Making SMEs part of the formal economy

Under Billon’s guidance, the Ivorian government has launched several initiatives to make SMEs a vital part of the formal economy. It has adopted a law that strengthens SMEs’ legal protections and makes bank loans easier to obtain; updated laws protecting and regulating investments; created a new commerce court which fast tracks disputes at a lower cost than the existing judicial system; slashed fees by 50% for importing tools and production equipment; and introduced several initiatives to connect entrepreneurs to funders, notably an investment forum held in January 2014 that brought pledges of US$930m of foreign direct investment into Ivorian businesses.

In addition, the government has made massive expenditures in infrastructure, allocating about $6bn to roads and a second port terminal in Abidjan. Several projects also aim at boosting energy production from 1,391MW in 2011 to almost 4,000MW by 2020.

The Investment Promotion Centre in Côte d’Ivoire (CEPICI, after its initials in French) is the government’s main measure to ease business life for entrepreneurs. This agency, headquartered in Abidjan and with three offices in the economic centres of Bouaké, San Pedro and Yamoussoukro, is a one-stop shop: in a few hours and in a single place, business owners can fill out documents such as business and tax registration, customs agreements, etc. The government is expected to respond to all applications within a month.

These procedures took nearly a year under the previous government. More importantly, they provide more transparency to help curb corruption. Last year, 2,535 new businesses, mostly SMEs, were registered, about 18% more than in 2012, according to CEPICI figures, which are not always reliable.

The CEPICI “simplifies everything”, said businesswoman Marie Diongoye Konaté, who has run a grain food-processing company since 1994. Like many businesses begun before Ouattara became president, Konaté’s company, Protein Kissé-La, was not registered and therefore did not exist legally. She took advantage of the new system to register and to raise capital. After spending one hour submitting her documents to the CEPICI, the government responded in 21 days, approving the registration of her agro-industrial business.

Her case is similar to that of many of the businesses in Côte d’Ivoire that struggled under the corruption and intimidation prevalent during the previous government. With 71 employees, her firm is an example of how a good business plan and a strong understanding of local realities can compete with foreign giants such as Nestlé and Danone. “Business is picking up,” Konaté said. “We have the feeling that things are moving forward after a decade of difficulties. The government has, so far, adopted several measures that make our life easier.”

Accessing funding

Despite the government’s new policies and the investment forum’s momentum, SME owners still face several difficulties, particularly in raising capital, explained Joseph Amissah, the director of a small-business group. Banks and other funding institutions do not provide enough guidance and are reluctant to take risks, he said.

But alternatives to a wary banking system are emerging. Thierry N’Doufou is the CEO of Siregex, a 20-month-old high-tech company with 10 employees. In May 2014 it launched an educational tablet for Ivorian classrooms that should be available soon in neighbouring countries. It has succeeded by overcoming major investment obstacles. Finding the funding was the hardest hurdle. “Ivorian bankers did not understand the project,” explained N’Doufou. “We succeeded in earning the trust of certain persons and investment funds to secure the project.” (N’Doufou, however, would not share the names of his investors.)

In addition to the difficulty of raising capital, the country’s “heavy fiscal burden” is impeding the development of SMEs, said Jean Kacou Kiagou, president of Côte d’Ivoire’s General Business Council, an association of business owners. The government’s taxation policies deter investments and encourage companies to relocate to neighbouring countries such as Ghana, with fewer fiscal constraints, he said last March. Businesses represent 90% of the Ivorian government’s tax revenues, while the African average is about 40%, according to the OECD, an intergovernmental think tank.

Fiscal pressure and the absence of funding need to be tackled together, according to the commerce minister. This is the goal of an upcoming government programme, which plans to improve managerial skills and teach companies how to participate in a competitive environment. “SMEs are crucial to fight against unemployment and poverty,” Billon said. “It is a government priority.”

Investors in Côte d’Ivoire, for the most part, are still holding their breath: political reconciliation from the bloody post-electoral crisis has yet to become a reality. The next presidential elections are in 2015. Firm economic growth may only take place once the troubles are definitively over.

This article was first published by Good Governance Africa.