Networking ambitions: Investments in infrastructure and large-scale projects are indispensable to economic growth

More than any other sector, the Ivoirian government has placed transport and infrastructure at the centre of its plans to revitalise the national economy after a decade of political instability and under-investment. The improvement of Côte d’Ivoire’s transport network is essential to increasing growth in its export-led agriculture sector and the nascent mining industry, as well as capitalising on the country’s role as a transit and transshipment centre for the sub-region.

The government has earmarked 25.5% of the 2012-15 National Development Plan’s budget to the transport sector for a total of CFA2.82trn (€4.2bn). Côte d’Ivoire plans to seek financial and technical support from donors, development finance institutions and private investors to fund a sizeable proportion of this. As of mid-2013, the government is making headway with its infrastructure agenda, having launched construction work on Abidjan’s third bridge and awarded a concession for the second terminal at Abidjan Port.

ROAD LINKS: As with all West African markets, the road network is integral to the country’s transport, logistics and distribution sectors. Bringing strategic exports like cocoa, palm oil and natural rubber from upcountry to the ports, the road network has critical knock-on effects for the wider economy, justifying the investments needed to develop this infrastructure.

The national road network consists of 6514 km of paved roads, 140 km of highways and 75,482 km of dirt roads. Côte d’Ivoire has lower road network density than other sub-Saharan countries – at 82 km per 1000 sq km of arable land compared to a low-income average of 133 km and middle-income average of 318.4 km per 1000. Indeed, the network is largely adequate for its needs, connecting large cities and towns. Côte d’Ivoire has two main arteries, a north-south road linking Abidjan and Ouagadougou and the east-west highway connecting Abidjan to Liberia and Ghana.

The road transportation sector has two principal institutions: the regulatory agency, Ageroute, and Road Maintenance Fund (Fonds d’Entretien Routier, FER). A second-generation, government-owned FER provides financing for road maintenance, markets road services and grants contracts for repairs. The fund receives the majority of its financing from a percentage of the fuel tax, currently CFA16 (€0.02) per litre of super fuel.

FUNDING NEEDS: However, the fund will require $0.15 per litre to finance maintenance and upgrading of the main road network. While it is recommended that emerging countries like Côte d’Ivoire allocate 1.5% of GDP to road maintenance, FER’s investment in upkeep has been nowhere close to this figure. Over the last decade, it has only invested CFA15bn (€22.5m) per annum, which is not enough for the country’s road infrastructure. President Alassane Dramane Ouattara has stated that he plans to allocate CFA300bn (€450m) to roads over the next five years, which will far exceed the estimated $48m per year needed to finance maintenance work and the total $85m needed per year to account for upgrades and other capital spending needs. Regular maintenance has an estimated cost of $30m per annum. As a fillip to the sector, FER raised CFA25bn (€37.5m) in January 2012 from a consortium of commercial banks including Ecobank, SGBCI and BIAO.

However, there is a lack of coordination between Ageroute and FER. With no formal legal structure, the fund is not equipped with an institutional framework to transfer funds to Ageroute. Furthermore, 90% of FER’s resources go to funding the principal road network, with the remaining sources dedicated to urban road infrastructure. Notably, the fund does not allocate any resources to the rural road network, which is in dire need of repairs. Some 32% of the rural population have access to an all-season road within 2 km – a figure higher than the sub-Saharan African average.

RURAL ROADS: To raise this figure closer to 100%, Côte d’Ivoire would need to construct 40,000 km of all-season roads, requiring a substantial level of investment. The impact of increasing the rural road network would be immense, particularly for the agricultural sector. Rural populations would be able to deliver goods to urban markets without risking spoilage. Given that this investment is unfeasible in the short to medium term, a more commercially viable solution would be overhauling roads that are in close proximity to areas of intensive agricultural production. A World Bank study in 2010 showed that 20,000 km of rural roads would provide access to 80% of agricultural lands, raising the rural population’s access to roads to 50%.

FREIGHT SECTOR: In addition to lack of finance, a highly fragmented road freight sector is also a large factor contributing to the deterioration of roads. Haulage in Côte d’Ivoire is mainly made up of small-sized local companies that compete for business by slashing prices. Operating on very tight margins, local trucking companies do not have the means to reinvest in their fleets or conduct routine maintenance. Trucks often exceed their charge loads per axle, putting additional strain on the road network. “With business picking up again in the country, there are a lot of new arrivals, driving logistics revenues from imports and new residents up strongly,” Frédéric Gros, agency director of international movers AGS Frasers Côte d'Ivoire, told OBG.

Furthermore, the costs of bribes to the police or at illegal roadblocks also lead haulage firms to overload trucks, another factor leading to road deterioration. Corruption undermines Côte d’Ivoire’s competitiveness as a regional hub for road freight. Bribes were estimated by the World Bank to cost $200m-290m per year in 2010, with freight traffic representing a fourth of that total. Bribes per 100 km of Ghana’s part of the Abidjan-Lagos road corridor average $12 per truck and the cost climbs to $88 per truck in Côte d’Ivoire.

NEW PROJECTS: Côte d’Ivoire has launched a number of large road projects that will improve national transit by connecting the north and east of the country to the commercial centre, Abidjan. In August 2012, the government unveiled renovation work on the AbidjanGrand Bassam highway costing CFA63bn (€94.5m). Financing for upgrading the 30-km artery will be largely provided by a China’s Eximbank, with the government contributing CFA9.3bn (€13.9m). The project represents President Ouattara’s commitment to mobilising funds for the overhaul and maintenance of the main roads of the network. Several sections of the road linking Grand Bassam and Noe near the Ghanaian border will be repaved for CFA25bn (€37.5m), in addition to renovation work on the road connecting Abengourou to Agnibilekrou in the west for CFA61bn (€91.5m). Other projects include the Bouna-Doropo road in the north, near the Burkina Faso border, which will be upgraded at a cost of CFA40bn (€60m) and the Abobo-Ayama highway near Abidjan for CFA15bn (€22.5m).

One project that has garnered attention is the extension of the northern highway linking Singrobo to Yamoussoukro. This would be a continuation of the expressway connecting Abidjan to the administrative capital, the first part of which was finished in 1982. The remaining 86 km between Singrobo and Yamoussoukro has been continuously postponed due to financing problems. The contractor in charge of the CFA90bn (€135m) project, Tunisian construction company Soroubat, received commitments from donors including the Islamic Development Bank, Arab Bank for Economic Development in Africa, the Saudi Development Fund, OPEC Fund for International Development and the Kuwaiti Development Fund when construction work began in 2007. However, as of 2013, it claims that it has not received CFA16bn (€24m) in funding from the project’s backers, forcing it to suspend work. The project was set back due to damages to equipment during the 2010 post-electoral crisis. With 20% of construction remaining, Soroubat restarted work in mid-2013.

URBAN TRANSPORT: The Ministry of Transport has several projects in the pipeline to ease traffic and congestion in the commercial capital of Abidjan. Built over the Ebrie lagoon and spanning numerous waterways, Abidjan’s central business district is linked to its industrial areas and the airport by only two bridges, which were both built in the 1970s to accommodate a mere 350,000 vehicles. Although it is not as arduous as the “go slows” of Lagos, as in many West African cities, traffic crawls during peak travel times, as people commute from commercial areas in the south like Vridi, Koumassi and Marcory to residential areas in the north, such as Cocody and Riviera. To ease congestion, the ministry is building a third bridge, the Henri Konan Bedie toll bridge, linking Riviera and Marcory across the lagoon. Set up as a public-private partnership, the project was awarded as a 30-year build-operate-transfer concession to French conglomerate Bouygues and its partners, which formed the local company Socoprim. In addition to the 1.9-km bridge, the project will also include a 6. 4-km highway of two three-lane carriageways.

The €292m project is being funded by a consortium of development finance institutions, Bouygues and the government. Backers include the African Development Bank, African Finance Corporation, Netherlands Development Finance Company, Banque Ouest Africaine de Développement, Ecowas Bank for Investment and Development, the Pan African Infrastructure Development Fund and Banque Marocaine pour le Commerce Extérieur. With construction starting in September 2012, the project is expected to finish in October 2014.

At the end of 2011, the government also launched work on an interchange in Riviera 2 with a CFA74bn (€111m) funding package from the World Bank, in the framework of the Urgent Urban Infrastructure Project programme. The project will free up congestion at the intersection through which 75,000 vehicles pass daily.

PUBLIC TRANSPORT: To relieve bottlenecks in Abidjan, the ministry also plans to develop a passenger train that would have a capacity of 260,000 passengers per day. The train would use 37 km of rail lines that are currently owned by the privately operated railway, Sitarail. The ministry, which is looking for private investors to finance and construct the project, has attracted offers from two consortia, one consisting of Bombardier and Samsung and the other of Bouygues, Alstom and Systra. Both consortia have submitted bids of €500m. The ministry is expected to select the winner in 2013.

SOTRA, the state-owned urban bus operator, has a fleet of 425 vehicles and serves 12 lines that run in the 10 districts of Abidjan. SOTRA transported 13m passengers each month in 2012 compared to 1m in 2011, as ridership recovered from the period of civil unrest. While SOTRA has struggled to pay debts of over CFA100bn (€150m), its 2012-16 strategic plan aims to expand its operations by acquiring more vehicles. In November 2012, it secured a CFA15bn (€22.5m) loan from Afreximbank that it will use to purchase new buses. In fact, SOTRA aimed to mobilise more funds from public and private investors to expand its fleet to 800 buses in the first half of 2013. In the medium to long term, the company is seeking to put into service 2000 buses and 50 ferries. In April of 2013, SOTRA’s management unveiled a long-term development plan, which targets 360m passengers per year by 2016.

RAIL: Rail transport is critical for promoting trade between Côte d’Ivoire and landlocked countries in the hinterland, as it remains one of the key means of transporting bulk freight. The operator of the 1260-km rail link between Abidjan and Ougadougou is jointly held by Côte d’Ivoire and Burkina Faso. In 1995, Sitarail’s management and operation was awarded to a private company, Bolloré, as a 25-year concession. The company runs 40 freight trains and 12 passenger trains per week. Although rail in West Africa is largely underdeveloped, lacking the extensive network and quality rolling stock that its neighbours to the north and south possess, Sitarail has nonetheless one of the most efficient, high-capacity rail operations in the region. Its traffic density at 0.5m tonne-kilometre per route-kilometre was one of the highest in the region. It also increased its freight volume from 300m tonnes to 800m tonnes in the first five years after its establishment in 1995. However, Sitarail was greatly affected by the political instability that started in 2002 resulting in a sharp fall in its traffic volumes to 100m tonnes in 2003. Volumes rebounded by 2006, due to the implementation of increased security measures, and since then have surpassed an earlier peak in 2001. Current freight volumes stand at 910,000 tonnes per km per annum while passenger volumes reach 300,000 per year.

INVESTMENTS: Sitarail invested in its rolling stock by purchasing 97 new high-capacity wagons from India in 2012. With this acquisition, the company has expanded its transport capacity for container content from Abidjan port heading to landlocked neighbours by 40%. However, over the years, Sitarail has faced challenges in meeting its financial obligations for track maintenance work and other investments in infrastructure. The firm had planned to spend $12.4m on refurbishing tracks, but only invested half of the funds. Track upgrades are expected to cost $132m, while rolling stock will need $99m over the remaining years of the concession. Given that the investment programme exceeded Sitarail’s 2009 revenues three-fold, the government will likely need to intervene and back investments. Sitarail was undercapitalised when its concession was first awarded to Bolloré and given that revenues have been low from freight traffic, Sitarail has lacked the means to make the long-term necessary investments in infrastructure.

CROSS-REGIONAL RAIL PROJECT: In a bid to promote regional trade, the governments of Côte d’Ivoire, Niger, Benin and Burkina Faso announced in late 2011 plans for building a trans-national railway starting in 2014. The 2700-km link would connect Cotonou and Parakou in Benin to Dosso, Niamey and Tera in Niger before passing to Ouagadougou and terminating in Abidjan. The project would also earmark funds for upgrading the Abidjan-Ouagadougou line. While the project cost has not yet been announced, the African Development Bank has expressed interest in financing it.

MARITIME ACTIVITY: The country has long held a sizable place in terms of regional maritime traffic, with two large ports – the Port of Abidjan and the San Pédro Port – that have put in a robust performance in transshipment, container and bulk cargo in recent years. For much of its post-independence history, Côte d’Ivoire was the primary port of entry for the West African subregion. However, over the past decade regional competitors, including Tema in Ghana and Lome in Togo, have eaten away at the Abidjan Port Authority’s (Port Autonome d’Abidjan, PAA) lead. Shipping volumes slid in recent years as sporadic unrest slowed broader growth, while the country’s 2011 post-electoral conflict dealt a significant blow to exports. However, with the return of relative stability, traffic at Abidjan Port has since rebounded, benefitting from pent-up domestic demand and jumping by more than 87% in first-half 2012 alone. In response, Côte d’Ivoire has launched a sweeping investment programme that seeks to re-establish Abidjan as West Africa’s shipping and logistics hub.

The PAA has a number of planned projects that aim to boost the port’s competitiveness by lowering entry fees and reducing handling times. The port is of particular strategic importance to the economy given that it produces 85% of Customs revenues and is the channel through which 90% of the country’s trade passes. The port charges a handling fee of $260 per tonne, and provides 54,000 direct and indirect jobs. With the largest capacity, Abidjan Port handles 60% of all imports and exports to and from Mali, Burkina Faso and Niger.

The port has a comparatively high container handling capacity standing at 800,000 twenty-foot equivalent units (TEUs) per year as of 2012, above the 750,000 TEUs of Ghana’s Tema port. At present, the port’s Vridi container terminal has 16 rubber-tyred gantry cranes, of which eight were acquired by Bolloré in 2009 to raise storage capacity to 22,000 TEUs. Abidjan has four STS cranes that can lift 40-60 tonnes and three Gottwald cranes with a lifting capacity of 100 tonnes. Depending on the crane, the port has an average productivity rate per ship of 33 containers per hour, while the P4 quay’s rate per hour reaches 43.2. At the minerals terminal, the port has increased its handling rate to 600 tonnes per hour with new equipment.

RAISING CAPACITY: Waiting times for ships average 12 to 24 hours. In 2010, The PAA issued a $50m bond to upgrade equipment, and in 2012 Bolloré announced a CFA35m-40m (€52,000-60,000) investment programme that aimed to double overall capacity, bringing the terminal’s handling capability up to 1.5m TEUs. The new renovations will consist of four new cranes, allowing the simultaneous processing of three ships.

In 2012, the PAA granted a build-operate-transfer concession to privately held firm PortSecurité to invest in the port’s security infrastructure making it compliant with International Ship and Port Facility Security (ISPS) standards. To pay for the concession, the PAA increased security tariffs for shipping companies, which vary according to container contents. The move led to opposition from shipping firms which noted that the new levies could represent as high as a 1000% hike, depending on the type of goods being shipped. SAN PÉDRO PORT: While on a much smaller scale, San Pédro Port also carries strategic weight for the national economy, as it contributes 5% to GDP and some 15% of total Customs revenues. It also provides 40,000 direct and indirect jobs. As of 2009, San Pédro Port’s traffic volume was 83% exports, of which 65.2% comprised coffee and cocoa. The port is also the first in the world in terms of volume of cocoa transported and already has a draught that allows larger ships to enter and berth there. The port is looking to raise $230m from investors linked to the Port of Antwerp International, to develop infrastructure and upgrade berths.

PORT MANAGEMENT: Bolloré manages Abidjan’s container port under a 15-year concession that it won in 2004, while San Pédro Port’s container terminal is operated by Mediterranean Shipping Company (MSC) under a concession that was signed in September 2008. In 2012, Abidjan’s total traffic stood at 22.1m tonnes, compared to 16.6m tonnes in 2011. Hilaire Lamizana, director-general at Port Autonome de San Pédro, told OBG, “Traffic is rapidly and steadily increasing through the San Pédro port, increasing by 49% in 2011, to 1.8m tonnes, and by a further 72% in 2012, with 3.2m tonnes.”

The industry is majority-controlled by shipping lines CMA-CGM and Delmas of France and Denmark’s Maersk Line and Safmarine, with market shares of 33% and 26%, respectively. In Côte d’Ivoire shipping firms and their agents are responsible for storing containers in warehouses. A shortage of warehouse space for empty containers leads to bottlenecks in the port area.

AIR TRANSPORT: In line with other West African markets, Côte d’Ivoire’s air transport network has suffered from a lack of funds and poor maintenance over the last decade. The gradual decline of air traffic – which fell from 1.8m seats in 2001 to 1.2m in 2007 – is in part a result of the insolvency of regional carriers, which had a negative impact on intra-African traffic. Connections between Abidjan and other African destinations declined from 45 cities in 2001 to 30 by 2007. This was compounded by the civil war, which had a deep impact on the regional airport infrastructure, with airports still struggling to resume full-time operations.

Abidjan’s Felix Houphouet-Boigny International Airport is the main point of entry for passenger and freight traffic. Aeria, a privately held company, manages the facility, which has capacity of 2m passengers, although it has never reached this mark; passenger levels dipped to 600,000 in 2011 due to the post-electoral crisis, rebounding to 900,000 by 2012. Passenger numbers are expected to surpass 1m in 2013. Aeria forecasts annual growth of 5-10% in the coming years.

The number of airlines operating at Abidjan has risen from 10 in June 2011 to 20 in September 2012, including South African Airways, Turkish Airlines, Royal Air Maroc, Emirates, Brussels Airline and Air France. Another step in rebuilding the aviation sector was the relaunch of a new national carrier, Air Côte d’Ivoire, which has devised a business model focusing on regional hops in underserved West and Central Africa (see analysis).

Having entered into its second period of the concession, Aeria plans to invest CFA80bn (€120m) in a number of projects over the coming 25 years. Aeria is planning to turn 3700 ha surrounding the airport into a mixed-use development called Aerocite. The project aims to boost Abidjan’s status as a regional hub by providing amenities such as business and conference centres, four-star hotels, office space and shopping.

OUTLOOK: The sector is seeing a resurgence of interest from foreign investors now that political stability has returned. The government is committed to tendering and fast-tracking large infrastructure projects that will stimulate economic growth, such as the third bridge in Abidjan and the second container terminal at Abidjan Port. Given the impact of infrastructure on the economy, the state is receiving substantial financial and technical help from development institutions for large-scale projects, which bodes well for investors looking to enter the sector. The transportation sector has a strong outlook for economic growth, with maritime transport and aviation being particularly promising in the light of ongoing regional investment.

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The Report: Côte d'Ivoire 2013

Transport chapter from The Report: Côte d'Ivoire 2013

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