It has taken 75 years, but finally the francophone countries of West Africa have broken free from one of the last vestiges of French colonialism - the CFA franc.
Since 1945, West and Central African nations have been pegged to the French franc and then the euro, and had 50% of their foreign reserves held in France by the French treasury, which has invested the reserves of African countries in its own name.
From January 1 this year, the CFA franc ceased to exist in West Africa (but still remains in Central Africa), and was renamed the Eco.
Under the deal brokered between France and the West African nations Benin, Togo, Burkina Faso, Mali, Senegal, Ivory Coast, Niger and Guinea Bissau, the Eco will be pegged to the Euro, but African countries won’t have to keep 50% of their foreign reserves in the French treasury, and there will no longer be a French representative on the currency union’s board.
The administration of President Emmanuel Macron had been open to the reform of the CFA franc, but was under pressure following the criticism of France made by Italian Foreign Minister Luigi Di Maio last year when he said that France was using the franc to exploit its former colonies.
By December, talks with West African nations had resolved to end the CFA franc zone in West Africa.
Benin’s President Patrice Talon had said: “There was unanimous agreement to end the financial dominance of economies by France.”
This is a step towards monetary independence, but the move is more symbolic and the reforms cosmetic, as the Eco will remain pegged to the
Euro and the Banque de France will continue to guarantee the convertibility of the Eco. The euro peg will continue to dictate the scope of monetary policy decisions.
The CFA franc zone has long been criticised as it was impossible for these countries to regulate their own monetary policies, and it was unclear how much of the foreign reserves held by the French Treasury belonged to them as a group or individually.
Earnings from the investment of these funds were supposed to be added to the pool, but no accounting was ever given to the two CFA banks or the central banks of the African states.
It is baffling that African countries have not had access to these funds held by the French treasury, but were allowed to borrow their own money from France at commercial rates.
A country cannot be said to be truly independent if its currency is controlled by the former colonial power, and its economy is dependent on European monetary policy.
The African elite and the wealthy have been the primary beneficiaries of the CFA franc zone and supported it, but the CFA franc is considered the main reason for underdevelopment, particularly in Central Africa, which is the poorest economic bloc on the African continent.
The CFA franc zone resulted in limited intra-regional trade, a high dependence on producing and exporting a limited number of primary commodities, leading to a lack of export diversification and low industrialisation.
The political elite close to France - like the current President of the Ivory Coast, Alassane Ouattara - previously argued that CFA states are better
off than Anglophone states due to growth and low inflation, and that
the discussion about the CFA franc
was a false debate as the currency is solid, well managed, and stabilising African countries.
The fact that Ouattara announced the demise of the CFA franc alongside Macron in December was likely for purposes of political expediency due to the upcoming elections in Ivory Coast in which he will probably face off against his political enemy former President Laurent Gbagbo, who was recently released by the International Criminal Court.
It was Gbagbo who had antagonised France years ago when he stated his intention to consult regional leaders on the idea of leaving the CFA franc zone. As president, Gbagbo had argued that it was his responsibility as an African to discuss the matter with other countries.
It has been suggested that this was one of the reasons France had wanted to neutralise Gbagbo’s political fortunes by ensuring he was held at the ICC for more than seven years on trumped up charges, only to be released last year as there was no case against him. Gbagbo’s incarceration left the field wide open for Ouattara, the former deputy managing director of the International Monetary Fund, to remain in power and support France’s role in the region.
Now that the eight West African nations have taken the bold decision to cut the umbilical cord with France, it is high time the Central African countries of Cameroon, Equatorial Guinea, Chad, the Central African Republic, Congo Brazzaville and Gabon follow suit.
If they fail to do so, France may devalue the CFA franc still used there as they did in 1994, which caused havoc in African economies. France may do this to safeguard the Euro and maintain France’s credit rating.
In 1994, the French treasury had devalued the CFA franc by 50%, which forced African governments to impose wage freezes and layoffs which led to widespread unrest. Unemployed youth have become the loudest opponents of the CFA zone, and it is hoped the governments of Central Africa will finally free themselves from a neo-colonial relic, and exercise true economic independence.
* Ebrahim is the group foreign editor for Independent Media.