MARKET DEVELOPMENT
Industrialization and Global Value Chains in Côte d’Ivoire
Industrialization and Global Value Chains in Côte d’Ivoire
15/05/2014 (Afribiz.info) - Côte d’Ivoire participates in GVCs involving many agro-food items (palm oil, cashews, pineapples, bananas) and agro-industries in heavy demand regionally or worldwide. The country supplies 40% of the world’s cocoa, as well as coffee (300 000 tons a year) and rubber (256 000 tons in 2012). These are exported unprocessed or after intermediate processing and attract giant international firms such as Cargill, Michelin, Olam, Nestlé and Unilever.
Potential exists for better participation in GVCs, through rich soil, plentiful farm labor, established firms and production sectors with good growth prospects. Rubber, for example, already has 16 industrial processing plants. Very good weather for production results in yields among the five highest in the world, in a global market where supply cannot keep up with demand. Worldwide cocoa demand is also growing, driven by chocolate consumption in emerging countries. Since 2012, Ivorian coffee and cocoa producers enjoy locally guaranteed prices and new quality control giving the right to a country-of-origin label under the 2QC (Quality, Quantity, Growth) program. The last harvest produced 81% grade-1 cocoa. Côte d’Ivoire is Africa’s biggest exporter of palm oil, with all processing (into refined oil and by-products) done domestically before export to ECOWAS countries, where demand is soaring. The two main firms, Palmci and Sania, majority-owned by the Ivorian group Sifca and its partners Olam and Wilmar (Singapore), do 90% of their business in the sub-regional market (Burkina Faso, Mali and Nigeria).
Limited access to rural land is one of the main structural obstacles to higher production and yields, mainly of perennial crops. Palm oil yields are seven times less than for growers in Indonesia and coffee yields are two-and-a-half times less than in Indonesia. A lack of secure long-term farmland tenancy (no deeds or leases) limits funding and development opportunities and also the possibility of outsourcing production. A good land access formula is needed, perhaps modelled on neighboring Ghana’s Lands Commission, which enables a practical link between the government and local tribal chiefs and creates the predictability needed for agricultural contracts.
The government wants to boost the industrial sector’s share of the economy from around 30% of GDP in 2012 to 40% by 2020, and is looking into how to increase raw-material processing, taking into account that some strategic GVCs do not have much room for direct industrial input, such as those whose related products are not traded on world markets. Making a finished product also requires capital and proper transport and distribution. A committed policy of local processing to supply world markets could be costly and of little benefit for GVCs.
Côte d’Ivoire’s best industrial growth opportunities, along with creating value and jobs, lie in GVCs with strong regional potential, and also in strengthening SMEs involved in intermediate export activity. The country has a diversified production, ports and good roads. This potential is still underused in the sub-region, if not underestimated by sectors such as textiles and clothing.
Population growth, urbanization, the emergence of regional hotel chains, the diaspora and regional trade preferences (zero duty inside WAEMU, preferential access to European markets and only 6% duty on exports to the United States) offer West African stylists and clothes designers healthy niche markets in high-class dressmaking, household textiles, interior decoration, traditional embroidery and luxury handicrafts. Côte d’Ivoire has good industrial capacity to compete in rapidly supplying these customers by diversifying its products. The two main current products, bazin and wax fabric, are only a small part of the regional market’s needs.
Many industrial opportunities also exist in agro-food, especially tropical fruit processing. Côte d’Ivoire is Africa’s leading cashew-nut producer and top international exporter (450 000 tons a year). The wooden furniture market also has big potential, with Africa’s rapid urbanization. By putting a specific focus on improving port facilities and administration, the country’s geography and expertise in port logistics would be an advantage in attracting assembly operations by big international firms seeking West African markets. The extension of the CET in ECOWAS in 2014 should provide better opportunities for these activities.
Additional obstacles need to be removed to use this regional potential. SMEs still perform too few useful functions for producers, such as packaging, marketing and distribution, and struggle to win new business in raw-material processing or exports. The national survey of SMEs (firms with annual turnover of less than XOF 1 billion and fewer than 200 employees) showed 30 000 enterprises, many more than expected. Nearly all were focused on the local market, 84% of them in the tertiary sector (telecommunications and commerce), only 15% in the secondary (processing) and 1% in the primary sector.
Apart from the idea of creating a guarantee fund for access to credit and setting up an SME development agency, export and sub-contracting activity must be made more attractive through simplified procedures for SMEs, special incentives and greater assistance in management. Small businesses know how to move quickly between sectors and into new and profitable activities. They lack the skills for the formalities required to get into export markets or presenting adequate loan applications. Their production capacities are also still too small to meet large orders.
Better local structuring of activity in special zones, with firms geographically close to the services they require, could also be an important attraction. The Moroccan model of integrated industrial platforms (with offers of infrastructure and training skilled labor) could be followed. The government’s plan to set up new free zones and modernize existing industrial areas is a first step in the right direction.
Potential exists for better participation in GVCs, through rich soil, plentiful farm labor, established firms and production sectors with good growth prospects. Rubber, for example, already has 16 industrial processing plants. Very good weather for production results in yields among the five highest in the world, in a global market where supply cannot keep up with demand. Worldwide cocoa demand is also growing, driven by chocolate consumption in emerging countries. Since 2012, Ivorian coffee and cocoa producers enjoy locally guaranteed prices and new quality control giving the right to a country-of-origin label under the 2QC (Quality, Quantity, Growth) program. The last harvest produced 81% grade-1 cocoa. Côte d’Ivoire is Africa’s biggest exporter of palm oil, with all processing (into refined oil and by-products) done domestically before export to ECOWAS countries, where demand is soaring. The two main firms, Palmci and Sania, majority-owned by the Ivorian group Sifca and its partners Olam and Wilmar (Singapore), do 90% of their business in the sub-regional market (Burkina Faso, Mali and Nigeria).
Limited access to rural land is one of the main structural obstacles to higher production and yields, mainly of perennial crops. Palm oil yields are seven times less than for growers in Indonesia and coffee yields are two-and-a-half times less than in Indonesia. A lack of secure long-term farmland tenancy (no deeds or leases) limits funding and development opportunities and also the possibility of outsourcing production. A good land access formula is needed, perhaps modelled on neighboring Ghana’s Lands Commission, which enables a practical link between the government and local tribal chiefs and creates the predictability needed for agricultural contracts.
The government wants to boost the industrial sector’s share of the economy from around 30% of GDP in 2012 to 40% by 2020, and is looking into how to increase raw-material processing, taking into account that some strategic GVCs do not have much room for direct industrial input, such as those whose related products are not traded on world markets. Making a finished product also requires capital and proper transport and distribution. A committed policy of local processing to supply world markets could be costly and of little benefit for GVCs.
Côte d’Ivoire’s best industrial growth opportunities, along with creating value and jobs, lie in GVCs with strong regional potential, and also in strengthening SMEs involved in intermediate export activity. The country has a diversified production, ports and good roads. This potential is still underused in the sub-region, if not underestimated by sectors such as textiles and clothing.
Population growth, urbanization, the emergence of regional hotel chains, the diaspora and regional trade preferences (zero duty inside WAEMU, preferential access to European markets and only 6% duty on exports to the United States) offer West African stylists and clothes designers healthy niche markets in high-class dressmaking, household textiles, interior decoration, traditional embroidery and luxury handicrafts. Côte d’Ivoire has good industrial capacity to compete in rapidly supplying these customers by diversifying its products. The two main current products, bazin and wax fabric, are only a small part of the regional market’s needs.
Many industrial opportunities also exist in agro-food, especially tropical fruit processing. Côte d’Ivoire is Africa’s leading cashew-nut producer and top international exporter (450 000 tons a year). The wooden furniture market also has big potential, with Africa’s rapid urbanization. By putting a specific focus on improving port facilities and administration, the country’s geography and expertise in port logistics would be an advantage in attracting assembly operations by big international firms seeking West African markets. The extension of the CET in ECOWAS in 2014 should provide better opportunities for these activities.
Additional obstacles need to be removed to use this regional potential. SMEs still perform too few useful functions for producers, such as packaging, marketing and distribution, and struggle to win new business in raw-material processing or exports. The national survey of SMEs (firms with annual turnover of less than XOF 1 billion and fewer than 200 employees) showed 30 000 enterprises, many more than expected. Nearly all were focused on the local market, 84% of them in the tertiary sector (telecommunications and commerce), only 15% in the secondary (processing) and 1% in the primary sector.
Apart from the idea of creating a guarantee fund for access to credit and setting up an SME development agency, export and sub-contracting activity must be made more attractive through simplified procedures for SMEs, special incentives and greater assistance in management. Small businesses know how to move quickly between sectors and into new and profitable activities. They lack the skills for the formalities required to get into export markets or presenting adequate loan applications. Their production capacities are also still too small to meet large orders.
Better local structuring of activity in special zones, with firms geographically close to the services they require, could also be an important attraction. The Moroccan model of integrated industrial platforms (with offers of infrastructure and training skilled labor) could be followed. The government’s plan to set up new free zones and modernize existing industrial areas is a first step in the right direction.