Ivory Coast - Economy
Ivory Coast, French-speaking West Africa's largest economy and world's biggest cocoa producer - Cocaoland, emerged from a 2002-2011 political crisis as one of the continent's rising economic stars. Despite the growth potential of Côte d’Ivoire, limited employment opportunities, particularly for youth, remained a challenge.
Cocoa is essential to Côte d’Ivoire. This sector mobilizes close to one million producers who provide income to five million persons (one-fifth of the country’s population) in order to meet 40% of global supply. Cocoa is also the country’s leading foreign exchange earner and is among the sectors making the biggest contribution to government revenue. In short, cocoa plays a central role in Ivorian society and in the lives of many families.
Cocoa is one of Côte d’Ivoire’s most important commodities, but farming families face persistent poverty, with the average Ivoirian cocoa farmer’s income equaling less than $1 a day. Poverty is one of the factors contributing to child labor on cocoa farms. Children in Côte d’Ivoire are engaged in the worst forms of child labor, including in the harvesting of cocoa and coffee, sometimes as a result of child trafficking. According to a report by Tulane University published in 2015 that assessed data collected during the 2013–2014 harvest season, the cocoa sector employed an estimated 1,203,473 child laborers ages 5 to 17, of which 95.9 percent were engaged in hazardous work in cocoa production. Children from neighboring West African countries are also trafficked into Côte d’Ivoire for agricultural labor, especially in cocoa production, and for work in mining, construction, domestic work, street vending, and commercial sexual exploitation. A study carried out by the ILO and the Government of Côte d’Ivoire in 2013 estimated that 55 percent of children working in agriculture in rural areas are subject to forced labor.
However, despite its importance to the Ivorian economy and society, the cocoa sector is not fully playing its role as the engine of economic development. Some even go so far as to cite the curse of “brown gold,” for at least three reasons. First, more than half of producers live below the poverty line—on less than CFAF 757 (roughly $1.2) a day. Second, the price paid for the expansion of cultivated areas in recent decades has been the destruction of virtually all the country’s forests. Third, Côte d’Ivoire has not yet managed to increase its share (between 5% and 7%) of the profit made along the cocoa-chocolate global chain.
Given this situation, it is not surprising that cocoa is at the center of a host of economic policy discussions in Côte d’Ivoire and that the Government has sped up its deliberations aimed at improving the performance of the sector, in particular through the Abidjan Declaration signed jointly in 2018 by the Presidents of Côte d’Ivoire and Ghana, which seeks to harmonize their policies and thus maximize their profit (these two countries account for approximately 65% of global production).
The Ivorian economy continuedg its sound performance that started at the end of the political crisis in 2011. 2018 was the seventh consecutive year that the GDP growth rate exceeded 7%. This rate is projected to reach 7.2% in 2019 and to remain at this level in the coming years. The private sector has once again become the main engine of growth after a decline in 2016 and 2017. Enterprises seem to have stepped up their investments in 2018, following reforms aimed at improving the business climate and, perhaps, in order to anticipate the October 2020 presidential elections, which will create uncertainty for the economic actors. However, private sector recovery has revolved around only three sectors (telecommunications, agribusiness, and construction), unlike the 2012-2015 period when all sectors expanded.
In 2013, some 30,000 jobs were created in the formal sector and 100,000 in the informal sector, although some 400,000 new job seekers are registered each year. Côte d’Ivoire is now ranked as the sixth fastest growing economy in the world in terms of projected compounded annual growth (CAGR) from 2014-2017 based on the forecasts from the World Bank's Global Economic Prospects.
Nonetheless, the average Ivoirian has not benefited from this growth and renewed investor confidence in the economy. Côte d’Ivoire ranked 172 out of 188 on the UN’s Human Development Index in 2015, and almost half the population – 46% -- lives below the international poverty line of $2 per day.
Côte d’Ivoire experienced an impressive turnaround since 2011, with economic growth averaging about 9 percent per year. The economic outlook remains strong. The authorities’ 2016-20 National Development Plan (NDP) appropriately prioritized inclusive and sustainable growth, focusing on structural transformation and improving living standards. Solid macroeconomic performance continued in the first half of 2016 notwithstanding the impact of a drought on agriculture, and real GDP growth is projected at around 8 percent for the year as a whole. The budget deficit is projected at 4 percent of GDP in 2016, reflecting higher spending, including for security, health and education. Economic growth is forecast to remain strong over the medium term, averaging 7.7 percent per year during 2017-19, reflecting buoyant domestic demand. Inflation is projected to remain below 3 percent, and reflecting investment-driven imports, the external current account deficit would widen to about 2.5 percent of GDP.
In 2013, the gross domestic product grew by 8.1 per cent and was projected to grow by 8.2 per cent in 2014. Although public spending increased by 9 per cent in 2013, external balances and debt remained within the performance criteria set by the International Monetary Fund. Increased spending was linked to increased expenditure on civil servants, after the Government doubled the minimum wage to 60,000 CFA francs (approximately $120) per month. There are also plans to recruit 18,933 new employees in 2014, including 3,641 former combatants. 47. The development of the private sector remained a priority. In January 2014, the Government organized an investors’ forum to promote opportunities in agribusiness, industry and mining. Investment pledges amounted to $886 million, of which $326 million in the form of public-private partnerships and $560 million from private investors. Mining activities also intensified. With the inauguration of two new gold mines in January 2014, the number of exploited mines reached five and production was estimated at between 13 and 16 tons per year, an increase of more than 20 percent. On 27 January, Côte d’Ivoire adopted a mining code based on transparency, traceability and social responsibility for the management of environmental risks.
The marginal contribution by the agricultural sector to economic growth in Côte d’Ivoire is linked to two deficiencies, which are becoming more acute. First, average yields of the main food and cash crops remain relatively low compared to countries that have successfully carried out their green revolution. Second, agriculture is not sufficiently diversified, as evidenced by the limited supply of more labor-intensive products (such as fruits and vegetables, meat, and dairy products) as well as processed products. Rural households in Côte d’Ivoire are not adequately combining agricultural and non-agricultural activities to boost their incomes, unlike their counterparts in Thailand or Vietnam for example.
A trained economist, Alassane Ouattara, President of Côte d’Ivoire, previously worked for the International Monetary Fund in Washington, DC and the Central Bank of West African States in Senegal. As president, he revamped the Ivorian economy by securing significant debt cancelation, investment and donor funding in support of infrastructure projects, and key economic sectors. He won the return of the African Development Bank’s headquarters, which were moved from Abidjan to the capital of Tunisia at the height of the First Ivorian Civil War in 2002.
For the first two decades since its 1960 independence, the Republic of the Ivory Coast (Cote d'Ivoire) had become known as a model developing economy. With good export earnings from cocoa and coffee and a high rate of savings and investment, the country Pttained high rates of economic growth, built a good transport and communications infrastructure, maintained political stability, and established a liberal attitude toward private investment. There were few things a foreign investor could find fault with. To be sure, energy costs were high, the local market for luxury goods was small, French is the business language, and the French still dominated the scene. This relationship dated back to their presence before independence, and before any US businessmen arrived. But in all, and especially as the result of the government's ready acceptance of free enterprise and ready convertibility and repatriation of foreign investment, the situation offered an almost ideal foreign investment climate.
By the mid-1970s the structural dynamics of the cocoa industry had effectively created a two-tier society based on an increasingly accentuated North-South divide. Infrastructure, services, and amenities were virtually nonexistent in the North. Health and education facilities were woefully deficient and economic opportunity was limited. The opposite was true in the South. Deep poverty and deprivation in the North were in stark contrast to the advancement and burgeoning wealth in the South. That Abidjan (the commercial capital in the South) earned the moniker ‘‘Petit Paris’’ speaks to the vast disparities that existed. The discovery of oil and gas reserves in 1975 and Cote d’Ivoire’s ascendency as a regional financial hub in the 1980s only served to widen the gap, as the structural arrangements established in the cocoa industry were replicated in the oil and gas sectors. Relatively little of the nation’s wealth made its way to the North.
By the end of the 1980s, the situation had changed. World prices for coffee and cocoa, the two export commodities on which the Ivory Coast economic miracle had been based, had collapsed from their lofty levels of the past decade. Unfortunately, the Ivory Coast government did not react promptly, but kept spending and supporting production above world prices. An ill-fated attempt to force matters by keeping their crops off the market in the late eighties only backfired. The gaps in public spending had to be covered by borrowing, to the point where the country was among the highest international debtors, on a per capita basis. Debt payment obligations turned the otherwise still favorable balance of trade into a negative cash flow, and led to an extreme cash shortage that restricted the operation, let alone the expansion of business, and has led to negative economic growth for the last 2-3 years of the decade. Per capita GNP, which in 1981 had grown to a level of $1,200 (the highest in Black Africa), collapsed to just about $700 by 1989.
The Ivoirian economy is largely market-based and depends heavily on the agricultural sector. Between 60% and 70% of the Ivoirian people are engaged in some form of agricultural activity. The economy performed poorly in the 1980s and early 1990s, and high population growth coupled with economic decline resulted in a steady fall in living standards. A majority of the population remains dependent on smallholder cash crop production. Principal exports are petroleum, cocoa, coffee, pineapples, tuna, rubber, and tropical woods. Principal U.S. exports to Cote d’Ivoire are rice and wheat, plastic materials and resins, kraft paper, agricultural chemicals, telecommunications, and oil and gas equipment. Principal U.S. imports from Cote d’Ivoire are cocoa and cocoa products, petroleum, rubber, and coffee.
Direct foreign investment plays a key role in the Ivoirian economy, accounting for between 40% and 45% of total capital in Ivoirian firms. France is overwhelmingly the most important foreign investor. In recent years, French investment has accounted for about one-quarter of the total capital in Ivoirian enterprises, and between 55% and 60% of the total stock of foreign investment capital.
By developing-country standards, Cote d'Ivoire has good infrastructure. There is a network of more than 8,000 miles of paved roads; good telecommunications services, including a public data communications network, cellular phones, and Internet access. There are two active ports. Abidjan's is the most modern in West Africa and the largest between Casablanca and Cape Town. A smaller port is located in San Pedro. There is regular air service between countries within the region and to and from Europe. Modern real estate developments exist for commercial, industrial, retail, and residential use.
A decade of political and economic problems have delayed Cote d'Ivoire's planned public investment program. The government's public investment plan accords priority to investment in human capital, but it also will provide for significant spending on economic infrastructure needed to sustain growth. Continued infrastructure development has been brought into question because of private sector uncertainty. In the environment of government disengagement from production activities and in the wake of privatizations, anticipated investments in the petroleum, electricity, water, and telecommunications sectors, and in part in the transportation sector, will be financed without direct government intervention.
Although Côte d’Ivoire provides electricity to many of its neighbors (and hopes to increase this in the future), the electric current is often erratic, and outages often occur during storms.
|Join the GlobalSecurity.org mailing list|