CFA zone no saviour of African states

The Daily Nation recently published a commentary in which the French Ambassador to Kenya, Mr Rémi Maréchaux, denounced an earlier article by columnist Rasna Warah on the controversial CFA pact in the former French colonies.

In the article, he expressed shock that his government was accused of perpetuating economic imperialism through a controversial monetary arrangement where former French colonies in Africa are obliged to deposit up to 50 per cent of their foreign reserves into France’s central bank.

Dismissing Ms Warah’s allegation of modern-day slavery of Francophone countries, Mr Maréchaux argued that the monetary pact, which established the CFA franc, is a “voluntary” union that had so far worked well for CFA member states. His main argument was that CFA ensured that member states benefited from greater monetary stability and much greater “investors’ and business partners’ confidence by eliminating foreign currency risk”.

While the ambassador’s arguments were compelling, he deliberately avoided the controversial aspects of the pact. A few days ago, the African Society of Cambridge University hosted a former prime minister of Mali, Mr H.E. Moussa Mara, for a talk at Kings College.

It was expected that a question on the CFA’s continued usefulness would arise from a lecture on security in the Sahel. Contrary to Mr Maréchaux’s implied suggestion, Mr Mara argued that the CFA is deeply unpopular with the masses in those countries and had they the choice, they would bolt out. He emphasised that the current arrangement undermined sovereignty, especially with regard to fiscal policy.

The CFA countries are effectively denied this liberty. Besides, a single French printer supplies the 15 African countries with their own currency.

Although Mr Maréchaux is right to argue that inflation and exchange rates instability are better contained within CFA countries than in the rest of sub-Saharan Africa, he conveniently avoided mentioning that interest rates there are abnormally high. Since the CFA franc is guaranteed a fixed exchange rate to a strong currency, it has created an environment that locks out millions of Africans from accessing credit.

While the arrangement is good for a handful of foreign investors wary of inflation and currency risks, it has made life terribly expensive for ordinary citizens. For the past 10 years, CFA countries have consistently registered poor growth compared to other sub-Saharan African countries, largely due to the high cost of doing business in a currency tied to the euro.

Defending the controversial policy where African states entrust 50 per cent of their reserves to Paris, Mr Maréchaux argues that the funds are allocated on an interest-bearing account and are “entirely and freely accessible”. These are half-truths. Individual countries cannot use this money as they wish without the approval of France.

Indeed, the “advisory” role that Mr Maréchaux says France plays is not ceremonial. It is an extremely powerful role with near-veto power. And although Mr Maréchaux is right when he says that interest is paid on these reserves, he was careful not to offer figures. The hundreds of billions of dollars held in the Bank of France by African countries earn a miserly 0.75 per cent. Meanwhile, France has never denied using these funds to reduce its own borrowing.

Ms Warah was on point with regard to the CFA as a neo-colonising tool. I am sure the ambassador is aware that in 1994 his country devalued the CFA franc by 50 per cent, plunging the entire zone into a political and economic crisis as commodity prices tripled in days and riots broke out. Such a recurrence is still possible.

Can these countries leave the zone “voluntarily”? Well not exactly. The currency has essentially ossified these economies in an asymmetrical yet symbiotic relationship with France. Most risk economic collapse if they leave. According to Mr Mara, exiting the CFA will be a slow, painful, but necessary process.

If this is not neo-colonialism, then the term has become impoverished of its original meaning.

Dr Omanga is a Fellow at the Centre of African Studies, University of Cambridge, and teaches media studies at Moi University. [email protected]