Could Africa succeed in permanently ditching US dollar?

The economic landscape of Africa is undergoing a seismic shift, challenging the hegemony of the US dollar in international trade. With the BRICS alliance extending an olive branch to Ethiopia among other nations, the continent’s engagement in the de-dollarization discourse has taken a front seat. This move, far from being a mere diplomatic gesture, signals a strategic maneuver aiming to leverage Africa’s burgeoning economies and their collective discontent with the current global financial status quo.

The BRICS Expansion: A New Dawn for Africa

Following the 15th summit in Johannesburg, the BRICS bloc, known for its critique of Western-dominated financial systems, welcomed new members, including Ethiopia. This inclusion is not just about numbers; it represents a critical pivot towards Africa, a continent rich in resources but often sidelined in global economic policies. Ethiopia’s entry into this alliance could be the harbinger of a broader shift in Africa, where nations are increasingly vocal about their frustrations with the World Bank’s lackluster engagement and the stranglehold of the US dollar on their economies.

The World Bank’s apparent neglect has not gone unnoticed, with African leaders and financial experts advocating for a move away from the dollar-centric trade system. The echoes of this sentiment were loud and clear in the words of Kenyan President William Ruto, who vehemently called for the continent to embrace local currencies for trade, mirroring BRICS’ operational philosophy. This bold stance, celebrated by Kenyan lawmakers, underscores a growing conviction across the continent that reliance on the US dollar is a chain that needs breaking.

The Yuan’s African Odyssey

The presence of the Bank of China (BOC) in Zambia, with its facilities for yuan transactions, exemplifies China’s strategic push to embed the yuan in Africa’s financial ecosystem. Zambia, a key player in copper production, vital for China’s industrial needs, has become a focal point for this monetary diplomacy. The establishment of yuan-clearing arrangements in Zambia and other African nations reflects a concerted effort to provide an alternative to the dollar, thereby reshaping the continent’s economic engagements.

This yuan-centric strategy gained further momentum following agreements between Zambia and China, aimed at enhancing trade in their local currencies. Such moves not only diversify currency risks but also align with China’s broader objectives to diminish the dollar’s dominance in global trade, especially in the wake of geopolitical tensions and economic sanctions.

The issuance of yuan-denominated “panda” bonds by Egypt and the contemplation of similar financial instruments by Kenya highlight a trend towards de-dollarization. This shift is not merely a financial strategy but a geopolitical recalibration, offering African nations a semblance of autonomy in the face of a dollar-dominant trade regime.

The narrative of Africa’s financial emancipation is gaining traction, with more countries exploring yuan transactions and financial instruments. This pivot towards local currencies and the yuan, in particular, signifies a critical juncture in Africa’s economic evolution. It’s a testament to the continent’s quest for financial sovereignty and a reflection of the shifting sands of global economic power dynamics.

The journey towards de-dollarization is fraught with challenges and uncertainties. As Africa navigates this complex financial terrain, the implications of these shifts will resonate far beyond its borders, potentially heralding a new era in global trade and economic governance.