Consensual Rape In The Franceafrique CurrencyMarkets

8/3/2019 Consensual Rape In The Franceafrique CurrencyMarkets

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Consensual Rape In The Franafrique Currency Markets

Dr Gary K. Busch

November 22, 2011

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It is happening again. The CFA franc will be devalued on 1 January 2012 according to severalreliable sources in West Africa. This happened before, with disastrous consequences. On 12January 1994 Benin, Burkina Faso, Cameroon, Chad, Central African Republic, Comoros, Congo(B), Cote dIvoire. Equatorial Guinea. Gabon, Mali. Mauritania, Niger and Senegal were

informed that their common currency had been devalued by 50%. It would no longer cost 50CFA francs to buy 1 French franc; it would now cost 100 CFA francs. There were violentreactions in many of the countries, especially Senegal, at the loss of 50% of their purchasingpower. 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 dealwith its long-term structural debt and the use of French reserves to prop up the failing Euroand to participate in the several bailouts within the Eurozone. French wars in the Ivory Coastand, 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 andcontinue to follow the lead of their protectors, the French Army, in whatever they suggest. Thisrelationship is long-standing and a paradigm of neo-colonial enterprise
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What Is The CFA Franc?

There are actually two separate CFA francs in circulation. The first is that of the West AfricanEconomic 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 ofthe Central African Economic and Monetary Community (CEMAC) which comprises six Central

African countries (Cameroon, Central African Republic, Chad, Congo-Brazzaville, EquatorialGuinea and Gabon), This division corresponds to the pre-colonial AOF (Afrique OccidentaleFranaise) and the AEF (Afrique quatoriale Franaise), with the exception that Guinea-Bissauwas formerly Portuguese and Equatorial Guinea Spanish).

Each of these two groups issues its own CFA franc. The WAEMU CFA franc is issued by theBCEAO (Banque Centrale des Etats de lAfrique de lOuest) and the CEMAC CFA franc is issued

by the BEAC (Banque des Etats de lAfrique Centrale). These currencies were originally both

pegged at 100 CFA for each French franc but, after France joined the European CommunitysEuro zone at a fixed rate of 6.65957 French francs to one Euro, the CFA rate to the Euro wasfixed 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 uncomplicatedbecause it is, in fact, operated by the French Treasury, without reference to the central fiscalauthorities of any of the WAEMU or the CEMAC states. Under the terms of the agreementwhich set up these banks and the CFA the Central Bank of each African country is obliged tokeep at least 65% of its foreign exchange reserves in an operations account held at theFrench Treasury, as well as another 20% to cover financial liabilities.

The CFA central banks also impose a cap on credit extended to each member countryequivalent to 20% of that countrys public revenue in the preceding year. Even though theBEAC and the BCEAO have an overdraft facility with the French Treasury, the drawdowns onthose overdraft facilities are subject to the consent of the French Treasury. The final say is thatof the French Treasury which has invested the foreign reserves of the African countries in itsown name on the Paris Bourse.

In short, more than 85% of the foreign reserves of these African countries are deposited in theoperations accounts controlled by the French Treasury. The two CFA banks are African inname, 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 tothem as a group or individually. The earnings of the investment of these funds in the FrenchTreasury pool are supposed to be added to the pool but no accounting is given to either thebanks or the countries of the details of any such changes. The limited group of high officialsin 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 prohibitedfrom disclosing any of this information to the CFA banks or the central banks of the Africanstates.

This makes it impossible for African members to regulate their own monetary policies. Themost 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 successfulcountries. Convertibility of the CFA franc into French francs through authorised intermediariesis supported by provision for central-bank overdrafts on these accounts.


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Three basic mechanisms have traditionally been used to control monetary growth in the CFAFranc 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 ofrediscounting paper with the central bank or by restricting member-countries' access torediscounting facilities.

Credit provided by the central banks to the government sector of each of their membercountries 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 Africanstates is only one aspect of the problem. The creation and maintenance of the Frenchdomination of the francophone African economies is the product of a long period of Frenchcolonialism 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 whosevulnerability to an increasingly globalised economy is increasing daily. There can be no tradepolicy without reference to currency; there can be no investment without reference toreserves. The politicians and parties elected to promote growth, reform, changes in trade andfiscal policies are made irrelevant except with the consent of the French Treasury which rationstheir funds. There are many who object to the continuation of this system. PresidentAbdoulaye Wade of Senegal has stated this very clearly The African peoples money stacked in

France must be returned to Africa in order to benefit the economies of the BCEAO memberstates. One cannot have billions and billions placed on foreign stock markets and at the sametime 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 wantedto create a Franco-African Community that stopped short of total independence. But, whenSekou Toure's Guinea voted "no" in the 1958 referendum on that Community, the idea waseffectively dead. Guinea was severely punished because of its decision and the French soonhad to proceed towards allowing the independence of its colonies but at the price of a strictcontinuing control over their economies. They agreed at independence to be bound by thePacte Colonial.

The key to all this was the agreement signed between France and its newly-liberated Africancolonies which locked these colonies into the economic and military embrace of France. ThisColonial Pact not only created the institution of the CFA franc, it created a legal mechanismunder 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 Foccartwas the chief adviser for the government of France on African policy as well as the co-founderof the Gaullist Service d'Action Civique (SAC) in 1959 with Charles Pasqua, which specialized incovert 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 in1960.

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


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two types of continuing contact. The first was the open agreement on military co-operation orTechnical Military Aid (AMT) agreements, which werent legally binding, and could be

suspended according to the circumstances. They covered education, training of servicemenand African security forces. The second type, secret and binding, were defence agreementssupervised and implemented by the French Ministry of Defence, which served as a legal basisfor 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 andmilitary facilities in Africa; run entirely by the French. Foccart had the African presidents eachsign an undated letter requesting French military assistance just in case it was needed asjustification for intervention by French troops.

According to Annex II of the Defence Agreement, France has priority over any other market inthe acquisition of those "raw materials classified as strategic. In fact, according to article 2 ofthe agreement, the French Republic regularly informs the Africans of the policy that it intendsto follow concerning strategic raw materials and products, taking into account the generalneeds 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 intendto follow concerning strategic raw materials and products and the measures that they proposeto 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 havingsatisfied the needs of internal consumption, and they will import what they need in priorityfrom it. The reciprocity between the signatories was not a bargain between equals, butreflected 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 reservedfor France first; France was the first choice for imports and French technicians were brought into manage ministries alongside the Africans.

In summary, the colonial pact maintained the French control over the economies of the Africanstates; it took possession of their foreign currency reserves; it controlled the strategic rawmaterials of the country; it stationed troops in the country with the right of free passage; itdemanded that all military equipment be acquired from France; it took over the training of thepolice and army; it required that French businesses be allowed to maintain monopolyenterprises in key areas (water, electricity, ports, transport, energy, etc.). France not only setlimits on the imports of a range of items from outside the franc zone but also set minimumquantities 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 ofdependence 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 oroligarchic status, contribute a substantial share of the GDP of these countries. Moreimportantly, however, they are often the single largest group of taxpayers. In many of thesecountries 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 Frenchcompanies the economy of the African state will collapse. When coupled with the inability ofthe country to access its reserves it undoubtedly true. However, it doesnt follow that private


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corporations from other countries, like the U.S. or China, would not contribute equally. This isone 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 itsforeign 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

coopration', signed after Independence by the late President Flix Houphout-Boigny andFrance's then Premier, Michel Debr, are still technically applicable. France maintains astranglehold of Ivorian commerce and currency which vitiates national initiatives towardsindependence.

This privileged position of France is confirmed by a report from the UN Commission: "Thetestimony we have assembled has also enabled us to see that the law of 1998 concerning ruralproperty is linked to the dominant position that France and French interests occupy in Coted'Ivoire.

According to these sources, the French own 45% of the land and, curiously, the buildings ofthe Presidency of the Republic and of the Ivorian National Assembly are subject to leasesconcluded with the French. French interests are said to control the sectors of water andelectricity. The report only superficially touched the dominance of French interests in Coted'Ivoire, but they are not hard to find. Below are some of leading players of the Frenchbusiness class in Cote d'Ivoire:

Bollore, leader in French maritime transport and principal operator of maritime transport inCote d'Ivoire along with Saga,SDV(Switched Digital Video). and Delmas, controls the port ofAbidjan, the leading transit port inWest AfricaWest Africa. Bollore also controls the Ivorian-Burkinabe 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. SinceIvoirian 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, throughprivatisation has obtained additional concessions, control of water distribution (Societe desEaux de Cote d'Ivoire), of production and distribution of electricity through the CompagnieIvoirienne d'Electricite and the Compagnie Ivoirienne de Production d'Electricite. It has alsobeen involved in the recent exploitation of Ivorian oil.

Total (the biggest French oil company) holds a quarter of the shares of the Societe Ivoiriennede Raffinage Oil Refinery (number one in Cote d'Ivoire) and owns 160 petrol stations andcontrols the bitumen supply

France Telecom (seventh in rank among companies in France and leader in the telecomssector) is the main shareholder of Cote d'Ivoire Telecom and of the Societe Ivoirienne desMobiles (it holds about 85% of the capital), since concessions were granted in this sector, inthe context of the privatisation of public enterprises.

In the banking and insurance sector, there is the Societe Generale (sixth bank in France--theSociete Generale des Banques de Cote d'Ivoire has 55 branches) as well as CreditLyonnais and BNP-Paribas. AXA (the second largest company in France and leader of theinsurance sector) has been present in Cote d'Ivoire since thecplonial period.
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The most long-established of the French companies in Cote d'Ivoire is the GroupeCompagnie Francaise de l'Afrique de l'Ouest de Cote d'Ivoire (CFAO-CI). It operates inmany sectors (cars, pharmaceuticals, new technology, etc). For a long time, CFAOmonopolised exports and the retail trade, and its profits (not a single year of loss, since itscreation 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 atthe port of Abidjan).

The presence of French capital is a demonstration of the profitability of Cote d'Ivoire. Andalthough French direct investment is only Euro 3.5bn--the most profitable former stateenterprises having been acquired at knock-down prices--the annual profits from thisinvestment 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 itsformer levels. In fact one of the first acts of Ouattara after he was imposed as president by theFrench was to pay millions in compensation to the French businesses who fled the Ivory Coastin 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 asPresident in the Ivory Coast. His willingness to consider revising the terms of the PacteColoniale and his intent to remove French and UN troops from his country was the reason thatthe 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 exposureto both Greek and Italian debt (among others) and has embarked upon yet another austerityplan. Its credit rating is on the brink of losing its Triple A status and the private banks aregoing to have to take a major haircut on its intra-European debts. It vast expenditures inpursuing its war in Libya have exhausted most of the annual budget. The reason it has beenable to sustain itself so far is because it has had the cushion of the cash deposited with theFrench Treasury by the African states since 1960. Much of this is held in both stocks in thename of the French Treasury and in bonds which have offset and collateralised a substantialamount of French gilts

The francophone African states have gradually been able to recognise that they may never seetheir accumulated assets again as these have been pledged by the French Treasury against theFrench contribution to the several European bailouts. Wade of Senegal has again been askingfor an accounting. None has been forthcoming. Ouattara of the Ivory Coast and Denis Sassou-Nguesso of Congo-Brazzaville have been told that it will be necessary to devalue the CFAfrancs and they have been delegated the role of informing their African presidentialcolleagues.. Economists reckon that if this devaluation takes place it will have the effect ofreleasing around 40% of the French debt exposure and extend a lifeline to the FrenchTreasury.

However, it will have a devastating effect on Africa. The last time there was such a devaluationmost of French Africa suffered badly (except for the Presidents and their friends). Devaluationis useful if you have things to export which are made relatively cheaper. However, for most of


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francophone Africa the goods they have for export are raw materials and petroleum. Theirmanufactured 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. Therewere signs of price inflation earlier this year. West African monetary zone inflation acceleratedto 4.1 per cent in January from 3.9 per cent the month before. Inflation in the eight-nationeconomic 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. Higherprices for petrol and food drove that increase.

One of the countries which was hardest hit by the previous devaluation was the Ivory CoastThat devaluation entailed the signature between the IMF and the World Bank for an EnhancedStructural Adjustment Facility (ESAF) (1994-1996), that imposed drastic measures on thegovernment to make budgetary restrictions destined to straighten up the national economy this, to no avail.

Furthermore, the raining billions (an exceptional, unprecedented volume of creditsencouraged bad governance) in the country. The man in charge then was Ouattara. Ouattarawas accused of being at the heart of deterring international financing whilst letting theIvorians sink deeper and deeper into poverty. It was the carrying-out of projects financed bythe European Union, and the massive deterring of credits linked to postponing debt contractedon behalf of international institutions, that brought these same institutions to break off withthe Ivory Coast in 1998.

Not only did the policy led by Alassane Ouattara propel the great majority of the Ivorianpopulation 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 thedollar, thereby doubling the stakes. One billion CFA-Francs on January 10th were convertedinto dollars on January 11th. The devaluated rate became on January 12th, allowed buyingback two billion on January 13th! The explosion of poverty and a considerable extension of anoccult economy are the open wounds resulting in the dstatisation (to reduce the

governments role, to render its responsibility next to nil) This governmental responsibilitypolicy led by Ouattara resulted in an ultra-liberal policy thereby reducing the governmentsrole in the countrys 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 IMFmandate in July 1999, he set about fully consecrating himself to destabilizing the country). The

coup dtat finally brought him to power, but he sub-contracted leadership from that pointon, preferring to concentrate instead on the resale of diamonds and cocoa, natural resourcesof the Ivory Coast which he did from his Burkina base: via Geneva for the diamonds, and viaLome and its ships, for the cocoa.

The country then sank into a depression and the growth rate reached a record low. In the year2000, the figure was negative for the first time in the countrys history: -2.3%. The crisis thatexploded in 2002 aggravated the situation even more. It was prepared in Paris, instigated byOuattara and his friends, Dominique de Villepin and Jacques Chirac. The rebellion fostered bythem was contained by Gbagbo and the machinations led to the recent bombing and strafing ofAbidjan by French tanks and helicopters. There was a parallel political approach, the longstride towards elections and the organization and manipulation of the electoral list, to theadvantage of Alassane Ouattara. This first phase succeeded in finally eliminating HKB ((HKB)


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Henry Konan Bedie, who was Felix Houphout-Boignys successor (1993-1999)) from thesecond round of the Presidential election.

Manipulations of the rate for cocoa permitted increase in the campaign budget, and it was theson, Loc Folleroux (by a first marriage of Alassane Ouattaras wife, Dominique Nouvian-Folleroux), 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 ofIMF, 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 andsurrounding regions. He has, without any doubt, the entire responsibility for the financial andeconomic collapse of the Ivory Coast. The question is if he is willing to act for the citizens ofthe Ivory Coast in the upcoming devaluation crisis or will he continue to be a Black Frenchmensafeguarding French interests in Africa.[i]The price will be poverty, stagnation and increased unemployment. This unemployment andunderemployment 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, theeconomic consequences are also clear. In economics, Okun's law refers to an empiricallyobserved relationship relating unemployment to losses in a country's production first quantifiedby 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 Africaneconomies 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 lastdevaluation 60% of the assets of the West African Pool, it is no less serious for the otherstates. Despite this, and the poverty it will bring to the region, there are few African presidentswho are willing to renounce the Pacte Coloniale and end the terrible toll of French neo-

colonialism in the region. France may have overspent its funds and bitten off more than itcould chew in European debt and Libyan destruction. Surely it isnt 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 Ivorianeconomy, or of getting personally richer? Ivorycoastfuture November 13, 2010

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