What can Africa teach the eurozone?

A bank teller gives a customer money in Senegal (Archive 2004)

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As European leaders battle to control the eurozone debt crisis, 14 sub-Saharan African countries could teach them how to maintain a disciplined and stable currency union.

Their single currency system, the CFA franc, keeps inflation low, retains investor confidence and in recent years has enjoyed rates of real economic growth that Europe can only dream about.

It has also weathered severe economic pressure - most member countries depend on price-volatile commodity exports and several are among the poorest on earth.

Parts of the bloc - which encompasses mostly former French colonies in West and Central Africa - have also endured violent political instability.

CFA Zone

CFA notes

West African Economic and Monetary Union (Uemoa)

  • Members: Benin, Burkina Faso, Guinea-Bissau, Ivory Coast, Mali, Niger, Senegal, Togo
  • Total population: 99 million
  • Central bank: Dakar, Senegal
  • Projected GDP growth: 2012 - 6.4%; 2013 - 5.7%*

Monetary and Economic Community of Central Africa (Cemac)

  • Members: Cameroon, Central African Republic, Chad, Congo-Brazzaville, Equatorial Guinea, Gabon
  • Total population: 43 million
  • Central bank: Yaounde, Cameroon
  • Projected GDP growth: 2012 - 6%; 2013 - 4%*

* Source: IMF

For several months early last year the banking and international payments system in Ivory Coast was paralysed by financial sanctions, after the incumbent head of state, Laurent Gbagbo refused to accept defeat in the November 2010 presidential election.

Guinea-Bissau and Mali have suffered coups and internal conflict; all the Sahelian members are struggling to recover from the aftermath of a devastating drought.

And yet, the credibility of the CFA franc union remains intact, in both political and economic terms - with projected economic growth this year of 4.6% for the Central African bloc and an impressive 6.4% in West Africa.

The CFA bloc functions with relatively harmonious coherence - and apparently without any need for political integration, to sustain its monetary discipline and financial stability.

Perhaps the strongest message it could give to Europe is the way CFA zone countries shield the rigorous management of the currency union from the influence of national politics and disputes between member states.

Political unity in West and Central Africa is probably weaker than in the eurozone. But the African franc zone governments mostly avoid public argument over regional economic policy.

Of course, just as in Europe, national interests clash in policy arguments - and tussles over power and big regional jobs.

There is rivalry too: While West Africa operates a shared stock market, in Central Africa, Cameroon and Gabon have launched rival exchanges.

Free from scrutiny


  • Countries: Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia, Spain
  • Total population: 331 million
  • Central bank: Frankfurt, Germany
  • Projected GDP growth: 2012 - -0.3% (contraction); 2013 - 0.7%*

* Source: IMF

But most of the tough wrangling between governments takes place behind closed doors, in discreet negotiations and tightly managed summit meetings.

In their domestic pronouncements, African politicians almost never comment on the single currency or the economic management of fellow member governments.

The existence of the system and the way it functions is just treated as a fact of life.

This is not a luxury open to governments in Europe, where politics is more open, and subject to much more intense media coverage and domestic parliamentary pressure.

Even though most CFA zone governments are elected and nominally democratic, in reality African power still mainly flows from the top.

Presidents and prime ministers take the main economic decisions without much pressure or scrutiny from the public or the press.

It is not like that even for Europe's most powerful government leader.

Chancellor Angela Merkel is not entirely free to take her own decisions about what Germany should do to help save the euro.

Her room for manoeuvre is tightly constrained by her own voters, still haunted by fears of a return to the over-indebted hyper-inflationary 1930s.

No West or Central African leader has to cope with that sort of limit on their freedom of action.

Ivory Coast's Abidjan port in May 2011 after the end of the presidential election crisis Cross-border trade through Ivory Coast was affected in the last decade

This enables CFA zone governments to maintain a steady course, weathering severe stresses, such as the current rebel takeover of northern Mali or the 10 years of conflict and national partition in Ivory Coast - much the largest economy in the West African bloc and a key trade gateway for landlocked countries such as Mali and Burkina Faso.

With Ivorian transport links disrupted, trade patterns simply shifted, to divert trade flows through other outlets, such as Senegal, Ghana and Togo.


But there is more to the CFA zone's stability than this.

BCEAO Bank tower in Dakar, Senegal, March 2008 The CFA franc zone has managed to sustain a sense of common purpose and policy thinking

It has a vital not-so-secret asset: The CFA is pegged to the euro at a fixed rate of CFA 655.957 per euro, guaranteed by the French treasury.

This is an arrangement inherited from the post-colonial era, when most of France's former African colonies opted to stay in a monetary union pegged to the French franc.

And when, almost four decades later, France joined the euro, the CFA's fixed parity was transferred to the new single currency.

So the franc zone's strongest anchor of stability is in fact the euro.

Yet, the paradox is that it is precisely this that differentiates the CFA from the eurozone.

When EU governments fail to agree or misjudge the next step in managing the crisis, they are punished by the markets.

The single currency sinks against the dollar and sterling, while the borrowing costs of the weakest countries soar towards the unaffordable.

By contrast, the franc zone is protected by its fixed exchange rate link to the euro.

Disappointing economic numbers or a budget crisis in a member state cannot spark a plunge in the value of the currency.

If investors' confidence weakens, the external value of the CFA is held firm by that French-guaranteed peg.

This gives francophone African countries a monetary stability that eurozone member states do not enjoy.

But it has not all been smooth sailing.

Strict rules

By the early 1990s the link to a steadily rising French franc left the CFA heavily over-valued.

CFA zone exporters saw their competitiveness eroded, and imports were sucked in, undermining local farmers' ability to supply their own home markets.

Matters came to a head in January 1994 when, in close coordination with the IMF and France, the West and Central African zones staged their only devaluation - a 50% cut in the value of the CFA franc.

This drove up the cost of living for city dwellers consuming imported goods, but revived the competitiveness of local farmers.

Although painful at the time, the devaluation was the springboard for recovery and long term growth; the parity has not been adjusted since.

There have been other challenges, including a mismanagement scandal at the Paris offshoot of the central African central bank.

Money changers in Cameroon The CFA franc is pegged to the euro at a fixed rate of CFA 655.957 per euro

But broadly the system has proved resilient and has gradually reinforced financial integration, for example, through the creation of regional markets in government debt paper.

The fixed rate link also means that CFA francs and euros can be changed freely.

But this shield is not cost-free.

It comes with strict rules on borrowing and depositing counterpart funds. CFA countries are treaty-bound to a set of financial disciplines.

These are much tighter than the rules that have governed eurozone states.

Combined with the strong outside oversight of the IMF, the arrangement leaves franc zone members with much less freedom over economic policy than their eurozone counterparts.

Today in Europe there are suggestions that the euro can only survive if member states adopt a much deeper degree of economic and financial union - particularly in the cross-border regulation of banking.

Bread seller in Abidjan, Ivory Coast Most CFA zone countries are former French colonies

Africa offers an example of what this can entail. The CFA franc blocs already operate regional systems of bank supervision, with regulatory commissions for West and for Central Africa.

They have also taken big steps towards harmonising business law and established a joint appeal court for business cases.

The collation of financial and economic statistics is largely harmonised too.

And these formal arrangements are also underpinned by cultural factors, as all but two of the 14 member states are former French colonies.

A close web of institutional and personal connections links members of the administrative elite across the region, with much common historical background, and shared educational and administrative traditions inherited from France.

Senior officials from different countries often have a common academic training, in France, or shared career experience at the IMF, World Bank or the regional central banks.

These factors help to explain how the CFA franc zone has managed to sustain a sense of common purpose and policy thinking.

Europe, with its varied languages and government administrative traditions, may find it hard to develop such a coherent shared outlook.


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  • Comment number 28.

    All this user's posts have been removed.Why?

  • rate this

    Comment number 27.

    Paragraph 3:

    'Several of the countries are amongst the poorest on earth'

    Hmmm, sounds SUCH a great idea to follow what they are doing!

  • rate this

    Comment number 26.

    Comparing the Euro to CFA is pointless - the 2 markets have vastly different structures and hugely different economic pressure points. You may as well go and ask some south american governments if they have any advice about shortbread biscuits.

  • rate this

    Comment number 25.

    You can only teach the Euros about fiscal unions if they're willing to learn.

    23. BelPaese
    "And this raises the even more exciting point about the lessons the African media can give the BBC"
    Are you suggesting censoring a media outlet you're foreign to, very very interesting.

  • rate this

    Comment number 24.

    There is nothing Africa can teach europe in term of Euro crisi. CFA franc is a french models not African model. African leaders are still depending on European models. http://mycontinent.co/AU.php

  • rate this

    Comment number 23.

    Very, very, very interesting. And this raises the even more exciting point about the lessons the African media can give the BBC.

  • rate this

    Comment number 22.

    The Euro Crisis Explained To Grannies: For a very simple (and funny) explanation for the euro crisis, just write on your search engine: wordpress blog The euro crisis explained to grannies

  • rate this

    Comment number 21.

    So everyoe using the Euro should end up in the extremes the rich would be very few but EXTREMELY rich and the poor horribly horribly poor. Oh sorry, was I taking the whole "be like africa" thing to serious? the fact that we give them billions in aid every year is also irrelivant.

  • rate this

    Comment number 20.

    Yep! Let's all model ourselves on Africa.

    Starvation, AIDS, malaria, uncontrolled population increase, fighting, corruption.....

  • rate this

    Comment number 19.

    Isn't the main lesson from this the strength of established cultural similarities from the French colonial days, which prevent the tribal and national animosities from destroying the currency zone?
    There is nothing comparable in the eurozone experiment. Shared culture seems to be restricted solely to the elected and unelected elites.
    When it suits.

  • rate this

    Comment number 18.

    Eu is struggling to find right combo of policies & regulations to stabilize the EZ.
    It would be my recommendation that an exchange of information might well be warranted; I mean various fiscal unions based on EU, including EU itself should meet tete-a-tete to share, advise, and work towards progress. What is to be lost - time? What is to be gained - ideas.

  • rate this

    Comment number 17.

    The benefits to the CFA and the Euro are summed up as:
    Easier to import/ Export, no blood sucking exchange costs and free movement of the capital, easy planning.

    The problem is the downside:
    No control of monetary policy, Loss of control over enhancing sectors of your national economy, member states that cheat / have civil wars / weak government.

    It's just a choice.

  • rate this

    Comment number 16.

    money stabilty maybe, crushing poverty - definitely

  • rate this

    Comment number 15.

    Europe is in the middle of a very hard time. No one disputes that. Jobs are being lost, economies are floundering, leaders seem useless at best and agents of lucifer at worst. That being said, Africa has problems in an entirely different league. Lets' not compare continent-wide poverty, lack of sanitation, and annual genocide with incompetent EU leadership. There's a big, big difference.

  • rate this

    Comment number 14.

    They can teach us a moral behaviour instead of our European a-moral bank business.

  • rate this

    Comment number 13.

    Why don't we throw in our lot with them?

  • rate this

    Comment number 12.

    This is a nice and entertaining assessment. Nonetheless one should avoid comparing apples and oranges.

  • rate this

    Comment number 11.

    There is a sure lesson to be learned namely, every economy is destined to fail. The monetary/ economic system is corrupt to the core favouring an elite few... 99/1%. The only solution is treating the subordinate substitute for human resources & energy money in the way we would treat people. For your information Google The World Monetary Order to Come.

  • rate this

    Comment number 10.

    A couple of points
    The CFA zone doesn't have Germany to contend with
    If Germany isn't in charge then it won't play

    The other is Zimbabwe
    People in Zimbabwe are doing fine by using South African Rand and US Dollars for trading
    The ZIM is avoided because of obvious reasons

  • rate this

    Comment number 9.

    One obvious thing is that these are similar economies: emerging economies with strong, consistent growth. This not only gets everybody from the President down to the farmers looking in the same economic direction, but makes other choices easier.

    The Eurozone tries to combine countries in which growth, though weaker, is still the most important thing, with others where welfare is most important.


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