Consensual Rape In The Françafrique Currency Markets

Dr Gary K. Busch
November 22, 2011


It is happening again. The CFA franc will be devalued on 1 January 2012 according to several reliable sources in West Africa. This happened before, with disastrous consequences. On 12 January 1994 Benin, Burkina Faso, Cameroon, Chad, Central African Republic, Comoros, Congo (B), Cote d‟Ivoire. Equatorial Guinea. Gabon, Mali. Mauritania, Niger and Senegal were informed that their common currency had been devalued by 50%. It would no longer cost 50 CFA francs to buy 1 French franc; it would now cost 100 CFA francs. There were violent reactions in many of the countries, especially Senegal, at the loss of 50% of their purchasing power. Now, in 2011, it will be even worse as high world prices for food, paid for in US dollars, will price imported food out of the reach of most Africans working in menial jobs, on the farms, as civil servants or unemployed.

The responsibility for this approaching disaster is the failure of the French economy to deal with its long-term structural debt and the use of French reserves to prop up the failing Euro and to participate in the several bailouts within the Eurozone. French wars in the Ivory Coast and, especially Libya, have cut a major hole in the French pocket. Their tame African partners, the presidents of francophone African states, are complicit in this plan for devaluation and continue to follow the lead of their protectors, the French Army, in whatever they suggest. This relationship is long-standing and a paradigm of neo-colonial enterprise

What Is The CFA Franc? There are actually two separate CFA francs in circulation. The first is that of the West African Economic and Monetary Union (WAEMU) which comprises eight West African countries (Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal and Togo. The second is that of the Central African Economic and Monetary Community (CEMAC) which comprises six Central African countries (Cameroon, Central African Republic, Chad, Congo-Brazzaville, Equatorial Guinea and Gabon), This division corresponds to the pre-colonial AOF (Afrique Occidentale Française) and the AEF (Afrique Équatoriale Française), with the exception that Guinea-Bissau was formerly Portuguese and Equatorial Guinea Spanish). Each of these two groups issues its own CFA franc. The WAEMU CFA franc is issued by the BCEAO (Banque Centrale des Etats de l‟Afrique de l‟Ouest) and the CEMAC CFA franc is issued by the BEAC (Banque des Etats de l‟Afrique Centrale). These currencies were originally both pegged at 100 CFA for each French franc but, after France joined the European Community‟s 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. The current plan is to peg the rate at CFA 1,000 to 1 Euro - a reduction of about 50%. Who Is Responsible for the CFA Franc? The monetary policy governing such a diverse aggregation of countries is uncomplicated because it is, in fact, operated by the French Treasury, without reference to the central fiscal authorities of any of the WAEMU or the CEMAC states. Under the terms of the agreement which set up these banks and the CFA the Central Bank of each African country is obliged to keep at least 65% of its foreign exchange reserves in an “operations account” held at the French Treasury, as well as another 20% to cover financial liabilities. The CFA central banks also impose a cap on credit extended to each member country equivalent to 20% of that country‟s public revenue in the preceding year. Even though the BEAC and the BCEAO have an overdraft facility with the French Treasury, the drawdowns on those overdraft facilities are subject to the consent of the French Treasury. The final say is that of the French Treasury which has invested the foreign reserves of the African countries in its own name on the Paris Bourse. In short, more than 85% of the foreign reserves of these African countries 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 are supposed to be added to the pool but no accounting is 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. The most inefficient and wasteful countries are able to use the foreign reserves of the more prudent countries without any meaningful intervention by the wealthier and more successful countries. Convertibility of the CFA franc into French francs through authorised intermediaries is supported by provision for central-bank overdrafts on these accounts.

Three basic mechanisms have traditionally been used to control monetary growth in the CFA Franc Zone by the two banks operating under the instructions of the French Treasury: In the central banks' operations accounts, interest is charged on overdrafts, and conversely, interest is paid on credit balances. When the balance in a central bank's operations account falls below an agreed target level, it is required to restrict credit expansion, generally by increasing the cost to member countries of rediscounting paper with the central bank or by restricting member-countries' access to rediscounting facilities. Credit provided by the central banks to the government sector of each of their member countries can be no larger than 20% of its fiscal revenue in the previous year. However, this tight control by France of the cash and reserves of the francophone African states is only one aspect of the problem. The creation and maintenance of the French domination of the francophone African economies is the product of a long period of French colonialism and the learned dependence of the African states. For most of francophone Africa there is only limited power allowed to their central banks. These are economies whose vulnerability to an increasingly globalised economy is increasing daily. There can be no trade policy without reference to currency; there can be no investment without reference to reserves. The politicians and parties elected to promote growth, reform, changes in trade and fiscal policies are made irrelevant except with the consent of the French Treasury which rations their funds. There are many who object to the continuation of this system. President Abdoulaye Wade of Senegal has stated this very clearly “The African people‟s money stacked in France must be returned to Africa in order to benefit the economies of the BCEAO member states. One cannot have billions and billions placed on foreign stock markets and at the same time say that one is poor, and then go beg for money.” How Did This Happen? Decolonization south of the Sahara did not happen as de Gaulle had intended. He had wanted to create a Franco-African Community that stopped short of total independence. But, when Sekou Toure's Guinea voted "no" in the 1958 referendum on that Community, the idea was effectively dead. Guinea was severely punished because of its decision and the French soon had to proceed towards allowing the independence of its colonies but at the price of a strict continuing control over their economies. They agreed at independence to be bound by the Pacte Colonial. The key to all this was the agreement signed between France and its newly-liberated African colonies which locked these colonies into the economic and military embrace of France. This Colonial Pact not only created the institution of the CFA franc, it created a legal mechanism under which France obtained a special place in the political and economic life of its colonies. This was largely the work of the French presidential adviser, Jacques Foccart. Jacques Foccart was the chief adviser for the government of France on African policy as well as the co-founder of the Gaullist Service d'Action Civique (SAC) in 1959 with Charles Pasqua, which specialized in covert operations in Africa. It was Foccart “the eminence grise” who negotiated the Pacte Coloniale with the evolving French African states who achieved their “flag independence “in 1960. The Pacte Colonial Agreement enshrined a special preference for France in the political, commercial and defence processes in the former French African colonies. On defence it agreed

two types of continuing contact. The first was the open agreement on military co-operation or Technical Military Aid (AMT) agreements, which weren‟t legally binding, and could be suspended according to the circumstances. They covered education, training of servicemen and African security forces. The second type, secret and binding, were defence agreements supervised and implemented by the French Ministry of Defence, which served as a legal basis for French interventions. These agreements allowed France to have pre-deployed troops in Africa; in other words, French army units present permanently and by rotation in bases and military facilities in Africa; run entirely by the French. Foccart had the African presidents each sign an undated letter requesting French military assistance just in case it was needed as justification for intervention by French troops. According to Annex II of the Defence Agreement, France has priority over any other market in the acquisition of those "raw materials classified as strategic.” In fact, according to article 2 of the agreement, the French Republic regularly informs the Africans of the policy that it intends to follow concerning strategic raw materials and products, taking into account the general needs of defence, the evolution of resources and the situation of the world market. According to article 3, the African states are obliged to inform France of the course they intend to follow concerning strategic raw materials and products and the measures that they propose to take to implement this policy. And to conclude, article 5: "Concerning these same products, the African States, reserve them in priority for sale to the French Republic, after having satisfied the needs of internal consumption, and they will import what they need in priority from it.” The reciprocity between the signatories was not a bargain between equals, but reflected the actual dominance of the colonial power that had, in the case of these countries, organised "independence" a few months previously (in August 1960). Everything was reserved for France first; France was the first choice for imports and French technicians were brought in to manage ministries alongside the Africans. In summary, the colonial pact maintained the French control over the economies of the African states; it took possession of their foreign currency reserves; it controlled the strategic raw materials of the country; it stationed troops in the country with the right of free passage; it demanded that all military equipment be acquired from France; it took over the training of the police and army; it required that French businesses be allowed to maintain monopoly enterprises in key areas (water, electricity, ports, transport, energy, etc.). France not only set limits on the imports of a range of items from outside the franc zone but also set minimum quantities of imports from France. These treaties are still in force and operational. The Impact of the Colonial Pact Some of the consequences for the Africa countries of the continuation of a policy of dependence are obvious – lack of competitive options; dependence on the French economy; dependence on the French military; and the open-door policy for French private enterprise. However, there are more subtle differences which arise. The French companies in francophone Africa, by virtue of their protected monopolistic or oligarchic status, contribute a substantial share of the GDP of these countries. More importantly, however, they are often the single largest group of taxpayers. In many of these countries the French corporations pay over 50% of the national tax revenues collected. This gives them a unique status. Quite frequently the French say that without the French companies the economy of the African state will collapse. When coupled with the inability of the country to access its reserves it undoubtedly true. However, it doesn‟t follow that private

corporations from other countries, like the U.S. or China, would not contribute equally. This is one reason that the French are so concerned with allowing competition into the market place. After 50 years of independence, France still controls most of the infrastructure and holds its foreign currency reserves as part of the 14-nation Franc Zone. The airline, telephone, electricity and water companies, and some major banks, are French-controlled. 'Accords de coopération', signed after Independence by the late President Félix Houphouët-Boigny and France's then Premier, Michel Debré, are still technically applicable. France maintains a stranglehold of Ivorian commerce and currency which vitiates national initiatives towards independence. This privileged position of France is confirmed by a report from the UN Commission: "The testimony we have assembled has also enabled us to see that the law of 1998 concerning rural property is linked to the dominant position that France and French interests occupy in Cote d'Ivoire. According to these sources, the French own 45% of the land and, curiously, the buildings of the Presidency of the Republic and of the Ivorian National Assembly are subject to leases concluded with the French. French interests are said to control the sectors of water and electricity.” The report only superficially touched the dominance of French interests in Cote d'Ivoire, but they are not hard to find. Below are some of leading players of the French business class in Cote d'Ivoire: Bollore, leader in French maritime transport and principal operator of maritime transport in Cote d'Ivoire along with Saga, SDV (Switched Digital Video). and Delmas, controls the port of Abidjan, the leading transit port in West Africa West Africa. Bollore also controls the IvorianBurkinabe railway, Sitarail. Although it has recently withdrawn from the cocoa business, it has maintained its leading position in tobacco and rubber. Bouygues (leader in construction and publicc works) dominates Ivorian construction projects, such as highways or dams, financed by public funds and constructed by the government. Since Ivoirian independence it has been the number one company in construction and public works (we also find Colas, third-ranking firm in road building in France). Bouygues also has, through privatisation has obtained additional concessions, control of water distribution (Societe des Eaux de Cote d'Ivoire), of production and distribution of electricity through the Compagnie Ivoirienne d'Electricite and the Compagnie Ivoirienne de Production d'Electricite. It has also been involved in the recent exploitation of Ivorian oil. Total (the biggest French oil company) holds a quarter of the shares of the Societe Ivoirienne de Raffinage Oil Refinery (number one in Cote d'Ivoire) and owns 160 petrol stations and controls the bitumen supply France Telecom (seventh in rank among companies in France and leader in the telecoms sector) is the main shareholder of Cote d'Ivoire Telecom and of the Societe Ivoirienne des Mobiles (it holds about 85% of the capital), since concessions were granted in this sector, in the context of the privatisation of public enterprises. In the banking and insurance sector, there is the Societe Generale (sixth bank in France--the Societe Generale des Banques de Cote d'Ivoire has 55 branches) as well as Credit Lyonnais and BNP-Paribas. AXA (the second largest company in France and leader of the insurance sector) has been present in Cote d'Ivoire since thecplonial period.

The most long-established of the French companies in Cote d'Ivoire is the Groupe Compagnie Francaise de l'Afrique de l'Ouest de Cote d'Ivoire (CFAO-CI). It operates in many sectors (cars, pharmaceuticals, new technology, etc). For a long time, CFAO monopolised exports and the retail trade, and its profits (not a single year of loss, since its creation in 1887) led to it being taken over recently by the Pinault-Printemps-La Redoute group. There is also "the former boss of French bosses", Baron Ernest-Antoine Seilleres, through Technip (plant for the oil sector) and Bivac (which recently installed a new scanner at the port of Abidjan). The presence of French capital is a demonstration of the profitability of Cote d'Ivoire. And although French direct investment is only Euro 3.5bn--the most profitable former state enterprises having been acquired at knock-down prices--the annual profits from this investment are enormous. Despite the flight of some French nationals during the rebel war of recent years, French business presence in Cote d'Ivoire has returned and has recovered its former levels. In fact one of the first acts of Ouattara after he was imposed as president by the French was to pay millions in compensation to the French businesses who fled the Ivory Coast in fear after the French massacre of civilians in November 20, 2004 . The first real challenge to French dominance resulted from the election of Laurence Gbagbo as President in the Ivory Coast. His willingness to consider revising the terms of the Pacte Coloniale and his intent to remove French and UN troops from his country was the reason that the French engineered his downfall and incarceration. Why The Devaluation of the CFA? France has run out of money. It has massive public and bank debt. It has the largest exposure to both Greek and Italian debt (among others) and has embarked upon yet another austerity plan. Its credit rating is on the brink of losing its Triple A status and the private banks are going to have to take a major haircut on its intra-European debts. It vast expenditures in pursuing its war in Libya have exhausted most of the annual budget. 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 which have offset and collateralised a substantial amount of French gilts The francophone African states have gradually been able to recognise that they may never see their accumulated assets again as these have been pledged by the French Treasury against the French contribution to the several European bailouts. Wade of Senegal has again been asking for an accounting. None has been forthcoming. Ouattara of the Ivory Coast and Denis SassouNguesso of Congo-Brazzaville have been told that it will be necessary to devalue the CFA francs and they have been delegated the role of informing their African presidential colleagues.. Economists reckon that if this devaluation takes place it will have the effect of releasing around 40% of the French debt exposure and extend a lifeline to the French Treasury. However, it will have a devastating effect on Africa. The last time there was such a devaluation most of French Africa suffered badly (except for the Presidents and their friends). Devaluation is useful if you have things to export which are made relatively cheaper. However, for most of

francophone Africa the goods they have for export are raw materials and petroleum. Their manufactured goods, their services, their invisibles almost all come from or through France. Food is largely imported from outside Africa and is growing daily in price as is transport. There were signs of price inflation earlier this year. West African monetary zone inflation accelerated to 4.1 per cent in January from 3.9 per cent the month before. Inflation in the eight-nation economic zone, which uses the euro-pegged West African CFA franc, was mainly due to rising food, transport, housing and communication costs. Price-growth averaged 1.4 per cent in 2010, up from 0.4 per cent the previous year. Higher prices for petrol and food drove that increase. One of the countries which was hardest hit by the previous devaluation was the Ivory Coast That devaluation entailed the signature between the IMF and the World Bank for an Enhanced Structural Adjustment Facility (ESAF) (1994-1996), that imposed drastic measures on the government to make budgetary restrictions destined to straighten up the national economy – this, to no avail. Furthermore, the “raining billions” (an exceptional, unprecedented volume of credits encouraged bad governance) in the country. The man in charge then was Ouattara. Ouattara was accused of being at the heart of deterring international financing whilst letting the Ivorian‟s sink deeper and deeper into poverty. It was the carrying-out of projects financed by the European Union, and the massive deterring of credits linked to postponing debt contracted on behalf of international institutions, that brought these same institutions to break off with the Ivory Coast in 1998. Not only did the policy led by Alassane Ouattara propel the great majority of the Ivorian population into poverty, but it also delocalized its assets just before the devaluation, via Ghanaian banks clever at changing the CFA-Franc money into another currency, notably the dollar, thereby doubling the stakes. One billion CFA-Francs on January 10th were converted into dollars on January 11th. The devaluated rate became on January 12th, allowed buying back two billion on January 13th! The explosion of poverty and a considerable extension of an occult economy are the open wounds resulting in the “désétatisation” (to reduce the government‟s role, to render its responsibility next to nil) This governmental responsibility policy led by Ouattara resulted in an ultra-liberal policy thereby reducing the government‟s role in the country‟s economy. This situation had a dramatic impact on the economy, made much worse by the blow of military force in December 1999 (Ouattara having finished his IMF mandate in July 1999, he set about fully consecrating himself to destabilizing the country). The “coup d‟état” finally brought him to power, but he sub-contracted leadership from that point on, preferring to concentrate instead on the resale of diamonds and cocoa, natural resources of the Ivory Coast which he did from his Burkina base: via Geneva for the diamonds, and via Lome and its ships, for the cocoa. The country then sank into a depression and the growth rate reached a record low. In the year 2000, the figure was negative for the first time in the country‟s history: -2.3%. The crisis that exploded in 2002 aggravated the situation even more. It was prepared in Paris, instigated by Ouattara and his friends, Dominique de Villepin and Jacques Chirac. The rebellion fostered by them was contained by Gbagbo and the machinations led to the recent bombing and strafing of Abidjan by French tanks and helicopters. There was a parallel political approach, the long stride towards elections and the organization and manipulation of the electoral list, to the advantage of Alassane Ouattara. This first phase succeeded in finally eliminating HKB ((HKB)

Henry Konan Bedie, who was Felix Houphouët-Boigny‟s successor (1993-1999)) from the second round of the Presidential election. Manipulations of the rate for cocoa permitted increase in the campaign budget, and it was the son, Loïc Folleroux (by a first marriage of Alassane Ouattara‟s wife, Dominique NouvianFolleroux), Director of a commercial company called Arjomaro Africa, who was in charge of it. Alassane Dramane Ouattara was in charge – throughout this period – as the African Leader of IMF, as Prime Minister and Minister of Economy and Finances, as Assistant Director of the IMF, and lastly, as inspirer of the rebellion, which took place in 2002, of the Ivory Coast and surrounding regions. He has, without any doubt, the entire responsibility for the financial and economic collapse of the Ivory Coast. The question is if he is willing to act for the citizens of the Ivory Coast in the upcoming devaluation crisis or will he continue to be a Black Frenchmen safeguarding French interests in Africa.[i] The price will be poverty, stagnation and increased unemployment. This unemployment and underemployment will place a crucial role in domestic stability and growth. While it is easy to see that people without jobs and hope are more willing to take more extreme positions, the economic consequences are also clear. In economics, Okun's law refers to an empirically observed relationship relating unemployment to losses in a country's production first quantified by Arthur M. Okun. This „law‟ states that for every 1% increase in the unemployment rate, a country's GDP will be at an additional roughly 2% lower than its potential GDP. Fragile African economies will find it hard to develop policies to compensate for these losses. Although the problem is most acute in the Ivory Coast, which represented at the last devaluation 60% of the assets of the West African Pool, it is no less serious for the other states. Despite this, and the poverty it will bring to the region, there are few African presidents who are willing to renounce the Pacte Coloniale and end the terrible toll of French neocolonialism in the region. France may have overspent its funds and bitten off more than it could chew in European debt and Libyan destruction. Surely it isn‟t the job of West Africans to pay for this aberrant behaviour. [i] “The devaluation of the CFA-Franc currency: a means of straightening up the Ivorian economy, or of getting personally richer?” Ivorycoastfuture November 13, 2010