The exacerbation of the situation in Guinea, which survived the military coup, exposed urgent problems in the countries that were formerly French colonial possessions.
The overthrow of the president Alpha Conde happened against the backdrop of the ongoing economic crisis in the West African state. Although servicemen initiated the coup, their actions probably would not have been so successful if not for the discontent of the population with the situation in the country. The beginning of 2021 was marked for Guineans by a sharp increase in food prices, and in the summer – by higher taxes and an increase in the cost of gasoline.
This coup d’etat is far from the first in the history of the state. After leaving the protectorate of France and gaining independence, the power in the country has repeatedly changed as a result of armed uprisings provoked by a crisis that has been continuously developing since 1960, since the state left the franc zone.
Single currency and economic partnership
Until now, the CFA franc remained the key instrument by which France controlled the former colonies.
The CFA franc is the common name for two monetary units of the 14 African countries that make up the franc currency area (CFA franc BEAC and CFA franc BCEAO). The currency was introduced into circulation on December 26, 1945 by the French government as the currency of the colonies in West and Central Africa.
Initially, the abbreviation CFA was formed from the first letters of the French words Colonies françaises d’Afrique (French African colonies). After they gained independence in the early 60s of the last century, the abbreviation CFA received new meanings – Communauté financière africaine (African financial community) for West African countries and Coopération financière en Afrique Centrale (Financial cooperation in Central Africa) for Central African countries.
The West African CFA franc is a single currency of a number of countries that make up the Economic Community of West African Countries (ECOWAS). The organization is a regional alliance formed in 1975 following the signing of the Lagos Agreement. The purpose of the creation of the Community was and remains the promotion of the economic integration of the countries of the region. Initially, it included 16 states, but in 2000 Mauritania left it.
One of the elements of this economic integration was the introduction of a single currency. And for the implementation of such an ambitious plan, a number of requirements were put forward for the countries that make up the community. For example, the budget deficit is less than 3% of GDP, the inflation rate is below 10% and the national debt is less than 70% of GDP. However, at the moment only four ECOWAS member states meet these criteria, and among the countries of the CFA franc zone there are even those occupying the last lines in the ranking of the poorest in the world (Niger, Togo, Guinea-Bissau).
And it was these countries, least of all prepared for the introduction of a single currency within the framework of ECOWAS, pursuing their own interests, announced the abandonment of the currency of colonial times and the transition to a new monetary unit.
Remnants of the colonial era
The presence of a single currency in the French-speaking countries of West Africa is a tribute to the history that haunted them for three quarters of a century. The monetary unit, introduced by the metropolis back in the middle of the last century, imposed a number of restrictions that just provoked this desire to get rid of the influence of the Fifth Republic.
All these restrictions were interrelated and complex in nature, providing France with control over the economy and monetary policy of the former colonies.
From the moment of their appearance, the West African CFA francs came out of the press at the Paris Mint, because at that time the territory of use of this currency was the French colonies. Thus, the metropolis controlled the amount of money issued. With the acquisition of independence by these countries, the situation has not changed, and the Fifth Republic continues to determine the amount of issued currency.
The first issuing authority, the organization responsible for issuing banknotes into circulation, was the private French Bank of West Africa, and after the colonies gained independence, it was transformed into the Central Bank of West African States. It would seem that from that moment on, the countries were able to make decisions on their own, but the board always included economists from the Fifth Republic, who had decisive votes in all important decisions. Thus, Paris retained control over the body responsible for monetary policy.
Initially, the CFA franc was firmly pegged to its parent currency, the French franc, at a ratio of 1 to 1.7. And throughout history this has not changed, the rates have remained fixed, only the proportions have changed: since 1960, 50: 1, since 1994, 100: 1. In 1999, the euro was introduced on the territory of the former metropolis, but the situation has not changed here either, the West African currency exchange rate was pegged to the euro and since January 1, 2002, 655.957 CFA francs are given for 1 euro.
Another element of control on the part of France was that from the very beginning Paris guaranteed currency conversion. This was necessary for the implementation of mutual settlements with other countries, however, there was a condition – 50% of the gold and foreign exchange reserves of the countries that used the CFA franc were to be kept in a special account of the French Treasury. At the same time, Paris itself decided how to manage these funds, without notifying the Central Bank of West Africa about what it was doing and how. The fifth republic for 75 years earned money by investing these funds, and did not share them with African states.
The countries of the franc zone themselves could not use their reserves, but only received part of them, but in the form of loans, the interest from which was again returned to the accounts of the French government. And again, Paris made money on the poorest countries in the world, without making significant efforts and using their own money, although for them at first it might look profitable.
“The existence of the franc zone is a mutually beneficial process. France undoubtedly has influence on the countries entering there. But on the other hand, there were precedents from the same Mali, which left this monetary union, but this did not end well. Because it is difficult, right down to training. So Mali came back “, – noted the doctor of economic sciences Inna Andronova, professor at RUDN.
Over the years of the CFA franc’s existence, the economic dependence of Africans on European politics has increased greatly. And Bamako (the capital of Mali – ed.) Realized in time that getting out of the orbit of Paris, even with the declaration of independence, was impossible, and the country was held hostage by the existing financial system.
Is the metropolis losing ground?
After abandoning the use of the CFA franc in West Africa, France will lose some leverage over the monetary and financial policies of the countries of the region. However, France could not and did not want to completely abandon control over it. Banknotes will continue to be printed at the Paris Mint, which means that the Elysee Palace will retain the ability to stop it if the former colonies do not agree to the conditions put forward by the monopoly on a particular issue.
The fifth republic will remain the guarantor of the convertibility of the region’s new currency. This means that now it will support the currency with its own funds. On the one hand, this means concessions and losses, but on the other hand, it is an opportunity. So, in order to keep the African states on the right course, Paris can impose preferences for French companies in one area or another, for example, in the extraction and purchase of natural resources.
Here and now
The emergence of IVF was planned for the summer of 2020, but the Covid-19 pandemic has made its own adjustments to the project. African countries themselves are facing difficulties. So, the President of Côte d’Ivoire Allasana Ouattara in an interview last September said:
“Eco * cannot be realized this year and, of course, because of Covid-19 and the difficulties faced by different states … Personally, I do not think that Eco will appear in the next 3-5 years. But I would like it to come as soon as possible. “
Already on January 23, 2021, during the 58th meeting of the heads of state of ECOWAS, the leaders of West African countries admitted that due to the Covid-19 pandemic, the situation in the economy has deteriorated significantly, so the GDP growth rates for 2020 on average in the region will have negative values.
This downturn in the economy is forcing the states of the CFA franc zone to focus on more serious problems and during the meeting it was decided to prepare a new roadmap for the introduction of Eco.
The project, which was announced at the end of 2019, is again hanging in the air. From the very beginning, its implementation within the agreed time frame seemed difficult.
Of course, the countries of West Africa, thanks to the introduction of the new currency, gain more independence from the former metropolis in matters of determining monetary policy. The position of France is more complicated. Paris is very often criticized for its attitude towards the former colonies, and not only in the countries themselves, where young people are louder and louder in declaring their desire to weaken the influence of the former metropolis, but also on the part of European partners. Thus, Italy has long accused the Elysee Palace of the neocolonization of West African countries.
The reputation of the Fifth Republic in Africa becomes more complex the further it goes. Paris is losing its influence on the territory where it enjoyed enormous opportunities until recently. A number of painful problems, solutions to which are expected from
France remains unresolved. For example, the fight against terrorists and criminal networks in Mali has entered a chronic stage, although Paris has been conducting a military operation there for a long time. The popularity of the Elysee Palace in Mali is seriously declining, and anti-French demonstrations are taking place in the capital of the Republic of Bamako. Similar problems exist in other states of the franc zone.
The concessions made in France could remove the burden of many accusations from Paris and seriously improve the image of the Fifth Republic in Africa. However, this means the need to give up some of the levers of pressure on their former colonies. The choice is definitely not easy.
* Eco – the name of a single currency, which several states of the Economic Community of West African Countries (ECOWAS) intend to introduce, which in 2000 united into the West African currency zone.