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Doing Business in Africa: Ivory Coast

Doing Business in Africa: Ivory Coast

Located on the Gulf of Guinea, Ivory Coast, or, alternatively, Côte d’Ivoire, is a West African state that has recently emerged from nearly twenty years of political conflict and instability that came after the death of its first president, Félix Houphouet-Boigny, in 1993.

Houphouët-Boigny, a well-educated member of Ivory Coast’s indigenous colonial elite, served in a variety of administrative and political positions, including a stint in the French Parliament and ministerial positions in the French government, before assuming the leadership of his newly independent country in 1960. His tenure, which lasted for 33 years, was among the longest in Africa and he left an indelible stamp on the country.

Unlike most of Africa’s post-independence leaders, Houphouët-Boigny did not break off relations with Ivory Coast’s former colonial master. Rather, President Houphouët-Boigny maintained very strong relations with Paris and as a result became something of a stalking-horse for French interests in post-colonial Africa.

His influence was such that he became a close advisor to several French presidents and he maintained a strong line against both Pan-African socialism and the Soviet Union, resulting in significant support from his backers back in France.

Though a capitalist, Houphouët-Boigny was no democrat and he ruled via a one-party political system that dominated every level of the Ivory Coast’s politics. This one-party rule, while autocratic, was nonetheless stable as President Houphouët-Boigny kept both party and government posts open to all of his country’s many ethnic groups.

Thus, although the country was undemocratic, the incorporation of those who might have become political enemies into his system of rule diminished opposition very effectively.

For most of its independence, then, the combination of political stability and a pro-capitalist orientation set the stage for significant growth, and from independence to the late 1970s Ivory Coast was one of the fastest growing countries in Africa.

This prosperity, however, was premised on high commodity prices for the country’s agricultural goods, particularly cocoa, and when the global economy slowed and went into recession in the late 1970s those prices collapsed and Ivory Coast went into free fall. As a result, the country  spent much of the 1980s lurched from one financial crisis to another.

By the end of decade the political stability imposed by Houphouët-Boigny’s one-party regime began to crumble and the president, by now ailing from ill health, was increasingly seen as unable to deal with his country’s significant problems.

In 1990 widespread protests and opposition agitation forced the president to allow multi-party elections, but Houphouët-Boigny managed to hold on for three more years until his death – at which time his chosen successor, Henri Konan Bédié – became president.

Unfortunately, Bédié was a much less gifted politician than his predecessor and swiftly alienated many though a policy of restricting access to government posts to only his close supporters. Corruption soared and, in 1999, a military coup ousted Bédié and installed a general, Robert Guéï, as president. Elections in 2000 subsequently led to Guéï turning the presidency over to Laurent Gbagbo, a long-time leader of the anti-Houphouët-Boigny opposition.

Gbagbo’s tenure, however, was even more unproductive than his predecessors and he faced string of rebellions and uprisings during his term of office that were put down with increasing amounts of force.

In 2005 the presidential elections was delayed until 2010, which  President Gbagbo subsequently fraudulently declared he had won. This set the stage for a significant period of civil strife that resulted in French military intervention, the arrest of Gbagbo, and the installation of Alassane Ouattara as Ivory Coast’s president.

Ease of Doing Business

Given all this, what are business conditions like in Ivory Coast? According to the World Bank, Ivory Coast currently ranks 169th out of 183 countries on its Ease of Doing Business Index – a measure created by the bank to gauge the degree to which commercial enterprises encounter regulatory hurdles, legal threats to property, and the time and money spent on things such as registering a business, ensuring right of title to property, and acquiring licenses.

By way of comparison, the United States ranks 4th on ease of doing business, right after Singapore, Hong Kong, and New Zealand.

What does this ranking mean? Take, for instance, the bank’s measure of how easy it is to start a business, which is depicted in Figure 1 below. From the figure one can see that the bank defines business-creation costs as consisting of the time and money outlays involved in the series of legal steps necessary for the entrepreneur must take in order to legally establish an in-country firm. Using this framework, the bank then tasks researchers to go through this process in order to establish in-country averages.

When this metric is applied to Ivory Coast, the bank finds that Ivory Coast ranks 172nd out of 183 in ease of starting a business, making Ivory Coast one of the worst places on Earth to start a legal commercial enterprise.

To start a business in Ivory Coast, one has to complete ten bureaucratic procedures that take a total of 40 days at a total cost of about $1,410, with a minimum capital requirement of $2,400 required for all new businesses in the country. Clearly, it is not easy for the average Ivorian to start a business.

Figure 1:

How the World Bank Measures Ease of Starting a Business

         Fig 1 Ease of Business Graphic WB

Using similar metrics for other aspects of business operations, the bank has ranked Ivory Coast in a number of other areas. To obtain a construction permit, for instance, Ivory Coast is ranks 165th out of 183 as it takes the completion of 21 procedures, which takes on average 592 days at a cost of $2,400, or about 2.4 times national income.

Clearly, this is a significant problem and a major obstacle to business creation and expansion in the former French colony.

Continuing in its assessment, the World Bank has determined that in order to obtain and register property, Ivory Coast ranks 151st out of, again, 183 countries measured. To register property in Ivory Coast, the bank finds, it takes the completion of six bureaucratic procedures that takes, on average, 62 days and costs 13.9-percent of the property’s financial value in fees and other costs to complete.

Ivory Coast does little better when it comes to obtaining credit, where it ranks 152nd out of 183 – making the country one of the worst places in the world in this category. Here, as depicted in Figure 2, the bank examines the legal rights of creditors and borrowers in secured transactions and bankruptcy law as well as the strength of credit information bureaus and exchanges.

When lenders have both strong legal rights and easy access to a wide variety of information about the client’s creditworthiness, reasons the bank, the more available credit will be. When information on borrowers is significantly lacking – as is the case in most of Africa – legal protections for creditors must in turn be very strong.