Africa > West Africa > Cote d'Ivoire > Abidjan > Côte d'Ivoire's government is focusing on small business to diversify the economy

Abidjan: Côte d'Ivoire's government is focusing on small business to diversify the economy


Côte d'Ivoire's government is focusing on small business to diversify the economy

Once the economic powerhouse of Francophone west Africa, Côte d'Ivoire has suffered decades of crisis. Presently the world's biggest cocoa producer is turning the tide on additional 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 next 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 Mr Ouattara's initial moves as president was to apply an emergency stimulus package, mostly funded by foreign donors such as the IMF and France.

Since again, 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 as well had a peace-building side that included the education and re-integration of former combatants.

But presently, economists foresee that GDP increase may slow down unless these quick fixes are restored 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 major goals of the government's strategy is to strengthen small and medium enterprises (SMEs), a incomparable strategy in a region where economic policies usually favour large corporations and ignore small businesses.

So far, development and economic wonks, particularly those from the Bretton Woods institutions, have praised the policies of Mr Ouattara, a former IMF director.

The country reached 79th place out of 160 nations 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 nations in the World Bank's 2014 "Doing Business" statement, but still lags behind nations like Afghanistan and Syria.

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

"An economy can be competitive only if it allows its SMEs to innovate, to supply large companies, to safeguard its exports and to contribute entirely to the GDP," he told Africa in Fact.

"In Côte d'Ivoire we have emphasised plantations and large enterprises. But 90% of Ivorian businesses are SMEs. This should be the cornerstone of our development," Mr 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 policy of President Felix Houphouët-Boigny from 1960 to 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 additional 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 authentic generator of employment." It provided the government with little tax gain.

Under Mr 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 $930m of foreign direct investment into Ivorian businesses.

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

The Investment Promotion Centre in Côte d'Ivoire (CEPICI, next its initials in French) is the government's major measure to relieve 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. Additional importantly, they provide additional transparency to help curb corruption.

Last year, 2,535 new businesses, mostly SMEs, were registered, about 18% additional 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 a lot of businesses begun before Mr Ouattara became president, Ms Konaté's company, Protein Kissé-La, was not registered and therefore did not exist legally.

She took chance of the new system to register and to raise capital. Next 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 a lot of 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 considerate of local realities can compete with foreign giants such as Nestlé and Danone.

"Business is picking up," Ms Konaté said. "We have the feeling that things are moving forward next a decade of difficulties. The government has, so far, adopted several measures that make our life easier."

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 ten employees.

In May 2014 it launched an educational tablet for Ivorian classrooms that should be available any minute at this time in neighbouring nations. It has succeeded by overcoming major investment obstacles. Finding the funding was the hardest hurdle.

"Ivorian bankers did not understand the project," explained Mr N'Doufou. "We succeeded in earning the trust of certain persons and investment funds to fasten the project." (Mr 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 nations 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," Mr Billon said. "It is a government priority."

Investors in Côte d'Ivoire, for the majority part, are still holding their breath: political reconciliation from the bloody post-electoral crisis has from presently on to become a reality.

The next presidential elections are in 2015. Firm economic increase may only take place once the troubles are definitively over.

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