Nairobi. The African Development Bank (AfDB) is proposing an innovative currency model dubbed the "African Units of Account" (AUA), which aims to enhance financial stability by being backed by critical minerals such as cobalt, copper, lithium, and manganese. This initiative comes as Africa boasts approximately 30% of the global reserves of these essential minerals, yet it captures only 3% of global energy investments annually and a mere 2%, equivalent to $40 billion, of worldwide green investments last year.
The AfDB attributes this disparity to the continent’s erratic currency markets, necessitating a robust alternative. The AUA currency would be "non-circulating" and leverage pooled critical mineral reserves from participating countries, allowing for local currencies to be converted at an established rate.
According to the AfDB, ramping up clean energy investments on the continent is crucial, with a target of doubling these investments to an average of $200 billion per year to effectively reduce carbon emissions and enhance electricity generation.
The AfDB’s proposal is reminiscent of the Gold Standard that facilitated global currency stability, although no specific timeline for implementation has been provided. This concept revisits earlier frameworks like the CFA-Euro peg in Francophone countries, which is supported by external reserve pledges. The bank asserts that the proposed basket of critical commodities would maintain value more effectively than any single African currency.
Furthermore, there is a growing trend among emerging market nations to mitigate dependencies on the US dollar for trade. The AfDB emphasizes that the AUA could serve as a catalyst for attracting foreign investment into green energy initiatives by alleviating currency and convertibility risks.
Revenues from electricity sales denominated in local currencies would be transferred to a designated settlement agent, who would then convert the equivalent amount of minerals to generate dollars, ensuring repayment for investments in energy projects.
