Equal relationship or Neocolonial politics?
By Claire Marie Mariani
“Cet âge de la Françafrique est révolu” (The age of the Francafrique is over) confidently affirmed French President Emanuel Macron during a state visit to Gabon. Indeed, he seems determined to build more equal relationships with the African continent. Whilst their grievous past cannot – and should not – be forgotten, the present and the future of Franco-African relationships could be built on better grounds. However, some relics of colonial rule such as the monetary union implemented by the French government – the CFA franc – (standing for “Communauté Financière Africaine” or “African Financial Community”) are still operating. This monetary union, partly overseen by France, has been the object of numerous criticisms by African elites and sparked a wave of protestation by the youth. As a response, The Western African Economic and Monetary Union, along with the French Minister of Economy signed an agreement to modernise the terms of this currency. Are these changes matching Macron’s promising speeches, or are they displaying a facade masking the perpetuation of neocolonial politics?
The Pillars of the CFA franc
The CFA franc zone was implemented in 1945, encompassing two currencies: the West African CFA, and the Central African CFA, spanning over fourteen countries — twelve of which were French colonies, plus Guinea-Bissau and Equatorial Guinea.
The monetary zone, adopted after the ratification of the Bretton Woods agreements, was created in the name of cushioning the colonies from the devaluation of the franc, although it mainly fostered the integration of the settlements in the French economy.
One could believe Western and Central Africa’s independence would have marked the end of the currency. However, on the eve of decolonisation, the institutionalisation of the CFA franc through the creation of the “Banque Centrale des Etats de l’Afrique de l’Ouest” (BCEAO) and “Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun” (BCEAEC) enabled France’s clutch on monetary policies to persist, notably by putting French representatives in their boards who had de facto veto power.
The franc zone relies on four main pillars: Firstly, its exchange rate – the value of the currency when converted to another – is fixed, meaning that it is tied to another currency, in this case to the euro. Secondly, the common currency allowed for free financial flows across the franc zone, facilitating economic relationships between the states. Notably, this allowed free financial flows between France and the zone. Third, the franc is guaranteed its unlimited convertibility in euros by the French government. However, this guarantee comes with the obligation for member states to place at least fifty percent of their foreign exchange reserves in an operating account within the French Treasury. Finally, the zone allows for free financial flows within it.
The institutions, as well as the pillars of the currency, embody perhaps the most astute form of influence – often referred to as the Francafrique – France has over Africa. Its de-facto control over the currency has impactful consequences on the development of the region. Whether those impacts are positive or negative is contested: indeed, some argue that low inflation conferred by the peg to the euro provides the economy with stability and resilience, which would translate to increasing trade and investment. In contrast, others stress the peg leads to the overvaluation of the currency, shrinking the competitiveness of their exports. Another critic argues the peg sustains a low-inflation policy that is unpracticable for developing countries.
Key points of the reform
Criticism has intensified in the past decade: from intellectuals to former officials, finally reaching civic populations. This led to numerous protests, songs, such as 7 minutes contre le CFA, and symbolic acts such as Kémi Seba’s burning of a CFA franc banknote. This controversial act rekindled debates all around the CFA zone and above, and sowed the seeds of reform.
Three years later, on December 21st, 2019, the French Minister of the Economy, along with the President of the Council of Ministers of the West African Economic and Monetary Union, signed an agreement seeking to reform the CFA Franc around three aspects. The currency is henceforth named the ECO, referring to the Economic Community of Western African States (ECOWAS). Moreover, the French government will no longer demand fifty percent of the member states’ federal exchange reserves, whilst still remaining the guarantor. Finally, French representatives will withdraw from the currency’s governing bodies, though they will be reintroduced if federal reserves fall too low. Additionally, an independent member can be nominated to monitor the reserves. It is important to stress this reform only concerns – for now at least – the West African CFA only.
Criticisms of the reform
At first glance, the reform appears as a promising step toward monetary sovereignty. For instance, member states are henceforth empowered to invest their federal reserves at their discretion. Additionally, it would seem their agency regarding policies would increase due to the withdrawal of French representatives. Even considering their possible reinstatement in the governing bodies, it would appear as France stepping back, and only fulfilling an advisory position.
Perhaps this explanation would have been credible if the peg to the euro would have been removed. Indeed, sustaining a fixed exchange rate, in the case of the CFA franc, severely limits states’ agency in choosing monetary policies. As the peg acts as a straitjacket for development, the criticisms presented earlier still remain applicable. Furthermore, some of the concessions made by France – notably not asking for fifty percent of the federal reserves in an account of the French treasury – are mostly symbolic. Of course, this does not mean such gestures should be underplayed, as no longer being obliged to invest its federal reserves in the former coloniser’s bank is loaded with symbolism. Nonetheless, it only goes so far, and by no means empowers the CFA franc zone with monetary sovereignty. In contrast, one can counter-argue removing the peg could have worrying consequences for the economy of the zone, as pursuing the same policies would be unprecedented without a guarantor.
As mentioned above, whether these monetary policies have positive or negative impacts on the development of the zone is contested, and it is likely there is some truth on both sides of the argument. However, what is uncontestable is as long as France shall be the guarantor of the currency, the member states of the Franc zone will not be sovereign in their monetary policies. Perhaps the reform, at first sight, appears as a promising step in shifting away from neocolonialism, but in substance, the new policies are paternalist at best.