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The CFA franc is the currency used by 14 African nations. These countries are part of the Franc Zone. Some of them are Benin, Burkina Faso, Cameroon, Central African Republic, Chad, Congo, Côte d'Ivoire, Equatorial Guinea, Gabon, Guinea-Bissau, Mali, Niger, Senegal, and Togo. The CFA franc was made in 1945.
Illustration by The Geostrata
Taylor explains the history of institutionalising the Franc, “In 1959 the Banque Centrale des Etats de l’Afrique de l’Ouest (BCEAO) was created and began issuing CFA Francs.35 A similar institution was established in Central Africa, the Banque Centrale des Etats de l’Afrique Equatoriale et du Cameroun (BCEAEC).”
At first, it was tied to the French franc. After some changes in value, it has been tied to the euro since 1999. The rate is 1 euro = 655.957 CFA francs. This rate does not change. The currency is issued by two regional central banks.
One is the BCEAO for West African countries. The other is the BEAC for Central African countries. The French Treasury makes sure the CFA franc can be exchanged for other currencies. The CFA franc can be converted into French francs with help from the French Treasury. It can also be traded for other foreign currencies through the Paris exchange markets, where the French franc acts as the anchor currency. People are free to transfer money within the Franc Zone.
However, on August 2nd, 1993, the BCEAO stopped buying back banknotes issued by them if exported outside the African countries in the Franc Zone. On September 17th, 1993, the Bank of Central African States (BEAC) put into action a decision to stop buying back banknotes issued by them if taken into the WAMU Zone. Later, on December 20th, 1993, the BCEAO stopped buying back banknotes issued by them if held in the CAMU Zone. The CFA Franc has been criticised as a neocolonial tool perpetuating French economic control over former African colonies.
WORKING OF THE CFA FRANC
The CFA Franc is used by the French government through the following manner that helps it retain control over the Francophone African nations. Firstly, the French Treasury will have access to 65% of the international reserves of the African states that have the CFA Franc.
This would be done through the opening of an operational account in the treasury, with the West African Economic and Monetary Union (UEMOA) ratified and reduced this number to 50%. Secondly the Foreign Exchange Reserves of these nations would cover about one-fifth of sight liabilities.
According to Law Insider, “the total deposits at the bank which are repayable on demand, but does not include savings account liabilities or the deposits of any other bank at the bank.” This can be interpreted as cash present in the Foreign Exchange Reserves account of the country that will be utilised.
If there are no sufficient funds present, then the Central Banks of those nations would have a meeting and would sort out monetary changes to rectify the situation wherein French authorities would course the plan of action. This resulted in Africans losing a significant amount of money to the French and hindering their growth patterns. As argued by Sylla, “Africans have been losing on their Treasury deposits — not just because low-interest rates and higher inflation means they’re losing in real terms but because they could have used this money constituting half of their foreign currency reserves in much more productive ways over the years.”
This helps us comprehend the neocolonialism argument set by the postcolonial school of thought in International Relations that is used by France on Francophone Africa.
ARGUMENTS OF NEOCOLONIALISM
Professor Nyika defines neocolonialism as, “The use of cultural, economic, and political pressure to influence and control decisions in independent countries that were former colonies. The phenomenon is predominant among developed nations to developing countries.”
France uses the CFA Franc as a modem to develop its influence in the region. Firstly the CFA Franc provides the opportunity for Paris to extract resources in the states present in the economic association to benefit its consumption and maintains its national interests.
This is articulated by Pigeuad and Sylla, “France continues to extract strategic raw materials from the African continent, while its companies easily gain access to the markets of the region and have the opportunity to freely repatriate their profits”.
Moreover the French can be the primary creditors in the region when states are in debt. This provides France the opportunity to demand money whenever they wish and can prevent providing funds to states who are against the French government. As argued by Professor Obeng-Odoom, “Politically, the CFA franc system enables the authorities in France to withhold funds from presidents in the CFA zone who are opposed to France, or create destabilising economic conditions for those who are against French interest, while giving board and several decision-making positions and political power to France.”
This resulted in criticisms against the French state from various leaders in Africa calling for control of the CFA Franc and diversifying funds away from Paris. Benin President in 2019 articulated the problem posed by the existing system, “Psychologically, with regards to the vision of sovereignty and managing your own money, it’s not good that this model continues,”
CONCLUSION
The CFA Franc system has been criticised as a tool that allows France to maintain economic control over its former African colonies. By giving the French Treasury access to a significant portion of the international reserves of CFA Franc nations and allowing it to influence decision-making, the system undermines the economic sovereignty and development of these African countries.
It enables France to extract resources, control markets, and disrupt economies that go against its interests. African leaders have condemned this system as an obstacle to true independence, calling for reforms or abandonment to achieve genuine economic emancipation from colonial legacies.
BY SANJAY GURURAJAN
TEAM GEOSTRATA