Africa’s Seat at the Table

By Gregory Simpkins

For the past several years, African governments and their non-African supporters have lamented the continuing exclusion of African governments from seats on international organizations where global decisions are made. Given the crucial benefits African governments offer to the world, such as the provision of critical natural resources, this exclusion from power is certainly unfair.

In the 1990s, there were two Africans who served as Secretary-General of the United Nations: Boutros Boutros-Ghali of Egypt and Kofi Annan of Ghana. However, no African nation has ever been any more than a rotating member of the UN Security Council even though nations such as South Africa, Nigeria and Kenya have significant economies and influence – not only in Africa but elsewhere in the world. For example, South Africa is a charter member of the increasingly influential Brazil, Russia, India, China and South Africa (BRICS) coalition.

Perhaps part of the reason is the lack of cohesiveness among the 50+ African members of the United Nations. There is a divide between the Anglophone and Francophone members that limits consensus on which nation should represent the continent on the UN’s highest policy body. South Africa has been presented as an influential African nation most logical as the continent’s representative, but then Nigeria is its main rival for influence in Africa.

In the African Union (AU), the chairmanship rotates and eventually includes even some nations thought to be pariahs outside of Africa. In this way, Anglophone and Francophone nations, as well as those from the five regions of the continent – North, South, East, West and Central – all have their day in the seat of power in this organization. However, various tensions and disputes has made decision-making at the AU difficult, and efforts at consensus among so-called renegade governments and those that try to play by the international standards have produced decisions in cases such as which member governments are to be suspended or sanctioned more problematic than one would hope for.

Currently, there are six AU members who are suspended: Burkina Faso, the Central African Republic, Guinea, Mali, Niger and Sudan.

Since the end of World War II, the world’s developed nations have created an economic order that suits their circumstances. At the time that the international system of monetary management established the rules for commercial relations through the 1944 Bretton Woods Agreement, almost all Africa countries were under colonial rule.

The Group of Twenty (G20), founded in 1999 after the Asian financial crisis as a forum for the Finance Ministers and Central Bank Governors to discuss global economic and financial issues, was designated as “the premier platform for international economic cooperation.” It plays an important role in shaping and strengthening global architecture and governance on all major international economic issues. The G20 members represent approximately 85 percent of the global Gross Domestic Product (GDP), more than 75 percent of the global trade, and about two-thirds of the world population.

The permanent members of the G20 are now Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, South Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, United Kingdom and United States. At its most recent annual meeting in September, the AU was added as a member, joining the European Union, despite South Africa already being a member.

The UN has welcomed the inclusion of the AU. Stéphane Dujarric, spokesperson of the Secretary-General remarked that:

This is a reflection of Africa’s growing influence on the global stage.

Kenyan President William Ruto echoed that sentiment, saying the move will increase Africa’s voice visibility and influence.

This new seat at the table of power should provide an opportunity for African nations to successfully push for new global rules to overcome the widespread poverty among African nations. Of the world’s 20 poorest nations, 19 are in Africa. Only Yemen, which is in the midst of a continuing conflict, shares a place on that list.

The world economic order

Since the end of World War II, the world’s developed nations have created an economic order that suits their circumstances. At the time that the international system of monetary management established the rules for commercial relations through the 1944 Bretton Woods Agreement, almost all Africa countries were under colonial rule. The United States, Canada, Western European countries and Australia, as well as 44 other countries, established the first example of a fully negotiated order intended to govern monetary relations among independent states.

As described by the World Economic Forum, the Bretton Woods system required countries to guarantee convertibility of their currencies into U.S. dollars to within 1 percent of fixed parity rates, with the dollar convertible to gold bullion for foreign governments and central banks at US$35 per troy ounce of fine gold (or 0.88867-gram fine gold per dollar). It was the intention to foster greater cooperation among countries in order to prevent future competitive currency devaluations to gain advantages in trade. This agreement also established the International Monetary Fund (IMF) to monitor exchange rates and lend reserve currencies to nations with balance of payments deficits.

It had been proposed that the reserve currency would be the bancor, a global currency unit that was never implemented. Noted economist John Maynard Keynes proposed the bancor, but the United States objected, and as the main victor in World War II, their request was granted, making the U.S. dollar the reserve currency. This meant that other countries would peg their currencies to the U.S. dollar, and – once convertibility was restored – would buy and sell U.S. dollars to keep market exchange rates within plus or minus 1 percent of parity. Thus, the U.S. dollar took over the role that gold had played under the gold standard in the previous international financial system.

Under a gold standard, the usual economic unit of account is based on a fixed quantity of gold. The gold standard was the basis for the international monetary system from the 1870s to the early 1920s, and from the late 1920s to 1932, as well as from 1944 until 1971 when the United States unilaterally terminated convertibility of the U.S. dollar to gold, effectively ending the Bretton Woods system. Many states nonetheless hold substantial gold reserves, which some nations hope can create a currency to replace the U.S. dollar.

In a National Bureau of Research paper entitled Bury the Gold Standard? A Quantitative Exploration, the strengths of the gold standard cited by its proponents are its ability to constrain the creation of new money while also discouraging large fiscal and trade deficits. According to the writers, this tends to help ensure price stability over the very long run, a fact that is also widely acknowledged. However, the strengths of the gold standard also are often cited as its greatest weakness: constraining monetary policy prevents stabilization of output and unemployment in the midst of recessions.

Katusa Research, an independent investment research firm, states that over the past 15 years, the U.S. dollar has appreciated roughly 18 percent versus other major currencies. As things have slowly normalized, the dollar has come back to earth, albeit still up 18 percent against most currencies over the past 5 years. It is hard to argue that the U.S. dollar is truly collapsing right now, the Katusa Research report states. Still, many developing countries have complained of a scarcity of U.S. dollars, which interferes with international trade.

African nations will have to achieve the unity that has thus far eluded them. If ever there was a time for Africans to work together for their mutual benefit, it is this current period.

According to Investopedia, the term dollar shortage is a situation that occurs when a country has an extremely low supply of U.S. dollars in its reserves needed to effectively conduct international trade. A dollar shortage happens when a country’s net outflows of U.S. dollars outweigh its net inflows, that is, when it has to pay more dollars for its imports than it receives for its exports or when its international dollar obligations are higher.

Dollar shortages are measured in dollars of course because of its continuing status as the currency of the world’s largest and strongest economy. Dollar shortages are nearly always tied to worsening debt problems. Echoing the World Bank, JPMorgan calculates that 21 countries with a combined US$240 billion of international debt are now effectively locked out of capital markets – a near record.

In addition to concerns about U.S. sanctions using the dollar as a tool and runaway U.S. government spending leading to inflationary pressures, the international community is increasingly wary of the annual budget and debt ceiling fights in the U.S. government. In the United States, such internal political conflicts are seen as regular political theater, but in other parts of the world, they cause great unease. American politicians in both major parties seem unaware of the impact their annual conflict has had on the international community’s willingness to depend on the current reserve currency.

With the effort to replace the dollar as the global reserve currency and the growing global economic fragmentation, the AU has a seat at the table at an increasingly unstable time. They will be challenged to use their leverage and influence to produce results that don’t just benefit the world’s leading powers as usual. To accomplish that, African nations will have to achieve the unity that has thus far eluded them. If ever there was a time for Africans to work together for their mutual benefit, it is this current period.

Gregory Simpkins, a longtime specialist in African policy development, is the Principal of 21st Century Solutions. He consults with organizations on African policy issues generally, especially in relating to the U.S. Government. He further acts as a consultant to the African Merchants Association, where he advises the Association in its efforts to stimulate an increase in trade between several hundred African Diaspora small and medium enterprises and their African partners.