Unified EAC Currency & Logistics in Kenya: What’s in it For Us?

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December 9, 2013

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This past weekend was monumental in deciding the fate of the East African Community (EAC) and the logistics industry at large: as the European Union sought strength in numbers, so have the leaders of the EAC, by finally signing the Monetary Union Protocol.

This protocol declares the intention of each member state to participate in having a unified currency accepted as legal tender across EAC countries within 10 years. A political triumph? Yes. This initiative will foster unity in the language that Africans understand best: money. A leap forward for the supply chain industry? Yes, as well.

Photo credit: Victoriafalls24.com

Photo credit: Victoriafalls24.com

A common currency in the East African region will allow supply chain managers cut down on time spent dealing with the intricacies of exchange rates. Between calculation of exchange rates, stopping essential business processes to switch to the proper currency and other such inconveniences caused by separate national currencies, time that could have been spent getting cargo closer to the final destination and customer is tragically wasted.

Having one currency across the board will allow for transactions to be carried out regardless of borders, shaving down delivery times and facilitating streamlining of freighting and trading processes in the East African region.

Transactional costs will similarly be reduced, as the unified currency does away with the need for exchange between different countries chosen monetary system. Variances of exchange rates creates a unique impediment for logistics companies constantly dealing with freighting and trade back and forth across a border: in the course of numerous exchanges, not only does it cost money to facilitate the currency trade, fluctuating exchange rates almost guarantee that companies will get shortchanged in the process.

To clarify? Yes, come with me, a trader beginning with 100 million in currency ‘A’ switches it to 50 million in currency ‘B’, when the exchange rate suddenly changes, devaluing currency ‘B’ such that it is now worth only 90 million currency ‘A’, representing a 10 million loss. Such an occurrence repeated several times a month in freighting companies operating across borders can quickly add up to serious financial damage, which will now be averted by the solitary currency arrangement.

Dealing with one currency also eliminates the issue of currency fluctuations, which is often the bane of traders operating across national borders. Exchange rate volatility usually means that say, exporters could be rejoicing one day at lowered costs due to exchange rate shift and in tears the next as they lose money to the changing value of the shilling against a neighboring currency. Eliminating this hassle means that prices will be stable, thus reducing trading risk. It will also be easier for supply chain managers to establish budgets and plan their activities, knowing that costs will be constant.

All these factors add up to make the East African community a very attractive place for foreign investors in search of places to expand their wealth. Lowered transaction costs, price stability and of course the speed in freighting and transactions without the currency exchange hindrance all adds up to create the investor’s dream on the Eastern edge of our fair continent.

Needless to say, investors are always welcome by the logistics industry: with increased funds pumped into the economy, improved infrastructure and the importation of new, efficient technology, what’s not to love about our foreign benefactors? Supply chain managers can expect the industry to grow in leaps and bounds, unfettered by the hassles of divisive and restrictive currency policies in the region.

Not only will this new currency be a long awaited for blessing to our industry, unifying legal tender is the first and one of the most important steps towards fostering better relations between the partner countries.

Where we have failed to advance as individual entities, working together as a bloc can achieve results: by streamlining our economic and growth targets, cliché African adages regarding teamwork will quickly become a tangible reality to our mutual benefit. Based on this and more, the logistics industry in Kenya wholeheartedly supports the initiative, and welcomes the march of progress that will see us rise from the shackles of poverty and underdevelopment and for all. Viva EAC!


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