Index Trend Previous Quarterly Editions
Expropriation Risk: 58 ► Political Violence Risk: 57 ► Terrorism Risk: 6 46 ► Exchange Transfer and Trade Sanction Risk: 45 ► Sovereign Default Risk: 65 ►
Overal Risk Temperature TREND ►
Special topic: Geopolitical alignment 5
Alignment five years ago 5
Degree of contestation 3
Two-way trade between China and Cote d’Ivoire (CDI), mirroring the rise in two-way trade between China and much of the rest of Africa, has witnessed a remarkable increase over the past two decades. This rise pre-dates China’s 2013 Belt and Road Initiative, but has clearly accelerated thereafter.
Chinese exports to CDI exceeded USD2.3 billion in 2020, an increase of 15% a year over the past two decades, while CDI’s exports to China topped USD518 million in 2020, an increase of 18% a year over the same period, albeit from a lower base. China continues to run a huge trade surplus with its West African trading partner, despite efforts by both countries to reduce the glaring disparity.
China’s exports are dominated by exports of pesticides, rolled iron, and processed fish, while CDI’s exports are dominated by unprocessed raw materials including rubber, manganese ore, and hydrocarbons. China is now CDI’s third most important trading partner, and two-way trade is forecast to continue on its current trajectory for the foreseeable future.
China is now a major force in CDI’s domestic auto, agro-machinery, pharmaceutical, and food processing sectors, and a valued investment partner following China’s investments in potable water supplies for Abidjan, expansion of the port of Abidjan, construction of the 275-megawatt Soubre hydroelectric dam, which is 85% financed by China, and construction of the Ebimpe stadium outside Abidjan.
The growing trade and investment partnership between the two countries over the past two decades has, however, had little or no impact on CDI’s political or foreign policy outlook, which remains firmly in the Western camp, and closely allied to those of the former colonial power, France.
CDI, under President Alassane Ouattara, has welcomed China as a valued trade and development partner, and has been eager to boost trade and development in sectors that otherwise may not have been forthcoming, but the country’s democratic outlook and market-based economy have not been compromised. This open disposition to Chinese trade and investment, while maintaining its broadly pro-Western outlook, is unlikely to change in the foreseeable future.
Expropriation Risk 58 (Significant) TREND ►
CDI continues to have an almost unblemished track record as a favoured destination for foreign investment, presenting little or no risk of expropriation for investors. This outlook is unlikely to change over the short to medium-term.
Even the one dark cloud overshadowing the economic outlook has been removed following the agreement in July between CDI, Ghana, and leading buyers of cocoa. CDI and Ghana are respectively the world’s first and second largest producers of cocoa beans, the raw material required for chocolate production. Buyers have agreed to pay premium prices and also back a price floor on cocoa sold by both countries as part of a hard-fought-over effort to tackle poverty among cocoa growers.
The two countries account for 60% of global cocoa output but receive only 3% of global revenues which are estimated to be USD80-100 billion per annum. They have been trying to increase their share of industry revenues since the inauguration of the 2018 Abidjan Declaration calling on the two countries to coordinate production, marketing and sales, and research. Attempts to improve the fortunes of growers by imposing a USD400-a-ton levy on cocoa exports continues to attract heavy criticism from buyers.
The leading participants in the international cocoa supply chain have agreed to back a fixed so-called ‘living income differential’ of USD400 a tonne on all contracts sold by the two West African cocoa producers. The deal is expected to facilitate a price floor of USD2,600 a tonne, an estimated 70% of which should reach growers.
CDI’s Coffee Council had earlier accused buyers of havering on the commitment towards the living income differential, hindering efforts to make the industry more sustainable. However, buyers appear to have backed down in the face of mounting public pressure to provide farmers with sustainable incomes.
Political Violence Risk 57 (Significant) TREND ►
Domestic political violence risks appear to be waning in the face of the ongoing national dialogue between leaders of the main political parties and civil society groups in pursuit of national reconciliation, following the outbreak of civil war in 2002, and the resumption of political violence in 2010-11.
Tensions between the government of CDI and the military junta in neighbouring Mali are, however, on the increase after Mali’s miliary authorities arrested 49 CDI soldiers at Bamako airport in July, accusing them of being mercenaries without orders or supporting documents. The soldiers were formally charged in August.
The two governments have been locked in a diplomatic tug-of-war since the arrests. Mali has been demanding the extradition of Karim Keita, the son of former President Ibrahim Keita who was overthrown by the junta in 2020, and is currently living under political asylum in Abidjan. Abidjan, meanwhile, demanded the expulsion of Mali from the Economic Community of West African States regional trading block, and a timetable for the return to civilian rule.
Mali has been under military rule since the 2020 coup, following mass political protests over the handling of the long-running jihadist insurgency in the country. Bilateral ties between the two countries have become increasingly fraught, with the junta linking the release of the troops to the extradition of Malians living in CDI, which the Abidjan government denounced as “unacceptable blackmail”
Terrorism Risk 46 (Medium) TREND ►
There are mounting fears terrorist groups such as Islamic State and Al-Qaeda are seeking to move south from their bases in the Sahel, with suggestions such groups are specifically targeting CDI and Ghana, countries which have been largely spared from successive waves of terrorist attacks.
CDI reports some 13 cross-border attacks in the year to March, although neither of the two main terrorist groups have manged to gain a foothold in either of these Gulf of Guinea states. While the terrorist threat from such groups remains real, CDI and Ghana present more challenging targets than other countries in the region, as counter-terrorist training for security and police forces in both countries has been steadily increasing.
Exchange Transfer and Trade Sanctions Risk 45 (Medium) TREND ►
CDI has managed to retain is B-rated sovereign credit status throughout the COVID-19 pandemic and the fallout from the Russia/Ukraine crisis, due to the government’s fiscal prudence and policies aimed at reversing the deterioration of the budget balance and stabilisation of government borrowing.
The 2021 budget deficit of 5% of GDP was lower than expected, due to higher-than-expected growth and increased tax receipts. The economy is expected to grow robustly at 6.8% this year and 6.5% in 2023. This is marginally lower than the 7.4% recorded in 2021 before the economic fallout caused by the Russia/Ukraine crisis.
Sovereign Default Risk 65 (Medium-high) TREND ►
CDI’s budget deficit is forecast to fall to 4.8% of GDP in 2022, and to 3% of GDP by 2024, and foreign reserves remain high at around six months’ import cover. The country’s strong growth outlook, relatively stable inflation, and renewed political stability continue to inspire investor confidence, making the risk of sovereign default extremely remote.
Debt is expected to peak at 52% of GDP this year, which is low by African standards, before falling steadily thereafter. Spending on preparations for the African Cup of Nations tournament in 2023 will add to the existing growth outlook along with anticipated growth in the mining and agricultural sectors.
