The African franc is a currency imposed by France in the 1940s and 1950s on 14 African countries that were its colonies, coinciding with the beginning of the liberation and independence movements from French colonialism of the African continent.
The CFA franc is one of the oldest currencies in the world. Despite this, it ranks among the weakest in the world according to the development, economic and social indicators of the countries that trade it, most of which suffer from political instability, armed conflicts, and the growth of armed and separatist groups, in addition to clandestine migration towards Europe despite… Its enormous natural resources.
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In September 1939, coinciding with its war against Germany, France issued a decree adopting the Syrian regime. A unified decree for all countries of the French Empire. The decree was an announcement of the beginning of the emergence of a “region of The value of the franc.
With the end of World War II, the Bretton Woods Conference was held in 1944. It represented the first building block for the new global monetary system, and through its outcomes, it established the foreign exchange system.
The new exchange system allowed the President of the French Fifth Republic, General Charles de Gaulle, his Minister of Finance, René Plevin, and the Minister of the Colonies, Jacques Sostal, to regulate the currency of the former French colonies to ensure French subordination and domination, as well as to ensure their connection to the French franc after their independence.
In December 1945, France officially issued a law establishing a private banking system called the “Franc Zone” in its African colonies, and the value of the African franc was set at 1.7 French francs. Its trading value in 1949 amounted to about two French francs.
This African currency was directly linked to the French franc, and the situation remained so even with the achievement of this states of political independence by signing economic cooperation agreements that Accordingly, the name and form of the currency were determined, while the name and content remained.
Economic and Monetary Union of West Africa
It was established on January 10, 1994 in the Senegalese capital, Dakar, to replace the West African Monetary Union, which had previously been established in 1963. The West African Economic and Monetary Union includes 8 countries: Benin, Burkina Faso, Ivory Coast, Guinea-Bissau, Mali, Niger, Senegal, and Togo, and its headquarters are In Ouagadougou (Burkina Faso).
Economic and Monetary Community of Central Africa
It was established on March 16, 1994 to replace the Central African Customs and Economic Union. It was announced from the city of N’Djamena in Chad. It includes 6 countries: Cameroon, the Central African Republic, the Congo, Gabon, Equatorial Guinea and Chad. It entered into force in June 1999, and its official headquarters are located in Bangui is the capital of the Central African Republic.
Principles regulating the franc currency
The agreement signed between France and the member states of the Franc Monetary Union imposed full and direct control on France over the management of the financial resources of the countries of the franc zone. Its tenth article stipulated the appointment of two French members to the Board of Directors of the Central Bank of West African States.
On this basis, and in accordance with Article 81 of the Bank’s bylaws, these two members, out of the 16 members of the Board, have the right to veto any vote taken by the Board’s management. This agreement, in its broad outlines, is based on the following principles:
The principle of centralization of accounts
Accordingly, the franc zone countries hand over their cash reserves to the French treasury to ensure the stability of the value of the currency.
This clause has undergone a number of revisions. From 1945 to 1973, the foreign assets of all countries in the CFA franc zone were at a loss. France, and from 1973 to 2005 the percentage was reduced to 65%, and since 2005 the percentage has stabilized at the mandatory transfer of 50% of Foreign origins of the region to French treasury.
The principle of exchange rate stability
It was agreed that the exchange rate of the euro against the franc would be fixed at 655,957 francs, and that the reserves to be deposited would be kept at an interest rate lower than international interest rates, as the interest rate on deposits in France fell from 8.5% in 1982 to below 0.8%.
The principle of exclusivity of converting the franc to the euro
The African franc is only convertible into the euro, and without specifying the amount that can be converted periodically.
The principle of free transfer of capital from the region to France
This principle enables foreign and national investors to transfer capital from the region to France without legal or legislative restrictions.
The money circulating in the franc zone is issued and printed exclusively in France, specifically in the city of Chamallier, and countries that use the African franc are obligated to do so.
Results at the level of countries in the region
The interest returns on these assets, in their value, constitute a very important economic and financial wealth from which France benefits directly. Paris was able to raise its cash reserves in the French Central Bank over the course of decades. In contrast, the African countries that fall under the franc zone did not benefit from them, but rather the majority of them witnessed stifling economic crises. .
There is a permanent decline in financial liquidity for governments that urgently need it, and sanctions on exports have reduced the margin of intervention of central banks, which in turn makes them focus only on combating inflation without thinking about programs concerned with economic development, in addition to the scarcity of investment funds that must be provided to companies. African families face high bank interest rates.
The economic and monetary connection of these countries to a single state treasury, according to the agreement, prevents them from diversifying the countries storing their foreign reserves, which is an important economic rule aimed at forming a monetary guarantee for these countries to maintain the strength of their currencies and economies.
All of the above caused the inability of these countries to create balances to provide an economic environment that attracts foreign investments and flexibility in dealing with the requirements of supply and demand and economic crises.
Under these agreements, France installed an economic monitor that restricts the countries of the region and determines their monetary transactions with other countries or companies, as going through French financial institutions is a matter that includes all the financial operations of the region.
This policy led to a reduction in the percentages and resources of countries from public savings in all African countries affiliated with the franc zone, and it also led to the ease of laundering and transferring money generated from the illegal gains of influential, political, and corrupt people in Africa, from some army officers, rulers, and wealthy families with interests linked to France.
Trade exchanges have been restricted within the CFA franc area, as it amounts to 10% in Central Africa and 15% within West Africa only, while it amounts to 60% with companies based within the European sphere.
There is a huge discrepancy between the European industrial economies and the economies of the CFA Franc Zone countries, most of which suffer from severe structural imbalances, which makes the balance of payments tilt in favor of France and Europe.
Results at the French level
On the other hand, France enjoyed many advantages, as it tightened its grip on the economies of these countries, and through the trade surplus of these countries, it was able to store its foreign currency reserves in French banks, which it could then invest in international financial markets.
French companies have also been able, over decades, to access local markets, extract and exploit resources, and then return their profits to France without the risks sometimes imposed by fluctuations in foreign currencies in the world.
France obligates exporters in its affiliated countries to transfer 80% of their hard currency revenues to the French Central Bank within a month of receiving them, and pushes central banks in the franc zone to invest the remaining 50% of their cash reserves in French bonds or euro-denominated bonds.
In return, France only grants these countries loans that are invested in opening new markets for French investors.
French and foreign companies generally benefit from cheap labor to produce at lower costs in African countries, and transfer their profits to France or European countries without any real benefit to the African countries.
The French Development Agency, which was established in 2001 and was entrusted with the initiative to relieve the debts of African countries and support their development, took control of determining the aspects of aid spending related to this initiative, and identified the targeted sectors and companies responsible for implementing the projects it finances, most of which were assigned to French companies.
Separation attempts
In 1960, Guinea decided to issue its own national currency. France had no choice but to organize sabotage operations to destabilize the new state. It supported local agents, flooded the economy with counterfeit banknotes, and intercepted rice shipments to starve Guineans and bring the country’s economy to its knees. This was acknowledged by the former head of the French foreign intelligence agency, Pierre Mesmer in his memoirs.
Thomas Sankara, President of Burkina Faso, supported the severing of relations with France, disrupted cooperation agreements with it, and boycotted the French-African Summit held in Bujumbura in December 1984. He was assassinated along with 12 of his aides, and the finger of blame for supporting the coup against him and his assassination was pointed at France and its networks of influence in its colonies. Despite its official denial.
From the African franc to the eco
Starting in 2007, the pace of movements and protests against French control began to rise in a number of countries in the Franc Zone, due to rising food prices and deteriorating economic conditions. Civil society began organizing campaigns to boycott French products in protest against the continued French hegemony in the Franc Zone.
These increasing pressures prompted French President Emmanuel Macron on December 21, 2019, to announce in a press conference held in the capital of Ivory Coast, Abidjan, a reform package that includes abandoning the obligation to keep 50% of cash reserves with the French treasury, and withdrawing French representation on the bank’s board of directors. Central Bank of West Africa, then changing the name of the African franc to the “eco” currency.
In contrast, France maintained control over the convertibility of this new currency into foreign currencies, and the principle of a fixed exchange rate against the euro was not affected, in addition to maintaining the freedom of movement of capital without restrictions.
Economic analysts from the African continent considered that these decisions are nothing but a French maneuver through which France is trying to use indirect policies to ensure its continued control over the economies of the franc zone countries.
