in business development across the continent. Perhaps the creation of a private continental market exchange would be ideal for funding achievable goals.
The journey toward an independent financial and industrial ecosystem is not easy, but deepening capital formation through continental infrastructure funds and other innovative mechanisms, it must. Through home-grown financial architecture, the continent should be able to move away from dependency on others to stand on its own feet, producing not only its own food but also its needs in terms of shelter and clothing and the necessary infrastructure for a viable economy.
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