By Paul Melly
The former economic engine room of francophone West Africa is showing marked signs of recovery
A growth rate of 3% may not be every African country’s idea of stellar performance, but for Cote d’Ivoire, emerging from years of civil conflict, economic dislocation and de facto partition, living up to this forecast of performance in 2008 will represent a signal success.
Much depends on continued buoyancy in world prices for oil, cocoa and coffee, but equally important is the capacity of the Ivorians themselves and their political leaders to restore the political stability that underpinned the country’s economic success until the late 1990s.
The IMF recently predicted real GDP growth of 3% for 2008 – double the figure for last year, when the process of post-conflict, political reconstruction was still in intensive care. According to IMF first deputy managing director John Lipsky, “Although there have been delays in implementing the Ouagadougou Accord, a climate of political dialogue is evident, and the improved security situation is beginning to pay off in better economic outcomes.” On April 6, the IMF approved a SDR40.6 million ($66.2 million) emergency post-conflict assistance (EPCA) package.
But it would take an optimist to believe that peace is solidly rooted, and major challenges must be met before Cote d’Ivoire can be declared stable. It is vital to complete the demobilization of the northern rebel Forces Nouvelles (FN) troops and the thorough reform of the national army forces.
On paper, the country is moving forward under a peace and reconciliation process established under last year’s Ouagadougou agreement. But the picture is complicated by the ethnic and regional factors that underpin the main political groups.
Incumbent head of state Laurent Gbagbo, Young Patriots movement leader Charles Ble Goude and FN leader and transitional prime minister Guillaume Soro have personal ties dating back to their student political days of many years ago.
Gbagbo and his Front Populaire Ivoirien will face a massive electoral challenge from former IMF deputy managing director Alassane Ouattara, leader of the opposition Rassemblement des Republicains, and former president Henri Konan-Bedie, of the Parti Democratique de la Cote d’Ivoire, especially if one-time rivals Ouattara and Bedie maintain their promised electoral alliance.
In such a fraught context, the preparation of a credible and universally accepted electoral roll assumes huge importance – and there are serious questions over whether it can be accomplished in time for an election this year.
Economic realities
In the meantime, economic policy-makers are attempting to reinforce growth and re-establish credible financial management. The restoration of a fragile peace has allowed the return of administrators, teachers and other public servants to large tracts of the north – once an FN stronghold – where many services have been suspended for much of the past five years. One priority agreed with the IMF is the restoration of tax administration in areas under rebel control. The disrupted revenue collection system and reduced levels of aid have forced the government to use revenue contributions from national oil company Petroci.
The strong performance of Cote d’Ivoire’s commodity sectors has saved the economy from collapse. Gbagbo’s government has also benefited from most of the cocoa, coffee, pineapple and banana farming areas in the tropical south, as well as hydrocarbons.
The task is to re-assemble a once-dense network of trading and service connections and improve the management of public finances. The IMF said: “The government managed to stay close to its overall fiscal targets in 2007, although the composition of expenditure did not meet expectations.”
Debt relief
A springboard for recovery will be debt relief, under the HIPC (Heavily Indebted Poor Countries) initiative – which is now in sight – and increased foreign bank and investor activity. According to Lipsky, “a track record of solid policy implementation under EPCA could help pave the way for a PRGF (poverty reduction and growth facility) arrangement and a HIPC decision point.”
London Club chairman Thierry Desjardins tells Emerging Markets he hopes soon to be negotiating the reduction of Cote d’Ivoire’s commercial bank debt. He says the country retains a strong banking system, while its currency, the euro-linked CFA franc, is stable.
The $2 billion bank debt – thought to be denominated roughly 50/50 in US dollars and euros – was reconciled a long time ago. Once the government has reached framework accords with the IMF, the banks will be able to move rapidly on to negotiation of a debt reduction package.
“The short-term liquidity position is extremely tight and is a concern for local and international investors,” says Francois Ekam-Dick, managing director of Iroko Securities, a London debt capital house specializing in sub-Saharan Africa.
“However, once Cote d’Ivoire has secured debt reduction under the HIPC, the picture will improve markedly, and the financial situation will become much less pressured,” he tells Emerging Markets.
Risk and return
Speaking of the priorities for creditors when dealing with debtor countries, Desjardins said “there are two issues – politics and economics. You have to take account of both. A country needs credibility.”
Such realism is appropriate to the Ivorian situation, but investors should not disregard the breaks on offer. “Broadly, there are opportunities across a wide range of sectors, public and private, in Cote d’Ivoire, because the entire economic infrastructure will have to be rebuilt,” said Ekam-Dick.
“The country will be able to do this on the basis of a wide range of natural resources and a diverse economic base. So if the country can re-establish a stable environment and hold a successful election, the sky is the limit for business opportunities.”