Why is Sierra Leone’s currency worth so little?: the paradox of The Thing

(If you can’t stream the video, check this website for a transcript.)

This video brings up many good points but I am going to let you decide what those are for yourself. The thing I would like to talk about is this question she asks “How come 5,000 units of our currency is worth only one of yours?” She’s definitely right about African countries having a huge share of the global gold reserves while still having some of the weakest currencies. And so despite our material wealth, what else lends to the value or lack thereof, of our currencies from Cape to Cairo?

One thing that Wiilliams does not go into is that gold reserves are not all that lend value to a currency. At the base of it, currencies really just have the value that we lend to it. To give a very current example, the Zimbabwean Reserve Bank recently announced plans to introduce a bonded note in a bid to decrease the high use of the United States Dollar (USD) in the country. Their plan is to promote the use of the South African Rand considering that South Africa is our biggest trading partner. Many Zimbabweans are against the idea because, to many, it seems a return of our own currency. The idea of own currency strikes fear and a lot of mistrust stems from the infamous 2008 crisis. But while the rejection of any Zimbabwean currency seems justified, there has also been widespread dismissal of the Rand as a currency strong enough to boost the economy. Most critics have made it clear that despite the little long-term value it has added as a central currency to the Zimbabwean economy ,its higher relative worth makes it a better option to the Rand. But what makes the US dollar so valuable? The US currency is in fact not backed by anything other than “The full faith and credit of the US government.” That means no gold reserves, nothing. Just the full faith and confidence in the money. And on the global market, the more people that opt for the US dollar over another currency, the more that the US dollar is valued.

With this context about currency being as worthy as we make it, Williams’ talk thus becomes interesting is when she talks of how the Folorunshi Creative Collective now sells to “luxury fashion stores in Paris, New York and Berlin.” Despite her belief in the riches on the African continent, Williams does not name a single African fashion store that they sell to. Maybe they do sell to African fashion houses,  but even so, none of them are apparently big enough to mention in this lineup.

If the African Development Bank is to be believed one in every three Africans today is part of a growing middle class. And even a quick look around the Charles De Gaulle aiport recently revealed a class of obviously well-to-do Africans clutching their telltale shopping bags from the high priced Gucci airport store. Why does Folorunshi feel that it’s biggest market is outside the African continent? Why do Africans with the means fly to other continents to do their shopping outside the continent? How do we have these two meet? One brings the demand for high quality goods, one the supply.

Let me know what your own thoughts are below. What do you think about Williams’ talk, or even Zimbabwe’s current situation?