Côte d’Ivoire looks to create new opportunities in cocoa

As urbanisation continues, the industrial sector is growing, with more people being employed in industry while traditional agricultural employment decreases. However, agriculture continues to play a significant part in the industrial sector through the development of new processing and packaging facilities. Cocoa and cotton, two major exports, were largely resilient to the impact of the Covid-19 pandemic, and government support for small and medium-sized enterprises (SMEs) ensured that producers could continue many of their economic activities despite supply chain challenges impacting the global economy.

The industrial sector comprises several other subsegments that have steadily developed over the last few years. There is potential for private investment across the energy, construction and machinery, manufacturing, automotive, telecommunications equipment, plastics, and paper and packaging industries.

Structure & Oversight

The Ministry of Commerce and Industry implements government policy across the sector. It also manages the regulation of all subsectors, as well as industrial imports and exports.

The Ministry of Agriculture and Rural Development also plays an important role, with agro-industry making up a considerable proportion of industrial production. It implements regulations through commodity-related organisations such as the Coffee and Cocoa Council and the Cotton and Cashew Council.

The 2018 Investment Code simplified the investment law, offering tax benefits to attract private investors. In addition, the National Development Plan (Plan National de Développement, PND) 2021-25 seeks to transform the country socially and economically, aiming to achieve average economic growth of 7.65% between 2021 and 2025. Pillar two of the plan focuses on job creation, specifically the industrialisation of the economy to drive employment across clearly defined subsectors. It aims to shift the agriculture sector to be more focused on agricultural processing and exports. The government developed the PND 2021-25 with support from the UN Industrial Development Organisation, in line with the UN Sustainable Development Cooperation Framework, which spans the same period.

Performance & Size

The sector has been gradually expanding in recent years thanks to urbanisation and greater private investment. As the gateway to West Africa, Côte d’Ivoire is a strategic import and export market and is home to several ports, including the Port of Abidjan, considered the most significant on the West African coast. In addition, the Abidjan-Lagos corridor links the country with Ghana, Togo, Benin and Nigeria, supporting over 75% of West Africa’s trade.

The economy is projected to grow by around 6% in 2022, supported by the development of the agriculture sector, manufacturing industries, mining, energy, transport, telecommunications and trade. GDP growth increased by approximately 7% in 2021, according to the IMF, mainly driven by exports and investment. Employment in the industrial sector is growing steadily, totalling 13.4% of the working population in 2020, compared to a figure of 11.3% in 2010.

According to the World Bank, while the construction sector and public investment were major contributors to economic growth before the pandemic, the manufacturing sector, services and exports are expected to drive the economy in 2021-22. However, it highlighted the need for greater financing for micro-enterprises and SMEs to develop the sector further. In addition, worker productivity growth has decreased in recent years, falling from 6% in 2012 to 3.2% in 2019, and even lower in 2020 to 1% due to pandemic restrictions.

Russia’s invasion of Ukraine has led many world powers to consider the impact on energy and consumer goods. West Africa currently imports a substantial quantity of food from Russia, which could be affected by the conflict. With inflation expected to reach around 5% in 2022, the increase in food prices could severely impact consumer spending. However, Olivier Marion, head of West and Central Africa at the Bühler Group, told OBG that these developments could enable Côte d’Ivoire and neighbouring countries to develop their food processing capabilities and diversify the types of food crops being grown. The African Development Bank announced in March 2022 it would be releasing $1bn to accelerate wheat production and help reduce regional dependence on wheat from Russia. This could change the face of the West African agro-industry and provide support for the government’s efforts to develop the domestic food processing industry.

Agro-Industry

Agri-business remains Côte d’ Ivoire’s main industrial activity, with around 40% of the population employed in agriculture. The country is one of the largest producers of cocoa, cashews and cotton in the world. The agricultural processing industry has developed substantially in recent years, with the aim to increase the processing of agricultural commodities by 50% by 2025. In 2019 agriculture contributed around 16% of GDP and an estimated 60% of exports, according to the World Bank.

Côte d’Ivoire is the largest cocoa bean producer and exporter in the world, with production rising from 1.4m tonnes in 2012/13 to 2.2m in 2020/21. In 2020 the country exported $3.5bn worth of cocoa beans, mainly to the Netherlands, the US, Malaysia, Turkey and Germany. Unfavourable weather conditions and the vegetative rest required by the crops could weigh on production levels in 2021/22. Additionally, lower farmgate cocoa prices will see farmers paid around 21% less than the previous year for the 2022 harvest, which could make the segment less attractive and drive some smallholders to rubber farming.

Telecommunications Equipment

The telecommunications sector has been rapidly expanding and currently contributes approximately 10% of GDP. The mobile penetration rate was around 149% in 2020, meaning that many people have more than one mobile account or SIM card. Most Ivorians access the internet via a mobile device rather than a fixed connection, though use of the latter grew by just over 19% in 2020.

There is significant potential to expand the telecoms manufacturing industry. In February 2022 the government announced plans to launch 5G coverage in 2023, requiring the expansion of existing internet infrastructure. Progress is being made in the manufacturing industry, with the launch of the first domestically produced smartphone and computer in 2021. The factory, managed by CERCO Group, is expected to produce up to 4000 units a day, with the potential to extend production to LED lamps, cameras and other devices. This supports the government’s aim of promoting Côte d’Ivoire as a leader in the digital field, according to Roger Adom, minister of digital economy, telecommunications and innovation.

Investment

Having invested substantial public funds in industry in recent years, the government is now orienting policy towards attracting private and foreign investors. Projects such as the 2018 Port of Abidjan expansion and $2.8bn in spending on the construction and renovation of roads between 2017 and 2019 are expected to increase the country’s investment prospects. Enhanced transport links and greater import-export capacity, coupled with the PND 2021-25, will likely attract increased foreign investment.

The accessibility of the market for foreign investors is evident in the evolution of the country’s investment metrics. Foreign direct investment (FDI) stock grew by approximately five-fold over the past two decades, from $2.5bn in 2000 to $12.2bn in 2020, according to the UN Conference on Trade and Development ( UNCTAD). As the strongest ECOWAS economy, Côte d’Ivoire remains a popular destination for foreign investment. However, FDI inflows dropped from nearly $1bn in 2019 to $509m in 2020 due to the pandemic, according to UNCTAD’s “2021 World Investment Report”.

However, several challenges remain for foreign companies operating in the industrial sector. “Market entry has been significantly facilitated by the government, even for foreigners in terms of work permits. The taxation system, however, remains challenging to navigate, especially for new companies,” Marion told OBG. This, he suggested, means that new companies can at times struggle to thrive in the market.

In 2021 the World Bank approved $200m in financing from the International Development Association to enhance the competitiveness of export-oriented agro-industry and manufacturing in support of Vision 2030. The Competitive Value Chains for Jobs and Economic Transformation Project aims to diversify the economy through the development of key sectors. The funds will go towards establishing a long-term investment facility as well as supporting 3000 smallholder farmers and over 200 start-ups and early-stage SMEs.

The development of the energy sector also promises to attract greater investment. The oil and gas industry has drawn higher levels of foreign investment in recent years. Côte d’Ivoire currently has 100m barrels of proven oil reserves and 1trn cu feet of gas reserves. Italian firm Eni’s offshore oil discovery in 2021 could encourage greater interest, with the company hoping to start oil and gas production in 2023. Eni and French firm TotalEnergies invested $185m in exploration operations in 2019 (see Energy & Mining chapter).

The country’s only refinery, located in Abidjan, increased its crude output from around 2.5m tonnes per year in 2018 to 3.1m tonnes per year in 2019. Stateowned Société Ivoirienne de Raffinage announced in 2021 that it had signed a contract with US corporation Honeywell to license the technology for the production of low-sulphur fuels, which supports the aim of using diesel fuels containing only 10 parts per million of sulphur across the continent by 2030. In 2018 the UN Development Programme estimated a refinery upgrade of this type would require approximately $300m worth of investment.

This expansion will support the manufacturing industry as demand for oil and gas equipment for exploration, drilling, storage and related services increases. The burgeoning renewable energy sector will also require new equipment. In line with its target to source 42% of electricity from renewable sources by 2030, the government signed a contract with the World Bank to join its Scaling Solar programme in 2019. Funds to develop 60 MW of grid-connected solar power will come from the Ministry of Foreign Affairs of the Netherlands, the Ministry of Foreign Affairs of Denmark, US Agency for International Development’s Power Africa and the Infrastructure Development Collaboration Partnership Fund.

The Ivorian company Société des Energies Nouvelles (SODEN) is working on an innovative project that could support the growth of the renewable energy industry using waste from cocoa production. Pilot projects have been carried out using bean shells, pod husks and cocoa sweatings, which are normally discarded in the production process, to power biomass operations. Instead of fossil fuels, waste is burned in a turbine to generate electricity. With support from the US Trade and Development Agency, SODEN plans to build a $244m facility in Divo, with nine plants being built across the country. The Divo plant is expected to be the largest in West Africa, with 46-70 MW of installed generation capacity starting from 2023.

Freezones & Incentives

The government is attempting to expand industrial activities beyond Abidjan through the construction of a new industrial zone in the port city of San-Pédro. This expansion is part of an agreement signed between the government and ARISE Ivoire in August 2020 that outlines for the construction of three industrial centres in Akoupé Zeudji (Abidjan), San-Pédro (south-west) and Ferkessédougou (north), at a cost of $1.7bn. This will be supported by the launch of the Project to Improve Services to Industries in Côte d’Ivoire, led by Souleymane Diarrassouba, the minister of trade and industry and SME promotion, and funded by the African Development Bank.

The 2018 Investment Code enhanced incentives for companies working in industry. The code can be used for domestic and foreign investment and includes two specific tax incentive regimes: the Investment Declaration Regime and the Investment Approval Regime. There is no minimum investment threshold, but companies must meet certain criteria. For example, private companies must dedicate at least 15% of their annual expenses to research, development and technological innovation to benefit from the related exemptions and tax credits.

The manufacturing industry contributed almost 11.2% of GDP in 2020, with the annual value added by the sector totalling $6.9bn, compared to just under $5bn in 2015. Several new manufacturing projects were set up in 2021, expanding the number of processed items being produced.

In September 2021 the Netherlands-based animal nutrition firm De Heus began the construction of its new greenfield compound feed factory in the industrial zone of PK in Attingue. With a capacity of 100,000 tonnes per year, the facility will produce high-quality complete feed to support local farmers. Production is expected to start in the second half of 2022, with the aim of expanding to allow for eventual regional export.

In November 2021 the US corporation Cargill completed a $100m expansion of its cocoa processing site in Yopougon, thought to be the largest in Africa. It is expected to increase production capacity by around 50%. The site produces cocoa powder, cocoa butter, liquid cocoa liquor and solid cocoa liquor to meet rising global demand. Additionally, Cargill plans to invest $6m in farmer training and $3.5m in traceability projects.

Value-Added Potential

The majority of agricultural exports, such as coffee, rubber and cotton, remain unprocessed. The government hopes to add significant value to the country’s exports by expanding the agricultural processing industry. Some of its main exports, including cashew nuts, cocoa and palm oil, could be processed as biofuel and refined industrial oil through the development of new facilities.

One of the initiatives designed to add value to the industrial sector is the promotion of the Made in Côte d’Ivoire label, part of the PND 2021-25. This is aimed at the cocoa industry, to signal to consumers that they are buying a premium product from the world’s biggest producer, in a way similar to other major producers through schemes like Café de Colombia.

Additionally, a favourable 2014 mining code established greater transparency and allowed for exploration permits to be provided for 10 years, adding value and encouraging interest in the gold sector. Mining activities increased by around 43% in 2019, generating $1.3bn in revenue and supporting 55,000 jobs.

Supply Chains & Inputs

The country is part of several regional and international trade agreements, including UEMOA, the West Africa-EU Economic Partnership Agreement and the African Continental Free Trade Area. This facilitates trade with Côte d’Ivoire for companies across both West Africa and Europe.

Private companies have shown growing interest in recent years in promoting responsible supply chain control. As consumers around the world increasingly attempt to purchase more responsibly, labels such as Fairtrade and Cocoa Life have grown more popular. As the main market for Ivorian cocoa, at around 67%, the EU launched a Sustainable Cocoa Initiative aimed at stopping child labour in cocoa production. Similar initiatives have been initiated in the gold mining industry.

Côte d’Ivoire is gradually attracting greater international investment in the development of new industries, which could eventually shift its supply chain needs. Jean Maurice Ibrahim, chairman and CEO of Distribution de Matériel Electrique Industriel et Bâ timents, emphasised the importance of supporting local production. “There is a need for better regulation of imported industrial products to avoid saturating the market with foreign goods, and to increase the competitiveness of local industry,” he told OBG.

Until recently, the country had imported all of its vehicles. In 2018 the government passed a law that limited the importation of private-use vehicles over five years old, and mini-buses older than seven years. As well as increasing the sale of new cars by 16% in 2018 and 2019, it also encouraged private investors to commence automotive operations in the country. In 2018 French-Italian automotive manufacturer Iveco established a partnership with Société des Transports Abidjanais to open a vehicle assembly factory.

In January 2022 the companies launched the first domestically produced mini-buses. The plant has an annual production capacity of approximately 1000 vehicles, to be sold under the Daily Ivoire brand. If successful, it could encourage more domestic automotive projects and decrease dependence on vehicle imports.

Outlook

By investing heavily in the development of the industrial sector and making national policy more favourable for private investment, the government has helped accelerate the growth of industry. Traditional sectors such as agriculture are being transformed as processing capabilities expand through the development of new industrial zones, adding greater value to the sector. Furthermore, international investment in the oil and gas industry, expected to grow substantially over the next decade, will be complemented by the ongoing development of the renewable energy sector.