Côte d’Ivoire focusing on small business to diversify the economy

Once the economic powerhouse of francophone West Africa, Côte d’Ivoire has suffered decades of crisis. Now the world’s biggest cocoa producer is turning the tide on more than 30 years of economic hardship caused by conflict, draining structural adjustments, the devaluation of the regional currency and the tumbling cocoa price.

From independence in 1960 to the 1980s, Côte d’Ivoire’s economy flourished from its fertile farmlands, which produced cocoa, coffee and palm oil. Those government-controlled sectors funded gleaming skyscrapers in the capital, Abidjan, and paid the salaries of the civil servants who worked inside. Building a diversified economy, however, was not a government priority during these years.

In the last decade, the country’s land has yielded other natural resources: oil, gas and gold. But Alassane Ouattara, who took the presidential reins in 2011 after a six-month post-electoral crisis that left 3,000 dead, is trying to move the country beyond natural resources and agriculture. He is counting on creating a mixed economy that will extinguish political tensions.

One of Ouattara’s first moves as president was to apply an emergency stimulus package, mostly funded by foreign donors such as the IMF and France. Since then, Côte d’Ivoire’s GDP has expanded, growing 9.8% in 2012, 8.7% in 2013 and an estimated 8.0% in 2014, according to the IMF. This package targeted five priority areas: water, health, education, electricity and sanitation. It included repairing and reconstructing infrastructure that was destroyed during the 2010-2011 post-electoral conflict. It also had a peace-building side that included the education and reintegration of former combatants.

But now, economists foresee that GDP growth may slow down unless these quick fixes are replaced by a longer-term strategy tackling the Ivorian economy’s structural flaws. In particular, the country’s dependence on cocoa makes the economy vulnerable to fluctuations in this commodity’s prices. To curb 30 years of growing poverty, one of the main goals of the government’s strategy is to strengthen small and medium enterprises (SMEs), a unique strategy in a region where economic policies usually favour large corporations and ignore small businesses.

Improving business environment

So far, development and economic wonks, especially those from the Bretton Woods institutions, have praised the policies of Ouattara, a former IMF director. The country reached 79th place out of 160 countries on the 2014 World Bank’s logistics performance index, the highest ranking of any francophone African country. Although its business environment still has a long way to go, it is improving. Côte d’Ivoire jumped six places in a year, reaching the 167th position out of 189 countries in the World Bank’s 2014 Doing Business report, but still lags behind countries like Afghanistan and Syria.

Jean-Louis Billon, president of the Ivorian Chamber of Commerce from 2002-2011, knows business challenges. He left the private sector in 2012 and since then has worked as the country’s commerce minister, an expanded portfolio that also includes supervising small business.

“An economy can be competitive only if it allows its SMEs to innovate, to supply big companies, to safeguard its exports and to contribute effectively to the GDP,” he told Africa in Fact. “In Côte d’Ivoire we have emphasised plantations and big enterprises. But 90% of Ivorian businesses are SMEs. This should be the cornerstone of our development,” Billon explained. “Côte d’Ivoire cannot develop and build a solid economy if it does not maintain a large pool of SMEs.”

Small companies represent about 98% of Côte d’Ivoire’s formal businesses and create 23% of the country’s jobs, according to the ministry.

This is not to say that small businesses did not emerge under the unchallenged rule of President Felix Houphouët-Boigny from 1960-1993. “During the Houphouët-Boigny era, civil servants were encouraged to buy land and, in a way, to start their own small businesses,” explained Marcel Benie Kouadio, an economist and dean at Abidjan Private University. “This allowed the rise of a middle class. But it was not formal and more of a hobby. Above all, it was not sustainable. One would employ the brother-in-law or the nephew to manage the land. It was additional revenue, but it was not a true generator of employment.” It provided the government with little tax income.