Deja vu: And if the cocoa price dropped?

A thumb sketch of Ivorian economic history from independence goes like this: a major cocoa farmer becomes president, encourages the development of the sector by opening up new land and encouraging farmers to cut down the forests to become productive. The cocoa sector becomes the biggest in the world by the end of the 1970s, the state creams off a good portion, and invests in great infrastructure. The country is peaceful and prosperous (hailed as the Ivorian economic miracle).

But from 1980 things change drastically as the price of cocoa drops, the country goes into a down-ward spiral, structural adjustment, political protest, and finally war. The country seemed to have great leadership in the first decade, but then the same people were in charge in the 80s, so was it more about commodity prices than vision?

An interesting new report from the World Bank asks if Cote d’Ivoire is experiencing its second economic miracle. What do we see? High cocoa prices (see 10 year price data here), high production, a healthy agricultural sector (especially cocoa, cotton and cashew), and infrastructure investments. And so, it would seem pertinent to ask if the country is again too vulnerable to cocoa price changes. One may recall that when Gbagbo took power, farmers were getting paid as little as 150 cfa at the farmgate – due in part to a botched liberalisation for which Gbagbo must bear some blame (though it started before he came to power). Gbagboists could well argue that if the cocoa price for Gbagbo had been what it is for Ouattara, maybe he would have got off to a better start. Discuss.

I don’t have comparative figures to hand, but there’s no doubting the importance of cocoa. It’s estimated at 22% of the national economy and 50% of export revenue, employing 800,000 farmers, and bringing in more than two billion euros annually. The country has been in the news for the last few days for a new target of attempting to transform 50% of cocoa beans to a semi-finished level of production by 2020. There were also headlines about producing chocolate locally.

[I’ve ranted against journalism on these things before on this blog. The 50% transformation target dates from the 1990s, and most recently it was fixed at 2015. I don’t mind dates being shifted – we all need to re-evaluate – but what I find worrying is that there seems to be a general amnesia about the original target date’s existence. When the date is changed, instead of being reported on as the moving of goalposts, it’s reported on as if the government has set itself a new objective, and that that is positive and inspirational. Chocolate has been in production in Abidjan for a long time (the Chocodi project in Gbagbo’s time). But from the news reports you’d think that no-one has ever thought of producing chocolate in Cote d’Ivoire before, and that Ivorians are suddenly going to be buying chocolate by the bucket full in a couple of years’ time.]

So, are we naive about the sustainability of the Ivorian recovery? A recent article by a Moroccan economist has added fuel to the fire. He argues that the impressive recent Ivorian economic growth is almost entirely based on high commodity prices, making it vulnerable to cyclical price changes, and climate. The head of the International Cocoa Organization, Jean-Marc Anga (an Ivorian) recently warned against the dangers of over-production.

In an editorial in the main government newspaper (which he edits), Venance Konan argued that the author makes some good points, but saying that unlike the 1960s and 1970s, the government is aware of these dangers and is working to combat them. He says the government’s investment in big infrastructure projects is proof of the willingness to diversify. If you’re not convinced by Konan, then you can find some stronger arguments in the above World Bank report (in French) which interestingly cites the increase in private sector investment as one of the key drivers of the Ivorian recovery. What does worry me though is that in almost all the economic reports from the World Bank and IMF that I see, the growth is attributed to the primary and tertiary sectors, while the industrial sector doesn’t seem part of the growth story, despite being generally acknowledged globally as being key to ’emergence’ (it is growing, but not as much).

Development is something that takes decades and will not come overnight. Despite all the positive work being done in Cote d’Ivoire I’m amazed at how much there is still to do. How water and electricity cuts are still common, how roads like Yamoussoukro-Daloa and Abidjan-San Pedro are still in such a deplorable state, how very little has changed in four years at the ports of Abidjan and San Pedro, how the university sector still seems in trouble.

As far as I can see, sparking industrial growth is something no-one quite fully understands. On the positive side, the government has initiatives to build roads, improve the electricity supply, reform business laws and change taxes. On the negative side, human resources, corruption, small markets, limited availability of credit, and administrative challenges still seem as obstacles without much hope of rapid progress.

Will the cocoa price go down hill soon? Who can tell? At least the EU market is in bad shape, and prices are holding. But diversification away from cocoa must remain a significant part of Ivorian economic planning to avoid another disaster.


This entry was posted in Economics and tagged , , , , , . Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.