Cote d'Ivoire Business Forecast Report Q3 2009

Peace Process: Still Chasing Shadows

Cote d'Ivoire is in a form of political suspended animation, pending elections which are expected to reunite the country once and for all and allow public policy making to be carried out in an efficient manner that takes into account the resources and needs of all parts of the country. Deadlines for completing the tasks necessary for a fair ballot and, indeed, for setting a date for the actual vote, have come and gone on several occasions. While the government and donors hope for a plebiscite in 2009, on current form we are increasingly uncertain as to whether this is an achievable ambition.

In our view, normalisation of domestic politics, improvements in internal security and a reunification of the country will be key for boosting investor confidence and stronger inflows of foreign direct investment into the economy, especially into the cocoa, oil and gas sectors.

Previous general elections in Cote d'Ivoire were seriously flawed, and there remain concerns among domestic players and the international community that the future polls will not be different. In the past, there has never been a credible electoral roll, so putting one together is the corner stone for the new democratic vote that all parties say they are committed to. It is a task of Herculean proportion, complicated by the absence of a government in control of all the national territory, administrative failings, insufficient budgetary allocations (donors take the position that the bulk of the cost of voter registration should be borne locally), and by the fact that an estimated 700,000 Ivorians remain internally displaced from their home areas after the civil war.

Although ongoing high cocoa prices are supportive of economic activity and export revenues, declining output is likely to cap Cote d'Ivoire's real GDP growth potential. According to the country's cocoa management committee, the country is likely to see a 26.0% year-on-year (y-o-y) decline in output during the 2008/09 season, with bad weather, diseases and strikes to blame. It is important to highlight that a decrease in production is not only a short-term phenomenon, but could become a chronic problem in the future. A lack of investment has led to a shortage in young, productive cocoa plants, which could result in a significant drop in output over the coming five to ten years, should the sector not experience a significant influx of capital soon.

According to the World Bank's 2009 Business Environment Survey, Cote d'Ivoire comes in at 161st place (out of 181 countries), compared to 155 in 2008. The country only slightly outperformed Afghanistan (162), and most of the nations ranked below Cote d'Ivoire, such as Guinea-Bissau and the Democratic Republic of Congo, are faced with extreme domestic political challenges and sometimes referred to as failed states. In contrast, other post-conflict economies such as Liberia, Sierra Leone and Rwanda were recognised as amongst those that made the fastest progress in improving the climate for enterprise in 2008.