From barter to cash: How East Africa’s currencies have evolved

Patrick Njoroge

Central Bank of Kenya Governor Patrick Njoroge displays new notes at his office in Nairobi on June 3, 2019.

Photo credit: File | Nation Media Group

What you need to know:

  • The silver coin, originally minted in Austria, was introduced to supplement grain and livestock — then commonly used as the medium of trade.
  • Cowrie shells, which were also acceptable for the same reasons, were also available close to the coast and prominently featured in the interior.

As Kenyans celebrate Mashujaa Day, one of the major shifts this month has been on the demonetisation of the Sh1,000 currency and the introduction of a new note.

We have taken a long journey since the introduction of the Maria Theresa Thaler by the Arabs trading with East Africa from Muscat in 1832, when the Sultanate of Zanzibar moved to the Indian Ocean islands.

The silver coin, originally minted in Austria, was introduced to supplement grain and livestock — then commonly used as the medium of trade.

FRUSTRATED

But traders used to be frustrated by the lack of currency, which forced the then Sultan of Zanzibar, Seyyid Said, to bring some copper pice (which was a fraction of the Indian rupee) to address the currency shortage. With that the rupee had been introduced into the region, and for many years was likened to the modern-day dollar. From pice the Swahili coined the word pesa.

The silver rupee, as it was known, had been used for many years by the British East India Company, and the exchange rate depended on the quantity of silver in each. Actually, early Indian Ocean commerce between 1600 and 1858 depended on these two silver coins.

But with American independence, East Africa started receiving ships from the US carrying a coarse cloth known as merikani.

This saw the introduction of the US silver dollar in Zanzibar, although it is not clear whether the silver dollar was ever used on the Kenyan coast. What we know is that the exchange rate was based on the weight of the silver coins.

ONE RUPEE

The collapse of the British East India Company saw the end of the silver rupee, and that is what led to the 19th Century Queen Victoria One Rupee.

Again, this rupee was of great significance in the country and there was booming trade, with a regular monthly steamship service between Zanzibar, Aden and Bombay. India was then a part of the British Empire, hence the text on the coinage included “Ind Imp”, which meant Emperor of India.

All this was happening before the partition of Africa, which followed the 1884-1885 Berlin Conference and, in 1888, the Sultan of Zanzibar allowed William Mackinon’s Imperial British East Africa to found banks in the Coast and to print currency notes.

It was after this decree that East Africa saw the emergence of the Imperial British East Africa rupees. These and some of the IBEA fractional coins, which were in use, were silver and hence easily exchanged with equivalent Indian coins of the same denomination (given weight and fitness).

The copper pice, or pesa, had the inscription ‘Mombasa 1306’, which was a date in the Muslim calendar, and was widely used as the coin for common trade. Copper coins were until recently the common currency but have disappeared despite still being a legal tender.

DIVISIBLE

One of the reasons the IBEA was a struggling company was that people in the hinterland did not embrace pesa immediately.

Here, the dominant trade goods were cloth, wire and beads, which were easily portable and divisible while their utility (largely associated with ornament) ensured that they were widely acceptable.

Cowrie shells, which were also acceptable for the same reasons, were also available close to the coast and prominently featured in the interior.

It was after IBEA, which was printing currency, became broke in 1895 — just about the time the railway project was beginning in Mombasa — that the British Foreign Office printed the only coin with the name East African Protectorate. This was used alongside the Indian rupee and the Sterling pound.

In May 1898, the East Africa and Uganda (Currency) Order-in-Council made the British India silver rupee the standard coin in the two protectorates, although the rupees, annas and pice issued by the IBEA were still acceptable. This order was the first to recognise a currency for East Africa.

In 1900, Sir Charles Eliot, commissioner for the British East Africa Protectorate, recommended a coinage modelled on the Ceylonese decimal coinage. He also expressed the need for notes for larger transactions.

The Germans in German East Africa (Tanganyika) had been using a German rupie, which was made up of 64 pesa. In 1905, they moved to decimal coinage, with 100 heller to the rupie. One heller was equal to Rs0.01, whereas the German rupies exchanged at 1.04 to the silver rupee (Indian and IBEA).

NEW LEGISLATION

In February 1905, a Currency Board was established in Mombasa and Kampala vide a new legislation to provide currency for the two protectorates of Kenya and Uganda. This became the first monetary authority and was tasked with printing the currency for the region.

Initially, it brought out coinage in rupees and cents and, in April 1906, introduced 5, 10, 20 and 50 rupee notes bearing English, Arabic and Hindi script.

These rupee notes were redeemable in silver rupees and were therefore acceptable since they carried no additional risks and were convenient to carry.

While the new legislation made the gold sovereign of the United Kingdom part of the acceptable currency — a fixed rate exchange between the rupee and the sovereign was set at 15 rupees to the English sovereign — it also demonetised the annas and pices from British India and those issued by the Imperial British East Africa and British East Africa Protectorate.

The cowrie shells ceased to be of use in the interior in 1902 after a half-cent coin was introduced with a convenient hole at the centre, since many people did not have clothes with pockets.

The first issue of one cent and half-cent coins were made of aluminium and proved defective, as they disintegrated with use. That is why they were demonetised in 1911.

LEGAL TENDER

In 1920, as Kenya became a British Colony, the East African Currency Board (EACB) decided that the exchange rate would be fixed at two shillings to the rupee, and that neither the Indian coins and notes nor the English notes would be legal tender. The name rubia among the Kikuyu was a corruption of the rupee.

They also thought there was need for an intermediate currency based on the English Florin to help the country move from the rupee to the shilling. It was decided that the florin would be the same size and shape as the rupee, and also be of silver substrate.

Through a Kenya Gazette notice of April 26, 1920, the florin currency was officially introduced, but traders still called it “rupee” and it continued to be in use for many years as the standard coin.

So strong was the East African shilling that it circulated as legal tender in Ethiopia, Somalia and the British Protectorate in Aden until April 1965. It was only after the death of King George VI in 1952 that a new currency bearing the portrait of Queen Elizabeth was printed and the word ‘pound’ dropped on the higher denomination. It was replaced with ‘shilling’.

CURRENCY BOARD

As the East African nations started to gain independence, a neutral currency note was printed by the currency board. It did not have the image of the monarch, which was now replaced with the image of a dhow on Lake Victoria. It was commonly known as the “lake issue”.

But with the rise of different central banks in 1966, each country adopted its own currency with the portrait of their president. In Kenya, the currency board banknotes ceased to be legal tender in September 1967 while the EACB coins were demonetised in April 1969.

It was during this period that the currency bearing the portrait of Jomo Kenyatta appeared.

In 1974, the Central Bank of Kenya issued smaller notes and dropped the Arabic and Hindi script for English and Kiswahili. It also added new security features.

In 1979, after the death of Mzee Kenyatta, new currency with the image of president Daniel arap Moi was issued and, while the coins were not wholly withdrawn, the Kenyatta notes disappeared. The five-shilling note was also replaced with a coin in 1985, followed by a new Sh200 note in 1986.

This was the highest denomination until 1988, when a Sh500 note was introduced as the economy started to collapse. In 1995, a Sh1,000 note was introduced.

After the retirement of President Moi in 2002, the Central Bank in 2004 changed the portraits on all its currency to that of Jomo Kenyatta, and now we have yet another shift with the introduction of a new currency with no portrait of the president.

Also, it demonetised the Sh1,000 note that was in use and replaced it.

Looking back, the history demonetisation of currency is awash with lots of issues, reasons and excuses. The devil is usually in the detail.