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  • 1. Rebuilding SocialCapital in the Spirit ofUbuntu The Potential of Community Currencies in Pioneering Sustainable Development in Africa International Conference on Community and Complementary Currencies Joel Thompson February 2011Source: NEF’s Happy Pl a net Index 2.0 (2009), p.25[http://bi t.l y/SuNOo] 2
  • 2. AbstractOne of the most exciting frontiers in the ‘what next?’ chapter of the alternative currencymovement is the potential for complementary and community currencies to drivesustainable development in sub‐Saharan Africa (SSA). Conditions are ripe for communitycurrencies to drive sustainable ecosystems and human well‐being in SSA given sociological,anthropological, cultural, ecological, economic, financial and ethical considerations andrealities.Community currencies in Africa, underpinned by the values of the traditional indigenousculture of ubuntu, will play a vital role in forging a new model of development based uponsustainability, self‐sufficiency, healthy growth, human dignity, sacredness of life,cooperation in balance with competition, and ecological and environmental restoration. Ahuge opportunity presents itself to reverse Africa’s misfortunes and see it blossom into acontinent of lasting hope – and even leadership. Sections Introduction 3 The Money Problem in Africa 4 The Liberation of Ubuntu: Community Currencies 12 Conclusion: Turning Potential into Opportunity 17 2
  • 3. References 181 IntroductionCulture is perhaps the most powerful force in determining change. ‘As within, so without’, so thesaying goes. What Africa has within is very precious. Tragically, it has thoroughly and systematicallybeen neglected, attacked, victimized, condescended and undermined to the brink of extinction. Yeta culture practiced for tens of thousands of years and handed down over hundreds of generations cannever be removed entirely by colonization and foreign cultural, political, economic and socialtransplants. It remains locked away in the African collective unconscious and the living memory of anincreasing few. It is even practiced in shrinking pockets of African society today that remainuntouched by modernity. What is ‘it’ that is being referred to? ‘It’ is the indigenous culture of theBantu people, known as ‘ubuntu’.Ubuntu has no direct definition and the culture does not belong solely to the Bantu people. Instead itreflects truths valuable for a harmonious and prosperous human existence embedded in traditionalAfrican societies as to how to be, relate and do. A concise translation might be ‘I am because you are,and you are because I am’.Ubuntu is very much a social culture: I am human because you are human; your hunger is my hunger,your joy is my joy, your child is my child and your progress is my progress. In other words, it is aculture of love, and inherently unselfish. The kind of community that it takes care of is one whichreflects the etymology of the word ‘community’: the unity and fellowship of all. The community isnot an artificial institution created to organize and govern political‐economic life but a natural humanorganism that outlasts the life of its constituents and takes care of future generations.With this in mind, an appropriate community currency in the African context would work best if it issocially inclusive. A social culture is best served by a social currency. What Africa has at the momentis a myriad of socially exclusive monetary systems which privilege the minority elite at the expense ofthe majority poor, and show little care for issues of maintaining a strong and stable state or lastingprosperity.This paper examines obstacles to development caused by monetary systems in thepost‐independence and contemporary African context. It then looks at the role communitycurrencies can play in restoring the socially beneficial aspects of ubuntu for sustainabledevelopment. It makes some concluding observations on the potential for Africa to turn around itsmisfortunes through a grassroots community currency movement. 2
  • 4. 2 The Money Problem in AfricaThe vicious cycle of poverty and underdevelopment in Africa draws its strength from ‘the moneyproblem’. Since political independence, monetary and financial systems instigated and controlled byinsiders and outsiders have brought Africa to its knees and condemned it to beggardom and oblivion.Surprisingly little has been written on the impact of the money problem upon development in Africa.I will therefore confine this section to a summary of how the money problem has played out incontemporary Africa (Kenya is used as a predominant example; parallels and commonalities acrosssub‐Saharan African countries abound): 1. Liquidity and scarcity of money: problems of the poor What? Poor liquidity and scarcity of money causes poverty despite vast amounts of (unmonetized) wealth in rural areas and among the majority poor in general. Why? Whereas the economies of Western countries are oiled by credit, the African commercial banking sector is relatively underdeveloped. Since, for example, 90‐94% of Kenyans do not have a bank account,1 and a similar percentage have no access to bank credit, the majority poor do not have access to the principle method in which money is created (credit). Analysis Even the pitiful amounts of currency (notes and coins) circulating cannot be guaranteed to stay within and serve an African community or country. The upthrust is for currency to return to the banks in their service to the minority elite. The banks’ monopoly on the creation of money is not designed to service the needs of the majority poor because banks are not interested in the profitless provision and circulation of currency. It is by extending credit that banks make a profit. Banks in Kenya withdraw money from circulation in order to increase lending to the minority elite who make use of bank credit. They do this by offering plump savings rates of 1%‐2.5% to Kenyans willing to make a deposit. Banks’ high demand for currency is additionally driven by 1) consumer demand for currency speculation – the practice of withholding money from the market for private gain (a rampant practice in Kenya), and 2) in order for banks to gamble on the money and foreign exchange markets (also a rampant practice in Kenya). Credit provided to and by the poor from microcredit and microfinance schemes does not address the scarcity of money and may actually1 Sam duPont (2010), p.3. Financial Post [of Kenya] (September 2007), p.5 2
  • 5. perpetuate inequality.2 Result 1. The transfer of money to the rich is thoroughly incentivized and systematized. The majority poor, entirely dependent on currency as means of exchange for a livelihood, suffer at the hands of usurious and parasitic practices that exploit the store of value function at the expense of money’s medium of exchange function; which most rely on to survive. 2. Ordinary Africans have to make do with the small amounts of currency put into circulation from converted foreign currency earnings (such as from tourists and expatriates), remittances (which may originate as national or foreign currency) and meager amounts of currency sold by the Central Bank to commercial banks that are spent into the general economy. Even then, this currency most often circulates among the richest community members.3 3. Since the currency that is issued and circulates is enormously insufficient for the ordinary poor to get by, huge rural‐urban migration (or rural‐Nairobi, in the case of Kenya) takes place as the poor search for medium of exchange.4 An exodus of men, women and children abandon the land. 4. In the rural areas, scarcity drives inter‐tribal animosities and flares land grievances, aggravated by politicians favoring a ‘divide and conquer’ strategy to monopolize power.5 5. Social and cultural degeneracy are rampant, particularly in urban areas, where ubuntu and social cohesion are swept away by the impulse to fight for what little money there is in order to survive. Exploitative business practices, cattle rustling and criminal activity prevail. 6. Huge amounts of wealth are sold off for less than their true value in order to obtain medium of exchange (land for example). Wealth is therefore transferred to the rich leaving the ordinary poor increasingly with not only no medium of exchange but nothing of value to exchange either. Absolute poverty grows. 7. Environmental degradation from the drawing down of common resources such as firewood, exacerbating desertification and climate change.62 Joel Thompson (October 2010)3 Elema Dido (Project Officer for Food for the Hungry in Marsabit district of Kenya) (personal communication,September 2010).4 As opposed to looking for work. This distinction is clearly made by Silvano Borruso (September 2010), p.45 The role politicians took in stoking the tribalized 2007‐8 post‐election violence in Kenya is just one example.6 Life‐altering climate change is already a common reality in Africa: ‘Crop farming is [now] hardly practiced inMarsabit because rainfall patterns have completely changed such that most of the time there are frequentdroughts or when it rains it floods, which is worse than droughts.’ Dido (September 2010). 2
  • 6. 2. Interest‐bearing debt: problems of the rich and poor What? The minority elite make use of the majority of the money supply (credit, which makes up around 90% of the supply in Kenya) 7 and are mired in debt. Why? High interest rates and limited lending. The banking sector fears the risks involved in lending to the poor (for political instability; crop failure; adverse weather; climate change; limited enforcement of debt and collateral collection). Analysis Although banks are trying to break into new markets by beginning to extend credit to small and medium sized enterprises (which the Central Bank of Kenya has encouraged by lowering fractional reserve requirements in recent years to increase the money supply),8 high interest‐bearing credit stays with the minority elite and a portion of the middle class. Rather than recycle it into the cash economy which the majority poor rely upon, it is spent abroad or on foreign imports; from Mercedes‐Benz cars to American cookies in supermarkets. The few consumables available for sale from Kenya’s chiefly agricultural economy are not high on the rich’s ‘wish list’ and there exists indifference, avoidance and even stigma towards patronizing local markets. Result 1. High interest lending (Kenyan banks typically lend at an interest rate of around 15%) limits returns from investment in Kenyan startups, keeping Kenyan industries unpatronized, underfunded or obstructed from markets. Instead, to repay interest, money must come from foreign exchange or be extracted from the majority poor – through speculation, cut‐throat business practices, extortion, racketeering, ensuring farmers remain price takers and other callous means.9 Ultimately currency is withdrawn from the economy of production, which the stability of Kenya and the livelihood of the majority of Kenyans rely upon, to feed the ‘bank‐minority rich credit circle’. 2. Spending from the bank‐minority rich credit circle transfers money to producers and suppliers outside of the country making local products increasingly uncompetitive and leaving viable businesses and business ideas chronically underinvested. 3. Lack of domestic investment opens up the country to more foreign investment which accrues profits and land to foreigners or foreign corporations, undermining7 Borruso (August 2009), p.38 The fractional reserve requirement has dropped from 6% in 2008 to 4% at present. Vimal Chudasama (TreasurySales Assistant Manager of Chase Bank Kenya) (personal communication, October 2010).9 Parastatals in Kenya used to enforce the sale of all surplus milk and coffee production to the state at belowmarket prices. This extended to a ban on replacing private coffee plantations with another crop to circumvent therestrictions. Worse still, delayed payments by the state to the producers – sometimes by a year or more –disrupted cash flows in order that bribes could be extorted from the farmers in return for due payment. 2
  • 7. local and national economies and sovereignty. 4. Life in the rural areas and among the majority poor is constantly degraded and undermined. The fight for survival intensifies, further aggravating social tensions, rural‐Nairobi migration and environmental degradation. Ultimately the whole country is increasingly destabilized (see results of ‘liquidity and scarcity of money’, above) 5. The minority rich and middle classes are in a precarious situation of unsustainable indebtedness coupled with no state welfare or personal safety nets to protect them from a dramatic fall into poverty upon default (a savings culture is virtually non‐existent). The price they pay in the mean time is debt slavery; the price the poor pay for freedom from debt is poverty. 3. Interest‐bearing debt: problems of the government What? Unsustainable debt servicing and repayment. Why? The government must continually borrow to service its debt, since revenue is insufficient and the economy suffers a chronic shortage of credit money. Analysis Without abundant credit money flowing through the economy, Africans are hugely reliant on government to decrease poverty and improve livelihoods. But with no alternative to raise revenues than to take on debt, governments since independence have become hugely indebted in order to finance annual budgets that barely keep the state’s head above water. Government securities are issued to pay the interest on public, private and external debt. Revenue raised from securities might then be invested in infrastructure that guarantees a return on the investment for interest/maturation payments of the securities issued. For example, the government of Kenya issued an infrastructure bond to fund the flyover currently under construction in Nairobi. Users of the flyover will be taxed (pay a toll) to service the government debt taken on. Since the government needs a return on its infrastructural developments to service the securities at and before maturation, taxable investments like a flyover are preferable to, say, an investment in improving access to basic health care, since the beneficiaries will be the majority poor who do not pay income tax.10 Therefore, paying for the health of the poor ‘doesn’t pay’. The government of Kenya will spend $850 million (about 3% of GDP) on servicing its public debt in the 2010/11 fiscal year, while public debt grew by 6% from $8.2 billion to $8.7 billion in the 2009/10 fiscal year.11 Bonds that mature must be replaced and10 Either for reasons of exemption (legal) or avoidance (illegal).11 Jevans Nyabiage (October 2010) 2
  • 8. new bonds issued to service the debt and at the same time maintain revenues. Government debt will increase and can never be paid off.Result 1. Interest payments ensure hundreds of millions of dollars every year are diverted away from public spending. A 2005 report on debt sustainability by the African Forum and Network on Debt and Development (AFRODAD) puts it plainly: ‘In Kenya, debt service has crowded out funding for capital and social expenditures. After debt servicing and salaries, there is little left for core functions of the government, basic infrastructure, education, health and other essential services to create an enabling environment for the private sector.’12 2. A useless attempt to ‘develop’ a continent from scratch using a Ponzi scheme (pyramid) model of economic development. While the Ponzi scheme is a standard monetary mechanism today around the world since banks have a global monopoly on the issuance of money (at interest), in the case of Africa the difference is twofold: a) Suffering is not just limited to foreclosures and bankruptcies but rather swathes of people who have their environment, traditions, ancestral land, culture and possessions snatched away from them. 50 years of riding this rollercoaster has brought death and destruction on a scale unfound in any other region of the world. b) Entering the United Nations as the world’s youngest and most immature states, the African countries have used ‘Ponzi economics’ as the engine to kick off their economic and human development. Foreign currency earnings from exports have only ever been siphoned off, wasted, spent or hoarded abroad, or pumped into government coffers to keep the Ponzi system going. It is not surprising then that fifty years of political independence has been tantamount to fifty years of spectacular human and economic failure. Older nations, states and civilizations at least had the advantage of building their economies using a money system that did not collapse by definition; the gold standard, colonial scrip, bills of exchange, barter networks and religious bans on lending at interest being some examples. 3. The poor, again, are victims of forces beyond their control. The irony is that the resultant poverty has accustomed the majority poor of Africa to daily activities which produce a low ecological footprint – a blessing and good station to innovate a path to improved, sustainable human well‐being that does infringe damagingly upon the Earth.12 AFRODAD Kenya (2005), p.3 2
  • 9. 4. The land question: problems of the poor What? An alien idea to ubuntu, private ownership of land was a colonial introduction (now institutionalized in Africa) that is intimately connected with the money problem. The non‐utilization, under‐utilization and usurious utilization of land have lead to highly destabilizing conflicts over land that have been raging for decades across the continent. Why? Land is needed for food; agricultural products and animal products are needed for subsistence and income. Food, then, is a form of money for the rural‐based majority. 13 Hence, control over land is akin to control of money and control over lives. The conversion of communal land to private land was introduced, legitimated and institutionalized by colonial rule. The fundamental mistake from which all the problems outlined in the analysis below stem is the unnatural introduction of private ownership of land, for private use and private gain rather than free land for the benefit of the people, which was the cultural tradition.14 It is important to remember that the economies of Africa’s countries remain largely undiversified rural, agricultural, pastoralist economies.15 Therefore, privatization of land for private use and gain is a privatization of the largest sector of Africa’s economy, and the lives of the majority Africans who work in it. In other words, it entails serfdom and a privatization of life itself. This is utterly opposed to the principles of ubuntu. Analysis When land is controlled by private interests there is no imperative for the owner to work the land or have the land worked. A better profit can be made by speculating, renting the land or exacting payment from those who utilize it. One way this occurs in Kenya is the non‐utilization of land in areas peripheral to the city, depressing agricultural wages for farmers who must pay middle men or the transport costs of produce reaching the city markets.16 Another example is, since a title deed is only as good as the force with which one can defend it,17 land grabbing occurs, particularly aggravated by events like the 2007‐8 electoral violence in Kenya in which inter‐tribal violence, forced evictions and threats13 ‘When land, instead of being widely distributed, is grabbed by a powerful minority, it becomes the mostprofitable type of investment...Food is a form of money. Subsistence agriculture and barter are two of the threefactors (the other is bills of exchange) that prevent usury from raising its claims higher than it can. That is alsowhy money manipulation has successfully driven millions of small farmers out of their land throughout the 20 thcentury.’ Borruso (November 2009), p.1514 Vincent Omwenga (personal communication, October 2010)15 70% live in rural areas according to the World Bank.16 Borruso (September 2010), p.517 Ibid. 2
  • 10. of violence created tens of thousands of internally displaced people, many of whom today remain displaced and dispossessed. It is also a ubiquitous practice for land owners that allow cultivation or settlement of the land to pay their workers rock‐bottom wages, extract high rents and leave areas uncultivated in order to keep the workers and tenants desperate enough to continue accepting rock‐bottom wages and increasing rents. This increases unemployment and is exacerbated by the employment of highly intensive capital. Population growth exacerbates land pressure only because of the title deed (i.e., private land ownership), since the population requiring land directly (for cultivation, development) or benefiting from its utilization indirectly (by lowering the price of food to an affordable level) grows faster than land availability, concentrating land ownership in a shrinking percentage of the population. This is not to say there is not enough land in Kenya to support its growing population, it is simply a question of equity.18 Besides arable land, pasture and settled land; the decimation of woodland, forest and rainforests for private or corporate gain increases floods, soil erosion, desertification and climate change, all to the detriment of those on the precipice of survival. Result 1. The majority poor who live off working the land – some owning dozens of acres of good land – suffer depressed prices which, compounded by the money problem at large (described in parts 1‐3 above) and counterproductive laws (described in part 5 below), force them to abandon the land and move to cities.19 This is a continent‐wide phenomenon. 2. Inequitable ownership of land. More than half of Kenya’s arable land (which covers 17% of the country)20 is owned by the minority elite – more often than not members of the extended family of the two former presidents, Jomo Kenyatta and Daniel Arap Moi.21 The majority of it is unutilized, underutilized, utilized for exports only or purely for private gain. 3. The parcelization of land by rich or poor limits food production capacity and creates a vicious cycle of land pressure, land degradation, biocapacity depletion, and poverty; constantly exacerbated over time.22 Rapidly growing populations have not been the18 The new constitution of Kenya takes aim at this problem by demanding parliament ‘to prescribe minimum andmaximum land holding acreages in respect of private land’ (section 68(c)(i)) and ‘to assess tax on land andpremiums on immovable property in any area designated by law’, which might be applied to under‐utilized land(section 67(2)(g)).19 Borruso (August 2009), p.320 Martin Meredith (2006), p.29021 Otsieno Namwaya (1 October 2004)22 Meredith offers a summative analysis of this cycle (pp.290‐1), although appears to misattribute the cause topopulation growth. 2
  • 11. cause; the cause has always been the unnatural private ownership of land – the crux of the ‘land question’. 4. The title deed allows multinationals and foreign corporations to buy up land on favorable lease terms, employ producers on their own terms and take advantage of the precarious situation African farmers find themselves in. 5. Law: problems of the poor What? Inappropriate laws, counterproductive taxation, bureaucracy and lawlessness Why? The money problem is exacerbated in Africa by a system of laws, taxation, bureaucracy and lawlessness which affect how money circulates and what it is used for. Analysis Some laws are simply bad laws which encourage corruption. The Ndegwa Commission in Kenya in 1971 legalized the pursuit of personal business interests by MPs, precipitating: ‘…the decline of fiscal discipline, and […] the undermining of the Kenyan state apparatus in general…Corruption and conflict of interest in the upper levels of state management was a reality in Kenya before the Ndegwa report, as was indicated in constitutional amendments empowering the national leadership in effect to defraud the treasury at will. What the commission’s recommendation did was to spread this addiction to the entire Kenyan civil service.’23 Fiscal indiscipline, impunity from law and flouting the law are favorite pastimes of African civil servants and politicians; the most notorious plunderer of all being past dictator of Zaire, Joseph Mobutu. The unaccountability of governments and the self‐aggrandizements and personality cults of African leaders like Mobutu and Macias Nguema of Equatorial Guinea are behaviors learned in part if not whole from the former colonial masters (or American masters, in the case of the founders of the Liberian state). In other words, colonial rule legitimated undemocratic, exploitative one man or minority rule. Taxation and bureaucracy has largely served to transfer money from the poor to the minority rich and middle classes by punishing value‐added activity rather than punishing activities which subtract value from land, natural resources, human capital, self‐sufficiency and poor governance. Compounded by bureaucracy and corruption, many prefer to stay in the tax‐free informal sector and pay bribes to stay in business. As for the rich, Kenyan MPs since independence have enjoyed exemption from tax on their enormous expense/benefit payments. The dawn of Kenya’s much triumphed23 David Himbara (1994), p.122 2
  • 12. new constitution changes this, requiring MPs to start pay income tax. However, bills have been rushed through parliament to increase MPs’ monthly salaries by more than the amount due to be paid in taxes!24 This means that Kenyan MPs that once received a $127,000 largely tax‐free salary will now be paid a cool $130,000 annual salary after tax. Inflated salaries of the civil service, whether taxed or untaxed, are a hidden form of tax exemption that robs from the poor and severely dashes faith in the intentions of government. Among the francophone countries of west and central Africa who use the WAEMU CFA franc and the CEMAC CFA franc respectively, the monetary policy of 14 countries with a combined population of about 135m is (ostensibly) in the hands of two central banks: one operating the WAEMU CFA and the other operating the CEMAC CFA. In reality, however, monetary policy is in the hands of the French Treasury, through a colonial‐era law which mandates 85% of the central banks’ foreign exchange reserves to be kept in its operations account, under its own authority.25 Result An environment which fosters corruption, tax evasion, unemployment, a thwarted informal business sector, counter‐productive taxation, absent monetary policy, and the national and global transfer of money and wealth from poor to rich.3 The Liberation of Ubuntu: Community CurrenciesThe money problem in Africa must be tackled at root. Social currencies designed to fit and revive thesocial culture of ubuntu must have objectives linked to the restoration of community, dignity,abundance, identity, justice, equality and the priceless social capital that once engulfed Africa not solong ago.Production, consumption and behavior which have social costs – including lost lives, opportunity,dignity and increased dependence on outsiders – would need to be internalized and made financiallyunrewarding. Conversely, work that provides social benefits and enhances self‐sufficiency andsustainability but is disincentivized at present by meager, unreliable salaries or unpaid positions(those of teachers, nurses, carers, volunteers, conservationists, organic farmers and road sweepersamong many others) would be the most financially rewarding. Community currencies andcomplementary currencies for businesses should be designed in such a way as to maintain Africa’sgift of an ecological footprint.24 Alphonce Shiundu, Peter Leftie (30 June 2010)25 This astounding revelation can be read in detail in Gary Busch’s article (18 May 2008). Busch’s article updatesHolger Engberg’s earlier investigation (December 1973). 2
  • 13. It should be remembered that although Africa has a respectable ecological footprint relative to therest of the world, this does not mean that highly damaging human activity is not currently beingwrecked on Africa’s environment. It is, and on a worrying scale. It is therefore necessary that socialcurrencies are designed to restore and maintain Africa’s biosphere and the ecological goods andservices it provides. Such ecological goods and services need to be monetized to incentivize humanaction accordingly. A well designed social currency should relieve land and water bodies frompressures such as degradation, desertification, deforestation, habitat destruction, water pollutionand eutrophication.26In short, the function of social currencies for Africa is to condition a culture which restores ubuntuvalues and practices in order to maintain a cycle of human and ecological prosperity. Money can bedesigned to be abundantly available for this purpose, backed by the trust of those who provide realproductive value that is socially beneficial to the community.What precisely can community currencies do to achieve these things? 1. Monetize wealth in rural areas This means allowing people’s wealth to generate money which will then allow the money to generate further wealth. It allows the hard work of ordinary people to be rewarded by means of exchange which can be spent and circulated within the economy. 2. Monetize ecological goods and services Estimates of the annual value of goods and services provided by the Earth are in the trillions of dollars. Africa is a continent rich in biodiversity that provides much of this value. Monetizing the value of its rainforests, food chains, soils, woodlands, fisheries, rivers and rains would mean built‐in, added‐value costs for using these services according to the needs of the community and the needs of the biosphere. Pricing of these services will decrease when their usage meets the criterions of sustainability and self‐development for maximum social and ecological well‐being. 3. Provide credit to small and medium sized businesses (SMBs) SMBs in Africa are needed to increase and diversify employment and improve indigenous business capacity and service provision. But African SMBs face massive cash flow problems because of delays in payment for goods received and reliance on scarce, unreliable and extortionate outsider investments that have made it difficult to stay in business. A complementary currency can solve the cash flow problem based on the proven models of the WIR in Switzerland or the C3 (Commercial Credit Circuit) in Uruguay by extending interest‐free26 Eutrophication is the hypoxia (de‐oxygenation) of water that contributes to the growing oceanic ‘dead zones’around the world (see map: It is caused by nutrient and fertilizer run‐off into water bodieswhich stimulates ‘algal blooms’, since algae feed off the nutrients. The bacterial decomposition of the algaedepletes the water’s oxygen, killing or forcing away aquatic life. 2
  • 14. credit to businesses in times of need.27 4. Digitize money to improve liquidity The launch of a mobile phone method of transferring money called ‘M‐Pesa’ launched in Kenya in 2007 by Safaricom has been hugely successful in improving liquidity in rural areas. Mobile‐to‐mobile transfers are cheap and balances can be cashed for the national currency at any one of thousands of agents dotted around the country.28 For maximum benefit, currencies would need to be digitized to improve liquidity, circulation and safety (digital money is much safer than travelling around with cash). 5. Monetize trust Community currencies are backed by existing goods and services or a claim on their future delivery. They are therefore backed by trust because buyers and sellers must meet their obligations to provide goods and services as promised and of the quality expected. Defectors may be excluded or suspended from participation in the currency. Given the benefits of participating in a successful community currency, persons will seek to build and maintain local networks of trust. The cost of defaulting on a payment is a cost borne by the community through a breakdown of trust. In the case of a complementary currency like C3, a guaranteeing institution exists to protect participating businesses against loss from defaulters. 6. Utilize demurrage: a fee for holding onto the money At the grassroots level from which the community currency movement is to be born, the need for demurrage (negative interest for holding on to money) will vary. African communities do not have a savings culture and are in desperate need of cash to make transactions to live day‐to‐day. Applying negative interest to a community currency may have no beneficial effects since hoarding is not a problem among the majority poor. There is likely no bank account in which the currency might be deposited and interest earned. But if it were to be a problem among certain parties, case‐by‐case punitive measures might be taken (a digital currency will make transparent the currency holdings of participants to monitor this behavior). As the currency grows to include middle classes and richer folk, demurrage will likely be a necessary measure to prevent hoarding and socialize the behavior of the richer participants. A mutual credit (credit clearing) currency system like LETS might be preferable since it makes hoarding impossible and the currency inherently inflation‐free. 7. Economic independence27 Lietaer et al., ‘Is Our Monetary Structure a Systemic Cause for Financial Instability?’ (April 2010), p.18; Lietaer,‘The Commercial Credit Circuit – C3’ (April 2010)28 M‐Pesa survived despite an attempt by commercial banks’ to have M‐Pesa squashed by the Central Bank.Recently M‐Pesa has partnered with Kenya’s Equity Bank to form M‐Kesho, which combines M‐Pesa money storedon a mobile telephone with an account at Equity Bank. 2
  • 15. This applies to self‐sufficiency at the community level through limiting circulation and liquidity to the local economy (since the currency is not valid outside of it) and national self‐sufficiency (economic independence) through a) a multitude of self‐sufficient communities operating their own community currencies, and b) the freedom of all (including government) from the interest burden applied to money as it is currently issued by domestic and international creditors. Economic dependence on credit, aid and unwanted foreign investment can come to an end. The Ponzi scheme can be abandoned and the economy built upon real productive value. 8. Democratize money and foster a culture of freedom Community currencies belong to and serve the people who use them. They are responsive to the needs of the people and designs can be tweaked accordingly. Such ‘free money’ is economically empowering and dignifying to the ordinary man or woman. The democratization of money at the grassroots can begin a psychological shift to a culture of freedom, transparency and accountability in government, churches and other institutions which affect the lives of ordinary Africans. This is important because African countries at present have limited cultures of freedom. 9. Better employ its participants Full and gainful employment comes with the stimulation of the local economy. Community currencies are designed for this end. The abundance of money frees up a proliferation of trade, increasing employment. This then spurs a growth in assets, wealth and capital expenditure encouraging more trade and more employment. Money will always be abundantly available for those providing value to the community and, given that there is an infinite amount of work to be done, there is an equally infinite amount of paid work for any capable man or woman. A growing division of labor and maximum use of community resources is the result. 10. Answer the land question The desire of all within the community becomes the maximum use of land, labor and capital for full returns, employment and social benefit. Owners of idle land would therefore be encouraged to have the land put to use. However, problems of the increasing parcelization of land, inequitable ownership, and other problems summarized on pages 23‐4 are left unsolved. Ultimately, the solution is to end private ownership of land and instead hand it over for the benefit of the community according to the fundamentals of Silvio Gesell’s ‘free land’ concept,29 Margrit Kennedy’s land reform ideas,30 or Community Land Trusts (CLTs).31 Free land to unite the eternal nature of land with its eternal belonging to the eternal community is the solution. Free land was the bedrock of ubuntu culture, providing vitality and stability to traditional African communities for millennia.3229 Silvio Gesell (1906), Part II30 Margrit Kennedy (1995), pp.16‐1831 Susan Witt and Robert Swann (1988)32 Tribal fighting for land occurred ‘to a minimal extent because land then was not a big problem, it was free.’ 2
  • 16. 11. Provide social welfare African communities can leapfrog the savings culture of other countries through community currencies which allow in‐kind payments for health care, care of the elderly, education and so forth. For instance, a youth may earn ‘health credits’ to pay for his or his family’s present or future health or personal care needs by providing care to others while healthy. Savings could not be eaten up by inflation. Similarly, positions which provide maximum social welfare, such as teachers, nurses, carers, conservationists – even civil engineers and builders – would be highly paid positions of prestige. 12. Take advantage of Africa’s demographic boon With a median age of below 20 years, Africa should be experiencing a demographic boon that is the envy of the world (see figure below). But this boon is being wasted and proving to be more of a burden. Community currencies can turn Africa’s mass of idle and restless youth that lack hope, direction and self‐belief into an army of workers that can be employed, make a living, care for their dependents and do great things for their communities and their country. It is on the backs of burgeoning youth populations that virtually every successful economic record has been built.33 The continent has enormous amounts of work to be done to improve human and natural life and it has the people to do the work. What is missing is abundant money, something which community currencies can solve. 13. Reforming EducationOmwenga (personal communication, October 2010).33 The first census in the United States, in 1790, just before the industrial take‐off of the United States, recordednearly 50% of white American males to be aged less than 16 years. A more recent example is China’s remarkablerecord of economic growth or, conversely, the fear that ageing populations in Europe will bring economic decline. 2
  • 17. Inspiring and preparing the children and young people of Africa to tackle the growing crises that overshadow their families, communities and countries will require a significant overhaul of the continent’s anachronistic education systems. Community currencies can serve to stimulate the necessary reforms in part by virtue of the change they will bring to the economic environment (community currencies should stimulate a commensurate change in curricula towards, most likely, vocations of service) and in part by introducing, for example, credits for schools which promise the best qualified and most needed human capital. These would serve as additional salary benefits to teachers which can be spent in the community.34Besides all these reasons, the African socioeconomic environment is moreover well suited to theintroduction of community currencies because: 1. The financial system in Africa is largely underdeveloped and has yet to take hold of the majority of the continent’s population economically 2. African societies have yet to become ‘consumer societies’ in which the hallmark of the society is wanton consumption and hypermaterialism 3. Africans at present mostly produce locally and consume locally 4. Africans living in poverty often out of necessity adapt a resourceful approach to living; with implicit or explicit awareness of the profound need for sustainable use of scarce resources 5. The ‘small change’ activities of community currencies like LETS in Western countries may be life‐saving or living‐making activities for poor participants in African communities.4 Conclusion: Turning Potential into OpportunityDevelopment is the application of the criterions of sustainability and self‐development to humanactivities which bring about ecological and human well‐being and prosperity. The countries of Africahave the opportunity for positive, lasting change through reviving the practices of their embeddedindigenous culture – ubuntu.But the opportunity will remain untapped potential until ubuntu can find an engine to give it life inthe modern world. This is a role community currencies can take on. By doing so, the money problemcan begin to be solved.The success of community currencies will hasten the liberation of ubuntu if the designs arecompatible with characteristics of ubuntu. If they are well‐designed and flexible, they will liberateubuntu and transform the lives of those involved. Given the vast potential, African communities andeven entire countries are in a prime position to take the lead in forging a new roadmap fordevelopment. Indeed, there is a unique opportunity for Africa to contribute something great to the34 See Borruso’s interesting idea of ‘Self‐Help Education’ (SHE) coupons to fully monetize the value of educatedhuman capital (October 2004). 2
  • 18. world, something the rest of the world can admire, if not learn from.There are no instances as of December 2010 of a single community currency or combination ofcurrencies working together that has/have achieved radical success through integrated developmentsolutions in Africa. One community currency worth monitoring over the course of the next few yearsis Eco‐Pesa, which started up in the summer of 2010 in Kenya, a ‘community business voucher tobenefit the environment and economy of Kongowea, a (slum) district of Mombasa.’35Significant obstacles remain. One is designing community countries that liberate ubuntu but balanceit with values and practices which are relevant and useful to the modern era. As Chiku Malungacomments: A rediscovery of ubuntu, its positive attributes and how to employ them in economic development is a major challenge on the continent…The challenge facing ubuntu today is that it has generally failed to change with time and transcend the stable and predictable context to ensure continued global relevance.36Malunga is aware that the traditional environment is long gone and ubuntu must adapt accordingly.Community currencies should therefore not chastise personal ambition, the knowledge‐basedeconomy, information technology, and so forth. The question is ‘how can we use ubuntu to achieve astable and predictable context in the future from an unstable and unpredictable context at present?’As ever, it is about balance and common sense. The answer is not to retreat to traditional ways ofbeing, relating and doing but to move forward by transferring what is useful from the past forrelevance today. What is useful for today must be systematized in how our money functions.Therefore the challenge is less one of restoring the culture of ubuntu than it is one of restoring thespirit of ubuntu. Community currency designs should be tweaked accordingly.Time is running out to turn potential into opportunity. Biocapacity in Africa is falling while Africa’secological footprint is growing.37 Africa continues to desperately stagger towards an obsolete,inappropriate model of development propagated by Western countries among others. As a directconsequence, the human condition in Africa is getting worse, with the few success stories that existblown far out of proportion to the worsening situation overall. Pressure points and vulnerabilities areincreasing and climate change is radically reducing the viability of millions of people and the stabilityof their countries. Time is therefore short to take advantage of the opportunity. Communitycurrencies must be piloted as soon as possible and scaled up where they have external validity.References35 See the website for more information: Chiku Malunga (2010), p.5737 See figures 9a‐9d from page 20 of the Ecological Footprint Atlas to watch the movement of African countriestowards ecological footprint averages above the world’s limit from 1980‐2006. See 2
  • 19. African Forum and Network on Debt and Development, ‘The Challenges of Maintaining Long‐TermDebt Sustainability: the Case of Kenya’, 2005. Retrieve from:, S., ‘Self‐Help Education’, October 2004. Retrieve from:, S., ‘Property Rights’, February 2008Borruso, S., ‘The Money Question’, August 2009Borruso, S., ‘Economic Law, Ethics and Paradox: Is There a Way Out?’, American Journal of Political Economy, March 2005 (revised November 2009)Borruso, S., Commentary on J. Omolo, ‘Dynamics and Trends of Employment in Kenya’, Kenya Institute of Economic Affairs, September 2010Busch, G., ‘The Euro Crisis and Africa’, Ocnus, 18 May 2008. Retrieve from:, S., ‘Connection Technologies in U.S. Foreign Policy’, New Policy Initiative, 2010. Retrieve from:, H., ‘The Operations Account System in French‐Speaking Africa’, Journal of Modern African Studies, 11, 4 (1973), pp. 537‐545. Retrieve from:, S., The Natural Economic Order, 1906. Retrieve from: Footprint Network, Ecological Footprint Atlas 2009, 2009. Retrieve from: of Kenya, ‘Constitution of Kenya’. Retrieve from:, D., Kenyan Capitalists, the State, and Development, Nairobi: East African Publishers, 1994Kennedy, M., Inflation and Interest‐free Money, 1995. Retrieve from:, B., ‘The Commercial Credit Circuit – C3’, April 2010. Retrieve from:, B., Ulanowicz, E., Goerner, S., McLaren, N., ‘Is Our Monetary Structure a Systemic Cause for Financial Instability? Evidence and Remedies from Nature’, Journal of Futures Studies, April 2010. Retrieve from:, C., Oblivion or Utopia: the Prospects for Africa, MD: University Press America, 2010Meredith, M., The State of Africa: A History of Fifty Years of Independence, London: Free Press, 2006Namwaya, O., ‘Who Owns Kenya?’, East African Standard, 1 October 2004. Retrieve from: 2
  • 20. New Economics Foundation, The Happy Planet Index 2.0, 2009. Retrieve from:, J., ‘Kenya’s Domestic Debt Hits Sh700bn as Government Borrows to Pay Loans’, Daily Nation, October 2010. Retrieve from:, V., personal interview, October 2010Shiundu, A., Leftie, P., ‘Kenya MPs Vote for more Pay’, Daily Nation, 30 June 2010. Retrieve from:, J., ‘Microcredit and CC complementarity’, Weblog Entry, Ubuntupreneur, October 2010. Retrieve from: author), ‘Are Banks Big Profit Genuine?’, Financial Post, Issue 147, September 2007. Retrieve from:, S., Swann, B., ‘Land: the Challenge and the Opportunity’, 1988. Retrieve from: http://conferences.ish‐‐conf/2011/schedConf/presentations 2