Ouattara victory bodes well for Ivorian economy

Ouattara victory bodes well for Ivorian economy
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A fractious opposition and strong support for President Alassana Ouattara will most likely guarantee a victory for the incumbent. Unlike the last presidential election, risks of violence are low but not to be discarded if results are contested. Assuming a peaceful election, Ivory Coast’s economic outlook is buoyant.

Ivorian citizens have been called to the polls today on Sunday 25 October to vote in the first presidential election since the 2010 contest that sparked a civil war. The incumbent Alassana Ouattara is expected to be re-elected given the support granted earlier this year by former President Henri Konan Bedie’s Democratic Party (PDCI) and the prevailing divisions among opposition parties.

Assuming that Ouattara wins in the first round, prospects look bright for Ivory Coast. The president’s economic reforms under his National Development Plan (NDP) and the progressive restoration of political stability and security have attracted investors to the country, particularly in the agricultural, energy and services sectors which are providing the highest returns on investment.

Its business and regulatory environment has improved amid low consumer price inflation and annual GDP growth rates averaging close to 9% in the past three years. The cancellation of debt by the Paris Club, the rising levels of FDI and the proactive support by the IMF and World Bank attest to the restored international confidence in the West African country. Given Ouattara’s economic track record, his re-election is seen as the preferred option by many international investors.

Low risk, stable prospects

In contrast to the previous election where the contestation of the outcome prompted violent confrontations that killed an estimated 3,000 people, Sunday’s election is unfolding with relative tranquillity.

With former president Laurent Gbagbo awaiting his trial at the International Criminal Court (ICC) for charges relating to the 2010 post-electoral violence, his party – the Ivorian Patriotic Front (FPI) – stands as one the main opposition contenders. But infighting within the FPI have fractured it, resulting in two breakout factions that have essentially undermined its electoral prospects.

Other opposition groups – mainly the Alliance of Democratic Forces (AFD) and the National Coalition for Change (CNC) – are unlikely to form an umbrella group to counterweight the incumbent party due to underlying political discrepancies.

Out of the 10 presidential candidates approved by the constitutional court, two have already dropped out in protest of the Independent Electoral Commission’s alleged bias for Ouattara’s party, restricted access to state-run media as well as fraudulent practices and voter intimidation in rural areas.

Although yet to be proved, the accusations point to a significant level of distrust and disgruntlement by some opposition candidates. This could put in question the legitimacy of the polls, particularly if a majority of opposition supporters do not cast their vote.

Notwithstanding these potential hindrances, assuming that the polls are carried out relatively peacefully – notably with the help of international observation missions and UN peacekeeping forces – an incumbent victory in the first round should consolidate the country’s stability prospects.

In spite of the fact that only 55% of biometric voting cards have been distributed, the high degree of opposition fractionalisation and citizen complacency with Ouattara’s presidency should guarantee him a safe victory even if low voter turnout and localised incidents in the divided western cocoa-rich regions lurk as downside risks to a peaceful outcome.

Economic upsurge

President Ouattara’s NDP has significantly contributed to re-launching the Ivorian economy. Public investments in the energy, agricultural and service sectors have been supported by notable improvements in infrastructural development and a revamped regulatory environment for foreign businesses.

This has been aided in particular by investor-friendly laws and the creation of a centre for investment promotions (Cepici) to facilitate the formation of new businesses and reduction in licensing costs.

As the world’s largest exporter of Cocoa and cashew nuts, Ivory Coast’s agri-business will continue to be the main driver of growth. With agriculture constituting 26% of GDP and 70% of export earnings, the country is one of the leading regional producers and exporters of rubber and palm oil.

Although global commodity prices have been sliding, the rapid expansion of this sector has relatively cushioned the deterioration in the terms of trade while the enlargement of its secondary and tertiary sectors have acted as economic catalysts.

The recent discovery of offshore oil and gas basins has brought many international oil corporations to the ground, prompting an inflow of capital goods for industrial production.

Moreover, the country’s unexploited vast mineral resources, particularly gold, bauxite, iron ore and diamonds present a huge potential in attracting further investment. With the government granting licences to Chinese and European companies, production in this sector is expected to triple within ten years.

Finally, the services sector, particularly transport and finance, are growing at very fast rates thanks to the positive spillovers from the primary and secondary sectors. It currently accounts for 47% of GDP, indicating a positive degree of economic diversification.

GDP composition in Cote d'Ivoire

Sources: AEO 2015, UNCTAD 2015

African powerhouse

From the 4.7% GDP contraction in 2011, the economy has witnessed a rapid expansion with rates of growth higher than the continental average. As one of the economic powerhouses of the Economic Community of West African States (ECOWAS), the increase in exports and industrial capacity has spurred FDI.

In addition, its membership to the West African Economic Union (WAMU) has provided significant monetary policy stability by reducing exchange rate and transfer risks amid benign inflation.

GDP growth, inflation & Net FDI/GDP (%)

Source: IMF WEO 2015, NKC research 2015

With relatively low fiscal and external account deficits, Ivory Coast will be able to continue borrowing on international capital markets at much more favourable rates than peers like Kenya, Ghana or Zambia.

Added to the IMF’s extended credit facility (ECF) in the past years, Ivory Coast’s prospects to continue boosting capital expenditure through international loans and credit lines has improved its capacity to invest in growth-enhancing economic sectors, raising its hopes of attaining emerging market status by 2020.

All in all, the economic prospects for the West African country are upbeat and will improve if stability materializes nationwide.

Progress ahead

President Ouattara’s re-election should set the ground for a second mandate marked by progressive democratic consolidation to ensure political and economic stability.

Although there has been significant progress made in the post-conflict reconciliation process and the demobilisation, disarmament and reintegration (DDR) of former combatants, some important issues like insufficient financial compensation for victims and DDR shortfalls continue to undermine national social cohesion. The incoming elected President will have the arduous task of addressing the grievances and reconcile the differences that have for long divided country.

Having already pledged to change the constitution’s article 35 regarding the controversial nationality clause, this has garnered support for Ouattara’s progressive stance in eliminating a discriminative law that caused much confrontation in the past.

Moreover, his intentions to respect the two term presidential limits sheds some encouraging light on his commitment to democratic alternation amid waves of protests across the continent sparked by Presidents attempting to cling on to power.

Ouattara’s ostensible resolve to strengthen democratic modes of governance, promote reconciliation and stimulate economic growth bodes well for the country’s future prospects. Time will tell if he can walk the talk.

About Author

Jose Luengo-Cabrera

Jose currently works at the EU Institute for Security Studies. He has previously worked for the European External Action Service, International Crisis Group and the United Nations Department of Peacekeeping Operations. His research focuses on developments across Sub-Saharan Africa, principally on the drivers of political (in)stability and economic growth in West Africa. The views expressed on this site are Mr. Luengo-Cabrera’s and do not reflect those of the EUISS or any previous institutional affiliations.