The CFA franc is a monetary union that subjugates African states to French economic interests.
31 May 2019 | Tomas Fazi | spiked
CFA franc. These two words probably do not mean much to most readers, but they encapsulate one of the world’s most enduring – and little-known – economic experiments.
In the simplest possible terms, the CFA franc is a currency used by 14 countries of Western and Central Africa, all of which are former French colonies. Hence the name ‘franc’, a reference to the currency formerly used in the colonies: the French franc.
Indeed, as we will see, the name is more than just a semantic legacy. France still plays a considerable role in the management of this ‘African’ currency. But, to avoid getting ahead of ourselves, let’s start by laying out the basics.
When we talk of the CFA franc, we are in fact talking of two monetary unions: the Central African Economic and Monetary Community (CEMAC), which includes Cameroon, Gabon, Chad, Equatorial Guinea, the Central African Republic and the Republic of the Congo; and the West African Economic and Monetary Union (WAEMU), which comprises Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo.
These two monetary unions use two distinct CFA francs, but which share the same acronym: for the CEMAC franc, CFA stands for ‘Financial Cooperation in Central Africa’, while for the WAEMU franc it stands for ‘African Financial Community’.
However, these two CFA francs work in exactly the same manner and are pegged to the euro with the same parity. Together with a 15th state – the Comoros, which uses a different franc (the Comorian franc), but which, again, is subject to the same rules as the other two – they form the so-called ‘franc zone’. Overall, more than 162million people use the two CFA francs (plus the Comorian franc).
For a long time, the CFA has been a non-issue in public debate – even in France or Africa. This, however, is changing. In recent years, it has been at the centre of an increasingly heated debate in the Francophone world, helped, in part, by books like L’arme invisible de la Françafrique: Une histoire du franc CFA (‘The Invisible Army of Franco-African Imperialism: A History of the CFA Franc’), by the French journalist Fanny Pigeaud and the Senegalese economist Ndongo Samba Sylla. As they put it:
‘For a long time, much effort has been put into keeping the topic of the CFA franc and the issues that surround it shielded from the public debate, in France as well as in Africa. Being poorly informed on the topic, citizens lacked the tools to question the system. However, in recent years, the CFA franc has ceased to be a matter debated solely by experts … and is today the subject of articles, events, television shows and conferences on the African continent and in France.’
On one hand, the French government claims that the CFA franc is a factor of economic integration and monetary and financial stability. On the other hand, the opponents of the currency – which include many African economists and intellectuals – argue that the CFA franc represents a form of ‘monetary slavery’, which hinders the development of African economies and keeps them subservient to France.
In order to make sense of this debate – and before we move on to analysing the actual mechanism of the CFA system – we need to start from the origins of this contentious currency.
A history of violence and repression
The CFA franc – which originally meant ‘franc of the French colonies of Africa’ – was created in 1945, when it became the official currency of the French colonies in Africa, which until then had used the French franc. Officially, granting the colonies their ‘own’ currency was a reward for the decisive role they played in the Second World War. In fact, as Pigeaud and Sylla write, ‘far from marking the end of the “colonial pact”, the birth of the CFA franc favoured the restoration of very advantageous commercial relations for France’.
Indeed, despite the rhetoric about granting greater autonomy to the colonies, the CFA franc was essentially a French creature, issued and controlled by the French Ministry of Finance. This meant that France could set the external value of new currency – its exchange rate vis-à-vis the French franc – according to its own needs. Which is exactly what the colonial power proceeded to do, by imposing a highly overvalued exchange rate on the colonies.
The aim was twofold: to make French exports cheaper, thus encouraging the colonies to increase their imports from metropolitan France (that is, France located in Europe, as distinguished from its colonies and protectorates); and to make the colonial exports more expensive on world markets, thus forcing the colonies to turn to the metropolis to get rid of their excess production. France, having been severely weakened by the war, therefore benefited both in terms of exports and imports, allowing it to regain its market share and to secure the supply of much-needed raw materials.
However, the most obvious benefit for France was the fact that the CFA franc allowed it to continue purchasing resources from the colonies ‘for free’, since it effectively issued and controlled the colonies’ currency, just like it did when the colonies used the French franc. In short, Pigeaud and Sylla note, contrary to French colonial propaganda, the aim of the CFA franc remained that of ‘ensuring France’s economic control of the conquered territories and facilitating the drainage of their wealth’ towards the metropolis.
It should be noted, however, that France was no exception in this regard: at the time, it was common practice among colonial powers to impose forms of monetary subservience on their respective colonies. What sets France apart from all the other former colonial powers in Africa – such as Great Britain, Belgium, Spain and Portugal – is the fact France’s monetary empire survived the decolonisation process which began in the 1950s. So while most African colonies, upon becoming independent, adopted national currencies, France managed to cajole most of its former colonies (except for Morocco, Tunisia and Algeria) into maintaining the CFA franc.
It did so by resorting to all the pressure tools at its disposal: diplomacy, corruption, economic destabilisation, even outright violence. ‘To uphold the CFA franc’, Sylla writes, ‘France has never hesitated to jettison heads of state tempted to withdraw from the system. Most were removed from office or killed in favour of more compliant leaders who cling to power come hell or high water.’
The first step was to force the colonies to sign a long list of so-called ‘cooperation agreements’ before granting them their ‘independence’. Under these agreements, the new states were forced to entrust the management of virtually all key sectors of their administration to the French state, including their currency, by pledging to remain within the monetary union of the franc zone. Pierre Villon, a French Communist MP, noted at the time that in the economic, monetary and financial fields, these agreements tended ‘to limit in practice the sovereignty granted [to the former colonies] by the law’.
To understand why the African states accepted such heavy limitations to their newly won sovereignty, one must grasp the extent of their psychological subjection to France – and their fear of ‘wading into open waters’ – stemming from decades of colonial ‘tutelage’. These were, after all, agricultural or extremely underdeveloped economies.
However, it wasn’t long before the first rebellions against the CFA franc started breaking out. From the 1960s to the 1980s, various countries tried to abandon the CFA system, but very few actually succeeded.
As Pigeaud and Sylla write, France ‘did everything to discourage those states that intended to leave the CFA. Intimidations, destabilisation campaigns and even assassinations and coups d’état marked this period, testifying to the permanent and unequal power relations on which the relationship between France and its “partners” in Africa was based – and is still based today’.
When Guinea, after its repeated calls for a reform of the CFA system fell on deaf ears, launched its own national currency in 1960, France responded by secretly printing huge quantities of the new currency before pouring them into the country, causing inflation to skyrocket and transforming the country into an economic basket case.
Similarly, when Mali left the franc zone in 1962, France pressured neighbouring nations to limit trade with the country, contributing to a sharp depreciation of the new currency and compelling Mali eventually to re-join the CFA system. France is also believed to have played a role in the murder of at least two African progressive heads of state that were planning to launch a national currency and take their countries out of the CFA system: Sylvanus Olympio in Togo (in 1963) and Thomas Sankara in Burkina Faso (in 1987).
This long trail of violence and repression helps us understand how France became ‘the only country in the world to have succeeded in the extraordinary feat of circulating its currency, and only its currency, in politically free countries’, as the Cameroonian economist Joseph Tchundjang Pouemi observed in 1980. It also calls into question the claim that the African states adhere ‘voluntarily’ to the CFA system.
The ‘diabolical mechanism’ of the CFA franc
With this necessary premise out of the way, we can now move on to analyse the ‘diabolical mechanism’, in Pigeaud and Sylla’s words, that underlies the CFA franc. Nowadays, Paris claims that the CFA franc has become a fully fledged ‘African currency’ managed by the Africans themselves. In the late 1970s, in a process that took the name of ‘Africanisation’ of the franc zone, the headquarters of the central banks of the two monetary unions – the BEAC (Bank of Central African States), the WAEMU’s currency-issuing authority, and the BCEAO (Central Bank of West African States), the CEMAC’s currency-issuing authority – were transferred to the African continent. Furthermore, the number of French representatives sitting on the boards of the two central banks was cut back.
However, as Pigeaud and Sylla note, apart from these cosmetic changes, the mechanism at the heart of the system ‘has barely changed since the colonial era’. Today it rests on the so-called four fundamental principles of the franc zone, which continue to grant France almost absolute control over the CFA system, even though France no longer possesses the franc.
Indeed, upon adopting the euro, France succeeded in ensuring that the management of the CFA system remained within its exclusive remit, with the European Union and the other member states having little or no say in the matter. The result is that ‘the spirit and function of the device on which this colonial creation rests remain the same as when it was created in 1945’.
The four principles in question are the fixed exchange rate (the anchoring of the CFA francs first to the French franc and now to the euro); the free movement of capital between the African countries and France; the free convertibility of the CFA francs into euros but not into other currencies (or even between the two CFA francs), which means that every foreign payment made in CFA francs must first be converted into euros through the Paris exchange markets; and the centralisation of foreign exchange reserves.
The benefits that France accrues from the four principles underlying the CFA system are innumerable. ‘More than simply a currency’, Pigeaud and Sylla write, ‘the CFA franc allows France to manage its economic, monetary, financial and political relations with some of its former colonies according to a logic functional to its interests’.
For example, by virtue of its presence within the institutions of the franc zone (France holds a de facto veto on the boards of the two central banks), Paris still has the power to determine the external value (exchange rate) of CFA francs, without even having to inform the African countries in advance (as France did in 1994, when it devalued the CFA francs by 50 per cent, and then again in 1999, when it adopted the euro). Moreover, thanks to the free movement of capital, French companies can ‘privatise’ the profits made in Africa by repatriating them to France rather than investing them locally.
Original Link: French colonialism lives on in Africa