Tag: politics

We have all heard the accolades about Africa’s mineral wealth, about how no other continent is well endowed with highly sought after precious minerals. However, the subject of growth with development is somewhat devious and dubious in the sense that most scholars (even in the developed world) don’t genuinely understand how to attain it. If they did poverty would be something we read in the history books.

If you read my last post on international trade I explain how the current international trade system needs to be replaced by an Electronic Clearing House (ECH) system. The introduction of this system would net approximately $20.9 trillion per annum easily making it the largest business or commercial entity in the world, 135 times larger than Saudi Aramco, with a spending capacity or budget bigger than that of the United States and China combined. Technically, it is not very difficult to establish an ECH with which to begin to earn this $20.9 trillion, however, it does require cooperation between governments and their central banks. Nevertheless, what can be raised from an ECH is small in comparison to what a Split Velocity model can generate.

The truth is that any approach to economic development and the eradication of poverty that does not address the poor design of the circular flow of income and that does not recover the annual losses it generates that are equivalent to GDP per annum, will inevitably fail. It does not matter how hopeful, country-wide or clever the national strategy or development plan may seem, it is unlikely to succeed in the long run. In Zambia, after independence we saw an earnest effort to channel funds from copper into strategic geographically positioned industries .e.g. batteries in Mansa, glass in Kapiri, pineapple canaries in Mwinilunga, automotive assemblies in Ndola, and so on imagining that an unstoppable march to industrialization had begun. New hospitals and schools were built in nearly every district. However, these industries and this development effort though gallant, well thought out and planned did not have the outcomes anticipated. Many of these industries eventually became derelict and buildings fell to ruin. It does not matter whether today the pineapples are tomatoes or instead of Land Rovers and Fiats African countries are building EVs, the effort remains gallant but as Africans we can no longer allow ourselves to be delusional and deceived by a lack of understanding of the shortcomings of the WKP and economic strategies that will never bear genuine fruit in Africa were economies are smaller, where strategies ignore the faulty design of the CFI, and unseen losses equivalent to GDP per annum that can and will ultimately and relentlessly grind any economic development plan to dust. We must hold onto the strong will to transform the lives of our people but we can no longer afford to keep making the same mistakes over and over again. We can no longer continue to play checkers while those we deal with are playing chess.

We live in times were the process of development planning does not understand a strategy that instructs a country to sell its mineral wealth in exchange for its domestic currency, e.g. sell copper and demand it be paid for in Kwacha. The simple mind thinks: We need forex, so why should we demand our gold, diamonds, copper, cobalt, oil, and other mineral wealth be bought in our domestic currencies? The answer is simple, you demand for your mineral wealth to be bought in your domestic currency because it increases demand for your currency which raises its strength when you later exchange it for forex making you the benefactor of your own mineral wealth. By selling minerals for foreign exchange rather than your own African domestic currency you inadvertently strengthen foreign currencies and weaken your own national currency wiping out the gains from the fact that you own the mineral wealth being traded in the first place. Being thirsty for hard currencies makes pundits mistakenly believe selling their minerals for foreign exchange makes sense, but this is a shallow mentality, in a strong mentality authorities will demand minerals from African countries be bought with their domestic currency. This position requires the buyer first run around the financial markets in your economy with their hard currency in hand looking for your African country’s currency. In this position Financial institutions like banks begin to respect your local African currency because they see commercial interests who want your natural resources looking frantically for your local currency, moving from bank to bank to negotiate the best rate so they can purchase your precious minerals. This increase in demand pushes up the price of your currency causing it to appreciate. By the time an African government sells its minerals in its own currency not only is it securing a sale, its local banks are now full of the forex commercial interests used to buy your local currency. Your country has asserted its sovereignty (being owner of the sought after mineral assets) in the transaction as it has increased the respect for and the value of its national currency which it can now use to demand and command more forex than it could when it sold its minerals directly for forex. At present the WKP has African leaders thinking foreign currencies are more important than their natural resources. This is a fallacy leaders must overturn to give their people the dues from mineral wealth they deserve. The mentality of African governments should be, if a buyer can’t pay in local currency, then no sale – go and get the minerals you want somewhere else, and this should be a collective stance on the continent. African countries must never forget that the mineral asset being sold, not the forex being used to buy it, is where the true value and power lies in this type of transaction, so it is important never to become so thirsty and desperate for hard currency that you accept for your mineral wealth to be paid for in foreign exchange. This is a counter-intuitive process and African countries must begin to think outside the box that keeps them locked in poverty indefinitely.

The current trade system is designed to facilitate microeconomic transactions, however, it completely abandons the macroeconomic registry of these transactions, which consequently lack Central Bank facilitation, participation and supervision. This is one of the reasons why it should be noted that the objective of creating a single currency, for example for BRICS, the AU and so on though notable, is not as important as creating an ECH mechanism to govern trade between countries. Why? Well firstly, an ECH system or mechanism, when applied to trade preserves the cultural and national identity of participating countries by preserving their national currencies (it is not imperialistic) secondly it generates incredible amounts of finance, as observed earlier a global ECH applied to international trade would generate $20.9 trillion and growing per annum. I don’t envy anyone tasked with figuring out how to spend this self replenishing volume of funds every year.

The ability of Split Velocity to recover 100 percent of GDP per annum at constant price from the faulty CFI and reintroduce it to productivity in the national economy is often difficult to grasp, it is also difficult to appreciate how being able to put resources on this scale to work in a national economy can be wholly transformative. We would like to implement the pilot with other progressive central banks and governments that value innovation, especially in Africa and firmly believe that leaders who oversee the implementation of Split Velocity anywhere in the world, in their respective countries will be re-known for achieving the greatest increase in economic advancement and prosperity for their people than any other leader in history.

A Split Velocity model is designed to comprehensively wipe out scarce resources, poverty, unemployment and inflation in any country it is applied, within a generation.

It is based on a scientific approach to how to develop an economic system called Split Velocity.