Thread by @PeteLiquid

🌍Africa Ready to Test a Currency Backed by Strategic Mineral Reserves

Returning to Africa, gold, and cryptocurrencies

Africa's actions are aimed at reducing financial dependence on foreign powers and maximising the benefits from the continent’s natural resources.

Major African countries and regional blocs are backing an ambitious plan to create a "non-convertible" currency backed by reserves of critical minerals essential for technological development, defense, and economic growth.

Analysts believe that a commodity-based currency could reduce Africa’s reliance on foreign currencies—especially the U.S. dollar—and lessen its dependence on loans from China, Europe, the United States, and global financial institutions such as the World Bank.

According to a plan developed by the African Development Bank (AfDB) and KPMG South Africa, the proposed monetary unit will be temporarily named the "African Trade Currency" (AUA).

The new currency is supported by the African Union and South Africa, the continent’s largest economic power, and may soon be piloted on a test market.

Under the proposal, the AUA would be traded on the international foreign exchange market and would be less volatile than individual African currencies or the U.S. dollar, making it more attractive to investors.

Economists believe that backing the currency with mineral reserves could reduce the risks perceived by lenders, potentially leading to lower interest rates on loans for development projects—especially in Africa’s energy sector.

While some figures in Africa’s mining industry are optimistic about the potential of such a currency, others warn that China could "use it as a weapon," given Beijing’s dominant position in global supply chains for critical minerals.

The International Energy Agency and other organisations predict that demand for critical minerals such as cobalt, copper, platinum, and lithium will quadruple in the near future, as global powers race to secure supplies.

Africa is at the center of this competition.

It is the poorest and least developed region in the world, yet according to the International Monetary Fund, it holds nearly one-third of the world’s reserves of critical minerals.

These minerals are essential for modern technologies such as smartphones and computers, for electrical grids, and for weapons—including missile systems, fighter jets, and military vessels.

U.S. President Donald Trump has considered critical minerals vital to America’s future and has sought to secure their supply as quickly as possible.

The U.S. Geological Survey (USGS) lists 50 minerals essential to America’s economy and national security, including cobalt, lithium, manganese, platinum, tantalum, tungsten, and vanadium.

Most of these are mined in Africa.

For example, South Africa is the world’s largest producer of manganese and platinum; Zimbabwe ranks among the top global producers of lithium; and the Democratic Republic of Congo (DRC) produces about 70 percent of the world’s cobalt.

"A well-managed and structured currency for critical minerals could strengthen Africa’s position in global resource markets and allow the continent to leverage its abundant natural wealth," said South African economist Moeletsi Mbeki.

This is especially important at a time when the continent is striving to mitigate economic damage caused by global uncertainty due to conflicts and "market shocks."

"Considering the tariffs imposed by Trump, as well as the current and future global trade wars, this new currency might protect Africa from collateral damage," said Mbeki.

The proposal by the African Development Bank (AfDB) and KPMG states that the currency will be backed by a basket of some of Africa’s most important critical minerals and will form part of an initiative to create a "more unified and stable financial system."

The framework document suggests that key producers of critical minerals commit to allocating a pre-agreed share of their proven reserves to support regional financial integration, cooperation, and cross-border trade.

Muno Mupotola, Director of the AfDB in South Africa, said the bank is currently deciding which minerals will be included in the "test" list and plans to select a "pilot country" where a feasibility study for launching the new currency will be conducted.

Mbeki stated that the currency could help Africa gain control over its critical minerals and their processing.

"We have all these minerals, but we don't earn much from them because the value-added chain in Africa is extremely weak," he explained.

"We process less than five percent of these minerals within the continent, meaning the real profits go to foreigners—primarily China."

"If we can use a common currency to unite Africa’s mining industries and their governments, this would be a concrete step toward greater independence, more effective mineral processing, and increased revenue flowing into African national treasuries."

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