There is a very important presidential election coming up in France in which one of the main contenders for the presidency is the National Front (FN) led by Marine LePen. The FN is a party of the far right; a strongly nationalist party whose main programme is an anti-immigrant, anti-Islamic and anti- European Union policy aimed at eliminating or reducing France’s role in the globalisation of the world economy. It has gained an increasing share of support among the French electorate.
Marine LePen visited the former French colony of Chad this month where 3,500 French soldiers are engaged in Operation Barkhane through which the French are seeking to secure the Sahara-Sahel region from terrorist attacks and to protect its source of uranium ore in nearby Niger. While she was there she pledged to break with her country’s decades-old relationship with Africa known as “Françafrique” and abolish the CFA franc currency policy that binds Paris and its former colonies. This was followed by a demand for France to leave the European Union and the Euro currency zone.
These policies were designed for their appeal to the ultra-right nationalists of the French electorate but they will also have a dramatic and disastrous effect on francophone Africa and its neighbours. The most important of these factors is the conflict over the Communuate Financiere de l’Afrique (“CFA”) franc, the common currency in francophone Africa. At its inception, the CFA was pegged at 100 CFA for each French franc but, after France joined the Euro zone at a fixed rate of 6.65957 French francs to one Euro, the CFA rate to the Euro was fixed at CFA 665,957 to each Euro, maintaining the 100 to 1 ratio. It is important to note that it is the responsibility of the French Treasury to guarantee the convertibility of the CFA to the Euro.
The monetary policy governing such a diverse aggregation of countries is uncomplicated for African Central Banks because it is, in fact, operated by the French Treasury, without reference to the central fiscal authorities of any of the African states. Each African state must deposit 65% (now reduced to 50%) of its foreign reserves with the French Treasury plus an additional 20% for administration. This means that since the early 1960s around 85% of the Africans’ foreign reserves have been transferred to France. These are deposited in the “operations accounts” controlled by the French Treasury. The two CFA banks are African in name, but have no monetary policies of their own. The countries themselves do not know, nor are they told, how much of the pool of foreign reserves held by the French Treasury belongs to them as a group or individually. The earnings of the investment of these funds in the French Treasury pool (at a rate of 0.75%) are supposed to be added to the pool but no accounting has ever been given to either the banks or the countries of the details of any such changes. The limited group of high officials in the French Treasury who have knowledge of the amounts in the “operations accounts”, where these funds are invested; whether there is a profit on these investments; are prohibited from disclosing any of this information to the CFA banks or the central banks of the African states. This makes it impossible for African members to regulate their own monetary policies. A recent Bloomberg survey estimates that the French Treasury is holding at least US$20 to $40 billion in African foreign reserves which are held in the name of the French Treasury.
African governments do not have access to these funds held by the Treasury but are allowed to borrow their own money from the French at commercial rates. In addition to the difficulties posed by the French Treasury holding unaccounted African money, France is in financial trouble. France has run out of money. It has massive public and bank debt. The reason it has been able to sustain itself so far is because it has had the cushion of the cash deposited with the French Treasury by the African states since 1960. Much of this is held in both stocks in the name of the French Treasury and in bonds whose values have been offset and used to collateralise a substantial amount of French gilts, including pledges to the ECB.
This has happened before. In 1994, the French Treasury simply devaluated the CFA franc by 50%, changing from a parity of one French franc for 50 CFA francs to the pre-Euro 100 CFA francs. This caused havoc in the African economies but the African Heads of State of did not do anything or make provisions for changing the relationship with France over their currencies. In a meeting in Yaounde in November 2016 another devaluation was mooted but was postponed.
Francophone Africa’s current problem is the threat of an electoral victory by the FN whose promise is to abandon Françafrique, the Euro and the European Union. That will mean that the African reserves held by the French Treasury and hypothecated by the French in their sale of French bonds and gilts and pledged as collateral to the ECB will be forfeit and irretrievable as they are in the name of the French Treasury.
Mamadou Koulibaly, the former President of the Ivory Coast National Assembly, has been holding meetings over the last four months trying to promote an awareness of the dangers of this. There are others equally concerned. They point out that even if LePen and the FN do not win, her opponents are also not committed to assist the African states. They, too, have pledged a revision of the terms of Françafrique.
This is a time of grave danger for Africa as a whole as many African economies, including the francophones, are involved in numerous intra-African projects of the AU, the Millennium Challenge and the World Bank-IMF programs. Now is the time to act.