Development plans add value to Côte d’Ivoire's already diversified agriculture sector

Historically, agriculture has been the central driver of development since the nation gained independence in 1960. The country has an abundance of natural resources, and its fertile lands and favourable climate have allowed it to position itself as a key producer and exporter of some of the world’s premier soft commodities, ensuring a crucial source of government revenue for decades. The agriculture sector is already very diverse: the country has been the world’s top producer of cocoa for many years, and is also one of the main exporters of cashew nuts, as well as a key player in the palm oil, cotton, rubber and banana markets.

After the return to political stability in 2011, the country started to implement a number of measures to develop its agriculture sector, notably through public investment as part of a sector development plan, the National Agricultural Investment Programme ( Programme National d’Investissement Agricole, PNIA). Beyond ensuring food security, self-sufficiency and sustainable agricultural development, the plan aims to encourage public and private investment in the sector, and boost exports and local processing so that agriculture plays a leading role in Côte d’Ivoire’s industrialisation. For now, however, the sector is still hindered by wider logistical issues, as road infrastructure impacts the cost of agricultural production, especially within the country’s most isolated regions.

In Figures

Agriculture represents 17.4% of the country’s GDP and accounts for 60% of its exports. This is down significantly from an average contribution of 48% to GDP in the 1960s, as the country has since diversified its economy through the rise of the industry and services sectors. Nevertheless, Côte d’Ivoire remains dependent on agriculture. The sector has recently felt the effects of climate change and price volatility – particularly in 2016 and 2017, when economic growth was impacted by decreases in the global prices of cocoa.

Sector Policy

The authorities have made agriculture and agro-industry, particularly local processing, a pillar of the country’s National Development Plan (Plan National de Développement, PND) 2016-20. The plan primarily aims to increase production and efficiency, improve supply chains and grow the agro-industry sector. The PNIA is also an important component of these efforts, allocating CFA2trn (€3bn) to be invested from 2012 to 2016 and CFA11.9trn (€17.9bn) for the second phase (PNIA II) 40% of which is government funded. PNIA II was adopted in late 2017 and spans from 2018 to 2025 with a total cost of CFA12bn (€18m).

The plan covers livestock, agriculture, fisheries, aquaculture, environmental management, food and nutrition security, rural development and the impact of agriculture on populations. Some of these areas have received too little focus in the past, industry players point out. “Côte d’Ivoire is yet to implement sufficient food safety assessments at production sites,” Hassan Diallo, owner of local catering and food distribution company Nutrivoire, told OBG. “Government intervention is necessary for the resolution of this issue.”

The plan further comprises six programmes focused on strengthening and developing value-added agriculture and fisheries, and generating inclusive growth. The PNIA will create nine integrated agro-industrial zones, combining the necessary activities to improve agricultural productivity, including bringing together public and private investors and stakeholders for processing, marketing and operating in each subsector. Under the plan’s second phase, 60% of financing for the investment will be provided by the private sector, while 40% will be funded by the state. In September 2017 the government announced that 80% of the required funding has already been secured and is available for the PNIA’s implementation.

However, the second phase is likely to run into the same issues as the first if institutional and governance difficulties are not addressed. Indeed, according to N’Dri Koffi, executive secretary of the Union of Agricultural and Forestry Enterprises of Côte d’Ivoire, the first phase of the PNIA saw a lack of coordination between government institutions and multilateral financial organisations such as the World Bank and the French Development Agency. “The governance apparatus put in place did not function well, and there is a lot more that needs to be done for public-private partnerships in terms of investment and general communication between the two sides,” he told OBG. Nevertheless, significant progress was made in particular subsectors such as cashew nuts. For instance, the introduction of cashew varieties that are more in line with local conditions helped to increase output.

Cocoa

Côte d’Ivoire is the world’s leading producer of cocoa, a crop which contributes 40% of national export revenue and supports as many as 2m small-scale farmers. That said, the cocoa segment has recently undergone a difficult period due to the decrease in global prices, as excess supply drove prices to fall by more than 30% in the 2016/17 season. The country is expected to produce 2m tonnes in 2018, up from 1.8m tonnes in 2017, for an average daily price of $2235 per tonne in mid-January 2019, according to the International Cocoa Organisation. By comparison, the daily price per tonne in December 2017 was $1920, with prices reaching a 10-year low in 2017. In December 2015 the monthly average of daily global cocoa prices stood at $3350 and fell to $2290 in 2016.

In 2012 reform of local prices set a minimum threshold, guaranteeing farmers some security against price volatility. Between 2012 and 2016 this was set at CFA1000 (€1.50) per kg. The government lowered the price to CFA700 (€1.03) for the 2016/17 campaign. In September 2018 it was announced that the price for the 2018/19 campaign would be CFA750 (€1.13).

Additionally, the reform set up a forward sales system so that 80% of production is sold in advance annually. Lastly, the Council for Coffee and Cocoa (Conseil du Café-Cacao, CCC) was created to ensure price stability and to ensure that farmers are given 60% of international prices. A reserve fund held at the Central Bank of West African States (Banque Centrale des Etats de l’Afrique de l’Ouest) was also established to hedge against international price drops.

On the demand side, cocoa prices will be affected by chocolate consumption patterns in the next few years, as several countries are gradually consuming less of the sweet. Although some of the world’s largest economies, such as China, have seen an increase in average buying power alongside their expanding middle class, chocolate consumption has not followed, with per capita consumption of chocolate in Western Europe standing at 4.7 kg, compared to 0.1 kg in China and India in 2017, according to ratings agency Moody’s.

In the 2016/17 season an excess of 370,000 tonnes of cocoa beans in the global market meant the government had to cut its budget for FY 2017 by 10%. The excess supply was caused by favourable weather, particularly in Côte d’Ivoire and Ghana, the world’s top-two cocoa producers. The 2017/18 season is expected to face a smaller global surplus of about 100,000 tonnes or less. Total global output was expected to reach 4.81m tonnes in the 2018/19 season, attributed mainly to Côte d’Ivoire’s expectations of record production levels, as well as the rising output of Ecuador, the world’s third-largest producer, accounting for 5% of the total.

The cocoa segment faces particular risks related to climate change and weather volatility, impacting potential long-term investment in the sector. Nevertheless, the move towards local processing and more efficient production can help counter these risks and both improve yield-per-hectare rates, and diversify foreign and local direct investment targets.

Cashew Nuts

International prices for cashew nuts are beginning to drop after years of being driven upwards by rising demand. While Côte d’Ivoire is now the world’s top exporter and second-largest producer of cashews, the fall in global prices impacted the country’s revenues. Collected as a 10% tax by the government, state income from cashews stood at CFA622bn (€933m) in 2017. This also impacted the 250,000 producers and 1.5m people employed by the segment.

In the year to September 2018 production rose to 730,000 tonnes – up 2.6% from 2017’s 711,236 tonnes and almost double the output of 380,000 tonnes in 2013 – accounting for 22% of the world’s production and about 33% of international supply. The government aims to reach production levels of 1m tonnes by 2020. Around 86% of Ivorian production is exported, to Vietnam (68%), India (28%) and Brazil (3%). At the start of the campaign the minimum guaranteed price was set at CFA500 (€0.75) – up CFA60 from the 2017/18 campaign – but this dropped to a low of CFA250 (€0.38). This decrease in price, coinciding with increasing demand, was caused by consumers’ rejection of the higher prices and the subsequent reaction of exporters who lowered the market prices for raw cashew nuts.

Another challenge pertains to Côte d’Ivoire’s processing activity. Less than 10% of Ivorian production is being processed at home, despite a 150,000-tonne capacity. The government has targeted processing around 50% of locally grown cashew nuts by 2020, to be increased to 100% by 2025. The current levels of processing is primarily due to the country’s lack of competitiveness compared to Vietnam and India, as costs are higher, leading processors to buy raw cashews from the country and process elsewhere.

Hevea

Côte d’Ivoire is expected to produce about 720,000 tonnes of hevea in 2018, with output estimated to reach 2m tonnes in 2023. Production for the plant whose family includes the rubber tree, stood at around 591,000 tonnes in 2017, for a turnover of CFA495bn (€742.5m). Previous production figures were 468,000 tonnes in 2016, bringing in CFA362bn (€543m) to the Ivorian economy, and 402,000 tonnes in 2015, according to the Professional Association of Natural Rubber Traders of Côte d’Ivoire. There are currently 165,000 hevea producers and approximately 600,000 ha of plantations in the country, which represent 60% of Africa’s production and 4% of global production. The country is seventh in the world, with Thailand and Malaysia producing 90% of the world’s hevea.

However, while production is increasing, international demand is struggling to keep pace. As a result, world prices are now at their lowest, having dropped from $5000 per tonne to $1000 per tonne in 10 years, significantly impacting farmers’ revenues. In addition, a government tax of 5% on turnover was introduced in 2011, reducing the income of farmers further, who argue the tax should be on profits rather than turnover.

In December 2018 the price per kg for hevea stood at CFA248 (€0.37). The abundant supply of hevea from Thailand, Indonesia and Vietnam – the three big Asian producers – is largely fuelling this global overproduction. In particular, the maturing of 100,000 ha of plantations in Malaysia has severely disrupted market prices and volumes. Global production has increased from 9m tonnes in 2014 to 13m tonnes in 2017.

To ensure appropriate representation for the segment, officials created a national regulatory body in charge of hevea, as well as palm oil, the Hevea and Palm Oil Council, which is similar to the councils for cocoa, coffee, cotton and cashew. This body is set to include farmers, private sector and government stakeholders active in the hevea industry. The segment also saw increased processing capabilities, with 12 new processing units and a programme run by the World Bank and the French Development Agency, which is focused on processing and added value, investing CFA6bn (€9m) over the 2016-20 period. “Cocoa, cashew and hevea are Côte d’Ivoire’s most promising agricultural subsectors. These industries are looking forward to the implementation of additional incentives to support production, processing and export,” Kamel Assaf, director-general of Générale de Produits Agricoles, a private firm specialising in the purchase, processing and export of agricultural products, told OBG.

Palm Oil

Côte d’Ivoire is the second-largest palm oil producer in West Africa after Nigeria and the 11th-largest producer in the world, with about 0.7% of global output. Annual production stood at 480,000 tonnes per year in 2017, 400,000 tonnes in 2016 and lower levels of 360,000 tonnes in 2012. The country aims to reach annual production of 600,000 tonnes by 2020. More than half of the country’s palm oil producers are small-scale farmers with an average farm size of 4 ha, while the rest are operated by large industrial groups. The sector employs more than 2m people in Côte d’Ivoire.

Cotton

Cotton production increased to 412,000 tonnes in the 2017/18 season, up from 328,000 tonnes in 2016/2017, an increase of 25%, according to data provided by Intercoton, Côte d’Ivoire’s main professional cotton organisation. The country has set a target of 442,000 tonnes for the 2018/19 season. There are often major changes between years in terms of production due to the nature of the crop. The government aims to produce 600,000 tonnes of cotton annually by 2020, and is encouraging farmers to grow more cotton through the establishment of minimum prices, standing at CFA265 (€0.40) per kg for the 2016/17 season.

Coffee

Côte d’Ivoire saw its production of coffee reach 123,924 tonnes in the 2017/18 season, averaging 100,000 tonnes per year since 2011, and peaking in 2000 with 380,000 tonnes, according to a 2017 report by the CCC. The guaranteed minimum price for coffee farmers stood at CFA700 (€1.05) per kg for the 2018/19 season, up from CFA620 (€0.93) per kg in 2012/13 and CFA750 (€1.12) per kg in 2016/17.

Currently the 15th-largest world producer and third-largest African producer of coffee, Côte d’Ivoire is behind its ranking of the 1970s, when it was the third-largest producer in the world and the first in Africa, with an annual production of 400,000 tonnes. Aiming to regain its place, in 2013 the government launched a CFA8bn (€12m) programme to revive the coffee segment, led by the CCC. The programme incentivises the creation of added value in the segment and seeks to reach an annual output of 400,000 tonnes of coffee by 2020. Part of its remit is to rehabilitate more than 75,000 ha of land earmarked for growing coffee, support capacity building for more than 100,000 producers and introduce a new variety of coffee that was developed by the National Centre for Agronomic Research by 2019. Currently, only 19% of the country’s coffee output is processed locally, but the government’s goal is to increase this to 35% by 2020.

Fruits

Côte d’Ivoire’s primary fruit exports are bananas and pineapples, which are well suited to the local weather and soil conditions. Annual production of pineapple reached 30,000 tonnes in 2017, according to figures by the country’s Central Organisation for Banana and Pineapple Producers and Exporters. This is still below output levels prior to the political crisis, which were at 230,000 tonnes in 2002.

Pineapple growing is primarily undertaken by small-scale farmers, largely organised as cooperatives. The fruit’s world market is highly competitive, with Latin American countries increasingly exporting to Europe, whose markets are key consumers. In particular, Costa Rica has become a major player by offering a clear substitute to Ivorian pineapples. Similarly, annual production for bananas reached 300,000 tonnes per year in 2017, with exports primarily sent to Germany, Belgium, France and the UK. Exports to the West African sub-region represent a key opportunity, which stands to gain from regional competitiveness thanks to the high quality of Ivorian fruits, the country’s relatively lower logistics costs given the shorter shipment distance, and the expanding middle class, leading to a rise in demand.

Outlook

A number of development strategies established by the government, notably the PNIA, are leading the way for Côte d’Ivoire to increase its production in key subsectors and improve its processing capabilities. These strategies are supported by public and private financing, as well as aid and technical assistance from international financial institutions. Despite some governance issues related to interdepartmental coordination and cooperation with international donors and the private sector, progress has been made. “Formalisation of the agriculture sector is a necessity to ensure stable growth,” Daouda Gon-Coulibaly, regional director-general of ACE Global Depository, a risk solutions manager for commodity supply chains, told OBG. “Agriculture has historically been a main driver of economic growth in Côte d’Ivoire, but industrialisation is a must to keep up with international competition.” The country is likely to capitalise on its existing strong position in key segments and continue receiving foreign direct investment for infrastructure works in logistics and local processing.

Nevertheless, political stability remains a perceived risk, particularly ahead of the presidential elections scheduled for 2020. In the short term, storage capabilities will be essential to ensuring that agricultural products are maintained at a standard of quality on par with buyers’ expectations. The biggest challenge, however, remains surpassing current low levels of added value and processing. The current dependency on raw materials – given price volatilities and risks related to climate change – remains problematic. As a result, efforts to encourage local processing substantially through bonuses and direct payments to processors, as well as with tax incentives and programmes directly tackling constraints to processing – notably logistical costs – will remain a state priority for the years ahead.