As China slowdown roils continent, Francophone Africa a relative island of calm

The arrangement has at time been heavily questioned, but for now CFA franc countries remain stable.

AS many African countries struggle to come to grips with the volatility in global markets which has seen their currencies take a pummelling and central banks short on options.

But for some 14 African countries that use the CFA franc, it has been relatively quiet, with Ivory Coast prime minister Daniel Kablan Duncan saying there was “no fear”.

In an interview with Bloomberg news wire, at which he outlined events in his country as it heads for a crucial election next month, Duncan said the common currency “is beneficial for our economies. Those who have tried their own money have had some ups-and-downs with some difficulties.”

The stability from the common currency has made it easier to keep investors in Ivory Coast, avoiding the sell-off in emerging market assets sparked by the surprise decision by China to devalue its yuan in August.

The CFA franc has depreciated 8% against the dollar this year, compared with the 24% decline in the Ugandan shilling and 29% plunge in the Zambian kwacha, Africa’s worst-performers.

Investors have shown their confidence in Ivory Coast, where the nation’s bonds are outperforming its peers, said Duncan. 

The yields on Ivory Coast’s $1 billion of international bond due July 2024 have risen 74 basis points to 6.84% since the end of April, almost half of the amount of Ghana’s $1 billion, 2023 Eurobonds. Ivory Coast’s dollar debt has fallen 3.8% in that period, compared to a 2.4% loss for emerging markets, according to data compiled by Bloomberg.

“The figures related to the Eurobond speak for themselves,” said Duncan, 72. “I can understand that some people fear for the coming election, but we have taken the necessary steps for that and we’ll have an open, transparent and peaceful election next October.”

The CFA franc, created in 1945 by former colonial master France has been credited with retaining macroeconomic stability in its member countries, but also criticised for being too dependent on the euro zone with little flexibility of its own.

But for now few member countries are complaining.

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