In Ivory Coast, creditors have some legal rights, but these protections are offset by the near complete lack of information the creditworthiness of potential borrowers.
Figure 2:
How the World Banks Conceptualizes Credit Acquisition
When it comes to protecting investors and minority shareholders Ivory Coast continues to do poorly. Here, the country ranks 154th out of 183 countries – making the country one of the worse in the world for shareholders. Ivory Coast received this score because even though it does have a moderate level of disclosure requirements, board members and directors are rarely held liable and it is a difficult place to bring shareholder lawsuits.
Ivory Coast has a similarly low ranking when it comes to paying taxes. The World Bank estimates that pleasing the tax man in Ivory Coast requires a total of 64 payments over the course of a year which, in turn, takes up to 270 hours to complete and can consume up to 44.4-percent of a company’s profits. Accordingly, Ivory Coast’s tax burden is ranked 153rd out of 183 nations.
When it comes to engaging in cross-border trade, Ivory Coast receives a low score once again. In Ivory Coast, to import goods into the country one is required to have nine documents for customs’ officials to inspect. On average, it takes a total of 36 days to import goods into Ivory Coast with the cost amounting to $2,577 (excluding tariffs) per container shipped into the country.
The cost to export goods, though still bad, is somewhat smaller as Ivory Coast requires ten documents to be inspected by customs’ officials, while the total cost (excluding tariffs) is $1,969 per container, with delivery taking up to 25 days from point of origin. Compared to global averages this nets Ivory Coast a ranking of 160th out of 183 on ease of engaging in cross-border trade – largely due to its relatively isolated, landlocked geographic location.
Ivory Coast does better when it comes to contract enforcement, where it ranks 126th out of 183 countries ranked on this issue by the bank.
On average, reports World Bank analysts, it takes a total of 33 legal procedures to take a contract from dispute to resolution, at the cost of 770 days, or just over two year, spent in court or otherwise attending to legal issues. The financial cost of pursing a contract claim, says the Bank, typically accounts for 41.7-percent of the value of the claim.
Finally, in terms of closing or liquidating a business Ivory Coast ranks 76th out of 183 countries. Here, it takes 2.2 years to close an estate at a cost of 18-percent of the value of said estate, for a recovery rate of 32.8 cents on the dollar.
Table 1 presents a summary of these rankings as well as Ivory Coast’s overall ease-of-doing business rating. As one can see, Ivory Coast’s scores are for the most part universally bad. The country excels or can even be considered a middling place for business in no area except, ironically, in the area of closing businesses.
Table 1:
World Bank Ease of Doing Business
Assessment and Rankings: Ivory Coast
Prospects
To say that Ivory Coast has had a tough three decades is an understatement. The economic crisis of the 1980s and then unremitting political tumult in the 1990s and 2000s set the country back in a number of ways. What had once been a rich, prosperous country stagnated and fell into a prolonged period of civil strife that fundamentally altered its post-independence political status quo.
It is, for instance, increasingly apparent that ethnic and geographic divisions in the country require some degree of decentralization from the prevailing model of strong, central-government and executive-office control that has typified Ivory Coast since independence.
Houphouët-Boigny, with French support, was able to maintain this type of rule by using strong economic growth and opposition incorporation into his regime to head off discontent, but, as the crisis of the 1980s showed, when growth stops the fight over the economic pie necessarily becomes much more intense.
This is especially the case, as in Ivory Coast, when the office of the president is invested with a huge amount of power and possession of which can economically make or break huge segments of the population.
Stripping the office of some of that power and allowing some degree of decentralization should, therefore, be seen as first step necessary in Ivory Coast’s long-term rehabilitation as it weakens the incentive for contending political actors to seize power by force of arms.
In turn, devolving power to lower levels and to the legislature will allow buy-in from a wider sector of Ivorian society into desperately needed reforms that will, hopefully, free the economy from the dead hand of continued state interference.
This is needed because while Houphouët-Boigny and his predecessors ran a capitalist state, it should be understood that the president, from Houphouët-Boigny on down, was effectively the chief capitalist of that state as well.
As in much the rest of Africa, then, there has for a long time been a fine, sometimes indistinguishable line between business and government in the Ivory Coast and structural corruption remains a significant problem. Indeed, Transparency International, the anti-corruption NGO, ranks the country as the 136th most corrupt country on the planet.
Figure 3:
Ivory Coast Economic Growth,
Percent Increase, 2003 – 2013
Still, as the chart above shows, there are nonetheless significant reasons for optimism about the Ivory Coast, too. The country’s current president, Alassane Ouattara, has made fighting corruption a major priority and the dismal ranking of 136th most corrupt country on the planet is actually something of an improvement as the country had been ranked as the 150th most corrupt country during his predecessors’ terms in office.
Peace and return to a semblance of stability have also allowed growth to return, with both 2012 and 2013 registering growth of over nine percent, beating IMF expectations. What’s more, 2014 is expected to be another banner year with the African Development Bank expecting growth to approach nearly ten percent.
So, things are looking up in Ivory Coast at long last. Coupled with its relatively well-educated population and the benefits of currency stability through its membership in the CFA franc zone, foreign investment is returning.
Impressive to be sure, but it should be noted just how fragile this recovery is. The country lost half of its businesses as a result of civil strife and poverty has accordingly risen to encompass half the population – up from merely 1 in 10 in years past. This means that growth is occurring on an exceptionally low base and amongst people desperate to recapture their lost wealth and position.
For this to happen, however, the business climate – as described above – needs to be radically improved. Fortunately this is another priority of President Ouattara, but past habits are hard to break and lingering political issues, particularly over the composition of the country’s security forces, needs to be resolved.
Given that corruption of the sort one sees in Ivory Coast is used as a political tool to paper over dissent, anti-corruption efforts could potentially threaten Ivory Coast’s newfound political stability.
Longer term, the country’s overwhelming dependence on commodity production needs to be reduced through diversification of economy all while infrastructure, which is in an acute state of disrepair, desperately needs investment. Still, despite all this the country’s prospects are better than they’ve been in years, and investors should plan accordingly.
Jeffrey Cavanaugh holds a Ph.D in political science with a specialization in international relations from the University of Illinois at Urbana-Champaign. Formerly an assistant professor of political science and public administration at Mississippi State University, he writes on global affairs and international economics for AFKInsider, Mint Press News and BAM South.
