Côte d’Ivoire: Industry drives integration
Although electricity pricing reforms will drive up input costs in the near future, Côte d’Ivoire’s downstream and building materials industries have seen a robust recovery from a comparatively poor performance in 2011. The secondary sector was hit hard by the electoral unrest in 2011, contracting by 9.7%, but year-end figures for 2012 show a strong rebound in output. In fact, the sector was one of the economy’s main growth vectors in 2012, having expanded by 14.8% in real terms, as opposed to 0.7% for the primary sector and 14.1% for the tertiary sector.
Indeed, the regional bourse in Abidjan, the Bourse Régionale des Valeurs Mobilières, ended on a high note in 2012, largely thanks to the strong performance of industrial stocks, such as bitumen producer Société Multinationale de Bitumes (SMB), which saw its share price rise by 25.3% year-on-year.
A portion of this growth has come about in large part thanks to downstream processing and building material industries. The largest company by revenue, the Société Ivoirienne de Raffinage (SIR) refinery, has rebounded strongly from the crisis by resuming exports throughout West and Central Africa in 2012. In February 2013 a structured loan of €92.79m from West African ABI Group (Banque Atlantique) and from Morocco’s Groupe Banque Populaire subsidiaries Chaabi Bank and Banque Centrale Populaire was issued for SIR to buy petroleum products.
Even after 48 years of operation and a steep decline in profitability (which fell from roughly $7.50 in 2008 to around $1.20 two years later, according to US-based consulting firm IAS), the refinery continues to hold a key position in West Africa’s downstream market – a region where for every $1 of intra-regional trade in petroleum products, $5 worth of refined fuels are imported from elsewhere. Côte d’Ivoire currently has the second-largest refining capacity in the region after Nigeria, most of whose refineries are operating at less than half capacity due to poor maintenance.
However, it is not just refined fuels where the recouping of lost output has led to strong growth. Derivative products and building materials have also seen a significant jump, which has strengthened the secondary sector performance. Most of SMB’s production is exported throughout West and Central Africa, with large volumes sold to Nigeria and Ghana, where the company’s bitumen dominates its neighbours’ fast-growing markets. A plethora of road renovations and extensions currently slated throughout West Africa have helped to underwrite most of the demand for SMB’s exports.
However, domestic consumption has also risen, strengthened by the short- and medium-term outlook, thanks to an increase in road building that drove domestic sales from 7000 tonnes in 2011 to 25,000 tonnes in 2012. The majority of planned road projects have yet to begin, which means construction contractors are likely to ramp up demand over the coming 18 months.
Attracted by a relatively steady electricity supply and strong supporting economic infrastructure, direct investments in industry are also increasing. Nigeria-based Dangote Cement recently created a subsidiary in Côte d’Ivoire to set up a cement import terminal, which will have the capacity to import and bag 1m tonnes of cement per year. The terminal should be commissioned by the second half of 2013 and will be positioned to supply neighbouring land-locked countries.
In a similar move, Morocco-based cement producer Ciments de l’Afrique (CIMAF) has invested in a grinding factory in Abidjan’s Yopougon district and in two depots by the city’s port. The plant will be able to grind 500,000 tonnes per year and is set to be operational by July 2013.
In spite of the encouraging signs of expansion in the industrial segment, a recent increase in electricity prices for large consumers could attenuate Côte d’Ivoire’s relative industrial competitiveness, though this could be offset if the increased revenue for the electricity sector is directed towards maintaining and improving the electricity network, as has been announced.
Maintaining growth in the secondary sector is crucial for Côte d’Ivoire, given its stubbornly high unemployment rate and reliance on raw commodity exports. Increasing industrial production helps not only boost export revenues but increase job creation rates. For decades the country had one of the largest manufacturing sectors in sub-Saharan Africa. If it can sustain the growth of recent months in industries such as building materials and refining, even amidst rising electricity prices, Côte d’Ivoire will be well positioned to maintain its robust GDP growth.