Kidole kimoja hakivunji chawa. This Kiswahili proverb reminds us that a single finger cannot crush a louse. In the same context, President William Ruto of Kenya has recently sparked a crucial debate, urging African leaders to break free from the dominance of the dollar. This rallying cry resonates with Africa's pursuit of economic independence, exemplified by the African Continental Free Trade Area (AfCFTA) championed by President Paul Kagame. For a start, why is it crucial for African nations to liberate themselves from the grasp of the dollar? What benefits await us on the path to achieving financial sovereignty? And how can the establishment of a pan-African payments system bring about a revolution in the economic landscape, ultimately empowering Africa to determine its own fate? Let's delve into the world of finance to understand the significance of these questions. A key concern lies in the susceptibility of African economies to fluctuations in U.S. interest rates and the pricing of essential commodities. The heavy reliance on dollar-denominated raw materials, such as oil, gas, and food, exposes African nations to the impact of U.S. monetary policy decisions. Any upward movement in U.S. interest rates can trigger higher prices for these commodities in local African currencies, creating economic instability and posing challenges to the well-being of African citizens. The impact of U.S. interest rates extends beyond pricing considerations and significantly influences the flow of capital into and out of emerging markets, including those in Africa. In periods of low U.S. interest rates, investors actively seek higher returns in emerging markets, leading to an influx of capital that drives up the value of currencies in these markets. Conversely, when the U.S. Federal Reserve raises interest rates, capital swiftly exits from emerging markets and returns to the United States. This pattern of capital flows creates a volatile environment and introduces uncertainty, which poses challenges for African countries in their efforts to formulate and execute long-term economic strategies Furthermore, the rise in U.S. interest rates translates into higher debt servicing costs for developing countries. As interest rates escalate, the cost of servicing existing debt increases, straining the financial resources of these nations. This situation is particularly relevant for African countries that have accumulated substantial debt levels. By diversifying away from the dollar, alternative avenues for financing can be explored, which may help alleviate the burden of debt servicing and foster greater economic stability and resilience. To reduce their dependence on the dollar, African nations can consider bilateral swap agreements or regional currency arrangements. Such initiatives offer mechanisms for facilitating trade and financial transactions without relying on the dollar as the intermediary currency. Examples of these arrangements include Saudi Arabia's swap agreements with Russia and various countries' agreements with China. In fact, this development is already in progress on the African continent as well, as highlighted by John Rwangombwa, the Central Bank Governor of Rwanda, during the tenth National Security Symposium 2023. In his remarks at the event jointly organized by the Rwanda Defence Force Command and Staff College (RDFCSC) and the University of Rwanda (UR), Governor Rwangombwa emphasized the adoption of a local currency framework for cross-border transactions. Specifically, he mentioned that Ugandan traders purchasing goods in Rwanda can now make payments in Uganda shillings, while Rwandan traders can use Rwandan francs to pay for goods in Uganda. Governor Rwangombwa's argument carries substantial implications that further strengthen President Ruto's call for African nations to reduce their reliance on the dollar. By employing local currencies in cross-border transactions, African economies directly confront their susceptibility to fluctuations in U.S. interest rates and the pricing of essential commodities. This approach reduces the exposure to dollar-denominated risks and minimizes the need for frequent currency conversions, which can introduce complexities and additional costs for African traders. However, it is important to acknowledge the challenges that come with implementing this transition. While the call to move away from the dollar gains momentum, completely transitioning from the dominant currency poses challenges. Some countries may encounter difficulties in fully shifting away from the dollar due to the weakness, volatility, or illiquidity of their own currencies or those of their trade partners. However, these challenges should not discourage African nations from exploring and adopting alternative currencies and payment systems. Moreover, critics may contend that the endeavor to relinquish the dollar as a global currency is an exercise in futility or impracticality, given its long-established hegemony in the global economic landscape. However, this perspective fails to recognize the inherently political nature of the international monetary system. The preeminence of the dollar is not an unalterable truth but rather a product of political choices and historical circumstances. Now, let's talk about the advantages of achieving financial independence. By reducing reliance on the dollar, African countries can become more resilient to economic shocks and have more control over their own destiny. And here comes the exciting part! Implementing a pan-African payments system can completely change the way Africa does business. It would make it easier for African countries to trade with each other, without needing to constantly convert currencies and pay extra fees. Given the aforementioned dynamics, it is of utmost importance for African nations to heed President Ruto's appeal and engage in a thorough and introspective analysis of the current structure of the global economic order. This process of introspection should stimulate a fundamental question: How can we strategically reconfigure our own regional economic framework in order to establish a system that is fair, just, and promotes the welfare of all nations involved? While the answer certainly exists, the crucial question remains: How expeditiously can we translate our words into tangible actions? Patient Kwizera is an IT expert and a political commentator
