To what extent should African countries be obsessed with foreign currency?
When agro-based African countries embrace a foreign currency mentality, there is a serious danger of marginalizing the majority of economic actors like farmers who do not need foreign currency for their daily needs. It becomes difficult for people to be patriotic about their currency when the reserve bank is always focusing on foreign currency, to the point of setting up a foreign currency auction platform, in the case of Zimbabwe.
It is sad that African policy makers tend to be too much driven by quick benefits like foreign currency at the expense of non-renewables like minerals and soil nutrients that are being depleted in producing cash crops for the sake of earning foreign currency. Excessive pursuit of foreign currency explains why most African governments are not investing in value adding indigenous crops. Consequently, value chains for indigenous crops end up being too shortened compared to cash crops and a few staples like maize and wheat which enjoy the lion’s share of value addition technologies like processing machines.
The other flip side of financial literacy
Farmers should not be blamed for demanding payment in foreign currency when it has been turned into a commodity. In fact, by establishing an auction system for money financial authorities are sanitizing the black market which is also a competing auction. In the past decades, ordinary people did not worry about knowing the exchange rate until the introduction of the multi-currency regime. They just knew that money is money and not something to be auctioned like goods.
When the majority become financially literate, the temptation to become forex dealers who manipulate exchange rates increases. Eventually, the Reserve Bank loses power to many actors dealing in foreign currency across the country including rural growth points. Financial authorities should realize that there is a difference between regulating and providing an enabling environment. If the regulatory environment becomes exclusive like in the case of Zimbabwe where only a certain class of economic actors are allowed to access foreign currency on the formal auction system, such a practice gives birth to under-ground markets.
Importing is killing local food systems
The comparatively low support and prices offered for small grains and legumes is an indication of less interest compared to cash crops whose marketing season is covered by the national media daily. By using foreign currency to import food that should be produced locally, African policy makers are killing local food systems. That is why a lot of land in dry regions now remains fallow because farmers are not getting the value of producing commodities whose surplus has no market.
On the other hand, there is still no explanation why irrigation is only about cash crops and wheat, not for small grains and other indigenous commodities which do not even need a lot of water compared to cash crops whose only advantage is bringing foreign currency. If it is possible to have huge estates for sugar cane production, why not have huge estates for small grains and other indigenous crops?
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