ABSTRACT:
Despite several ongoing ambitious projects of monetary cooperation in Africa there are only two functioning regional monetary zones: The Francophone CFA -, and the Anglophone CMA - (former Rand) Zone. However, even in these zones the monetary arrangements are of questionable viability. The CFA - and CMA-Zones are vivid examples of the limited practical value of abstract economic models, like that of Optimum Currency Areas, in the African context. The major structural deficiencies within and between member states of each zone cannot be solved by monetary coordination. They require sustainable political and economic solutions, adapted to the specific needs of each of its members, and aimed at the ownership of the measures and instruments by each country and/or sub-zone concerned. Monetary stability is not sufficient: Three decisive elements impacted on the zones performance. All three had little to do with endogenous economic requirements of member states, but very much with external politics and informal economics; i.e.:
ØThe colonial heritage and “Northern” interest in up-keeping its dominance as well as political stability in the region
ØHierarchical structures of dependency maintained by the major economic and political powers (France and South Africa).
ØRent-seeking elitist informal trans-national social networks, like that of the messieurs AfriqueThe CFA-zone is composed of two sub-zones, UEMOA and CEMAC, characterised by significant structural economic and political differences within and between its member countries. Neither of these sub-zones meets the classical criteria of an Optimum Currency Area (OCA); nevertheless UEMOA counted as model case for economic and monetary integration in Africa. The F CFA viability has been hurt by its dependency on the monetary policy of the Euro-zone, which does not necessarily correspond to the needs of African member countries. Violent conflicts in both regions (e.g. Ivory Coast since Sept. 2002, and civil war in Congo Brazzaville 1997/98) made a mockery of several regional convergence criteria and put the gains of the 50% CFA-devaluation in 1994 at risk. Political stability and the preservation of the status quo is the overriding factor over national economic aims. The crucial common denominators of the CFA-Zone are:- The rules of the informal sector (e.g. neo-patriomonialism, prebend-economy, rent-seeking etc.) are more important in structuring the CFA-zone than the institutions and policies of the formal economic sector, including its monetary institutions.
- For decades, prices of French imports were overpriced (by 35% on average, compared with the world market), due to protection by tied aid and other political and cultural non-tariff barriers (Yeats 1989). The cost of this rent-seeking were carried not only by the French Treasury, who guarantees the peg, but by the French and EU-taxpayers, who financed budgetary bail-outs and development aid, and finally by the poorer member countries and social strata.
- However, neither sub-zone could currently defend its own currency without the link to the Euro and a sustainable solution to crisis–prevention, backed by the international community, under the prevailing political conditions - The CMA is characterised by considerable structural divergences, inherited from its colonial past and the power politics of the Apartheid Regime, as well as by hierarchical monetary structures, still dominated economically and politically by South Africa.- CMA members (including Botswana as a de facto member) form an Optimal Currency Area (OCA), given the existence of common long-run trends in their bilateral real exchange rates. However, this does not provide for autonomous sustainable development of its member states. Reliance on monetary integration will probably lead to perpetuated dependency.
