Thanks to a return to political, social and institutional normality and efforts to rebuild and rehabilitate basic infrastructure, economic activity picked up, with growth estimated at 8.6% in 2012, expected to reach 8.9% in 2013 and 9.8% in 2014.
If these growth rates are to be achieved the process of national reconciliation and social cohesion will need to be strengthened, and reforms to improve the business climate accelerated so the private sector can act as a driver of the revival of the economy.
The country needs to take full advantage of its natural resources to maintain this momentum both by increasing the share of its agricultural products that are processed and by strengthening its institutional and and human capabilities and making more transparent the management of its fossil-fuel and mineral resources.
Economic activity after the post-election crisis was more vigorous than expected. The return of confidence among economic actors in the aftermath of the normalisation of the security situation and increased peace efforts was accordingly confirmed. After a fall of -4.7% in 2011 real gross domestic product (GDP) registered growth estimated at 8.6% in 2012, driven by public investment and the pick-up in final consumption. In the medium term the implementation of the National Development Plan (PND) 2012-15 should put the country back on the trajectory of inclusive and sustainable growth. GDP is forecast to grow in 2013 and 2014 at 8.9% and 9.8% respectively, sustained by the recovery of oil and gas production and by a rise in investment prompted by a better business climate and a strengthening of public-private partnerships.
As a result of efforts to revive the economy the overall budget deficit deepened in 2012. For the first time in five years the external current account recorded a deficit. Nevertheless the satisfactory execution of the 2011-14 economic and financial programme, backed by the Extended Credit Facility (ECF) of the International Monetary Fund (IMF), enabled the country to reach the completion point of the Highly Indebted Poor Countries (HIPC) Initiative in June 2012 and to benefit from a substantial cut in its external debt. Inflation also returned to below the 3% level set at community level.
On the political front the country saw notable progress in institutional, social and political, security and human rights normalisation.
To fortify the recovery and ensure sustainable growth Côte d’Ivoire needs to continue its efforts in terms of structural transformation by taking full advantage of its considerable natural resources. In this respect, several obstacles hampering the sustainable management of natural resources need to be overcome. These are the weakness of the links between the companies exploiting the resources and the other sectors of the economy, and inadequate transparency in natural resources management and contracts relating to the sharing of production between the government and the oil companies.
The country also enjoys a strong agricultural potential as the world’s biggest producer of cocoa. An increase in the rate of processing of agricultural production, which varies between 2% and 27%, should be a priority objective for the authorities in the years ahead.
Recent Developments & Prospects
Helped by a return to social and political normality, economic activity picked up vigorously in 2012, with growth in GDP of 8.6% compared with a drop of 4.7% in 2011. On the supply side this growth was sustained by a rise in activity in the main sectors of the economy and on the demand side by an increase in public investment and the recovery of household consumption.
Primary sector production, which accounts for 30% of GDP, recorded growth of 0.7%, in 2012, a clear slowdown compared with 2011 when it grew by 4.8%. This was due to poor performance by export crops and mineral extraction. The drop in cocoa production, following a period of dormancy, accounts for the drop in agricultural exports while the fall in mining products of 6.1% is explained by the drop in oil and gas production, arising from natural depletion and the closing of some wells for work to be done on them. However, production of crops rose by 3% and of gold by 20.5% thanks to good rainfall, the use of improved seeds and the full-time activity of the Tongon mine.
The secondary sector, which represents 22% of GDP, experienced a drop in activity of 7.4% in 2011, but recovered in 2012, growing by 14.8%. This was the result of the good performance of: i) agro-industry linked to a rise in national and sub-regional demand; ii) building and public works involved in the completion of socio-economic infrastructure; iii) oil products following the resumption of activity by the Société ivoirienne de raffinage; and, iv) the energy sector due to intensified industrial activity and continued rural electrification.
The tertiary sector accounts for 48% of GDP and grew by 14.1% in 2012, driven by transport and trade. The transport sub-sector benefited from the improved security environment and the good performance of maritime transport as imports picked up. Trade had the return of household confidence and the recovery of exports to thank for its vigorous showing.
On the demand side growth was chiefly driven by investment, which recorded progress of 9.5% in 2012, thanks to the construction and rehabilitation of socio-economic infrastructure by the government and the renewal of production equipment in the private sector. Final consumption also recovered under the effect of rising revenues and a general resumption of confidence among economic actors. Nevertheless the positive contributions to growth made by investment and final consumption were to some extent offset by the performance of foreign trade (-5.2%) as a result of a rise in imports prompted by strong demand for intermediate goods and equipment.
The recovery of the country’s economy should be consolidated in 2013 and 2014 with real GDP growth rates forecast at 8.9% and 9.8%, respectively. But these macroeconomic prospects depend upon a series of conditions being satisfied. They include: a favourable international economic environment; sufficient mobilisation of external finance to implement the National Development Plan; and, the absence of acute sociopolitical upheavals and a marked improvement in the security situation. The recovery in oil and gas production, combined with higher gold production and the continuation of reforms to improve the business climate, the encouragement of private investment and strengthening of public-private partnerships (PPP) will be major elements in helping growth in 2013 and 2014.
Moreover, growth should continue to be driven by a rise in investment (of 9.2% in 2013 and 11.1% in 2014) as a result of major government construction projects and rising private investment, benefiting from a return of confidence among investors and the improved business climate.
Prospects are favourable but not without risks. Internally, these essentially arise from the fragility of the socio-political context owing to worries about security. Externally, the risks might come from shocks caused by poor prices for raw materials (cocoa, oil) and a worsening of the international environment which might hamper an adequate mobilisation of external financing and reduce the inflows of foreign direct investment (FDI).
Fiscal policy in 2012 was conducted in line with the undertakings made in the framework of the economic and financial programme backed by the Enlarged Credit Facility (ECF) and agreed with the IMF for the 2012-14 period.
Receipts (including grants) totalled 19.6% of GDP in 2012 compared with 19.5% in 2011. This slight improvement arose from an increase in income from oil and gas and the reorganisation of tax services.
Expenditure rose from 21.4 % of GDP in 2011 to 23.1% in 2012, the result of an increase in the wages and salaries bill and investment spending. The rise in the wage bill is explained by the financial support for volunteer teachers in the central, north and west zones and the exceptional recruitment of former combattants. The proportion of wages and salaries in fiscal receipts was 43.5% in 2012, a long way above the maximum threshold of 35% stipulated by the West African Economic and Monetary Union (UMEAO/WAEMU). Spending on investment reached 5.4% of GDP compared to 3.4% in 2011, linked to reconstruction and the execution of emergency programmes.
The overall deficit deteriorated from 1.8% of GDP in 2011 to 3.5% in 2012. It was chiefly financed by external resources and borrowing on the regional financial market.
In 2013 total receipts should rise by 1.4% of GDP over 2012 thanks to an expected rise in grants. Public spending should amount to 25% of GDP and 24.6% in 2014, as higher investment spending continues. Current spending should fall back, in part because of a lowering of subsidies on oil products after an automatic price adjustment mechanism came into effect and in part because of good control of the overall payroll thanks to the integrated system of management of public service workers and state employees (SIGFAE) which became operational. Capital spending should continue to increase in the framework of the implementation of the state investment programme and should be financed to a large degree by external resources. As a result of the twin effects of rising revenue and lower public spending, the budget deficit should fall to 4.0% of GDP in 2013 and 4.1% in 2014, compared with 6.3% in 2012.
Côte d’Ivoire is a member of the West African Economic and Monetary Union (WAEMU/UEMOA). Monetary policy is directed by the Central Bank of West African States (BCEAO) and explicitly targets price stability.
Average annual inflation in 2012, estimated at 2.1%, down from 4.9% in 2011, was maintained within the limits of the community norms (around 3%). This satisfactory control of price levels can be attributed to policies instituted by the government to combat high living costs. The measures included, among others: i) the application of agreements between the government and various commercial interests on the price of consumer products, backed by a stronger campaign on the display of prices; ii) systematic weekly price summaries to provide complete and reliable information about the price of leading consumer products, their availability and the provision on the markets of staple necessities; and, iii) a temporary suspension of duties and import taxes on rice for the period from 1 August to 31 October 2012. The lasting effect of these measures and the expected impact of crop production subsequent to the implementation of the national agricultural investment programme (PNIA) should maintain the rate of inflation at 2.2% in 2013 and 2.3% in 2014.
During 2012 the BCEAO lowered its lending rate to support economies grappling with various shocks. Accordingly the minimum bid rate in open market operations and the marginal lending rate were cut by 25 basis points in June 2012 to 3% and 4% respectively. The ratio of obligatory reserves was lowered from 7% to 5% on 16 March 2012. This easing of interest rates, in a context of slowing inflation, together with the improved socio-economic climate contributed to a rise of 5% in credits to the economy in 2012 compared with 2% in 2011.
Economic Cooperation, Regional Integration & Trade
For the first time in five years the external current account recorded a deficit in 2012, falling from a surplus of 6.7% of GDP in 2011 to -3.3% in 2012, as a result of the drop in the trade balance surplus and a worsening of the services deficit. The drop in the trade surplus was the result of a sharp rise in imports (36% of GDP in 2012 compared with 28.3% in 2011) in line with the growing need for intermediate and capital goods. In 2013 and 2014 the current account should remain in deficit because of rises in imports.
The country has resumed its co-operation with the major regional integration organisations and since February 2012 has occupied the presidency of the Economic Community of West African States (ECOWAS/CEDEAO). Côte d’Ivoire applies the ECOWAS common external tariff (CET) which identifies four distinct category product bands. The creation of a fifth tariff band to be added to the existing four (of 0%, 5%, 10% and 20%) in the structure of the CET is under discussion. While awaiting the conclusion of the Economic Partnership Agreement (EPA) at the ECOWAS level in November 2008 the country signed a temporary EPA with the European Union (EU) which provides for an 80% rate of openness in terms of duty-free access for its products to European markets. A sunset clause provides for the disappearance of this interim agreement in favour of a regional EPA.
Thanks to the ending of the post-election crisis and the conclusion of the economic and financial programme backed by the IMF, Côte d’Ivoire was able to reach the completion point of the Highly Indebted Poor Countries (HIPC) Initiative in June 2012. Debt relief extended under the HIPC Initiative should enable a substantial lightening of the debt burden. The updated debt/income ratio should amount to 99.6% in 2012 compared with 298.9% in 2011. This lightening of external debt should make it possible for the country to restore public finances and once again become credit-worthy in regard to its financial partners. The government has also been successful in restructuring its entire internal debt, extending maturities and financing itself on the regional financial market. The restructuring of short-term bonds into two-year treasury bills and three- and five-year bonds took place in December 2011 and accumulated interest has been paid.
However, analysis of the sensitivity of the debt shows the country is still vulnerable to shocks. With the backing of the IMF and the World Bank, the government has introduced a new comprehensive debt management strategy covering internal and external debt and new borrowings with a view to ensuring that the debt is sustainable. It has also decided on a special treatment of the debt through the creation in November 2011 of a national public debt committee (CNDP) in line with the ECOWAS community regulations which call for the institutionalisation of debt management.
Economic & Political Governance
Business in the Côte d’Ivoire suffered badly in the crisis that followed the elections. Production facilities suffered major destruction and as a result financing requirements became more acute. The country’s employers calculate that 1 113 businesses, most of them small- and medium-sized enterprises (SMEs), suffered damage totalling more than XOF 650 billion (CAF Franc BCEAO). Under these circumstances the thorny question of the low rate of financing of the private sector by the banking system came into sharper relief.
This low rate of bank financing of SMEs and small- and medium-sized industries (SMIs) is chiefly due to their unreliable structuring and the absence of certified accounts. In addition, the private sector has poor knowledge of innovative financing mechanisms such as factoring and leasing. Analysis of the structure of credits declared to the Central Risk Division at the end of July 2012 showed that 61% of credits allocated went to the tertiary sector, which remains the chief beneficiary of banking finance. The secondary and primary sectors come in second and third with 34.6% and 4.4% of bank credits respectively. The World Bank report Doing Business 2013 maintained the country’s 2011 rank of 126th of 183 countries in regard to access to credit.
The report also found that in regard to improving the business climate Côte d’Ivoire fell back in 2012, losing three places compared with 2011, to occupy 176th place out of 185 economies. As for regulating insolvency the country lost three places compared with 2011 to be classified 76th. Attempts by the authorities to improve the business climate which had deteriorated because of the prolonged consequences of the post-electoral crisis took a number of forms. The committee of co-operation between the state and the private sector (CCESP), one of whose priorities is making it easier to start up businesses, has been reactivated; the business court in Abidjan has been created and has been at work since October 2012; and, a new investment code was adopted by decree in June 2012.
The country’s financial sector is progressively returning to normal activity but remains limited in size. It was weakened by the post-election crisis and the government took subsequent steps to improve the solidity of the banking sector. Public banks stayed open during the crisis and were the most affected. Measures to safeguard them were taken, in particular: debt recovery was strengthened, operating charges were reduced and commercial strategy and governance were reinforced. Nonetheless the banking sector is still rendered fragile by capital weaknesses. The average capital to risk-weighted assets ratio deteriorated slightly in 2011, linked to a fall in the effective capital of public commercial banks. At the end of 2011 six commercial banks out of 23 (among them four of the five public banks) were not respecting the regional minimum capital adequacy standards. The implementation of the plan to restructure the public banks, agreed in 2012, represents a major challenge for the consolidation of financial stability.
Elsewhere, actions to revive and develop the microfinance sector were initiated with the help of technical and financial partners. These include: the undertaking of an audit of the sector; the preparation and implementation of the restructuring of the country’s union of national savings and credit co-operatives (UNACOOPEC); and, updating the national microfinance strategy (SNM).
In the financial markets the government resumed its intervention in the public securities market with the issue of securities with longer maturities of two to five years. Activity on the regional securities stock exchange (BRVM), which is dominated by Ivorian companies, recorded a favourable overall performance.
Public Sector Management, Institutions & Reform
A plan to restructure public enterprises was adopted with the aim of reducing state holdings by a quarter through privatisation, merger or transferring authority to technical oversight.
A census of public service workers and state employees was completed and led to the establishment of an integrated public employee management system (SIGFAE). Savings of XOF 11 billion were achieved through the discovery of about 3 000 phantom public service employees. The adoption of draft legislation on a code of conduct for public service staff and the signing of a decree relating to promotion on merit in the public sector are aimed at strengthening the culture of ethical behaviour and merit in the public administration. Transparency International’s Corruption Perception Index saw the country’s ranking improve from 154th out of 182 countries in 2011 to 130th out of 176 in 2012. In November 2011 the country ratified the United Nations Convention against Corruption.
The reform designed to improve the efficiency of the coffee/cocoa sector was completed and led to the establishment of a new institutional and regulatory framework. This provides for: i) the creation of a central body (the Coffee and Cocoa council, or CDC) made up of representatives of all the stakeholders, which is responsible for management, regulation, development and price stabilisation in the sector; ii) a marketing mechanism that includes forward sales of export licences and producer price guarantees; and, iii) a reserve fund set up at the BCEAO to cover exceptional risks.
The reform of the electricity sector is aimed at absorbing its structural financial deficit. A base price of USD 5.5 per million BTUs (MMBTU) was set, compared with an average of USD 9.8 in 2011, and a 10% rise in industrial electricity tariffs was decided.
Natural Resource Management & Environment
In line with the criteria of the Extractive Industries Transparency Initiative (EITI) the 2008, 2009 and 2010 reports relating to financial flows between the state and the extractive industries were published in May 2012. The country has had the status of a candidate for EITI membership since 2008 but cannot yet take advantage of the initiative.
The country is among those where there has been major deforestation, with at least 35% of its forests subject to unauthorised settlement and exploitation. The implementation of the national reforestation programme which began in 2005 with the aim of a rate 20% (6.45 million hectares) in 2015 has slowed. The country has inadequate infrastructure for drainage for rainwater and collection and treatment of waste water, a weak level of treatment and disposal of household waste and a low number of public lavatories. A little more than 60% of the population have access to drinking water and if the target of raising that proportion to 80% by 2015 is to be achieved there will need to be effective management of under-used water resources and a strengthening of infrastructure.
Nevertheless encouraging efforts are being made by the authorities by way of sanitation programmes in the big cities. In addition, since February 2012 two decrees have been signed. One deals with the creation, organisation and operation of a national commission of the Global Environment Facility (GEF). The second provides for a new procedure for classifying national parks and nature reserves through a committee established for the purpose.
Parliamentary elections and the election of a speaker of the national assembly in March 2012 marked a return of the institutions to normality. At the socio-political level a democratic dialogue between the government and opposition made possible the creation of a permanent framework for dialogue (CPD) operating on the basis of consensual decisions. The chief issues treated by the CPD include: i) the status of the opposition and the financing of political parties; ii) electoral issues, in particular the renewal of the independent electoral commission (CEI) and the bringing up to date of the electoral register in the light of the results of the population census; and, iii) legal and security questions, in particular respect for the rule of law and the disarmament of former combattants. The reform of the armed forces is continuing and the dialogue, truth and reconciliation (CDVR) committee has started work. Furthermore, public universities have resumed their activities.
Sporadic attacks by armed groups were reported in 2012 and there were frequent prison breaks. Among the steps taken by the government are the strengthening of security at frontiers and inside prisons, the restructuring and modernisation of the united armed forces, and the creation of a national security council. These decisions have had a positive impact on security which has greatly improved.
In regard to human rights the authorities have decided to combat impunity by making efforts to promote an independent and impartial justice system and make political life more ethical. The national inquiry committee has delivered its first report on human rights violations during the period following the election.
Overall Côte d’Ivoire has recorded perceptible advances in terms of institutional, socio-political, security and human rights normalisation. These advances were confirmed in the 2013 report on civil liberties published by Freedom House. The indices relating to political rights and civil liberties improved and allowed the country to achieve the status of a “partly free” state compared its previous “not free” ranking. Nevertheless given that the scars left by the crisis that followed the election are still raw and deep in the minds of people, it is essential that political issues do not hamper the consolidation of national reconciliation and social cohesion that the country’s inhabitants so expect.
Thematic analysis: Structural transformation and natural resources
The extractive energies (oil and gas) and information and communications technologies (ICT) sectors have generated positive developments in the nation’s economy. The discovery of new deposits (the Foxtrot field in 1991, Panthère-Lion in 1993 and Baobab in 2001) and the rise in the price of hydrocarbons on world markets have stimulated the oil and gas sectors. ICTs have taken advantage of an ever-increasing demand and the existence of suitable infrastructure. The contribution of the telecommunications sub-sector to GDP is put at around 6% over the last five years.
With Nigeria and Chad, Côte d’Ivoire is among the chief oil producers in the West African region. Production of crude oil and natural gas rose continually between 2001 and 2005. In 2006 export earnings from crude oil and oil products were greater than those from the main export crop, cocoa, of which Côte d’Ivoire has been the world’s biggest producer for decades.
Nevertheless, overall the benefits in terms of jobs and competitiveness of the structural changes that have taken place in these sectors remain very limited due to the socio-political crisis that affected the country for more than ten years (1999-2011).
Yet the country’s substantial natural resources still represent potential engines of growth and job creation over the next ten years. Mineral raw materials at present only account for 1% of GDP but are a sector of the future. The country’s subsoil contains estimated wealth in the form of 3 billion tonnes of iron ore, 390 million tonnes of nickel, 1.2 billion tonnes of bauxite, 3 million tonnes of manganese and 100 000 carats of diamonds. Prospects for fossil resources (crude oil and natural gas) are equally promising in the light of recent oil and gas discoveries. There are plans for more intensive exploration in deep territorial waters beyond the continental shelf.
Plans to intensify mining research involve: the awarding of licences to operators equipped with the greatest technical and financial capacities; improving the geological and mining information system; and, launching prospection and evaluation work on the deposits of reserves of iron at Monogaga and phosphates at Eboinda.
Côte d’Ivoire has major plant and marine resources. About 75% of the country’s land is arable. The quality of the soil and the agro-climatic conditions make possible the cultivation of a wide variety of tropical plants, including cashews, rubber, bananas and pineapples, which, together with coffee and cocoa, are major cash crops.
These natural resources provide the state with a major source of income. Revenues from some of them (oil, natural gas, coal, minerals, forest products) amounted to 7% of GDP in 2010, according to the national council of the Extractive Industries Transparency Initiative (EITI). Taxes, duties, dividends and other income from the energy sector (oil, gas and electricity) accounted on average for about 14% of state revenues in 2008 and 2009.
These major natural resources suggest a favourable outlook for the nation’s economy but bottlenecks continue to hamper management and put a brake on structural transformation efforts of the country.
First, relationships between the natural resources sector, and in particular fossil fuel and mineral resources, and the other sectors of the economy are very weak. Furthermore, the industrial processing of agricultural raw materials and fisheries’ products is still inadequate for the generation of strong economic growth. During the last decade the rate of local processing was 2% for rubber, 5% for cashew nuts, 10% for coffee, 20% for cotton and 27% for cocoa. In addition, the lack of clarity that characterises the contracts for the sharing of production between the government and the oil companies through different confidentiality clauses means transparent management of the resources is impossible. Yet again, the country has no specific instrument to manage income from natural resources, which is pooled with other resources in the general budget. Finally, the country’s ability to conduct good governance of its natural resources is still relatively weak.
Côte d'Ivoire should make full use of its natural resources with a view to supporting structural transformation of the economy and achieving sustained growth. With this in mind it should first strengthen the links between the natural resources sector (fossil fuels and minerals) and the other branches of the economy, in particular through refining and marketing, as well as a greater use of local services and equipment. Furthermore, the state should adopt specific policies to train staff suited to the needs of natural resource management. These needs concern: i) better capacity in the conception and negotiation of exploration and exploitation contracts to maximise public revenues while not discouraging private investment in the natural resources sector; ii) the creation of a framework of participatory and transparent revenue management from the exploitation of natural resources; and, iii) management of the environmental and social aspects with a view to promoting sustainable development.
In regard to agricultural raw materials and fisheries’ products, the authorities need to reallocate economic activity from the primary to the secondary and tertiary sectors, which are relatively more productive, resulting in exports of products with high capital intensity. In this respect the free zones created by the government are to be encouraged. The fish processing businesses in these zones have made an appreciable effort in taking on more than 2 800 new staff in 2011, 98% of them Ivorians, in spite of the crisis. The fish processing industry is a key sector of the economy since it alone accounts for around 15% of income from the country’s exports to the European Union.
1. This spending covers, among other things, agriculture; rural development, marine resources and livestock production; education and health; water, sanitation and electricity; infrastructure; and decentralisation.
2. The Global Gender Gap Report is the global report on the gap between men and women. It ranks countries according to their ability to reduce inequalities in four areas: health and life expectancy; access to education; participation in politics; and economic equality.