|Link: Naming the Currency of the African Union
See: Advocating for the African Currency Board
April 18, 2004
Draft Bill on Single African Currency
Draft PAP Bill on the Establishment of a Single African Currency, for the purpose of implementing a common monetary and fiscal policy for the African Union
Whereas reports by several African bankers conferences, concerning the progress made by African states regarding the convergence of their economies, insist on the durability of fiscal and monetary convergence in Africa, as well as the reduction of trade barriers between African states;
Whereas the creation of a single currency makes it possible to speed up the economic convergence of African states, and shall facilitate budget consolidation, which is within the mandate of the PAP;
Whereas the excessive government debt that remains in several Member States is not incompatible with their participation in the single currency;
Observes that adequate conditions exist for the implementation of the single currency, and for the creation of bodies that shall make it possible to manage the single currency;
Observes that there is growing awareness of the necessary shift in economic policies towards the priority issues of fair international trade and the growth of inter-state commerce in Africa, as well as the augmentation of the African banking sector, and the rejection of dirty and unsustainable development;
Recalls that the AU states have ratified the AEC Treaty, and have committed themselves to participate in economic and monetary union under which national currencies are replaced by a Single Currency.
Recalls, indeed, that over and beyond purely monetary considerations, the management of the single currency and monetary policy will contribute, in accordance with the Union Act and the Treaty establishing the African Community, to the achievement of all the objectives of the African Union, including the promoting of “unity, solidarity, cohesion and cooperation among the peoples of Africa and African States”.
Considers that the single currency, which is a complementary requirement of the single market and a source of influence on the international scene, makes it possible to promote good macroeconomic conditions and policies across Africa, and facilitates coordination of states economic policies as a necessary complement to, and in accordance to the provisions of the Union Act, and as a means towards stronger growth, economic stability and integration.
Affirms that the introduction of the Single African Currency is a necessary step towards African integration and the completion and stabilization of the single African market. The single currency will facilitate the removal of the non-tariff barriers to the free movement of goods, capital, services and persons. It will also facilitate financial exchanges between citizens and between states of the African Union, and help to develop people and communities as resources for each other rather than as competitors for scarce foreign currencies.
Reaffirms that the single currency will not be a success unless it remains competitive with respect to major foreign currencies; that a single currency enables Africa to relate to other parts of the world from a position of unity and strength through simplifying and increasing intra-African commerce, maximizing Africa’s latent capacity to participate in international trade, and by offering to the rest of the world, a simpler and more equitable way to settle business between them and the Africans.
Reaffirms the need to reserve a percentage of the single currency in circulation for purposes of offsetting downturns that may result from the use of the single currency and to ensure that currency harmonization cannot jeopardize the capacity of African state authorities and municipal governments to apply fiscal, labor and employment policies corresponding to options democratically chosen by their citizens; as well as in order to ensure that a single currency does not impact negatively on the poorer regions leading to outflows of capital, increased unemployment, lower wages and therefore falling tax revenue, and in order to avoid the resulting health, education and social cutbacks.
Reaffirms that durability of currency depends upon commodity backing, and the capacity of people to buy and sell commodities, and that more direct relation between currency supply and local commodity backing can provide stability to African currencies during the transition to a single currency system.
The PAP hereby establishes a Single African Currency for the purposes of replacing the currencies of AU Member States. The duration of the transitional period shall be reviewed every year, until the single currency is fully integrated and stabilized.
The Single African Currency shall be known as the “Sheba”, and shall be designated as the “African Union Sheba” or "AU Sheba" for purposes of international transactions. For ease of fractional transactions, the sub-units of a single unit of Sheba shall be designated as “Moneta”. One unit of Sheba shall be equivalent to 100 Moneta.
The PAP shall retain 15% of the total single currency issue, which shall be held in reserve at all times, for the purposes of offsetting downturns in the economies of the poorer African regions, and for use at the discretion of the Pan African Parliament for the purpose of administering of the operations of the PAP, including payment of PAP members’ salaries, funding for staffs and facilities.
The PAP shall mandate an organization, the African Currency Board, for the purpose of administering the Single African Currency, coordinating the fiscal and monetary functions of the African economic regional groupings, and facilitating a swift and smooth transition to a single currency system for the whole of Africa.
The African Currency Board shall be charged with the administration, supervision and implementation of a charter specifying the regulatory, organizational and logistical framework necessary for the fiscal, monetary, and banking systems in Africa to perform their tasks with regard to the Single African Currency.
The board shall oversee fiscal and monetary policy in order to strengthen the coordination of the economic policies of the constituent states of the African Union, and shall develop dialogue with the African central banks by regularly inviting to its meetings the financial representatives of the states and regional groupings, including NEPAD, the AU Commissioners, states’ parliament members of finance committees, as well as African finance and trade ministers.
The board shall regularly and publicly hold hearings with those in charge at the African Development Bank and other financial institutions regarding monetary policy guidelines for the purposes of defining the main guidelines and facilitating greater coordination of economic policies. As and when necessary it may decide to sit in camera.
The African Currency Board will enjoy full operational independence in determining monetary policy. It alone will have responsibility for determining the exchange policy guidelines, for setting short-term interest rates, for setting reserve requirements for all participating banks, for buying and selling of African Union treasury bills and notes, and for using other monetary instruments necessary to preserve the stability of the single African currency.
The African Currency Board shall be accountable for its actions to the Pan African Parliament, and to persons designated by the president of the PAP and confirmed by the PAP. All the decisions and reports of the board on currency integration, and the financial operations which will be set up between the Member States, shall be brought systematically and at the earliest opportunity before the PAP.
The President of the PAP, and members of concerned PAP committees, and executive personnel nominated by the president of the PAP and confirmed by relevant PAP committees, shall participate regularly in the meetings of the currency board.
Where leading executive personnel, ministers, delegates, commissioners, advisors, chairs or the directors in charge of the African Currency Board, or any other financial institution mandated by the PAP with the responsibility to print or distribute currency, are to be appointed by the President of the PAP, the nominees may be invited to appear before interested committees of the Pan African Parliament to make statements and answer questions. The committees may adopt resolutions or make recommendations, as appropriate, relating directly to the statements made and answers provided.
The committee responsible shall make a recommendation to Parliament as to whether the nomination should be approved. A parliamentary vote may be taken, to confirm the appointment of the director, deputy-directors and other Executive Board members of the African Currency Board. If the opinion adopted by Parliament is negative, the President shall withdraw the nomination and submit a new nomination to Parliament.
Following the statements and answers referred to above and at the initiative of the committee responsible, Parliament may make a recommendation.
The director of the mandated financial institution shall keep Parliament fully and regularly informed as to the practical implementation of his/her mandate, and shall be invited on occasion, or at his/her initiative, to attend meetings of the committee responsible in order to make a statement and answer questions.
The PAP committees concerned shall seek to ensure that the director of the African Currency Board provides them with regular and timely information on the development, conduct and implementation of the African Union's current and past fiscal and monetary policies, on outcomes envisaged under those policies, on any other considerations relating to the implementation of actions under that policy, and on the condition of African financial and monetary assets, including facilities and staffs, on the use of the AU single currency, changes to statutes governing African banks, changes in the powers of the African Currency Board to supervise financial institutions, as well as on agreements concerning exchange-rates between the African and non-African currencies.
At the discretion of parliament, the directors of the African Currency Board, and of other fiscal and monetary institutions such as the African Development Bank, shall be invited to each plenary debate that involves trade, integration, fiscal and monetary policy.
The directors of the currency board shall report periodically, on the goals and the action of the board, to the PAP committees; in particular the Chair of the PAP Finance Committee shall invite at least once a year the directors of the African Currency Board to come and present before the Committee the policy that the board intends to follow relative to the fixing of interest rates, relative to single currency trading for the purpose of reinforcing direct face-to-face commerce, as at markets.
The African Currency Board shall, after consulting with the President of the PAP, fix the exchange rates of the currencies of the AU Member States into the AU single currency on 1 January 2005.
The PAP shall hold an annual debate on the main aspects, basic choices and implications of the common currency, as well as on fiscal and monetary policy.
The committees responsible for the AU fiscal and monetary policy may draw up recommendations to the Assembly, the AU Commission, the AU States authorities and other institutions, in their areas of responsibility after obtaining authorization from the PAP.
The AU Commission, the NEPAD Secretariat, and other organs of the AU must report to Parliament on all major decisions and developments in the field of general economic policy. The PAP must be informed of any decisions taken by a Member State, or regional economic grouping, in monetary and fiscal policy. These may form the basis of reports by a committee of the Parliament, a debate by Parliament as a whole, in public, or a resolution adopted by Parliament as a whole.
The PAP can make recommendations for monitoring, for publicizing, and for action to be taken and sanctions imposed as a last resort, against state and municipal governments that incur excessive deficits through borrowing that threatens the economic stability, economic growth and integration of Africa. In exceptional circumstances, the PAP may suspend the free movement of capital, or certain categories of goods, within the AU or to overseas countries, in order to protect Africans from monetary and fiscal violations by international, regional, state or local authorities.
When a recommendation for action against a particular region or state has been made public, the President of the PAP may be required to appear before the competent committee of Parliament, following which the committee may make a recommendation or resolutions for a vote by the whole Parliament.
Proposed regulations and measures to help citizens on the introduction of the African Single Currency:
The PAP calls upon states governments and legislatures to enact and provide legal protection for consumers against abuses and fraud, which might be committed on/or as a consequence of the introduction of the Single African Currency;
The PAP calls upon states and regional authorities to ban clauses in standard contracts, which might enable parties to avoid obligations in the event of the African Single Currency replacing the states currencies;
The PAP encourages Central Banks to make conversion software available to financial institutions to enable any debtor or creditor to discharge his/her debt in the African currency of choice.
The PAP calls upon the states and banks to ensure that conversion between a currency of an AU Member State and the African Single Currency is free of charge. Conversion between participating currencies should be based on the official conversion rates, and any transaction costs separately identified.
Member States should take measures to ensure that, during the critical period when the African Single Currency is being introduced as legal tender, the display of prices in the Single Currency should not mislead consumers as to the actual value of goods or services purchased. In the transitional period following the introduction of the single currency, the following three prices might be indicated: (1) the selling price in the member state currency; (2) the selling price in the single currency; and (3) the price per unit in the single currency.