Dear President Macron, it’s time to let go your outdated African policies!
For more than 50 years, the citizens of 14 francophone countries in Africa are using an outdated French monetary system. They pay the price of it with their democratic rights and wealth, leaving their own countries in poverty. Whereas France is still benefitting from a joint currency they introduced during colonial times. It’s about time for us to change.
The newly elected President of France — Emmanuel Macron — is to be a promise for change, “lifting France into the 21st century’’: a more modern socio-economic system in France, a new role for France in uniting European Union countries and — as the 163 million inhabitants of francophone Africa hoped for — a more equal relationship between France.
Why? Please, continue reading.
France still controls francophone African economies after more than 50 years of independence.
In the early 1960’s, 14 French former colonies in West and Central Africa gained independence:
To this day, it is this currency that all these French-speaking countries are using: the CFA-franc, introduced over 70 years ago. Ndongo Samba Sylla, a Senegalese development economist, says: “It is a mechanism of the colonial era that is still in place.” At the Review of African Political Economy Sylla adds: “Membership of the franc-zone is synonymous with poverty and under-employment.”
Regulations around the CFA-franc are determined in the so-called Monetary Cooperation Agreement. An agreement between France and the West and Central African francophone countries which was established immediately following independence. In a Skype-interview, Ndongo Samba Sylla explains the four core principles of the Monetary Cooperation Agreement and the influence it has on francophone Africa’s finances, economies and sovereignty:
1) A fixed exchange rate with the euro.
The French-speaking African countries are all using the CFA-franc. A currency that has a fixed exchange rate to the euro (and previously the French franc). For instance, from 1972 to 1994 1 French franc was always 0.02 CFA.
Decisions of the French Central Bank and the European Central Bank (since 1999 the very start of the introduction of the euro) affects the economy of all francophone African countries. Whereas the fast-developing Southeast Asian countries could decide for themselves to protect or open their markets by increasing or decreasing the value of their money, these African countries can’t. Ndongo Samba Sylla says: “The African central banks are always dependent on the European Central Bank and thus have no monetary autonomy.”
Sylla explains further: “And since the CFA-currency is strong — because linked to the euro — it means that importing is relatively cheap, while exporting is expensive. So, it makes it more difficult to export, which does not help our industrialisation.”
2) A centralisation of foreign exchange reserves in an account of the French Treasury.
The French Treasury in Paris holds 50% of each of the CFA-member countries’ foreign exchange reserves. (Immediately following independence, this was a 100% and from 1973 to 2005, it was 65%).
Moreover, every CFA in the African Central Banks must be backed with 20 CFA cents in foreign exchange reserves (which is a ratio of 20%). It means that African countries cannot access their foreign exchange reserves stocked in Paris, when the total amount at the Central Bank equals 20% of the total number of euros in Paris, which is almost always the case.
Consequently, it puts a pressure on the amount the banks can use for lending credits to entrepreneurs and citizens, the economist Sylla explains. “In CFA-countries credits involve 25% of the national yearly income (GDP), whereas in non-CFA countries this is 60%! Without credit, there is no economic growth and no jobs.”
3) A French guarantee of the unlimited convertibility of CFA francs into euros.
France agreed to pay the difference whenever the amount of foreign exchange reserves is below the 20%. But France never did.
It happened once that the African franc-zone came below the agreed 20% line. The Central Bank of France — Banque de France — mentions in its publication that on 11th January 1994 the CFA-franc was only worth 50% of its former value. Banque de France devaluated the currency (and so automatically the reserves are higher). Ndongo Samba Sylla says: “[So] France didn’t guarantee anything! In fact, Africa guaranteed itself.”
Imagine that all of a sudden, your savings and cash are cut in half. Sylla: “Devaluation is harmful for the population. The price of imported products will explode — as will the foreign debt — and so the purchasing power of consumers will be weakened.” Serious devaluation can easily generate uprisings.
4) The principle of free capital transfer within the franc zone.
Within the franc zone “capital can come and go when it wants”, Ndongo Samba Sylla says. The official aim is to facilitate trade between the franc-zone countries. However, only 15% of the total trade is among the West African franc-zone and less than 10% in the Central African franc-zone, according to the Togolese economist Kako Nubukpo in Le Monde.
Besides, the free flow of capital “means no capital control, which destabilizes the economy,” Sylla explains. French enterprises can freely transfer their profits to Europe and secure it by converting it into euros. It is revealing, Nubukpo adds, that on average, 60% of the franc-zone’s export is going to France.
Ndongo Samba Sylla concludes that in reality the monetary system means: “France controls the francophone African economies over controlling their money supply.”
The French monetary system has “No equivalent in the world,” as Banque de France says proudly in its publication. It’s true and there’s nothing secret about these monetary agreement and practices. It’s out in the open that it leaves the countries concerned without monetary control.
But why? Who is benefitting?
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