It has long been in doubt whether the establishment of the East African Monetary Union (EAMU) will make the 2024 deadline. A taskforce that has been looking into the matter now recommends implementation of the EAC single currency be delayed until 2031. The EAC partner states are simply not ready. Harmonisation of policies and legal frameworks between the member states to support the implementation of the EAMU protocol is way behind schedule. Among other crucial prerequisites, the EAC is also yet to put in place institutions that will carry out the mandate and implement the protocol. Key among the institutions is the East African Monetary Institute (EAMI), which was expected to have been up and running by 2021. But by July this year, member states were bickering on which country should host the monetary institute, which is set to become the East African Central Bank. Other three vital institutions—the EA Financial Services Commission; the EA Surveillance, Compliance and Enforcement Commission; and the EA Statistics Commission—remain in limbo, apparently because of a lack of resources. Would it be too pessimistic to wonder whether the EAC single currency will go the way of the old East African Shilling if it ever sees the light of day? The East African Shilling was the common currency of the first East African Community that brought together the three original member states of Uganda, Kenya and Tanzania before the Community acrimoniously got dissolved in 1977. The East African Shilling offers a cautionary tale of how nationalism, lack of effective institutional controls and incompatible political ideologies can bring down what might have been a good thing. But its demise is also a result of its colonial legacy. The East African shilling was introduced by the British in 1936 when the three pre-independence realms were seen as a single East African region under colonial rule. After independence in the early 1960s as the nationalist fervour caught on among the new states, the countries were eager to assert their own identities in which a national currency, like the national flag, is the best bearer. In 1966 the East African Currency Board that oversaw the regional shilling was abolished, as each country established its own central bank. The East African shilling was replaced at par with the national currencies. The parity presumed unvarying exchange rates, lending the arrangement a semblance of a monetary union to smoothen cross-border transactions in the Common Market established the following year. The Common Market was established under the 1967 Treaty for East African Cooperation, which also established the East African Community enjoining the three countries. But it soon proved a rocky union. The institution of socialist policies under Ujamaa in Tanzania in 1967, followed by the overthrow of the Uganda government by the brutish Idi Amin in 1971 and exploitative capitalist tendencies by Kenya proved a heady mix. The overall effect was that the different ideological orientations of the partner states and deepening nationalism and protectionist tendencies affected trade relations and the general scheme of investments and industrial policies. By 1977 when the Community was being dissolved the differences were irreconcilable, burying pretensions of a monetary union as all three governments extended exchange controls to each other’s currencies. The East African Community would be re-established 22 years later in 1999 between the original three countries and has enjoined Rwanda, Burundi, South Sudan and most recently the Democratic Republic of Congo. Establishing a Monetary Union is the third pillar in the EAC Integration. Which is not without some irony that we are not only reclaiming what was cast away under nationalist hubris but that the enterprise is being postponed to 2031 for what appears lacklustre national and regional resolve. Establishing the Customs Union and the Common Market are, respectively, the first and second pillars of EAC integration. And though much of the two pillars have been accomplished, issues surrounding some on-tariff barriers remain to be resolved. There are also hints of protectionism in the split between the member states on preferential Rules of Origin on some goods. These issues must be resolved by 2031. Along with other specific macroeconomic convergence criteria, fully operationalising the Customs Union and the Common Market is a prerequisite to the introduction of the single currency. It is also not farfetched to read politics into all these, including what it portends for EAC’s fourth pillar of political federation. It bears re-reading EAC history from the last century for lessons the doomed East African Shilling might lend us. Twitter: @gituram
