An article by Alexandra Reinhild Berndt
Luigi Di Maio, an Italian minister, accused France of impoverishing Africa by means of the CFA franc (Giles & Goodman, 2019). The CFA franc has been introduced by the French government in 1945 and is still used by 14 African countries in West- and Central Africa (Specia, 2019). Why is the CFA franc still used today even though it is a legacy of the colonial era? In the following, I will elucidate both the advantages and disadvantages of the currency. Furthermore, I will investigate whether or not the Eco represents a solution to the problem. The Eco is a new currency that will be introduced in eight of the fourteen countries (Frisch, 2020).
Stability – The main economic advantage of the CFA franc
There are three central economic advantages of the CFA franc. First of all, the currency guarantees low inflation rates. This is very important as high inflation rates can have a negative impact on a country’s economic development (Assoko, 2020). Secondly, the CFA franc provides for low borrowing costs as interest rates are capped (Assoko, 2020). Thirdly, the currency makes it easier for investors to predict fluctuations (Assoko, 2020). The CFA franc thus ensures economic and monetary stability (Specia, 2019).
The neocolonial nature of the CFA franc
Critics perceive the CFA franc as a legacy of colonialism (Frisch, 2020). The original name of the currency was “Franc of the French Colonies of Africa” reflecting the neocolonial nature of the CFA franc (Specia, 2019). Many African artists showed their indignation at the currency in the context of art campaigns. In 2018, ten rappers from six different West African countries published a song named “seven minutes against the CFA” criticizing the currency as a relic from the colonial past (Cascais, 2018). Hervé Youmbi, an artist from Cameroun, invented a pan-African currency in the context of an art campaign to express his anger at the currency (Frisch, 2020).
Economic dependence – a point of critique
Critics of the currency condemn the economic dependence on France. France holds 50 percent of the foreign exchange reserves (about ten billion euro) in the French central bank in return for stable exchange rates (Herrmann & Bos, 2019). Furthermore, the CFA franc is pegged to the euro. This has several consequences. The currency is automatically pegged to monetary policies of the European Central Bank (Reuß, 2020). This means that the states using the CFA franc cannot change their exchange rates on their own. Moreover, the monetary policy of the European Central Bank does not necessarily serve African interests (Reuß, 2020). The states using the CFA franc are thus not independent in their economic and monetary decision-making. Another criticism is that French firms profit from the existence of the CFA franc as they can more easily export their products to the regions where CFA franc is used (Frisch, 2020). There are thus not only political, but also economic points of critique.
The Eco – a possible solution?
Eight countries from the West African Economic and Monetary Union decided to introduce a new currency: the Eco (Fröhlich, 2019). Changing the currency from CFA franc to Eco has several implications. The French government will “stop holding 50 percent of the reserves in the French Treasury” (Fröhlich, 2019). Moreover, France will “withdraw French governance related to the currency” (Fröhlich, 2019). However, the Eco is also “pegged to the euro, just like the CFA franc” (Fröhlich, 2019). In this regard, nothing has changed. It thus remains questionable whether the reform really provides a significant change.
In conclusion, countries using CFA franc face a trade-off between economic stability and self-determination. The debate about the currency shows the extent to which post-colonial countries are affected by colonial legacies. The Eco is an attempt to end economic dependence. However, it remains unclear whether the Eco-reform really guarantees self-determination.
Assoko, J. T. (2020, December 03). The CFA Franc, Macron and everyone else. Retrieved December 5, 2020, from https://www.theafricareport.com/52934/the-cfa-franc-macron-and-everyone-else/
Cascais, A. (2018, July 21). Westafrika: Rap gegen die “Kolonialwährung” CFA-Franc. Retrieved December 5, 2020, from https://www.dw.com/de/westafrika-rap-gegen-die-kolonialwährung-cfa-franc/a-44340082
Frisch, R. (2020, October 04). Das Ende einer Kolonialwährung. Der Franc CFA und die Kontrolle des Geldes in Westafrika. Retrieved December 5, 2020, from https://geschichtedergegenwart.ch/das-ende-einer-kolonialwaehrung-der-franc-cfa-und-die-kontrolle-des-geldes-in-westafrika/
Fröhlich, S. (2019, December 23). West Africa’s new currency, the Eco: Rebrand or fresh start? Retrieved December 5, 2020, from https://www.dw.com/en/west-africas-new-currency-the-eco-rebrand-or-fresh-start/a-51784054
Giles, C., & Goodman, J. (2019, January 25). African migration: Is the CFA franc forcing people to leave? Retrieved December 5, 2020, from https://www.bbc.com/news/world-africa-46960532
Herrmann, C., & Bos, J. (2019, May 24). Der CFA-Franc: Eine Währung, die polarisiert. Retrieved December 5, 2020, from https://www.dw.com/de/der-cfa-franc-eine-währung-die-polarisiert/a-48854249
Reuß, A. (2020, July 19). Ein Schein von Unabhängigkeit. Retrieved December 5, 2020, from https://www.sueddeutsche.de/politik/koloniales-erbe-ein-schein-von-unabhaengigkeit-1.4971837
Specia, M. (2019, January 22). The African Currency at the Center of a European Dispute. Retrieved December 5, 2020, from https://www.nytimes.com/2019/01/22/world/africa/africa-cfa-franc-currency.html