The CFA system only works while franc-zone economies stay small

Evidence

According to the supporters of the CFA franc, the franc zone offers a context of ‘macroeconomic stability’ characterised by a fixed exchange rate, low inflation and relative budgetary discipline. This is said to favour the inflow of foreign investment. This statement, however, is a myth, just like the others. The statistics of the United Nations Conference on Trade and Development (UNCTAD) on foreign direct investment (FDI) prove this. They show that FDI in Africa is captured by the countries with the highest GDP and the highest amount of hydrocarbons and mineral resources. In 2016, South Africa, Egypt, Nigeria, Morocco and Angola received over 50 per cent of the FDI stock absorbed by Africa. The CEMAC accounted for only 7.1 per cent of this stock in 2016, while then WAEMU’s share was a meagre 3 per cent. Only three countries of the franc zone were among the top 20 in Africa: Congo (10th), Equatorial Guinea (17th) and the Ivory Coast (20th). Ghana, whose currency, the cedi, is considered less stable than the CFA franc, nevertheless records a stock of inward FDI higher than that of all the WAEMU countries combined. Even more surprising is the fact that, in terms of stock of inward FDI, Congo is the only country in the franc zone to be more ‘attractive’ than the Democratic Republic of the Congo. All this shows that foreign investors are motivated by considerations other than those proclaimed by the enthusiasts of the CFA franc. Ironically, the franc zone is not even the first destination of French FDI in Africa. In 2012, these stood at just under $58 billion (3.7 per cent of the total French FDI stock in the world), of which 60 per cent went to four countries that are not part of the franc zone: Morocco, Angola, Nigeria and Egypt. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 290 (#complicates, via linked claim)

If the socioeconomic performance of the countries of the franc zone leaves much to be desired, it is largely due to four handicaps imposed by the CFA system: an excessively rigid exchange rate regime, a problematic pegging to the euro, the underfinancing of the African economies and a free movement of capital that generates a massive financial bleed-out. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 293 (#expands, via linked claim)

With independence, they gave way to national currencies around the world except in the countries of the franc zone and in some small island countries and some ‘dependencies’, such as overseas territories and departments, the Vatican, San Marino, Monaco, etc. — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 350 (#qualifies, via linked claim)

Categorization

• XREF: connects to: CFA convertibility guarantee is cheap only because African economies stay small.; The CFA franc functions as a political instrument of pressure over 15 African states.; CFA macroeconomic stability does not attract foreign direct investment — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 290 (+4 more)

Related

• CFA macroeconomic stability does not attract foreign direct investment (similarity 0.92)
• CFA convertibility guarantee is cheap only because African economies stay small. (similarity 0.88)
• Franc zone economies have stagnated since independence, with most growing under 1 percent yearly (similarity 0.87)
• Four structural handicaps explain the franc zone’s poor socioeconomic performance (similarity 0.86)
• The CFA system blocks African countries from financing their own agricultural development (similarity 0.85)
• CFA francs are non-convertible among the three African franc-zone sub-units (similarity 0.85)
• Eurozone membership merged CFA extraction with neoliberal austerity, worsening African prospects. (similarity 0.84)
• Franc zone growth is uneven and often strongly negative (similarity 0.84)
• The CFA franc was a colonial instrument depriving African actors of credit. (similarity 0.84)
• The CFA franc was a political choice that deprived non-adapting African actors of credit (similarity 0.83)
• The CFA system gives France instruments to steer franc-zone politics (similarity 0.83)
• The CFA guarantee arrangement secretly benefits France at Africa’s expense (similarity 0.83)
• The CFA franc’s parity was set without regard for local economic realities (similarity 0.83)
• CFA ‘stability’ masks currency fluctuation against dollar and pound (similarity 0.82)
• Two CFA francs serve 162 million people across 15 states under one franc zone (similarity 0.82)

Broader Connections

• CFA macroeconomic stability does not attract foreign direct investment #complicates (0.60) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 290
• Post-colonial monetary unions survived only in the franc zone and small dependencies #qualifies (0.50) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 350
• Four structural handicaps explain the franc zone’s poor socioeconomic performance #expands (0.50) — Fanny Pigeaud_ Ndongo Samba Sylla, Africa’s Last Colonial Currency, 293
• Franc zone growth is uneven and often strongly negative #corroborates (0.45)