How will new incentives benefit Ivorian raw cocoa processors?

 

Côte d’Ivoire has recently attracted a raft of investments that are set to increase the country’s capacity to process its raw agricultural production. These follow government initiatives to develop the agro-industrial segment and boost local value addition, which are among the country’s top economic goals.

Cocoa Grinding

Agro-industrial companies involved in cocoa have made some of the largest recent investments in Côte d’Ivoire’s processing capacity. In March 2019 Swiss chocolatier Barry Callebaut inaugurated a new cocoa-grinding unit in Abidjan to increase the company’s production capacity by 40% by 2022, part of plans to invest CHF55m ($55.9m) by that year. The new unit has raised Barry Callebaut’s local grinding capacity to 215,000 tonnes. Moreover, at the end of 2019 US-based conglomerate Cargill announced that it will invest $100m to expand production capacity at its Yopougon cocoa-processing plant by 50%.

Chinese investors have also announced projects to boost cocoa processing after Souleymane Diarrassouba, the minister of commerce and industry, invited them to take advantage of opportunities related to the processing of cocoa, coffee, cashews and other raw agricultural products in January 2019. During the final month of that year industry media reported that Côte d’Ivoire’s cocoa regulator and Chinese agro-industrial company China Light Industry Design Engineering signed an agreement for the construction of two cocoa-processing factories and related warehouses in Abidjan and San Pedro. Each factory will have a processing capacity of 50,000 tonnes.

Recent investments in local cocoa-grinding capacity are significant because processing constitutes a major component of agro-industry. According to the World Bank, primary cocoa processing accounts for 40% of the total value of agro-industrial production. The country processes about 30% of its total raw agricultural output and aims to increase this figure to 50% by 2022. In 2018 Côte d’Ivoire processed 530,000 tonnes of raw cocoa.

Fiscal Incentives 

Much of the government’s initiatives to attract investment to raise the country’s agro-industrial capacity have focused on providing fiscal incentives. Most recently, in January 2020 the authorities adopted an ordinance clarifying previous measures to reduce the differentiated export tax (droit unique de sortie, DUS), a tax imposed on cocoa exporters. Reduced DUS rates are available to companies that previously signed agreements with the government to increase their local processing capacity.

Reducing the DUS rates are part of the state’s wider efforts to promote industrialisation and other economic development goals through fiscal policy. Encouraging the local processing of raw materials is one of the main objectives of Côte d’Ivoire’s new investment code, which the government adopted in August 2018 and revised one year later. The code identifies companies active in agriculture and agro-industrial operations as eligible for fiscal and other kinds of incentives. The code provides varying incentives depending on factors such as the phase of a project or the size of an investment. For example, eligible companies are exempt from import duties (e.g., for industrial equipment) and value-added tax during the investment phase of a project. During the operation phase companies may continue to receive incentives related to income and property taxes, among others. Overall, the code makes it clear to industry players that boosting local agricultural processing is one of the government’s top priorities.

Although such investments have already been made due to the new code’s implementation, investors remain conscious that some of its incentives specific to cocoa are limited in time and scope. For example, depending on the size of an investment, certain tax exemptions provided during a project’s operation phase are partial and no exemptions last for more than 15 years. Nevertheless, the revisions address weaknesses of the previous edition, such as ineffective spending and incentives that were seen as inadequate by investors.

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The Report: Cote d'Ivoire 2020

Industry & Retail chapter from The Report: Cote d'Ivoire 2020

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