At a press conference in the Ivory Coast city of Abidjan on Saturday evening, President Emmanuel Macron and his Ivorian counterpart Alassane Ouattara announced a “historic reform” of the CFA franc, the currency used by 14 West African states and created at the end of World War II, and its replacement next year by what will be called the “Eco”.
It now transpires that the move was the principal reason for Macron’s visit. But it had not been mentioned in advance on the official agenda of his three-day trip to France’s former principal West African colony, which included a visit to a French army base in Abidjan for early Christmas celebrations with troops, and continued with the signing of various bilateral contracts, and the symbolic inauguration of reconstruction work on a vast market place in Bouaké, the second-largest Ivorian city. While the French media accompanying Macron were told in advance of the announcement, for the populations of the countries that use the CFA France its so imminent demise was a surprise.
The CFA franc was officially created on December 26th, 1945. Six years earlier, at the start of World War II, France had already established a “Franc Zone” by passing legislation that brought about changes across its colonial empire.
France’s aim with the CFA France was to “protect itself from the structural imbalances in a war economy” and continue to supply itself with low-price raw materials from its colonies. At the time the initials CFA stood for 'colonies françaises d’Afrique' or 'French colonies of Africa', then from 1958 the meaning changed to 'communauté française d’Afrique' or 'French community of Africa'.
After France granted independence to its African colonies at the start of the 1960s, the currency system was imposed on the newly-independent states. From then on CFA came to mean 'communauté financière africaine' or 'African financial community' in West Africa and 'coopération financière en Afrique centrale' or 'Financial Cooperation in Central Africa' in Central Africa.
The CFA franc was initially pegged to the French franc, but since the latter’s replacement by the euro two decades ago, the value of the African currency is aligned to the euro at a fixed rate of 655.96 CFA francs to one euro.
Enlargement : Illustration 1
There are currently two separate CFA franc currency zones in Africa, one in West Africa and the other in Central Africa. Macron and Ouattara announced on Saturday several changes in the zone that is used by eight West African countries, called the Union Économique et Monétaire Ouest Africaine (UEMOA) – for West African Economic and Monetary Union – which include Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal and Togo.
Until now, the Bank of France has held half of the currency’s total reserves, and in the changes announced at the weekend that is to be ended. Another is what Ouattara called the “withdrawal of French governance” of the currency, which in practice will mean no French officials will sit in on decision-making meetings of UEMOA, including the governing board of its central bank, the BCEAO. The new Eco is due to enter circulation in mid- 2020.
The Togolese macro-economist Kako Nubukpo welcomed the moves. “The passage of the CFA France to the Eco is marvellous news for the future of the countries that use it,” he declared on social media. But he appeared to be a rare example among fellow economists critical of the CFA franc to now rejoice in the transformation.
“The CFA franc crystalizes numerous criticisms of France,” said Macron at the weekend, addressing the Ivorian population, when he spoke of the colonial “fault” of France . “I see your young people who reproach us for a relationship that it judges to be post-colonial. So, let’s break off the anchors.”
But in reality, the anchor chains are still intact in that the CFA franc’s fixed-rate parity with the euro will continue with the Eco, which a number of economists consider to be a significant handicap for African economies.
France will also continue to provide a “guarantee” for the new currency, which means it may lend euro sums to the UEMOA states if they find themselves in a currency shortfall (although this occurred very little with the CFA franc). Neither Ouattara, who has been a close ally of France and previously a firm supporter of the CFA franc system, nor Macron gave any indication of what may have been asked for by Paris in exchange for the reform.
They did however indicate that a new “monetary cooperation agreement” will be signed between France’s finance minister and the chairman of the ministerial group of the UEMOA states, whereas in theory it might have been possible for the European Central Bank to take that role.
“The agreement signed between Ouattara and Macron is going to perpetuate the same system under a ‘renovated’ form,” commented Senegalese economist Demba Moussa Dembélé, director of the Forum for African Alternatives. His compatriot and economist colleague Ndongo Samba Sylla* agreed: “The CFA franc is not dead. Macron and Ouattara have only got rid of its most controversial aspects. The hearty of the system is very much in place: the monetary cooperation agreement with France as ‘guarantor’, fixed parity with the euro, a policy of monetary repression, the maintaining of a Franc Zone composed of countries that trade little between themselves and who, logically, should not share the same currency.”
The reform, which was prepared in secret between France and Alassane Ouattara, also places in question the project for a common currency – also called “eco” and also planned for 2020 –between the 15 countries within the Economic Community of West African States, ECOWAS, and which includes those member states of the UEMOA. That project already appeared in difficulty, notably because the UEMOA had not come up with a clear plan to cut itself off from the French treasury as demanded by ECOWAS heavyweight Nigeria.
For the Ivorian economist and opposition figure Mamadou Koulibaly, the CFA franc reform will “short-circuit the ECOWAS currency”. Writing on social media, Koulibaly said: “The CFA franc of West Africa is dead, we are told, and its phantom has come to haunt the Eco that we were waiting for from the ECOWAS.”
Ndongo Samba Sylla is of the same opinion, arguing that Macron and Ouattara had “signed the death certificate” of the ECOWAS common currency project. French association Survie, which is active in opposing what it calls “neo-colonial” French interference in African affairs, said the CFA franc reform “allows for the capturing and prevention of the common monetary reform of the ECOWAS countries, and speaks more of a will to maintain the dominance of France over this new currency”.
Se pose aussi la question de l’avenir du franc CFA de la Communauté économique et monétaire de l’Afrique centrale (Cemac), qui comprend six pays. Jusqu’ici, les « réformes » concernant l’Uemoa ont toujours été transposées peu après au franc CFA de la Cemac. Les chefs d’État de la zone, qui ont eux aussi récemment évoqué la nécessité d’opérer des changements dans leur franc CFA, certains militant pour son abolition, accepteront-ils qu’un scénario similaire à celui actuellement mis en œuvre dans l’Uemoa s’applique chez eux ?
Meanwhile, the other CFA franc zone, the Communauté Économique et Monétaire de l'Afrique Centrale, the CEMAC, is in the centre of the African continent. Its six members are Cameroon, the Central African Republic, Chad, the Republic of the Congo, Equatorial Guinea (a former Spanish colony which adopted the CFA franc in 1984) and Chad. Like its UEMOA counterpart further west, whose central bank, the BCEAO, is based in Dakar in Senegal, the CEMAC central bank, the BEAC, is based in in Yaoundé in Cameroon.
Though both CFA francs have been guaranteed by the French Treasury, the West African CFA franc cannot be used in Central African countries, while the Central African CFA franc cannot be used in West African countries.
In the past, any reforms made to the UEMOA’s CFA franc were subsequently soon applied to that of the CEMAC. Some heads of state among the six CEMAC countries have recently spoken of the necessity to overhaul, and even abolish, the CFA franc, but it remains to be seen whether the region would accept a reform identical to that announced at the weekend in Ivory Coast.
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* The writer of this article, Fanny Pigeaud, co-authored a book about the CFA franc with Ndongo Samba Sylla, entitled L’Arme invisible de la Françafrique, une histoire du franc CFA, published in France in 2018 by publishing house La Découverte.
- The French version of this article can be found here.