A powerful gentleman is Mr. Money.

(Francisco de Quevedo, Don Dinero)

The Democratic Republic of the Congo is officially relinquishing its bimonetarism with the U.S. Dollar and betting on its own currency, the Franc Congolais or Congolese Franc. The DRC, as the sub-saharan country is known, is mostly famous for being a mining powerhouse. Its copper reserves are 3rd-largest worldwide and make up a key part of Africa’s copper belt. In addition, it is the number one producer of cobalt, a strategic mineral used to make batteries making it an essential trade partner for the energy transition.

With the 2nd-largest land extension in Africa only behind Algeria, the DRC has over 80 million hectares of arable land and is in a privileged position to develop its agricultural sector as well as renewable energy, mainly hydroelectric and eolic. On top of these extremely profitable potential opportunities, in the present the DRC has a huge domestic market.

With a population of over 105 million people, the DRC is the most populated Francophone country and has a constant demand for consumer goods that is practically impossible to meet. These facts represent a huge opportunity for foreign brands to tap into an unexplored market that is ready for consumption. It is safe to assume that in the coming decades a lot of African commerce will revolve around the DRC.

The context of dollarisation

The DRC first sought the U.S. dollar as a stable currency in the late 90s and made it official in the early 2000s. At the time, the country was being pacified after experiencing two civil wars in under five years. The U.S. dollar's status as a reserve currency and being the preferred currency for global trade made it ideal for a country that yearned for decades of stability and growth after a long time of mismanagement and crisis. The strategy of dollarising after a convoluted period is a common reform used by a motley group of countries. In Africa, the most famous case is Zimbabwe, but elsewhere, examples include Cambodia and El Salvador.

The context of dedollarisation

In the summer of 2024, the government announced a dedollarisation plan which began with all payments being in Francs. No longer will customers receive the options to tap “USD” at card terminals. This is the first step of a plan to rollback the dollar that will take on larger measures in the years to come and eventually fully replace the dollar.

There are two ways of looking at this, from the private perspective or from the public perspective. This is that there are two ways of understanding the challenges and opportunities de-dollarisation poses. One is from the perspective of private citizens, and the other is from the perspective of State actors.

Dedollarisation from the private view: loving the green economy

The view from the side of private citizenry is negative and rightly so. After all, public policy is supposed to be designed with the best interests of the public in mind, and ditching hard currency for a local, autonomous currency often has inflationary tendencies. Inflation in U.S. dollars presents little concern to non-Americans since the global status of the dollar always gives them an advantage over the local currency. That’s why the first comment an American makes when visiting Latin America or Southeast Asia is always, “OMG everything is so cheap”.

The Congolese people were glad to live in a dollarised economy. Using the U.S. dollar as the official currency saved them not only their purchasing power but also a few headaches. Living in a country with bimonetarism ensured flexible exchange rates and freedom of financial movement. In turn, FDI increased significantly as it was easier for foreigners to inject money into the country.

If anything, the only downside observed after 20 years of dollarisation in the DRC is that the country is significantly more expensive than African standards. This is because most consumer goods are imported and the franc was designated as the currency for small or cash purchases as well as for low-salaried employees, which are most members of the workforce. Still, in many countries of the underdeveloped world, people choose to save in hard currencies like the U.S. dollar because the shenanigans of Jerome Powell at the Federal Reserve are preferable to the amateur circus going on in most central banks.

Dedollarisation from the government perspective: quick cash and kowtow

At first, all mentions of dedollarisation efforts from government officials mention only monetary authority as the number one reason. After connecting the dots, we might find the real reasons begin in Beijing. But first, let’s overview the monetary sovereignty argument. Anytime a bureaucrat preaches national unity through any institution, they mean more power for the government, in their hands.

Monetary sovereignty implies a Central Bank manipulating rates and printing money to finance government programs. All of this happens at the cost of the free market and thereby, consumers. Within an inflationary period, people tend to save in hard currencies to preserve their purchasing power. A move like the one promoting the Congolese government might result in a shadow economy for hard currencies like what can be seen in Argentina, Russia, or Lebanon.

Enter the dragon

A common trope in the underdeveloped world is to look towards China for investment and trade. The DRC is no exception. Ever since coming into power, President Felix Antoine Tshisekedi Tshilombo, or Fatshi for short, has strengthened the ties of his country to the Asian giant. His economic plan involves an industrialisation of the agricultural sector and pushing trade agreements with China. At first, it sounds like a great plan. Arable land in the DRC sits unused, and the Chinese demand for agricultural products is over 1 billion people. Therefore what better plan than to use Chinese investment to develop the countryside and then sell crops and food to the same Chinese?

But how does dedollarisation play into this? As a country where most exports are already destined to China and the rest of the BRICS, why fix something that ain’t broken? The most possible answer to this lies in the long-term vision for the country. Developing the agricultural sector of the DRC to become an agricultural power is a long-term investment whose long-term effects will definitely include an appreciation of the Franc Congolais.

Besides this, it is imperative to understand the realist terms of Chinese trade policy. As a non-ally (not to say rival or much less, enemy) of the U.S., it would be ridiculous to pretend that they conduct their trade in U.S. dollars. If the already huge trade relationship is willing to be expanded, the least the DRC could hope for is for their main investor and purchaser to use Francs and keep the circular economy between the two and not benefiting a non-ally third party, the United States.

Simply put, China is not willing to strengthen the U.S. dollar, and Congolese officials are willing to make that sacrifice for their long-term goals. There are important considerations for both the little guy and the macroeconomic factors when discussing dedollarisation. Some might think about their purchasing power and their pockets, while others might be more concerned with long-term results and geopolitics. Anyway, economics is not an exact science, and projections are always tilted to the side of the projector. Therefore, like with any other recently introduced economic policy, we must wait and see.