March 4, 2009 / 2:58 PM / 10 years ago

African Union sees single currency by 2021

NAIROBI (Reuters) - Africa aims to have a common currency by 2021, the economic affairs commissioner at the African Union (AU) said on Wednesday.

A South African child displays a 50 rand note in a file photo. REUTERS/JN/FMS

Governments hope this will attract higher levels of inward investment, boost the continent’s competitiveness in global trade and lift millions of people in the 53-nation AU out of poverty.

“The date is not yet established but it will not be later than 2021...we may bring it down to 2018,” Maxwell Mkwezalamba told Reuters at a meeting of African economists in the Kenyan capital.

He said free movement of goods and services and the creation of an African Central Bank to be based in Abuja, Nigeria, all need to be in place first.

“We need to harmonise our fiscal and monetary policies and then have an intermediate step towards having an African central bank which is going to issue the common currency,” he said.

Mkwezalamba said he hoped lessons would be learned from the European experience of setting up a central bank.

“We need resources to set up the African central Bank, it may take eight years, ten years for it to be established,” he said.

An African monetary union is envisaged in the Abuja Treaty of 1991, but concerns abound that some member countries will lose out from a single currency, undercut by the disparate economic strengths of the various economic blocs.

Experts say the Common Market for Eastern and Southern Africa (COMESA) states that have heavy funding needs in relation to the size of their economies stand to gain from a common currency.

On the other hand, the Southern African Development Community (SADC) with better fiscal policies could lose out.

Mkwezalamba said there is need to ensure every country attains a minimum level of policy harmonisation and added countries like South Africa could benefit from the new large market resulting from the creation of a single currency.

“This is indeed a challenge that we need to meet. We will ensure there is macroeconomic convergence. The criteria have been developed by the African Monetary Co-operation programme of the association of African central bank governors,” he said.

The economic affairs commissioner said the AU is pushing for faster regional integration to speed up the implementation of the pan-continental currency.

“There is progress but we want this progress to be accelerated. We could have done better,” he said.

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