Trading in Africa without currency

By Shelley Galliver

Our newest contributor, Shelley Galliver, looks at the difficulties of doing business in Africa.

There is currently a problem throughout Africa where we find that countries do not have access to foreign currency. This poses a real challenge for trade businesses that are buying products from South Africa or importing from overseas.

“Africa is not a place for sissies!”

We have seen this happen in Zimbabwe, Mozambique, and the Democratic Republic of Congo in recent times. This can severely impact on local business. Not being able to pay suppliers can hold back further shipments of stock, as well as not being able to secure physical cash in country from trading, as people’s ‘disposable income’ is depleted.

Some people seem to think this is caused by the governments having to pay the World Bank for loans provided and therefore use all the available currency to pay debt, leaving nothing but ‘fictitious’ numbers in the bank accounts, of money you have but cannot access. You are limited by what you are allowed to draw out of the bank on a daily basis. We find large international banks will often not deposit cash into the country’s Central Bank, as it doesn’t ‘come out the other end’, that is, it is often not paid to the relevant countries or companies.

So banks resort to flying out the physical cash in airplanes, back to South Africa. This surely also largely impacts on currency shortage. The people in country, who have physical cash to spend or are paid in cash, also become hesitant to invest it into the banking system, preferring to store it ‘under the mattress’ at home. Again, this leads to a drain of currency in the market.

But then we consider that so many countries are affected almost simultaneously. And, with the disinvestment of overseas companies and organisations, and the drop in copper and oil prices, which are key to the survival of single economy countries, perhaps we are seeing the effect of non-investment from outside African borders. So although we have an abundance of natural resources, without foreign investment to mine and develop these resources, not to mention the foreign markets purchasing power of these resources, Africa is stuck with a lot of potential and no means to do anything with it or even able to prosper on a local level because, let’s be brutally honest, cash is king and money makes the world go round, after all.

It’s not all doom and gloom, though. Companies that are already established in various African countries have learned to ride the wave of good times and bad, and perhaps have become experts in managing the crises. Supplier understanding of the challenges these businesses face is paramount, but these same suppliers will benefit when the economy turns, as this loyalty will always be rewarded. As they say, “Africa is not a place for sissies!”

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