Let's Talk Afro-Geopolitics: CFA Franc

[DrBanneker]

What is the CFA franc zone?
The CFA franc zone consists of 14 countries in sub-Saharan Africa, each affiliated with one of two monetary unions. Benin, Burkina Faso, Côte D’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo comprise the West African Economic and Monetary Union, or WAEMU, founded in 1994 to build on the foundation of the West African Monetary Union, founded in 1973. The remaining six countries — Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, and Gabon — comprise the Central African Economic and Monetary Union, or CAEMC.
These two unions maintain the same currency, the CFA franc, which stands for Communauté Financière Africaine (African Financial Community) within WAEMU and Coopération Financière en Afrique Centrale (Financial Cooperation in Central Africa) within CAEMC. WAEMU and CAEMC account for 14 percent of Africa’s population and 12 percent of its GDP.

All of these countries except Guinea-Bissau and Equatorial Guinea were colonies of France and maintain French as an official language. Guinea-Bissau was ruled by Portugal, and today its official language is Portuguese, while Equatorial Guinea was ruled by Spain, and today both Spanish and French are its official languages.

Having an independent currency and monetary policy is a significant part of real sovereignty and independence. But most of the former French colonies in Africa don't. They have the CFA Franc, which while benchmarked to first the Franc and then the Euro, may have provided some currency stability and full convertibility with the Franc (and now Euro), it has quite a few zingers:

• Members' foreign-exchange reserves are pooled; each central bank keeps 65% of its foreign reserves with the French Treasury.
  
• To ensure monetary discipline, foreign reserves must equal at least 20% of the central banks' short-term deposits.

So France essentially has a veto on the monetary policy's in the countries. Also, like a quasi-Euro, the countries cannot devalue or revalue the currency without France's consent. Since most reserves are kept in France, they cannot feasibly build up enough to jumpstart their own currency as well.

I know most of these countries trade with France and each other so there is some benefit but is pegging the the Franc or Euro in their best interest? It effectively ties them to Europe when they could be pegging to the USD, Chinese Yuan, or creating a pan-African currency. The latter is reportedly why Ghadaffi was overthrown and killed.

Any thoughts on how to get out of this? Having private citizens accumulate gold and silver that the central banks could eventually swap for a new precious metal backed currency is the only thing I can think of.

 

[The Odum of Ala Igbo]

What is the CFA franc zone?
The CFA franc zone consists of 14 countries in sub-Saharan Africa, each affiliated with one of two monetary unions. Benin, Burkina Faso, Côte D’Ivoire, Guinea-Bissau, Mali, Niger, Senegal, and Togo comprise the West African Economic and Monetary Union, or WAEMU, founded in 1994 to build on the foundation of the West African Monetary Union, founded in 1973. The remaining six countries — Cameroon, Central African Republic, Chad, Republic of Congo, Equatorial Guinea, and Gabon — comprise the Central African Economic and Monetary Union, or CAEMC.
These two unions maintain the same currency, the CFA franc, which stands for Communauté Financière Africaine (African Financial Community) within WAEMU and Coopération Financière en Afrique Centrale (Financial Cooperation in Central Africa) within CAEMC. WAEMU and CAEMC account for 14 percent of Africa’s population and 12 percent of its GDP.

All of these countries except Guinea-Bissau and Equatorial Guinea were colonies of France and maintain French as an official language. Guinea-Bissau was ruled by Portugal, and today its official language is Portuguese, while Equatorial Guinea was ruled by Spain, and today both Spanish and French are its official languages.

Having an independent currency and monetary policy is a significant part of real sovereignty and independence. But most of the former French colonies in Africa don't. They have the CFA Franc, which while benchmarked to first the Franc and then the Euro, may have provided some currency stability and full convertibility with the Franc (and now Euro), it has quite a few zingers:

• Members' foreign-exchange reserves are pooled; each central bank keeps 65% of its foreign reserves with the French Treasury.
  
• To ensure monetary discipline, foreign reserves must equal at least 20% of the central banks' short-term deposits.

So France essentially has a veto on the monetary policy's in the countries. Also, like a quasi-Euro, the countries cannot devalue or revalue the currency without France's consent. Since most reserves are kept in France, they cannot feasibly build up enough to jumpstart their own currency as well.

I know most of these countries trade with France and each other so there is some benefit but is pegging the the Franc or Euro in their best interest? It effectively ties them to Europe when they could be pegging to the USD, Chinese Yuan, or creating a pan-African currency. The latter is reportedly why Ghadaffi was overthrown and killed.

Any thoughts on how to get out of this? Having private citizens accumulate gold and silver that the central banks could eventually swap for a new precious metal backed currency is the only thing I can think of.

The only solution I can think of is if the Africa Development Bank aids the development of a fiscal and monetary union in the CFA franc countries. Even then, France would undermine those efforts.

 

[DrBanneker]

The only solution I can think of is if the Africa Development Bank aids the development of a fiscal and monetary union in the CFA franc countries. Even then, France would undermine those efforts.

Yeah, but I keep thinking, if the Euro collapses or Le Pen gets in office, they are likely to get fukked over so hope and prayer aren't good strategies...

 

[The Odum of Ala Igbo]

Yeah, but I keep thinking, if the Euro collapses or Le Pen gets in office, they are likely to get fukked over so hope and prayer aren't good strategies...

Right... I don't have a readily available policy solution besides forming a French-speaking African currency or pegging their economies to another stable currency.

 

[Red Shield]

Yeah, but I keep thinking, if the Euro collapses or Le Pen gets in office, they are likely to get fukked over so hope and prayer aren't good strategies...

Ain't no way out without taking pain

But those countries have a future.. france doesn't

 

[The Odum of Ala Igbo]

Ain't no way out without taking pain

But those countries have a future.. france doesn't

I don't think Niger, for instance, has a future.

 

[DrBanneker]

I don't think Niger, for instance, has a future.

On its own, some of them don't. With regional or continental integration that learns the mistakes of the EU mess, I think they could all pull through. Climate change and high birth rates are hitting Niger like a mother though.

 

[Red Shield]

I don't think Niger, for instance, has a future.

France doesn't because WW3 ain't gonna leave much alive in western europe


But yea some African countries are not gonna exist in 100yrs.. So places will...

1. have their borders expand
2. have their borders contract
3. cease to exist and be replaced by new countries with new borders



hell that can be said for the entire world

 

[Poitier]

France doesn't because WW3 ain't gonna leave much alive in western europe

 

[Red Shield]

:doomed:





Even if the shyt don't happen...france is still fukked.

 

[The Odum of Ala Igbo]

On its own, some of them don't. With regional or continental integration that learns the mistakes of the EU mess, I think they could all pull through. Climate change and high birth rates are hitting Niger like a mother though.

Given the climate disaster facing countries like Chad, Niger and Mali - can we expect Francafrique to survive in the Sahel?

 

[DrBanneker]

Given the climate disaster facing countries like Chad, Niger and Mali - can we expect Francafrique to survive in the Sahel?

Short of a massive, coordinated and thought through policy to preserve grazing lands or provide feed for the pastoralists and a way to up agricultural productivity quick---yeah, it looks bad.

 

[ZoeGod]

Jesus do the CA franc is benchmarked by the euro. The euro isn't going to last long since the EU is facing a myriad of crisis like Brexit aftermath, Italian banking crisis,Greek debt crisis, Deutche Bank fiasco.

For a pan African currency to work these nations will have to give up alot of national Sovereignty. The reason the euro is a spectacular failure is because it is a Confederacy where economically all the countries are not on the same page. For a pan African currency to succeed it will have to follow the US model. Each state has a state Bank but they all cede power to the Central Bank.

 

[DrBanneker]

So Le Pen has promised to can the CFA Franc if she gets to Elysee Palace. Any ideas on how this will go down? Could it be good for economic and monetary independence or just lead to a disaster of competing weak currencies?

At the very least, the nations involved get their central bank foreign reserves back and no longer have to send their currency surplus gained through current account surplus to France.

 

[The Odum of Ala Igbo]

@Frangala