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Presented by Daouda Lawa tan TOE
Taipei, December 5th 2015
1. Presentation of the CFA
2. Macroeconomic analysis of PAZF (countries using the franc)
3.Board of directors: Issue for African’s economy
4. Analysis of the fixed parity
5. Analysis of the free transferability
6. Analysis of the free convertibility
7. Analysis of the centralization of foreign currencies
8. Some solutions
Outlines
Give me the power to create money
and I’ll laugh at who makes laws
Mayer Rothschild
Leave the CFA: the ultimate solution of development for franc zone countries
Presentation of the CFA
The CFA is the currency of 15 African’s countries divided into 3 groups
Created on December 26, 1945 by Gal DE GAULE
 MALI
 SENEGAL
 NIGER
 BURKINA FASO
 IVORY COST
 TOGO
 BENIN
 GUINEA-BISSAU
 CAMEROON
 CENTRAL AFRICA
 CONGO
 GABON
 EQUATORIAL GUINEA
 CHAD
 COMORES
West Africa: BCEAO Central Africa: BEAC Comores: BCC
 Creation of CFA : December 26 1945 1 F CFA = 1.70 FF ( CFA stronger than FF)
 Devaluation of France franc (FF) :October 17 1948 1 FCFA = 2.00 FF(CFA stronger)
 Introduction of the new France franc(FRF) : December 27 1958 1 F CFA = 0.02 FRF
 50 % devaluation of CFA : January 11 1994 1 F CFA = 0.01 FRF
 Securing the CFA to EURO : January 1 1999 1 € = 655.957 F CFA
Presentation of the CFA
Chamalières
Presentation of the CFA
PAZF
Macroeconomic analysis of PAZF
 Among the 49 least developed countries (LDCs), 35 are in sub-Saharan
Africa (SSA) . The franc zone represents 12% of the African population ,
12% of GDP and 1.5 % of exports.
 With a population 25% larger than that of France and a lot of raw materials,
the franc zone countries represent 4.5% of French GDP or 1.5 % of money
supply.
 Bank financing in Ivory coast ( first countries in the franc zone in term of
GDP) is about 16% against about 70% in Tunisia ( country out of the CFA
zone).
 in terms of life expectancy within the franc zone countries , Togo (63 years)
, Benin (62 years) and Gabon (61years ) occupy the top place. Countries
that have achieved very early in their monetary sovereignty have higher life
expectancies than the three countries mentioned above. These are examples
of Tunisia (74) , Algeria (73 ), Morocco (72) , Mauritius (72) and Cape
Verde (72).
Rank Countries GDP/capita ($)
1st Guinea-Equatorial 11081
2nd Gabon 8395
3rd Congo 3075
4th Cameroon 1071
5th Ivory coast 1016
6th Senegal 964
7th Chad 743
8th Benin 673
9th Mali 649
10th Burkina-Faso 590
11th Guinea-Bissau 498
12th Central Africa 469
13th Togo 441
14th Niger 3
Countries Real GDPl ($billions) GDP/capita(dollars)
Algeria 159 4478
Angola 85,8 4812
Botswana 12,5 6796
Ghana 15,3 646
Kenya 32,4 888
Morocco 91,7 2868
Mauricia 9,4 7303
Namibia 11,5 5454
Nigeria 206,7 1324
Soudan 65,9 1643
Tunisia 43,9 4160
Zambia 15,7 1286
Using the CFA Not using the CFA
Source : Le Monde , international economic situation, 2011, p. 91
Macroeconomic analysis of PAZF
Source: IMF, 2015
1 Burundi
2 Central Africa
3 Malawi
4 Gambia
5 Madagascar
6 Niger
7 Libéria
8 Congo
9 Guinea
10 Togo
11 Guinea-Bissau
12 Afghanistan
13 Uganda
14 Mozambique
15 Erythree
16 Burkina Faso
17 Mali
18 Sierra Leone
19 Ethiopie
20 Benin
21 Comores
22 Rwanda
23 Nepal
24 Haïti
25 Senegal
11/15
Macroeconomic analysis of PAZF
25 poorest countries
Economic policy
Fiscal policy
Monetary policy
Monetary policy is the actions of a central bank, currency board or other
regulatory committee that determine the size and rate of growth of the money
supply, which in turn affects interest rates. Monetary policy is maintained
through actions such as modifying the interest rate, buying or selling
government bonds, and changing the amount of money banks are required to
keep in the vault (bank reserves).
Fiscal policy is the means by which a government adjusts its spending levels and
tax rates to monitor and influence a nation's economy. It is the sister strategy to
monetary policy
Policy used in various combinations to direct a
country's economic goals
Central Bank of West
Africa(CBWA)
BCEAO
16 African and 2
French
Central Bank of
Central Africa(CBCA)
BEAC
12 African and 2
French
Central Bank of
Comores(CBC)
BCC
4 African and 4
French
Decisions
mode
Unanimity
Decisions
mode
Unanimity
Decisions
mode
At least 5
Board of directors: issue for economy
Businesses
Central
Bank
Commercial
Bank 1
Commercial
Bank 2
Commercial
Bank 3
Commercial
Bank 4
Commercial
Bank 5
Commercial
Bank 6
French African
France limit the credit to slow down the economy
through their presence in the board of director
Board of directors: issue for economy
Ratio credit/ GDP
USA= 200%
UE= 100%
PAZF=23%
WAEMU banks are
over liquid but the
economy suffer of
problem of funding
Analysis of the fixed parity
the parity of the CFA with
the euro is fixed and defined
for each subarea. The
currencies of the Zone are
convertible between each
other to fixed parities,
without limitation amounts .
No control of the monetary policy
Less competitive on international market (CFA depend on EURO)
Not able to export the raw materials in other countries
Revenue fluctuate according to the value of EURO
Analysis of the fixed parity
France
PAZF
Before devaluation
1EURO = 500 F CFA
France
PAZF
Before devaluation
1EURO = 1000 CFA
France control African’s economy
Analysis of the fixed parity
500 000 TON of uranium1000 EUR 500 000 TON of uranium500 EUR
Transfers are in principle free within the
Zone. Within each sub- zone and between
each subarea and France.
Analysis of the free transferability
Free transferability: France buys everything in
Africa (PAZF) for free ( zero dime)
Analysis of the free transferability
The free transferability encourages capital flight from Africa to Europe (especially
France) .
 According to UNCTAD, capital flight in 30 African countries since independence is
more than 400 billion US dollars.
 According to Hugon (1999, p.99 ), it is estimated bleeding of capital out WAEMU to
3 billion francs in 1991 to 4.6 billion in 1992 and 5 billion francs in the first six
months of year 1993.
 Speculative investments made in francs CFA by France between January 1990 and
June 1993 had amounted to 928.75 billion CFA francs , or about 1.416 billion euros.
 The amount of unrequited non-African households out of the franc zone countries
towards France and RDM has increased from $ 89 million ( in 1970) to 434 million (
in 1993).
The cumulative amount of remittances is estimated at 3,783,600,000 dollars ( 2.2 trillion
CFA franc) .
Analysis of the free transferability
the convertibility of
currencies issued by various
issuing institutions of the
Franc Zone is guaranteed
without limit by the French
Treasury .
Analysis of the free convertibility
 The convertibility of the CFA franc is more virtual. BCEAO CFA and BEAC
CFA are not convertible between each other, which does not encourage the
development of trade between the two areas . Instead, the mechanisms of the
franc zone facilitate financial and commercial relations between the metropolis
and the territories while eliminating the exchange rate risk between the two
currencies (Euro and CFA franc) .
Analysis of the free convertibility
 The Naira is not a convertible currency Yet Nigeria is an economic giant ;
 Also the rupee is not convertible yet India is an economic powerhouse .
African countries are
obliged to deposit 50% of
their export revenues
(currencies they got from
export) in France.
Analysis of centralization of currencies
 Each central bank of the franc zone has an operations account with the French Treasury
and has to deposit part of their currency reserves.
 Since 2005, 50% of foreign exchange reserves should be stored on the account of
operations in France (until 2005 this percentage was 65%). So there are currently about
8000 billion CFA francs from the BCEAO and BEAC stored to the Treasury, more than
12 billion euros.
CFA Users
France
Other countries without
CFA
Example: USA
African international trades benefit to France
Analysis of centralization of currencies
Bank of
France
African’s wealth
8000 Billions CFA
526 Billions Gold
50%
France control African’s political system
Analysis of centralization of currencies
Leave the CFA: the ultimate solution of development for franc zone countries
Create the Single African Currency (MUA)
 Ivory Coast , with its 60 % of the money supply and 40% of WAEMU's
GDP , can play a decisive role in the liquidation of the CFA franc in favor
of the birth of a typically African currency controlled by and for the
Africans
 Africa ranks first in the production, export and possession of reserves of gold
, diamonds , cobalt , vanadium , manganese, chromium and partinium .
MUA must be guaranteed by the synthetic value of these raw materials.
 Africans may request payment in part, for their trade with the rest of the
world, in their own currency which necessarily will grow in value because its
demand will be stronger than its offer.
Minerals
African %
of world
production
African
production
Rank
African %
of global
reserves
ranking
African
reserves
Platinum 54% 1 60+% 1
Gold 18% 1 42% 1
Chromium 40% 1 44% 1
Manganese 28% 2 82% 1
Vanadium 51% 1 95% 1
Cobalt 18% 1 55+% 1
Diamonds 78% 1 88% 1
African resources and mining production (2004)
Source: USGS
The creation of the African Central Bank
AFRICA USA CHINA JAPAN EURO Zone RUSSIA INDIA
GDP 1 081 13 162 2 645 4 368 10 637 987 912
Number
of CB
40 1 1 1 1 1 1
GDP 27 13 162 2 645 4 368 10 627 987 912
Current /
Africa
1 488 97 161 393 36 34
Source: World Bank, World D
A single African Central Bank (ACB ) [for housing the MUA] must
be created. this single ACB will end the monetary balkanization and
ridiculous atomization of African Central Banks .
 South Korea and China in 1960 had each a relatively lower standard of
living than in many countries like Ghana, Kenya and Ivory Coast. Today,
these two Asian countries are leading because they actually understood and
applied the method of local processing of raw materials
Local processing of all the African raw materials
Hypothesis
Hypothesis H1 H2 H3 H4 H5
Selling price/kg in
Europe (€)
200 200 200 200 200
Reeduction 1/2 1/4 1/8 1/16 1/32
Selling price/kg (after
reduction (€)
100 50 25 12,5 6,25
Quantitý (kg) 1,410 ,000 ,000 1, 410 ,000, 000 1, 410 ,000, 000 1, 410, 000, 000 1,410 ,000, 000
Incomes (Billions €) 141 70.5 35.25 17.625 88.125
Incomes (Billions
FCFA)
92, 489.937 46,244.968 23,122.484 11,561.245 5,780.6210
Ivory coast state
budget (Billions CFA)
2,000 2,000 2,000 2,000 2,000
Equivalent in year (1) 46.2 23.1 11.5 5.8 2.8
Public debt in Dec 31.
2007 (Billions FCFA)
7,397.234 7,397.234 7,397.234 7,397.234 7,397.234
Total debt
reimbursement
12.5 times 6.2 times 3.1 times 1.5 times 0.8 times
Source: Hypothesis Professor AGBOHOU
For example, the table shows clearly that if the Republic of Ivory Coast transforms its
entire annual production of coffee and cocoa , it could not only put out in less than a
year all his debts , but would also consistent financial means to feed decently all
populations in sub-Saharan Africa.
Local processing of Coffee and Cocoa (Ivory coast)
Thanks for
listening

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Leave the CFA: the ultimate solution of development for franc zone countries

  • 1. Presented by Daouda Lawa tan TOE Taipei, December 5th 2015
  • 2. 1. Presentation of the CFA 2. Macroeconomic analysis of PAZF (countries using the franc) 3.Board of directors: Issue for African’s economy 4. Analysis of the fixed parity 5. Analysis of the free transferability 6. Analysis of the free convertibility 7. Analysis of the centralization of foreign currencies 8. Some solutions Outlines
  • 3. Give me the power to create money and I’ll laugh at who makes laws Mayer Rothschild
  • 5. Presentation of the CFA The CFA is the currency of 15 African’s countries divided into 3 groups Created on December 26, 1945 by Gal DE GAULE  MALI  SENEGAL  NIGER  BURKINA FASO  IVORY COST  TOGO  BENIN  GUINEA-BISSAU  CAMEROON  CENTRAL AFRICA  CONGO  GABON  EQUATORIAL GUINEA  CHAD  COMORES West Africa: BCEAO Central Africa: BEAC Comores: BCC
  • 6.  Creation of CFA : December 26 1945 1 F CFA = 1.70 FF ( CFA stronger than FF)  Devaluation of France franc (FF) :October 17 1948 1 FCFA = 2.00 FF(CFA stronger)  Introduction of the new France franc(FRF) : December 27 1958 1 F CFA = 0.02 FRF  50 % devaluation of CFA : January 11 1994 1 F CFA = 0.01 FRF  Securing the CFA to EURO : January 1 1999 1 € = 655.957 F CFA Presentation of the CFA
  • 8. Macroeconomic analysis of PAZF  Among the 49 least developed countries (LDCs), 35 are in sub-Saharan Africa (SSA) . The franc zone represents 12% of the African population , 12% of GDP and 1.5 % of exports.  With a population 25% larger than that of France and a lot of raw materials, the franc zone countries represent 4.5% of French GDP or 1.5 % of money supply.  Bank financing in Ivory coast ( first countries in the franc zone in term of GDP) is about 16% against about 70% in Tunisia ( country out of the CFA zone).  in terms of life expectancy within the franc zone countries , Togo (63 years) , Benin (62 years) and Gabon (61years ) occupy the top place. Countries that have achieved very early in their monetary sovereignty have higher life expectancies than the three countries mentioned above. These are examples of Tunisia (74) , Algeria (73 ), Morocco (72) , Mauritius (72) and Cape Verde (72).
  • 9. Rank Countries GDP/capita ($) 1st Guinea-Equatorial 11081 2nd Gabon 8395 3rd Congo 3075 4th Cameroon 1071 5th Ivory coast 1016 6th Senegal 964 7th Chad 743 8th Benin 673 9th Mali 649 10th Burkina-Faso 590 11th Guinea-Bissau 498 12th Central Africa 469 13th Togo 441 14th Niger 3 Countries Real GDPl ($billions) GDP/capita(dollars) Algeria 159 4478 Angola 85,8 4812 Botswana 12,5 6796 Ghana 15,3 646 Kenya 32,4 888 Morocco 91,7 2868 Mauricia 9,4 7303 Namibia 11,5 5454 Nigeria 206,7 1324 Soudan 65,9 1643 Tunisia 43,9 4160 Zambia 15,7 1286 Using the CFA Not using the CFA Source : Le Monde , international economic situation, 2011, p. 91 Macroeconomic analysis of PAZF
  • 10. Source: IMF, 2015 1 Burundi 2 Central Africa 3 Malawi 4 Gambia 5 Madagascar 6 Niger 7 Libéria 8 Congo 9 Guinea 10 Togo 11 Guinea-Bissau 12 Afghanistan 13 Uganda 14 Mozambique 15 Erythree 16 Burkina Faso 17 Mali 18 Sierra Leone 19 Ethiopie 20 Benin 21 Comores 22 Rwanda 23 Nepal 24 Haïti 25 Senegal 11/15 Macroeconomic analysis of PAZF 25 poorest countries
  • 11. Economic policy Fiscal policy Monetary policy Monetary policy is the actions of a central bank, currency board or other regulatory committee that determine the size and rate of growth of the money supply, which in turn affects interest rates. Monetary policy is maintained through actions such as modifying the interest rate, buying or selling government bonds, and changing the amount of money banks are required to keep in the vault (bank reserves). Fiscal policy is the means by which a government adjusts its spending levels and tax rates to monitor and influence a nation's economy. It is the sister strategy to monetary policy Policy used in various combinations to direct a country's economic goals
  • 12. Central Bank of West Africa(CBWA) BCEAO 16 African and 2 French Central Bank of Central Africa(CBCA) BEAC 12 African and 2 French Central Bank of Comores(CBC) BCC 4 African and 4 French Decisions mode Unanimity Decisions mode Unanimity Decisions mode At least 5 Board of directors: issue for economy
  • 13. Businesses Central Bank Commercial Bank 1 Commercial Bank 2 Commercial Bank 3 Commercial Bank 4 Commercial Bank 5 Commercial Bank 6 French African France limit the credit to slow down the economy through their presence in the board of director Board of directors: issue for economy Ratio credit/ GDP USA= 200% UE= 100% PAZF=23% WAEMU banks are over liquid but the economy suffer of problem of funding
  • 14. Analysis of the fixed parity the parity of the CFA with the euro is fixed and defined for each subarea. The currencies of the Zone are convertible between each other to fixed parities, without limitation amounts .
  • 15. No control of the monetary policy Less competitive on international market (CFA depend on EURO) Not able to export the raw materials in other countries Revenue fluctuate according to the value of EURO Analysis of the fixed parity
  • 16. France PAZF Before devaluation 1EURO = 500 F CFA France PAZF Before devaluation 1EURO = 1000 CFA France control African’s economy Analysis of the fixed parity 500 000 TON of uranium1000 EUR 500 000 TON of uranium500 EUR
  • 17. Transfers are in principle free within the Zone. Within each sub- zone and between each subarea and France. Analysis of the free transferability
  • 18. Free transferability: France buys everything in Africa (PAZF) for free ( zero dime) Analysis of the free transferability
  • 19. The free transferability encourages capital flight from Africa to Europe (especially France) .  According to UNCTAD, capital flight in 30 African countries since independence is more than 400 billion US dollars.  According to Hugon (1999, p.99 ), it is estimated bleeding of capital out WAEMU to 3 billion francs in 1991 to 4.6 billion in 1992 and 5 billion francs in the first six months of year 1993.  Speculative investments made in francs CFA by France between January 1990 and June 1993 had amounted to 928.75 billion CFA francs , or about 1.416 billion euros.  The amount of unrequited non-African households out of the franc zone countries towards France and RDM has increased from $ 89 million ( in 1970) to 434 million ( in 1993). The cumulative amount of remittances is estimated at 3,783,600,000 dollars ( 2.2 trillion CFA franc) . Analysis of the free transferability
  • 20. the convertibility of currencies issued by various issuing institutions of the Franc Zone is guaranteed without limit by the French Treasury . Analysis of the free convertibility
  • 21.  The convertibility of the CFA franc is more virtual. BCEAO CFA and BEAC CFA are not convertible between each other, which does not encourage the development of trade between the two areas . Instead, the mechanisms of the franc zone facilitate financial and commercial relations between the metropolis and the territories while eliminating the exchange rate risk between the two currencies (Euro and CFA franc) . Analysis of the free convertibility  The Naira is not a convertible currency Yet Nigeria is an economic giant ;  Also the rupee is not convertible yet India is an economic powerhouse .
  • 22. African countries are obliged to deposit 50% of their export revenues (currencies they got from export) in France. Analysis of centralization of currencies  Each central bank of the franc zone has an operations account with the French Treasury and has to deposit part of their currency reserves.  Since 2005, 50% of foreign exchange reserves should be stored on the account of operations in France (until 2005 this percentage was 65%). So there are currently about 8000 billion CFA francs from the BCEAO and BEAC stored to the Treasury, more than 12 billion euros.
  • 23. CFA Users France Other countries without CFA Example: USA African international trades benefit to France Analysis of centralization of currencies
  • 24. Bank of France African’s wealth 8000 Billions CFA 526 Billions Gold 50% France control African’s political system Analysis of centralization of currencies
  • 26. Create the Single African Currency (MUA)  Ivory Coast , with its 60 % of the money supply and 40% of WAEMU's GDP , can play a decisive role in the liquidation of the CFA franc in favor of the birth of a typically African currency controlled by and for the Africans  Africa ranks first in the production, export and possession of reserves of gold , diamonds , cobalt , vanadium , manganese, chromium and partinium . MUA must be guaranteed by the synthetic value of these raw materials.  Africans may request payment in part, for their trade with the rest of the world, in their own currency which necessarily will grow in value because its demand will be stronger than its offer.
  • 27. Minerals African % of world production African production Rank African % of global reserves ranking African reserves Platinum 54% 1 60+% 1 Gold 18% 1 42% 1 Chromium 40% 1 44% 1 Manganese 28% 2 82% 1 Vanadium 51% 1 95% 1 Cobalt 18% 1 55+% 1 Diamonds 78% 1 88% 1 African resources and mining production (2004) Source: USGS
  • 28. The creation of the African Central Bank AFRICA USA CHINA JAPAN EURO Zone RUSSIA INDIA GDP 1 081 13 162 2 645 4 368 10 637 987 912 Number of CB 40 1 1 1 1 1 1 GDP 27 13 162 2 645 4 368 10 627 987 912 Current / Africa 1 488 97 161 393 36 34 Source: World Bank, World D A single African Central Bank (ACB ) [for housing the MUA] must be created. this single ACB will end the monetary balkanization and ridiculous atomization of African Central Banks .
  • 29.  South Korea and China in 1960 had each a relatively lower standard of living than in many countries like Ghana, Kenya and Ivory Coast. Today, these two Asian countries are leading because they actually understood and applied the method of local processing of raw materials Local processing of all the African raw materials Hypothesis
  • 30. Hypothesis H1 H2 H3 H4 H5 Selling price/kg in Europe (€) 200 200 200 200 200 Reeduction 1/2 1/4 1/8 1/16 1/32 Selling price/kg (after reduction (€) 100 50 25 12,5 6,25 Quantitý (kg) 1,410 ,000 ,000 1, 410 ,000, 000 1, 410 ,000, 000 1, 410, 000, 000 1,410 ,000, 000 Incomes (Billions €) 141 70.5 35.25 17.625 88.125 Incomes (Billions FCFA) 92, 489.937 46,244.968 23,122.484 11,561.245 5,780.6210 Ivory coast state budget (Billions CFA) 2,000 2,000 2,000 2,000 2,000 Equivalent in year (1) 46.2 23.1 11.5 5.8 2.8 Public debt in Dec 31. 2007 (Billions FCFA) 7,397.234 7,397.234 7,397.234 7,397.234 7,397.234 Total debt reimbursement 12.5 times 6.2 times 3.1 times 1.5 times 0.8 times Source: Hypothesis Professor AGBOHOU For example, the table shows clearly that if the Republic of Ivory Coast transforms its entire annual production of coffee and cocoa , it could not only put out in less than a year all his debts , but would also consistent financial means to feed decently all populations in sub-Saharan Africa. Local processing of Coffee and Cocoa (Ivory coast)