Common currency reform aimed at reducing French influence in West and Central African countries is facing delays
As the Sahel states Mali, Niger, and Burkina Faso – which formed the new AES alliance last September – strive to overcome their colonial past and the neocolonial influence of France, their dependence on foreign currency demands closer scrutiny. The lasting aftermath of the French franc zone (franc CFA, Communauté financière africaine) in West and Central African countries serves as an example of a foreign currency foothold.
The enduring influence of the French franc zone exemplifies the impact of complex historical events on Africa’s economic independence. Pre-colonial Africa boasted diverse economic systems, with some regions flourishing with rich agricultural, political, and trade structures.
However, during the colonial era, African economies were fundamentally restructured. European colonies prioritized the exploitation of resources that benefited their own countries, neglecting investment in infrastructure and agricultural diversification. Following the end of colonialism, African countries still faced severe challenges due to the plundering of resources by colonial powers, coupled with the effects of neocolonialism and debt burdened by stringent conditions.
While pegging the CFA franc to the euro offers more stability compared to the dollar’s fluctuations, it raises concerns about member states’ limited control over their monetary policies. This system, with its fixed exchange rate, restricts monetary control measures, with key decisions largely controlled by two institutions.
The CFA franc zone encompasses 14 countries in Sub-Saharan Africa, each aligned with one of the two monetary regulatory unions: the West African Economic and Monetary Union (WAEMU, or, by its French acronym, UEMOA) and the Central African Economic and Monetary Community (CAEMC, or CEMAC). The WAEMU comprises Benin, Burkina Faso, Cote d’Ivoire (Ivory Coast), Guinea-Bissau, Mali, Niger, Senegal, and Togo, while the CAEMC comprises Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, and Gabon.
The CFA franc was introduced on December 26, 1945, to improve stability among French colonies after World War II. France established the CFA franc to replace the French West African franc used in its colonies, and the unified currency has served as a tool for France to continue maintaining influence over the economy and administration of countries in the zone. Initially pegged to the French franc at a fixed rate, colonies were protected from the effects of an underperforming French currency, making imports from France cheaper but adversely affecting their global competitive advantage.
In the 1950s, the CFA franc became fully established as the common currency for French-speaking African colonies, maintaining a fixed exchange rate with the French franc. During the 1960s, despite gaining independence, most of these countries retained the CFA franc as their currency under new agreements with France. The CFA franc then split into two separate currencies: the West African CFA franc (used by countries in West Africa) and the Central African CFA franc (used by countries in Central Africa), each with its central bank.
In the 1970s, following the collapse of the Bretton-Woods System and the devaluation of major currencies, the fixed exchange rate of the CFA franc was maintained. Economic policies and regulations continued to be influenced by France, which provided guarantees for the convertibility of the CFA franc into the French franc and later the euro.
Throughout these decades, the CFA franc has been a subject of debate regarding its role in African economies, its ties to France, and calls for monetary sovereignty by member countries of WAEMU and CAEMC.
In 1994, the CFA franc experienced a significant devaluation to address economic challenges, sparking intensified debates on its role and ties to France. With the introduction of the euro in 1999, the CFA franc was pegged to the euro, continuing the fixed exchange rate system. The CFA franc zone imposes its own set of limitations on economic independence. Individual countries within the zone are unable to devalue their currencies to make exports more attractive, hindering economic growth. A unified monetary policy under the CFA zone doesn’t allow the countries to adequately respond to their unique challenges. Policies targeted at export promotion may be challenging to execute if they are inconsistent with the zone’s overarching objectives. Appreciation of the euro makes exports more expensive, effectively destroying competitiveness in the market. This creates a domino effect, making the economies reliant on certain commodities and ultimately leading to poor productivity in other sectors.
The former requirement for the CFA franc was established in 1948 as part of the monetary system. The requirement was initially set at 100% of foreign exchange reserves, meaning that African countries had to deposit all their foreign exchange reserves with the French Treasury. The reserve requirement was reduced to 65% in 1973 and then to 50% in 2005. Member states holding a significant portion of their foreign exchange reserves in a common pool managed by the French Treasury restricted their ability to devalue their currencies, which could have made exports more competitive.
The Macron-Ouattara initiative was announced on December 21, 2019, named after the presidents of France and Cote d’Ivoire, Emmanuel Macron and Alassane Ouattara, aimed to modernize the West African CFA franc and reduce French influence. The three key changes of the reform include renaming the currency to the ‘Eco,’ abolishing the requirement for WAEMU countries to deposit their reserves in the French Treasury and withdrawing French representatives from the boards of the central bank of the WAEMU, known by its French acronym BCEAO (Banque Centrale des États de l’Afrique de l’Ouest). Persistent criticisms of the CFA franc drove this reform as a colonial relic, political pressure for greater economic autonomy, and the need for a contemporary monetary framework. France agreed to the reform to redefine its relationship with its former colonies.
Implementation has faced delays due to the Covid-19 pandemic and differing economic conditions among member states. Efforts to transition to the Eco continue, with ongoing negotiations shaping the final implementation. The reform is framed by bilateral agreements between France and WAEMU countries, WAEMU internal regulations, and official communiqués outlining the specific changes and timelines.
Five years later, opinions on the reform remain divided. Some activists believe that France has undermined reform attempts by African governments, as progress has stalled. Luigi Di Maio, Italy’s former deputy prime minister and current minister of foreign affairs, reignited the debate over the impact of the CFA franc on Africa’s development with a provocative statement: “France is one of those countries that, by printing money for 14 African states, hinders their economic development and contributes to the refugees leaving, dying at sea, or arriving on our coasts.” Mohamed Keita, a senior policy adviser with the Human Rights Foundation who has lived in two countries within the CFA franc zone, Senegal and Mali, believes that assisting citizens of the CFA zone in overcoming foreign influence is, from his perspective, not merely criticism of France but a crucial stride toward achieving complete decolonization.
The French government, however, maintains that it has upheld its end of the bargain. France’s minister for Europe and Foreign Affairs, Stephane Sejourne, reiterated these views, stating that France no longer interferes with governance in these countries. France’s reassurances come amidst renewed discussions about the CFA franc, which many consider a colonial currency and a tool for French domination. Several recent military coups in the region have been linked to these sentiments, with some ousted governments exiting the Economic Community of West African States (ECOWAS) while hinting at potentially leaving the CFA franc system.
Despite some positive results in the aftermath of the 2019 reform, its main goals remain unachieved, and even though it is expected that the changes will have come into effect by 2027, some critics believe they will be only symbolic and will not guarantee transition to fully sovereign monetary policy for the region.
While the historical context and current systems such as the CFA zone present significant hurdles, there’s a growing movement toward economic autonomy. Several promising solutions exist, including regional integration, diversification, and financial inclusion. Increased economic and trade ties between African nations can develop a larger, more resilient market. Pivoting away from an overwhelming dependence on a single export commodity is crucial in building autonomy. Investing in infrastructure and developing diverse industries will allow African nations to weather fluctuations in global markets.
