Africa's Last Colonial Currency

The CFA Franc Story

Fanny Pigeaud, Ndongo Samba Sylla

• Editore: Pluto Press
• Anno: 2021
• ISBN:
  9781786806697
• Edizione: 1
• Argomento: Economics
• Categoria: Economic History

Colonialism persists in many African countries due to the continuation of imperial monetary policy. This is the little-known account of the CFA Franc and economic imperialism.

The CFA Franc was created in 1945, binding fourteen African states and split into two monetary zones. Why did French colonial authorities create it and how does it work? Why was independence not extended to monetary sovereignty for former French colonies? Through an exploration of the genesis of the currency and an examination of how the economic system works, the authors seek to answer these questions and more.

As protests against the colonial currency grow, the need for myth-busting on the CFA Franc is vital and this exposé of colonial infrastructure proves that decolonisation is unfinished business.

1

A Currency at the Service of the ‘Colonial Pact’

‘Everyone can create money, the problem is to get it accepted’ was one of American economist Hyman Minsky’s catchphrases.¹ France, like all the other colonial powers, during the nineteenth and twentieth centuries endeavoured to get its currency ‘accepted’ – or rather, to impose it – in the territories it conquered on the African continent.

Unlike all the other colonial powers, however, France managed an incredible feat: to maintain its monetary empire built around the CFA franc even after the African countries officially gained their independence. This is why today people talk of the CFA franc as a ‘colonial relic’, a ‘vestige of colonialism’ or, more simply, as a ‘neocolonial currency’.

THE IMPOSITION OF THE FRENCH CURRENCY

During the pre-colonial period, different types of currencies circulated on the African continent. Rubber balls, iron and copper bars, shells, zinc fragments, cotton wool, brass wires, glass beads and porcelain grains were just a few of the materials used as means of transaction. Money was certainly a medium of exchange and payment but it was, above all, an institution that helped reconfigure social relations.² For this reason, it was entrusted ‘to the elderly, to the village leaders, who were responsible for protecting the binds between the community and its founders’.³ The cowries, a shell found in the Indian Ocean,⁴ called timekla by the Tuareg and oudà in Timbuktu, and particularly widespread among the Yoruba, a people of Nigeria, was long used in West Africa, which in fact was known as the ‘cowrie zone’. It was at the centre of the construction of powerful pan-African trade networks, particularly in the western Volta region, located in present-day Burkina Faso, and in Sudan in present-day Mali.⁵ In the first half of the eighteenth century, cowries even had an official exchange rate vis-à-vis the livre tournois, the prevailing unit of account in France from the Middle Ages until 1795, when the franc became the only currency in the country. In 1724, 1,000 cowries were worth 960 deniers tournois, a sub-multiple of the livre tournois.⁶ However, like the other African currencies, the cowrie gradually lost its influence.

One of the main objectives of the European powers’ colonial enterprise in Africa throughout the nineteenth century was the appropriation of most of the continent’s riches through the establishment of commercial regimes to the benefit of the metropole. To this end, the colonial powers had to control the circuits of production and exchange, which in turn requires controlling the currency. To curb local resistance and get their currencies accepted, the colonisers used all the means of pressure at their disposal and didn’t hesitate to resort to colonial law and violence.

As it expanded and consolidated its colonial rule, France gradually succeeded in spreading its currency. In 1825, King Charles X minted the first coins bearing the inscription ‘French colonies’, which were to serve as a unit of account in Gorée, a small island off present-day Senegal, at the centre of the slave trade for at least two centuries. In 1830, France demanded that transactions with ‘native’ intermediaries along the West African coast be carried out in its own currency. The objective was to counter the domination of the English trading companies. The long and violent French conquest of Algeria, from 1830 onwards, accelerated the imposition of the colonial monetary system: after defeating the Emir Abdelkader, the French authorities established, in 1851, a colonial bank, the Bank of Algeria, under the supervision of the Bank of France.

In sub-Saharan Africa, the French government also resorted to force in the two federations it had created, French West Africa (Afrique occidentale française, AOF), created in 1895, which included eight colonies: Dahomey (present-day Benin), Ivory Coast, Guinea, Upper Volta (present-day Burkina Faso), Mauritania, Niger, Senegal and Sudan (present-day Mali); and French Equatorial Africa (Afrique équatoriale française, AEF), created in 1910, which included four colonies: Congo, Gabon, Ubangi-Shari (the present-day Central African Republic) and Chad. Cameroon and Togo, at the time under German rule, were annexed to the French Empire after World War I.

At the end of the nineteenth century, soldiers were sent in the vicinity of Lake Chad with the objective, among other things, of ‘organising small fair markets in which the French currency would be the only legal currency’.⁷ According to the historian and numismatist Régis Antoine, ‘the peasants were forced to sell their goods and their reluctance to use the “franc” was attributed to their stupidity’.⁸ In 1895, in the Ivory Coast, the colonial authorities forbade the use of the manilla, a form of money made from bronze. In 1907, they forbade the importation of cowries and the payment of colonial taxes with this currency within the AOF.

Such authoritarian measures were not always successful in overcoming local resistance. There were many reasons why the local populations were reluctant to adopt the French currency. Not only did they struggle to become familiarised with the singularity of the calculation system, but the coins were hard to store due to their small size, and the poor quality banknotes resembled pieces of cloth. But it was above all the association of the colonial currency with taxes that caused its rejection, as the colonial administration demanded that the innumerable taxes that oppressed the colonised be regulated in this currency. The taxation of the ‘indigenous’ certainly helped to raise revenue, but its main purpose was to forcibly convert local societies to the colonial capitalist system. The demonetisation of the cowries was imposed in 1922. Three years later, an amendment to the Code de l’indigénat – the legislation in force in the French colonial empire – introduced the obligation to use the French franc in trade transactions under the threat of penalties. In all, it took France almost 50 years to get the franc ‘accepted’ in its African colonies.⁹

The central role of the colonial banks

The replacement of indigenous currencies with colonial currencies¹⁰ – what anthropologists call ‘monetary transition’ – would not have been possible without the colonial banks. One of the first to see the light of day in France’s African empire was the Bank of Senegal. Based in Saint-Louis, a city in northern Senegal, it began operations in 1855 thanks to the ‘reparations’ paid by the French state to the slave owners after the abolition of slavery on 27 April 1848.¹¹ The ‘loans and discount’ bank was controlled by the Bordeaux trading companies, in particular Maurel and Prom, who used it to curb the development of their African competitors by preventing them from accessing the credit needed to purchase local and imported products.¹²

The Bank of Senegal was dissolved in 1901. It was immediately replaced by the Bank of West Africa (Banque d’Afrique Occidentale, BAO), based in Paris. With a law of 1901, this new financial institution obtained the privilege of issuing francs, under the supervision of the Bank of France: from that moment on, it was tasked with the issuance of the coins and banknotes used in the African part of the empire. The BAO thus became ‘the only credit institution to simultaneously play the role of issuing bank, commercial bank and investment bank’.¹³ It operated exclusively at the service of French metropolitan interests and in particular of the French import–export companies to which it devoted most of its resources, at the expense of their African rivals. The law of 29 January 1929 renewed its privilege of issuing the franc in the AOF, in the AEF, in Cameroon and in Togo. Four years earlier, a law passed on 22 December 1925 had created the Bank of Madagascar, which enjoyed the privilege of issuing the currency in this territory and in its dependencies. In 1943, the BAO would hand over its issuing rights in the AEF and in Cameroon to the Central Fund for the French Overseas Territories (Caisse Centrale de la France d’Outre-mer, CCFOM), a public institution originally founded in 1941 under the name of Central Fund of Free France (Caisse Centrale de la France Libre).

Subsequently French deposit banks also arrived on the continent. In 1939, the National Bank for Trade and Industry (Banque nationale pour le commerce et l’industrie) opened its doors in Senegal, followed by Crédit Lyonnais and Société Générale. They were integral elements of the so-called ‘trading economy’ (‘économie de traite’), a term that refers to the drainage of local resources – human beings, agricultural products, raw materials of various types, silver, etc. – towards the various metropoles.¹⁴ These banks favoured the coastal regions (Senegal, Dahomey, Ivory Coast) to the detriment of the inland regions (French Sudan, Upper Volta, Niger) and exclusively financed the production destined for France. Their clients were essentially private colonial companies specialised in trading activities, which often benefited from monopoly situations.

Overall, the banks and companies in question responded to the logic of the ‘colonial pact’,¹⁵ which was centred around four fundamental rules: the colonies were forbidden from industrialising, and had to content themselves with supplying raw materials to the metropole which transformed them into finished products that were then resold to the colonies; the metropole enjoyed the monopoly of colonial exports and imports; it also held a monopoly in the shipping of colonial products abroad; finally, the metropole granted commercial preferences to the products of the colonies.¹⁶ This ‘colonial pact’ established relationships of dependence that forced the colonies to constantly adapt to the economic conjuncture of the metropole and to the requirements of its economic development.

PARIS CREATES THE ‘FRANC ZONE’ (1939)

In the interwar period, France reorganised its colonial empire. Marked by the global economic crisis of 1929 and by a strong rivalry between the great powers, which all resorted to protectionist measures of various kinds, this period, alongside the dissolution of the international monetary system, witnessed the birth of new forms of trade and monetary integration.

In 1931 Britain abandoned the gold standard regime. In force between 1870 and World War I, this monetary system was resurrected in the second half of the 1920s. It was based on gold: the various currencies (sterling, dollar, franc, etc.) were defined as a fixed weight of gold and were freely convertible into this international means of payment. Through this mechanism, the currencies were pegged to each other according to fixed metal parities and therefore their values remained stable. In order to guarantee the convertibility of their respective currencies, the central banks had to limit the issuance of money to the gold reserves available to them.

Once out of this regime, the United Kingdom established a monetary zone organised around its currency, the British pound. Called the ‘sterling area’, it included countries that had adopted the pound sterling as a national currency or whose currency was pegged to it or which held their reserves in that currency. London’s goal was to protect the value of its currency and promote trade within its colonial empire. The British authorities established free trade rules within the aforementioned area, while adopting protectionist measures in all relations between the empire and the outside world.

France soon followed on Britain’s heels. In 1936 it also abandoned the gold standard. At the start of World War II, in 1939, the French government banned all trade and financial transactions between metropolitan France and foreign countries. In the following months, these measures were also imposed on the colonial empire, officially marking the birth of the ‘franc zone’ (although the measures in question were not always observed due to the war).

Whereas the sterling area encompassed the British colonies and dependencies, but also a number of sovereign countries, the franc zone, organised around the metropolitan franc and comprising solely the French colonies and dependencies in Africa, Asia, the Pacific, the Americas and the Antilles, was relatively smaller and less prosperous. Another difference was that the franc was not a major international currency, unlike the British pound, which was a reserve currency, that is, one of the main currencies in which the foreign assets of central banks, international trade transactions and global financial assets were denominated.¹⁷

The franc zone, however, was based on the same logic as the sterling area: free trade within its borders, protectionism vis-à-vis the outside world. It was governed according to an extremely centralised logic that allowed France to control the currency and to coordinate foreign trade in the area. A common exchange policy was also established. In concrete terms, this meant that the rules relating to foreign currency transactions between the franc zone and the outside world were decided in Paris and applied uniformly to the whole area. It also meant that the zone’s imports were subject to the French state’s authorisation since they involved purchases of foreign currency to pay for them. To this end, a foreign exchange stabilisation fund was established, under the supervision of the Bank of France, which centralised and pooled all the currencies of the zone. This fund held a monopoly on the purchases and sales of foreign currency throughout the area. As for the coordination of foreign trade, it consisted of organising trade within the colonial empire with the dual objective of separating the colonies from the world market and establishing privileged commercial relations between the metropole and its empire: the territories of the zone had to grant commercial preferences to the metropole (favourable tariffs, common customs duties in the whole area, export quotas that had to be directed towards the metropolis, etc.).¹⁸ France now had an arsenal that allowed it to protect its currency and trade.

Despite these measures, World War II fragmented the relations between the metropole, divided between the forces that supported the German occupation and those of the Resistance, and the empire, which suffered the consequences of the metropole’s ruptures. In 1945, Paris was forced to loosen its grip on its African colonies, which had played a decisive role in the war effort and whose populations, tried by the conflict, demanded better living conditions. The emergence of a whole range of new social and political claims in the colonies was further favoured by the position taken by the new great powers, the United States and the Soviet Union, in defence of the ‘the right of the peoples to self-determination’.

At the Brazzaville conference, held in February 1944, General de Gaulle, head of the French Committee of National Liberation (Comité français de Libération nationale, CFLN), pledged to improve the material and moral wellbeing of the colonies. Six months later, for example, trade union freedom was recognised in the territories in question. In 1946, freedom of association was established, forced labour was abolish...