Côte d’Ivoire’s Finance Minister and Prime Minister Daniel Kablan Duncan has skillfully guided the country back to international markets, selling its potential for economic growth and its position as the world’s leading cocoa producer and trying to dispel its image of constant conflict and division.
The culmination of that effort was a Eurobond issue in July 2014. The country raised $750m, paying 5.625% for its 10 year debt. The low yield was remarkable, not only because of the country’s recent history of conflict, but because in February 2011 the country effectively defaulted on $2.3bn of Eurobonds.
The 18 months that followed the crisis were difficult. Market sentiment was understandably poor, although in June 2012, the country began paying its bond coupons again, after missing three payments. The World Bank and the IMF signed off on $4bn of debt relief under the Highly Indebted Poor Countries initiative and the Multilateral Debt Relief Initiative.
In November 2012 a cabinet reshuffle saw the charismatic Duncan, then foreign minister, promoted to prime minister and handed the finance and economics brief. The foundations of growth had been relaid, but the economy remained in dire need of inward investment and liberalisation.
Duncan and his predecessor, and now president, Alassane Ouattara have reinvigorated the privatisation process, and in December 2013 he announced a list of 15 companies, ranging from engineering firms through to financial institutions, up for sale.
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At the same time, the government has improved its business environment, removing red tape for entrepreneurs and rewriting the rules on registering property and enforcing contracts. The changes have improved its World Bank Doing Business ranking by six places between 2013 and 2014, making it one of the world’s top reformers last year.
A programme of public works, most of which will be financed through public-private partnerships, is underway, including ports, airports, railways and highways.
Duncan has also taken the country’s revival to international markets, going well beyond Côte d’Ivoire’s traditional partnerships with French companies and public sector bodies. Fluent in English, Duncan has led trade delegations to Europe and North America.
The diversification of Côte d’Ivoire’s international partnerships is bearing fruit. Oil companies Tullow and Lukoil, South Africa’s Standard Bank and the global shipping group Maersk joined the French construction firm Bouyges in investing in 2014.
Citigroup has moved its regional office back to Abidjan, and the African Development Bank is bringing its headquarters back to the country, a sign that it is once again considered the centre of francophone West Africa. The International Finance Corporation has declared an intention to invest $1bn over three years, and other donors have backed the renaissance with more than $8.5bn in pledges.
Oil exploration, spurred by large discoveries in neighbouring Ghana, has resumed, with the potential of adding hydrocarbon exports to Cote d’Ivoire’s traditional strength in cocoa and other cash crops.
Economic growth has been strong but it has been declining slightly since a strong 9.8% expansion in 2012. The IMF expects 8.5% growth this year and 7.9% in 2015. Above all else, says Megan McDonald, global head of debt capital markets at Standard Bank, it is this growth that has brought capital markets investors back into Ivorian debt. “That’s what investors are buying into [in Côte d’Ivoire],’ she says. “The African growth story.”
EM INTERVIEW Seventy year old Daniel Kablan Duncan is not a newcomer among African policymakers. Indeed, he was finance minister in the early 1990s under the late president Félix Houphouet Boigny, who also appointed Alassane Ouattara as prime minister at the time. Duncan is now overseeing a far-reaching plan to restore the country’s past glory.
“The country is fast becoming a regional showcase,” he told Emerging Markets. “It is again one of the locomotives of the region in the sub-region, together with Nigeria.”
Côte d’Ivoire is already preparing another bond issue next year of some $1bn, in agreement with the IMF following last year’s successful Eurobond issue. “We have been working with the Fund to sustain the pace of investment in Côte d’Ivoire,” he said. The country has been pursuing a $22bn investment programme (2012-2015), 60% of which is supposed to be financed by the private sector.
Duncan says the investment rate has already doubled from 8% of GDP during the civil war to 16.5% this year. Officials are now aiming for 23% by 2015 and returning to the level of “les années glorieuses” of Houphouet Boigny of more than 25% of GDP.
Economic growth is expected to hit 8%-10% next year, he says. The fall in commodity prices has not really hurt Côte d’Ivoire so far, as cocoa prices are still supportive, he said, which has allowed it to increase the price paid to producers.
The Ivorian prime minister is also a regional integration enthusiast. Nigeria already accounts for 23% of overall trade of the west African economic community ECOWAS, of which Côte d’Ivoire is a member. This share is supposed to double by 2020, according to government projections. “Integration is the key for the whole sub-region of West Africa,” Duncan said.