The Origins and Evolution of Money in Africa

Africa's Monetary Transformation Since Ancient Times

Apr 4, 2009

This article examines Africa's role in the evolution of money since ancient times. It briefly touches on the legacy of this transformation.

Money has played a central role in man’s economic evolution for a period that dates back to ancient times. As the modern world continues to grapple with an endless spiral of economic and financial crises, it is important for a while to take a look at the history of money. As a medium of exchange, money has evolved from very rudimentary objects since ancient times, to the complex and ultra-modern electronic transfer systems of today’s economy. Africa has always been part of this history.

Money in Ancient Africa

Though trade predates money, both have complemented each other as economic forces in man’s economic evolution. In Africa like in other ancient societies, the earliest form of trade was barter. A major variant of this barter in Africa was what J.D Fage calls “silent trade” or “dumb barter.” As its name implies, it originated because of language barriers. According to Fage, this trade existed between Ghanaian merchants and their southern neighbors.

In spite of the predominance of barter in ancient Africa, this continent still has the pride of place in the history of money. The Egyptians for example, used metal rings as money some 2500 years before the birth of Christ according to Encyclopedia Americana Vol. 19. This trend in the use of money continued alongside barter to the eve of colonialism. As a result, Ralph Austen sees monetization during the colonial period only “as a stage in the spontaneous process of [African] economic development.”

Monetary Situation in Africa on the Eve of Colonialism

On the eve of colonialism, barter had evolved to a higher stage which Austen calls “commodity money.” This involved items which, because of their quality, enjoyed special advantages as stores of value, media of exchange or units of account. They included livestock, salt bars, jewelry, tools, cotton, palm leaf or bark, textiles and shells. Such valuable commodities were bought and sold in major trading centers such as West and central Sudan, the Guinea coast and the Swahili coast.

The abundance of precious metals in Africa also facilitated the production of coins by early European governments. Walter Rodney for example notes that African gold was the main source for the mintage of the Dutch gold coin in the 17th century. This helped Amsterdam to become the financial capital of Europe at that time. In the same light, the English named their newly found coin “guinea” in acknowledgment of African gold imported from the Guinea coast of West Africa.

For a very long time before colonial rule, African gold played a major role in monetary transformations around the world. Tiyambe Zeleza agrees for example that “… for centuries, West Africa and Zimbabwe produced the bulk of the world’s gold supply which propped up the monetary and commercial systems of Western Europe and the Indian Ocean trading zones respectively.”

Monetary Transformation Under Colonial Rule

The colonial period marked a major turning point in the history of African monetization. Fiscal control was one of the ways by which European countries consolidated their economic power in Africa. These governments replaced existing currencies within their territories with new government coins and paper tied at fixed rates to the metropolitan money system.

Financial regulation under colonial rule was designed to ensure both control and exploitation of African people and resources. Within the colonies, monetary reforms eased the collection of taxes since taxation was one distinguishing feature of the colonial economy. The colonial governments also placed severe restrictions on the amount of money in circulation. As Austen agrees again, this "directly restricted the financing of government and private investment in Africa."

The Legacy of Colonial Monetization in Africa

Scholars remain highly divided over what Rodney calls the “balance sheet” of colonialism in Africa. The debate becomes even more heated when it touches on the economic and monetary transformation of Africa. Apologists for colonialism among other things, insist that the introduction of money regulated trade, stabilized African currencies and brought Africa into the global economy. Opponents however discard these claims on the grounds that colonialism was simply the robbery and theft of African resources. To Rodney, colonialism was a “one armed bandit.”

In the eyes of an ordinary observer, however, the ravages of colonialism are never far away. The introduction of a western-style monetary economy struck hard on the very backbone of African society, putting an end to communalism, the force which held Africa together. It established new centers of wage labor – the mines, plantations, roads, railways and harbors. These centers completely distorted the social and demographic landscape of Africa. Above all, the new money economy taught Africans to worship the only one and true god whose name was and still remains “money.”

The copyright of the article The Origins and Evolution of Money in Africa in African History is owned by Tongkeh Joseph Fowale. Permission to republish The Origins and Evolution of Money in Africa in print or online must be granted by the author in writing.