Ndongo Samba Sylla argues that the CFA franc – officially created on 26 December 1945 by a decree of General de Gaulle – used across much of Africa today is a colonial relic. For those hoping to export competitive products, obtain affordable credit, work for the integration of continental trade, or fight for an Africa free from imperialist control, the CFA franc is an anachronism demanding orderly and methodical elimination.
On 11 August 2015, speaking at the celebrations marking the 55th anniversary of the independence of Chad, President Idriss Deby declared, ‘we must have the courage to say there is a cord preventing development in Africa that must be severed.’ The ‘cord’ he was referring to is now over 71 years old. It is known by the acronym ‘CFA franc’.
The pillars of the CFA franc
Like other colonial empires – the UK, with its sterling zone, or Portugal, with its escudo zone, France had its franc zone. The CFA franc – originally the French African Colonial franc – was officially created on 26 December 1945 by a decree of General de Gaulle. It is a colonial currency, born of France’s need to foster economic integration among the colonies under its administration, and thus control their resources, economic structures and political systems.
Post-independence the CFA franc was redesignated: for the eight members of the West African Economic and Monetary Union (WAEMU) – Benin, Burkina Faso, Côte d’Ivoire, Guinea-Bissau, Mali, Niger, Senegal and Togo – it became the African Financial Community franc; for the six members of the Central African Economic and Monetary Community (CAEMC) – Cameroon, Central African Republic, Republic of the Congo, Gabon, Equatorial Guinea and Chad – the Central African Financial Cooperation franc. The two zones possess economies of equal size (each representing 11 per cent of GDP in sub-Saharan Africa). The two currencies, however, are not inter-convertible.
As established by the monetary accords between African nations and France, the CFA franc has four main pillars:
Firstly, a fixed rate of exchange with the euro (and previously the French franc) set at 1 euro = 655.957 CFA francs. Secondly, a French guarantee of the unlimited convertibility of CFA francs into euros. Thirdly, a centralisation of foreign exchange reserves. Since 2005, the two central banks – the Central Bank of West African States (BCEAO) and the Bank of Central African States (BEAC) – have been required to deposit 50 per cent of their foreign exchange reserves in a special French Treasury ‘operating account’. Immediately following independence, this figure stood at 100 per cent (and from 1973 to 2005, at 65 per cent).
This arrangement is a quid pro quo for the French ‘guarantee’ of convertibility. The accords stipulate that foreign exchange reserves must exceed money in circulation by a margin of 20 per cent. Before the fall in oil prices, the money supply coverage rate (the ratio of foreign exchange reserves to money in circulation) consistently approached 100 per cent, implying in theory that Africans could dispense with the French ‘guarantee’. The final pillar of the CFA franc, is the principle of free capital transfer within the franc zone.
The CFA franc: for and against
Despite its exceptional longevity, the CFA franc by no means enjoys unanimous support among African economists and intellectuals. Its critics base their analysis on three separate arguments. Firstly, they condemn the absence of monetary sovereignty. France holds a de facto veto on the boards of the two central banks within the CFA franc zone. Since the reform of the BCEAO in 2010, the conduct of monetary policy has been assigned to a monetary policy committee. The French representative is a voting member of this committee, while the president of the WAEMU Commission attends only in an advisory capacity. Given the fixed rate of exchange between the CFA franc and the euro, the monetary and exchange rate policies of the franc zone nations are also dictated by the European Central Bank, whose monetary orthodoxy entails an anti-inflation bias detrimental to growth.
Secondly, they focus on the economic impact of the CFA franc, construed as a neocolonial device that continues to destroy any prospect of economic development in user nations. According to this perspective, the CFA franc is a barrier to industrialisation and structural transformation, serving neither to stimulate trade integration between user nations, nor boost bank lending to their economies. The credit-to-GDP ratio stands around 25% for the WAEMU zone, and 13% for the CAEMC zone, but averages 60%+ for sub-Saharan Africa, and 100%+ for South Africa etc. The CFA franc also encourages massive capital outflows. In brief, membership of the franc zone is synonymous with poverty and under-employment, as evidenced by the fact that 11 of its 15 adherents are classed as Least Developed Countries (LDCs), while the remainder (Côte d’Ivoire, Cameroon, Congo, Gabon) have all experienced real-term economic decline.
Finally, they maintain that membership of the franc zone is inimical to the advance of democracy. To uphold the CFA franc, it is argued, 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, as shown by the CAEMC nations and Togo. Economic development is impossible in such circumstances, as is the creation of a political system that meets the preoccupations of the majority of citizens.
For its partisans, in contrast, the underlying logic of the CFA franc lies not in neocolonialism, but in monetary cooperation. The under-development of the franc zone nations is attributed to factors independent of their monetary and exchange policies, in particular to their political instability and the poor economic policies of their leaders.
The CFA franc is characterised as a credible and stable currency, a significant virtue given the experience of most currency-issuing African nations. This counter-argument is, however, flawed: experience shows that nations like Morocco, Tunisia and Algeria, which post independence withdrew from the franc zone and mint their own currency, are stronger economically than any user of the CFA franc.
It is also claimed that the CFA franc has allowed inflation to be pegged at a rate considerably lower than the African average. For its critics, however, the counterpart of this low inflation rate is weak economic growth and the creation of fewer jobs. Not to mention that this low average inflation rate does not prevent cities like Dakar from ranking among the most ‘expensive’ in the world.
In fact, the terms of the debate are quite simple. The CFA franc is a good currency for those who benefit from it: the major French and overseas corporations, the executives of the zone’s central banks, the elites wishing to repatriate wealth acquired legally or otherwise, heads of state unwilling to upset France etc. But for those hoping to export competitive products, obtain affordable credit, find work, work for the integration of continental trade, or fight for an Africa free from colonial relics, the CFA franc is an anachronism demanding orderly and methodical elimination.
From forbidden topic to emerging social movement
In October 2016, a group of African and European economists published a book entitled [in translation] Liberate Africa from Monetary Slavery: Who Profits from the CFA Franc? The date was not selected at random; it coincided with a meeting of the franc zone’s finance ministers, central bank governors and regional institutions. In the wake of the public debate sparked by the book, people are beginning to speak out.
France maintains the position that the CFA franc is an ‘African currency’, existing only as a support to Africans, who retain their ‘sovereignty’. Some heads of state, like Alassane Ouattara in Côte d’Ivoire and Macky Sall in Senegal take the same line. Unlike Idriss Déby, Macky Sall describes the CFA franc as ‘a currency worth keeping’. Ouattara goes further, insisting that the currency is a matter for experts and thus not a subject for democratic debate. From this standpoint, any critic of the CFA franc must by definition know nothing about it.
Yet, alongside radical economists and intellectuals, the critics of the CFA franc also include former international officials like Togo’s Kako Nubukpo (ex-BCEAO), Senegal’s Sanou Mbaye (ex-African Development Bank, and Guinea-Bissau’s Carlos Lopez (ex-UN Economic Commission for Africa), as well as African bankers like Henri-Claude Oyima (President-Director General of BGFI Bank).
From a taboo subject raised only by a handful of African intellectuals and politicians, the CFA franc debate is starting to enter day-to-day conversation and to attract the attention of activists. A social movement is developing to demand the joint withdrawal of African nations from the CFA franc. On 7 January 2017, on the initiative of ‘SOS Pan-Africa’ (‘Urgences Panafricanistes’), an NGO set up and run by the activist Kemi Séba, anti-CFA demonstrations were organised in several African and European cities, and in Haïti. The mobilisations varied in size according to country, bringing together intellectuals, pan-Africanist and anti-globalisation activists and others. SOS Pan-Africa has since issued a symbolic appeal for Africans to boycott French products.
The current alternative to the CFA franc in West Africa is the joint currency planned for members of the Economic Community of West African States (ECOWAS). The new currency was due to enter circulation in 2015, but this has since been deferred until 2020. The new deadline may or may not be met, but one thing seems increasingly clear: the CFA franc no longer has a future.
This article was first published on the Review of the African Political Economy (ROAPE) blog.
Photo credit: Kaysha.
Ndongo Samba Sylla (@nssylla) is Research and Programme Manager for the Rosa Luxemburg Foundation. He is the editor and author of a number of books including The Fair Trade Scandal.
The views expressed in this post are those of the author and in no way reflect those of the Africa at LSE blog or the London School of Economics and Political Science.
It’s good to see the CFA discussed in English, but this article is more ‘activist’ than ‘academic’. I appreciate the ROAPE perspective, but their ideological stance over commits to positions a priori.
I haven’t made my mind up on the CFA, but the text makes some obvious problematic jumps. It’s ridiculous to use the Magreb country experience as a counter-example – this is a different part of the world. Why not stay in sub-Saharan Africa and discuss the Guinea, Sierra Leone, Liberia or Ghana experience? Senegal and Cote d’Ivoire are regularly cited as the hottest economic stories in West Africa at the moment, neither based on oil. How have they managed that with the ‘burden’ of the CFA? The spiralling inflation in the likes of Ghana and Nigeria must be brought into the equation as well.
The reality is that whether you have the CFA franc or not, sub-Saharan Africa continues to struggle with creating jobs and trickle down development. That’s true in Sierra Leone and Togo, The Gambia and Senegal. Getting rid of the CFA franc is not the curse that if lifted would liberate these economies. We need to look elsewhere.
It’s not about looking elsewhere. You are not getting it and you are looking at a narrow view and not a bigger picture of the solution because you see with this extract piece is….Problems. Forget Problems? One of the largest continent in the world, the richest continent in the world, should not be facing economic oppression from the West as it has studied – harmed economic growth across the region, jobs for the citizens of Africa. It’s more academic than activism.
It’s 2017 and if North African countries like Morocco can move away from declining/dead colonial economic imperialism from Europe, so can West Africa. The truth about the western rigged economy, it is impossible for Africa to have a currency that is over inflated, weakened pegged against world markets with their weak currencies below market prices where it should be the opposite, it does not makes sense from a common sense economic analyst.
It’s time for West Africa to be free from shackles because it’s going to be a big player of the economic world, not dying declining Europe, therefore it needs a single currency for the region by 2020 especially in West Africa as the main pillars for African economic engines because Africa is going to have the world’s biggest trade area with all 55 countries signed up, an African passport that could boost continental trade, jobs, opportunities and depend less on the outside market making it better for Africans to diversify markets and create millions of jobs for millions of Africans, open skies for air transport trade in 2018 and customs union in 2019 leading up to an development of the economic community with the common market by 2023.
Furthermore, in the near future, the formation of the single market and the single currency by 2028 with pillars for a strong foundation of a continental currency independence of continental region currencies would be a perfect balance for pegging currencies’ valuation. This is a start for African countries to have economic independence from colonialism because after so-called Independence in Africa, those countries were given under “one condition” to compromise their own economic sovereignty and even sovereignty as a whole so that it benefits the colonial masters. That is unacceptable. That’s not what most Africans want or even wanted in the first place. Africa does not need to be dependent on Europe, it’s not an aid emergency wasteland, it’s a continent bursting to strive and grow with its rich resources and corrupt leaders are being duped and lying to themselves that it’s impossible to “break free from colonisation”. This century is Africa’s century, not Asia, not Europe, not North America and South America. Because if Africa does not make massive changes from top to bottom then Africa will cease exist before the next century. Guess what? The youngest population under 24 is in Africa – by 2050, the population will grow and surpass China and India with 4.4 billion. This is Africa’s biggest opportunity to transform and in fact it is transforming as we speak and no one can stop it!
Times have truly changed and the world is upside down, populism far right rhetoric rising in the West, isolationism for UK with Brexit, a broken EU, and a potential 2018/2019 economic crash for the western elites, , America’s dying empire with Trump weaken global affairs and globalisation as seen with weakened NATO members and western Europe alliance. You see China’s history that they don’t put up with Western tactics on its economy something Africa can learn from with this special ingredient of being relevant in the world. The decline of Western economic and political dominance is a wake up call to the South, East, North of the globe especially the sleeping giant continent, Africa to simply walk away and say to the west no thank you, we can manage on our own and look after are own and will strongly stand by, help and support the African diaspora outside the continent.
The economic analysts are bringing out the facts and the ugly truth that hinders Africa from surpassing the obstacles and the economic shackles that only benefit the rich 1% of the west and the corrupt leaders of Africa preventing the continent being at the forefront of the world’s economic superpower and it needs to end and it will end. Because at the end of the day, when we please the French, the Brits who is benefiting the resources, the economy, colonial currencies? Ask yourself that!
France will not give up the CFA without a fight. In fact they have been behind many coups in these countries when leaders have tried to cut ties. Gbagbo in Ivory Coast is a recent example with his successor Ouattara being a former trained French Legionnaire. And basically a puppet for France. Without Africa France would relegate to a third world economy – I’ve heard they make 500 billion each year on the back of these CFA countries. It has to stop but I fear the western superpowers will not allow it. This is white supremacy in its deepest most evil form,
Thank you Martha. France is just nothing. They just depend on their former colonies to survive. Those African countries too should wake up. All of those countries dont want to join the single currency for West Africa and it makes sense because “almighty” France will destroy them. Be there and compare yourselves to Ghana and Nigeria and you dont wake up.
France is just nothing? France would actually be a little bit richer if she did not have to help her former colonies financially. She does not depend on them to survive at all. Come on, let’s be realistic and objective here. Your comment is ridiculous.
France has no doubt made a lot of mistakes since 1960 and she, unfortunately, behaves just like the UK, the USA, Russia, and China, who are trying to build or maintain their ’empire’ or their zones of influence.
France is not the 5th or 6th more powerful country economically ‘because of sub-Saharan African countries’. You can be mad at France but you have to be intellectually honest when you comment on such a sensitive topic.
Where is France now, a dying economy with a situation getting out of control of Macrons disastrous economic structures in the country, as the country leaning towards populism and anti-EU integration rhetoric, paving a continental disaster for Europe in the long term with domino effects from Brexit. France is in the position today due to leaching off of Sub-Saharan Africa, without Africa, it would slide to the third world.
Are you joking? Then why do you want help us absolutely? Since when you are philanthropic? Your treasury getting $500 billions dollars every year from CFA. Without Africa, you would be poorer than a country like Romania. Your economy is structurally weak compared to countries like the UK , Italia, and Germany. You are surviving via neo-colonialism and you want pretend helping those who making you stand up. You will see CFA will end along with your dirty colonial contract that help you taking over all our resources. On top of that you guys have no respect for us. Wait and see, lies will end and the truth will take over.
500 billion dollars every year? Think about that for a moment, or as long as it takes.
Good point. It’s not just France, it’s a whole collision against the franc zone because the currency is being controlled by the French Treasury and co-managed by the European Central Bank
I think that is a good thing that the role of the CFA Franc is discussed, however, the argument that it would constitute a major reason for the poverty of former French colonies is unconvincing. West African states that do not use the currency are not necessarily in a better shape. More importantly, there should be a debate on what the alternative to the CFA should be. It is dubious that the ECOWAS monetary union project would go anywhere, because there is no commitment to monetary integration and smaller countries are afraid to be “swallowed” by Nigeria. Having 6 or 7 different currencies for each of the country that now adopts the CFA would create even more fragmentation and hamper regional exchanges.
“Colonialism Alive and Well, Better Say as Bad as Ever! Part 1”: https://wipokuli.wordpress.com/2017/05/27/colonialism-alive-and-well-better-say-as-bad-as-ever-part-1-der-kolonialismus-lebt-und-feiert-froehliche-urstaend-teil-1/
Good article and discussion. The issue here is more to do with France’s domination of the CFA Franc such as having to deposit 50% of foreign reserves in the French treasury and France having a veto vote on the boards of the west African and Central African banks.
Does a fixed exchange rate system such as this peg to the Euro benefit the Francophone economies ? Will it be more beneficial to peg the CFA Franc to a basket of reserve currencies such as the Euro, Dollar and Yen ?
Should the Francophone countries adopt a floating exchange regime and determine their forex on market forces of demand and supply ?
I believe the CFA franc is here to stay given the lack of commitment to set up a west african monetary currency. I do not see a currency union in 2020, which is round the corner by the way.
Therefore Francophone countries need to chart their own course with the CFA Franc and decide whether to adopt a peg to a basket of other reserve currencies or adopt a floating exchange rate system.
So we sell raw material to France 50% of the price and they sell it back to up 100% which actually means the that 50% price raw material is actually 25% since our currency is at a fix rate, and their 100% is 200% of our cfa and there’s no way for growth all, so that’s why we swim our way to Europe.
How much do the CFA Franc contribute to the French economy in terms of percentage of its own economy and GDP.? Also how much does France make in fees and what it gets from trade links with its former African conolies?
Does anybody know where to get these answers?
Its 2021 and we are still talking about France and colonization, the whole world was colonized and they have all moved on!! They print their own currencies and run their own economies and interact on the world global market. Come on Africa!
France would be a much poorer country without african nations to swell their pockets. That is why they want us to think we benefit when we agree to their feudal suggestions. The french will do anything to maintain their sphere of influence