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The CFA Franc, Macron and everyone else

By Joël Té-Léssia Assoko
Posted on Wednesday, 2 December 2020 18:45, updated on Thursday, 3 December 2020 16:07

CFA franc
A merchant holds CFA currency at his shop in this picture illustration taken December 23, 2019, 2019. REUTERS/Luc Gnago

The CFA franc is undefendable. And yet, there are reasons to defend it, whether courageously or by omission. French President Emmanuel Macron resigned himself to taking the latter route. He isn’t alone.

Supporters of the CFA franc have a guilty conscience. They know full well that none of the arguments in favour of this monetary system can match the emotional power of the objections it elicits: the rejection of the legacy of colonialism, independence, the blood spilt, the land of our forefathers and the pride we take in being who we are, without the French Finance Ministry’s approval.

When it comes to unspeakable ideas, defending the CFA franc in its current configuration is akin to risking the lives of soldiers to protect oil concessions. It needs to be done without hesitation, as it will literally save lives: entire categories of government spending, including health and education, could be slashed due to lost tax and royalty revenues or sacrificed to compensate oil majors in international arbitration court proceedings. Certainly, these points are true, but good luck defending such a position.

Low inflation

And yet, the common currency, pegged to the French franc initially and later on to the euro, has helped keep inflation low. High inflation is particularly detrimental to the poorest communities in our countries.

Interest rates under the CFA franc are capped, thereby reducing borrowing costs for governments, businesses and households. Whether or not access to credit is tightened due to deficiencies in the banking system is an entirely different debate.

READ MORE Mali/CFA franc: Topics to tackle during Macky Sall’s visit with Macron

Thanks in part to the CFA franc, we have witnessed the hitherto unseen legal integration of the countries belonging to the monetary union through the creation of the OHADA [Organisation for the Harmonisation of Corporate Law in Africa] zone.

Lastly, though the stability of the CFA franc may restrict the leeway of central banks, the currency makes things more clear-cut for investors and merchants, putting them in a better position to predict fluctuations in the value of their portfolio and goods.

All of these aspects help maintain the balance of economic growth in the zone. While growth may be more subdued there than in other parts of the continent, it is also less volatile.

What’s more, this monetary system has ensured – up to the present time – the unity of the eight member states of the West African Economic and Monetary Union (UEMOA) through strong institutions with vast financial and political powers, as illustrated by the Central Bank of West African States’ (BCEAO) intervention in conflict situations in Côte d’Ivoire in 2010-11 and recently in Mali.

During a conversation I had back in 2019 with the then-spokesperson for the Senegalese presidential candidate Ousmane Sonko, who fervently supports doing away with the CFA franc, he could hardly describe what would happen if Senegal were the only country to take the leap, without the support of Côte d’Ivoire or Mali. Despite the plausibility of such a scenario, it seems that it had not even been entertained.

Tactical considerations and ideology

These arguments are neither dishonourable nor false, but they are rarely raised forcefully by our leaders, and for two reasons.

The first reason is a tactical one. Any proposal in favour of the status quo is inherently viewed as reactionary, and thus unacceptable in the African environment. Prioritising “keeping broad-based economic stability intact” as calls for “revolution” ring out, with half of the population living below the poverty line, can indeed come off as “unseemly”.

The second reason runs deeper and is, so to speak, an ideological one. Contrary to popular belief, the pro-CFA franc camp has its share of losers, the renegades who forswore past orthodoxies about the role and power of the state in the economy. Whether or not this crowd believes in a “strong state” when it comes to state “prerogatives”, they have more or less accepted that the powers of public authorities are limited and moved on from the interventionist policies of the past.

Austerity measures and neoliberalism

Public authorities are still able to invest in infrastructure and education, at times reduce the private sector’s worst excesses, fight corruption – and even, at a pinch, extreme poverty – and smooth over certain market “inefficiencies” and rigidities. But that’s about it.

It should thus come as no surprise that the most powerful allies, mainly in France, of those who oppose the CFA franc, are found in anti-establishment circles challenging the prevailing orthodoxy and rigidities of the European Central Bank as well as “austerity measures” – basically, “neoliberalism”.

READ MORE BCAS’s Tolli: Can he help stop a CFA franc devaluation?

Beyond the controversies about the superiority of one exchange rate regime over another or their compatibility with the realities and needs of our countries’ economies, the original ideological break concerns the capabilities of public authorities to radically change a nation’s development trajectory.

The CFA franc’s most clear-headed detractors, including Professor Kako Nubukpo, formulate their objections in a broader-based argument in which they critique the pusillanimity of African decision-makers and their lack of imagination and courage where economic policy is concerned.

READ MORE Replacing CFA with Eco ‘challenges the sovereignty’ of Nigerian naira

The other side’s response can be nothing other than inadequate. If, as the French poet Thomas Corneille once wrote, “timid virtues are unworthy of kings”, does the same apply to modern democratic leaders? An economic policy approach that is moderate, cautious and mindful of waste and hubris, which has lead to so many white elephant projects on the continent in the past, cannot stir up enthusiasm. But does that make it reprehensible?

Instead of reviving state interventionism, the much-vaunted “emergence plans” adopted continent-wide at the beginning of the last decade bear all the hallmarks of this kind of restraint (or resignation, depending on how you want to look at it). These plans do at least have the advantage of being understandable, backed up by figures (in general) and cautious, if not effective.

Compared with the extravagances of previous decades – the construction of the Basilica of Our Lady of Peace in Yamoussoukro comes to mind – there are undeniable signs of progress. Looking at the debate through this lens, the real enemy isn’t the status quo but the “disrupters”: if it ain’t broke, don’t fix it.

Stability, guarantee and parity: breaking every monetary policy taboo

Macron’s pro-forma commentary on the CFA franc during his interview with The Africa Report / Jeune Afrique needs to be understood in this light.

When referring to “the end of the CFA franc”, he merely praised the eradication of a “highly symbolic indicator which inspired many dreams while also fuelling criticism”.

READ MORE France: One step closer to ending the CFA franc

In his remarks, he refrained from defending the currency’s parity with the euro, the focus put on price stability, the unlimited convertibility guarantee and even France’s exclusive option to appoint “on a one-off” and temporary basis a representative on the BCEAO’s Monetary Policy Committee.

Stability, guarantee and parity: in many circles across Africa nowadays, these words are taboo when it comes to formulating economic policy and recommendations for the continent. Hence why the disruptor-in-chief on the French and European political stage kept his comments on the CFA franc lowkey. Probably a wise choice.