CFA Franc: a Colonial relic
The former sub-Saharan French colonies did not have to fight for their independence. De Gaulle, then President of France, granted it to them. These countries undertook immediately to dismantle the federal structure in which they were operating and erected trade barriers between them.
Paradoxically, they kept the CFA as their common currency. They surrendered the management of 65% of their foreign exchange reserves to the French Treasury in exchange for the convertibility of the CFA.
France was also given the right of veto whenever the special account in which these funds were kept was overdrawn. Furthermore, since the former French colonies were no longer trading among themselves, the CFA money supply was solely based on the volume of trade between France and its African allies. At the international level France managed to secure the safety of this arrangement with French nationals succeeding each other at the helm of the IMF.
The political, economic and military dividends that France derives from such a scheme are enormous. With the equivalent of 1.26% of its money supply, France was able to enjoy a vast market for its products, a steady supply of cheap raw materials, the repatriation of the lion’s share of the local savings, an unchallenged political influence, a strategic military presence and the certainty that it can rely on its African stooges to undermine all attempts with regard to economic integration in the region, especially within ECOWAS.
In addition, French groups have a quasi monopoly in the running of their economies. The French banks have had a virtual monopoly since the public finance rehabilitation programmes of the IMF and the World Bank destroyed the local banks. Short-term financing, which the French banks indulge in, is more lucrative, especially when it is used to buy petroleum products, foodstuffs and luxury products. Consequently, the francophone countries do not have access to the medium and long-term financing that their small and medium enterprises need if they are to prosper and play a part in Africa’s industrialisation and development process.
The private sector operators dominated by French firms enjoy a free flow of cheap labour and raw materials and a protected market for their manufactured products. The other beneficiaries are the members of Lebanese community whose corrupt business practices can only be compared to those of the members of the Asian business community in Eastern and Southern Africa. They were able to contribute 6 billion dollars for the reconstruction of Lebanon. This is more than the amount of private investment that sub-Saharan African countries received annually, South Africa excluded.
The members of the elite, who trade with their people and rush to transfer the proceeds abroad, mainly to France, crowned the corporation of the gravediggers of the masses. The suffering of the losers, is compounded by rising import prices, high interest rates that characterise the franc zone, and the skyrocketing level of unemployment worsened by spending controls and the massive lay-offs in the private and public sectors under the stringent conditions attached to the various structural adjustment programmes.
But still France was not satisfied. 1.26% of its money supply was a price too high to pay for all these gains. It decided to reduce the cost by way of a massive devaluation of 100% when in 1994 the official exchange rate of 1 FF to 50 CFA was reduced to 1 FF to 100 CFA. The fact that the francophone Heads of States were summoned to a meeting in Dakar to be told about this blow by M. Michel Camdessus, the French Director of the IMF, accompanied by a French junior minister since disgraced for financial malpractice, is an indication of the degree of esteem in which French officials hold their African partners.
Devaluation may be helpful if it boosts exports and improves trade balance. France has devalued the French franc 14 times since the end of the Second World War. The volume of its foreign trade indicates the advantages that competitive devaluation can bring to an economy. However, if the French economy benefited from the depreciation of its currency, it was mainly due to the fact that it had a strong industrial base, orders from its European partners, a dynamic private sector capable of delivering the increased demand for goods and services, a stable political regime, and finally an environment conducive to business expansion.
The francophone countries do not have these advantages. Their industrial bases are shaky. Trade between them is skeletal. The political regimes are unstable and unpopular and all owe their survival to French military presence and “aid”. In such a context the devaluation just added to the misery of the people. The streets are littered with beggars, homeless people and garbage.
It has always been assumed that the convertibility of the CFA franc constituted an irresistible attraction for a corrupt elite with a taste for expensive cars, foreign bank accounts and residences abroad. However, when this convertibility was nullified by France’s decision in 1993 to impose exchange control on the movements of the CFA franc, the unanimous decision of the francophone leaders to follow the French franc in the euro is incomprehensible. They do not seem to have pondered all the consequences. Countries that do not operate within a single market cannot adopt a single currency.
Taking into account the gaps in population and level of development that exist between the member countries of the franc zone, a new devaluation is inevitable. The dislocation of the whole edifice is bound to happen soon rather than later. The signing between France and its African partners of the treaties establishing the West African Economic and Monetary Union (UEMOA) and the Economic Community of Central Africa (CEMAC) seems to have convinced francophone leaders that it was worthwhile maintaining their common currency.
However, the setting up of these organisations cannot resolve the fundamental problem that confronts these countries, i.e. that they cannot put the cart before the horse and start with a monetary union and then proceed to build upon it an economic union. This delaying strategy will only add to the misery of their people. It is within ECOWAS that the task of uniting West African States politically, economically and financially should take place. Any attempt to build an economic bloc in West Africa without Nigeria and Ghana is a costly joke. Regional integration is the most effective way to bring to the Africans benefits in terms of jobs, income growth and better living standards.
Projects of regional integration such as the US intention to extend the North American Free Trade Area (NAFTA) beyond Mexico to Chile and other South American nations, the Asia-Pacific Economic Co-operation (APEC), the European Union plan to extend from the Atlantic cost of Ireland to the Black sea etc. are all indications that the new agenda is towards multilateralism.
Regional integration leading to a Union of sub-Saharan African countries should, therefore, be given the priority it deserves when determining policies and strategies in all sectors and endeavours. Otherwise Africa will remain tangled in the web of poverty and civil disorders.
About Sanou Mbaye (185 Articles)
Sanou Mbaye, ancien haut fonctionnaire de la Banque africaine de développement, est un chroniqueur politique et économique. Ses écrits sur le développement des pays africains proposent des politiques alternatives à celles mises en place, en Afrique, par des Occidentaux et leurs bras alliés : le FMI et la Banque mondiale.