After years of underinvestment and mismanagement, the government has launched a series of reforms and initiatives aimed at putting the agricultural sector back on track towards profitability and sustainability. Indeed, Côte d’Ivoire has a vibrant agricultural sector that has played an integral part in its national economy since the country gained independence in 1960. The sector accounted for 27.7% of GDP in 2012, or CFA3.5trn (€5.3bn) out of CFA12.5trn (€18.8bn). It also generates around 40% of export earnings and provides jobs for 68% of the labour force.
Moreover, Côte d’Ivoire is the largest producer of cocoa in the world, contributing 35% to global output as of 2012, in addition to producing other cash crops like cotton, cashew nut, palm oil and natural rubber. However, the agricultural sector is for the most part composed of non-mechanised, small-scale farming, with producers having limited access to inputs. Around 89% of farming households have holdings that are less than 10 ha, with the average plot size being 3.89 ha. Difficulties in obtaining financing and falling commodity prices have meant small producers lack the means to reinvest in their land to increase crop yields and improve crop quality.
STATE INITIATIVES: Given the sector’s strategic importance to the national economy, the government has put in place a number of large investment programmes that aim to revitalise growth. Some of its goals include increasing farmers’ incomes by setting minimum farm gate prices and improving crop quality and productivity. Under the National Development Plan for 2012-15, the government has allocated CFA940.34bn (€1.4bn), equal to 8.49% of the plan’s total cost, for agricultural sector programmes to address problems, including limited distribution of fertilisers and seed varieties, lack of mechanised agricultural and irrigation infrastructure, growing rural-urban migration, and ongoing difficulties with securing agricultural land despite the 1998 rural land code that was designed to formalise land ownership in rural areas.
The Ministry of Agriculture has also launched the National Agriculture Investment Programme ( Programme National d’Investissement Agricole, PNIA), which aims to increase the sector’s growth to 9% by 2020, up from an expected 4.7% for 2013. With a budget of CFA2trn (€3bn) over a five-year period starting in 2012, the PNIA has two principal goals: guaranteeing food security in staples, like rice, yam, manioc and plantains, and reducing poverty from the present 48.9% to a 1990 level of 16%. The programme will act as the main framework for channelling public investment into the sector and putting in place attractive fiscal incentives for attracting private sector investment. The government has already earmarked CFA75bn (€112.5m) for programmes from January 2010 to July 2012 and CFA80bn (€120m) for five other programmes, although at the time of writing no timeframe or additional details were available for these project allocations. Public investment in the programme will amount to CFA195.7bn (€293.7m), with agricultural players contributing another 5-7% of the programme’s budget through the Interprofessional Research Fund and Agricultural Council (Fonds Interprofessionnel de Recherche et Conseil Agricole, FIRCA). Financing of the PNIA will thus rely significantly on donors and the private sector.
INCENTIVES: As part of the PNIA, the government has also set out attractive fiscal incentives, including tax exemptions on profits and reductions on Customs duties on all agricultural investments. Private investors will also benefit from exemptions on value-added taxes for agro-industrial equipment and on registration taxes. Companies will also receive additional tax breaks if they set up operations in special economic zones for the agro-progressing sector in the north-west, west and east of the country.
Running alongside the development projects, Côte d’Ivoire also has an agricultural research institute, the National Centre for Agronomic Research (Centre National de Recherche Agronomique, CNRA), which is working on 318 projects seeking to improve yields of cash crops and staples. Its primary focus for cash crops is boosting productivity and enhancing crop quality. For cocoa, it is notably concentrating its efforts on finding ways to fight swollen shoot disease.
As outlined in the PNIA, the government has made food security one of its main priorities, and is looking to increase production of staple crops for the domestic market. Current production of staple food crops stands at 10.7m tonnes per year, according to government statistics. The majority of output is yam (49.09%), with manioc (21.5%), plantains (14.96%), rice (6.4%) and corn (5.9%) representing other important crops. Côte d’Ivoire has to import fish and seafood, meat, and milk and dairy products to meet deficits for them of 87%, 53% and 87%, respectively. However, national production is able to meet domestic demand for all staple food crops with the exception of rice.
RICE: Like many West African countries, Côte d’Ivoire has a large rice deficit, equal to around 850,000 tonnes per year, which it meets through imports. In 2009, Côte d’Ivoire spent a total of CFA235bn (€352.5m) on rice imports from Asia. Given that demand increases by 6% annually, the government has set up a strategy for developing rice farming. According to the National Strategy for Developing the Rice Sector 2012-20, the production target for 2018 is 2.1m tonnes.
The government has attracted a number of private investors that will be setting up rice farming projects. The largest deal thus far has been a CFA30bn (€45m) public-private partnership with French commodities company Louis Dreyfus for developing rice production in the northern regions of Poro, Bagoue and Tchologo. According to the terms of the deal, Louis Dreyfus will work with 50,000-60,000 local producers. It will also set up a factory that will whiten 100,000 tonnes of paddy rice in addition to investing in irrigation. The project will see rice production increase to around 400,000 tonnes.
A number of other private sector projects for rice production are also in the pipeline. General Alimentaire Africaine (GAA) plans to invest CFA2bn (€3m) in a rice farming project that includes hulling plants and support for 7500 small-scale producers. Mimran Group also has plans to invest CFA150bn (€225m) in a rice paddy production project designed to increase cultivation of the crop from 60,000 ha to 182,000 ha near the Bandama River by Tiassale and Grand Lahoue. The company will construct dams and irrigation infrastructure. Furthermore, Cevital, the Algerian conglomerate, has set up a CFA100bn (€150m) joint venture with Ivoirian company CICA for farming rice in the Bounkani region. It plans to support rice farmers by supplying inputs and promoting mechanised agriculture, and the venture will also build processing facilities next to the production sites.
The African Development Bank (AfDB) is providing a CFA16.4bn (€25m) loan for reclaiming 923 ha of lowlands, of which 873 ha will be used for rice cultivation. The project will immediately develop 237 ha for growing rice and improve water supply systems.
COCOA: Cocoa is the country’s most valuable export agricultural commodity, contributing 15-20% to GDP. Côte d’Ivoire controls the largest share of the international cocoa market with 35% of the world’s output. The sector employs 800,000-900,000 people and directly supports 3.5m of the country’s 23.4m people. Production reached a total of 1.49m tonnes for the 2011/12 season, slightly down from its historic peak of 1.5m tonnes registered the previous year. “Côte d’Ivoire is such an important producer internationally. There are no other African countries which have such a stranglehold on a single crop on the international market,” Edward George, head of soft commodities research at Ecobank, told OBG.
Cocoa is grown in the entire southern half of the country, with the south-west being a key production zone. Unlike cocoa-processing countries such as Indonesia, where large-scale cocoa plantations are common, Côte d’Ivoire has small-scale cocoa farming with average plots ranging from 3 to 5 ha.
The marketing of cocoa in Côte d’Ivoire comes in two forms, farmers’ cooperatives and a supply chain involving several intermediaries. Commercially unviable cooperatives have been eliminated, bringing the total number down from 3000 to 500-700 that can deliver a minimum of 500 tonnes. At present, up to 30% of cocoa beans are sold via cooperatives. The other method of delivering beans to exporters involves a number of intermediaries. Middlemen (pisteurs) source beans directly from the bush – i.e. pisteurs go to rural villages and collect beans from small-scale farmers who do not belong to cooperatives – which are then sold to buyers. The remaining 70% of the crop is sold using this system.
While international and Ivoirian firms are active in the buying, exporting and processing of cocoa, large trading houses dominate the sector. Cargill, Archer Daniels Midland (ADM), Barry Callebaut and Olam bought 51% of cocoa production in the 2010/11 season. For 2012/13, Barry Callebaut has been the largest buyer. Other important traders in the sector include Armajaro, SAF Cacao, Noble and Sucden.
COCOA REFORMS: Following a series of liberalising reforms that were guided by the World Bank and IMF in 1999, Côte d’Ivoire eliminated the sector’s regulatory body, the Stabilisation Fund, which had regulated cocoa marketing and prices. After over a decade of mismanagement resulting in low prices for farmers, decreasing yields and deteriorating bean quality, the government instituted a number of reforms in November 2011 as a condition for receiving a debt relief package from the World Bank and IMF. The main pillar of the reforms was the forming of a new cocoa board that would guarantee a fixed price for farmers. The Coffee Cocoa Council (Conseil Café Cacao, CCC), which was set up in January 2012, enforces the rule that producers receive 60% of the cost, insurance and freight (CIF) price, thereby giving them the funds to reinvest in their plots. The principal marketing mechanism of the CCC is daily auctions that will allow traders to purchase 70% of the next crop season, with the remainder sold via spot sales during that season.
As part of its reforms, the government has also removed fiscal advantages (droit unique de sortie) for local processors whose activities include grinding beans and producing semi-finished goods like cocoa butter, liquor and powder. Introduced to incentivise foreign and local firms to expand processing activities in the country, the fiscal advantage took the form of a reduction in the export tax on semi-finished goods. While it was originally meant to last for a five-year period and apply only to the April-September mid-crop, the tax reduction remained in place and was extended to the October-February main crop as well.
The tax break drew criticism from farmers and exporters alike. Farmers claimed that the government, which was seeing annual losses of CFA35bn-40bn (€52.5m-60m) from the reduction of CFA75 (€0.10) per kg, needed those funds to reinvest in farmers’ plantations. Exporters, including Armajaro, Sucden, Touton, Novel, Coex and Continaf, urged the government to lift the fiscal incentives, which they argued gave processors an unfair advantage (see analysis).
CHALLENGES: In addition to low farm gate prices and low levels of investments, other factors have led to the deteriorating quality of Côte d’Ivoire’s cocoa, such as diseases and poor drying and fermentation techniques. As a result, Ivoirian cocoa does not command a premium on the international market, with futures contracts selling for £60 per pound as compared to £90 per pound for Ghanaian cocoa.
Cocoa plant diseases are widespread in West Africa, and the Swollen Shoot disease has decimated plantations. Research may help to address this. “There are a few plant maladies that are of concern in the country, such as brown rot, bad grass, and the soil and shoot virus, which has devastated certain cocoa fields. Work is under way to find phytosanitary solutions and plant varieties that are effectively resistant,” Yté Wongbé, director-general of the CNRA, told OBG.
A lack of proper drying and fermentation techniques among producers has also contributed to the poorer quality of Ivoirian cocoa. Farmers have traditionally dried beans on asphalt or cement, which has a negative impact on quality. Exporters now dry their own beans with drying racks close to the ports. In order to prevent beans from moulding while in transport, moisture levels need to be lowered from 14% to 8%. Many producers, particularly cooperatives, are starting to dry beans in racks, ferment in trays and condition beans in jute sacks to improve bean quality.
While the introduction of the mandatory minimum farm gate price seeks to allow farmers to reinvest in their plantations to improve crop quality, producers have not yet been able to afford inputs to increase yields and quality. An estimated 300 kg of fertiliser is needed to replenish the soil’s fertility for growing 1000 kg of cocoa. In the absence of state subsidies, fertiliser use among farmers remains very low. While 450,000 tonnes of fertiliser was required for the output of 1.5m tonnes of cocoa during the 2011/12 season, only 40,000 tonnes was used. The Ministry of Agriculture aims to deliver fertilisers to farmers as part of its Quality-Quantity-Growth initiative.
Given the low prices and the prevalence of diseases, farmers are increasingly switching from cocoa to other cash crops like rubber and palm oil. While this trend could pose a threat to the sector in the medium to long term, it is unlikely to result in an immediate drop in production. Given that start-up costs for rubber farming are high and it takes seven years before trees start producing, the average cocoa producer is unlikely to be able to move into this area.
COTTON & CASHEW NUT: The principal cash crops of the north, cotton and cashew nut, have seen diverging trends in production over the last decade. While seed cotton production has fallen from a peak of 399,468 tonnes during the 1999/2000 season to 260,305 tonnes in 2011/12, cashew nut production has rapidly expanded to 475,000 tonnes in 2012 from 185,000 tonnes in 2005. Cotton has also made a comeback. “Despite the fact that cotton production dropped to 100,000 tonnes during the worst years of the crisis, output has now jumped to 350,000 tonnes, surpassing pre-crisis levels,” Malamine Sanogo, the executive director of the Regulatory Authority for Cotton and Cashew, told OBG.
With the cotton sector still recovering, cashew nut farming has the potential to turn into the primary cash crop for the north in the model of cocoa for the south. As the second-largest cashew nut producer after India, Côte d’Ivoire reported export earnings of CFA136.4bn (€205m) in 2012 and the government collected CFA3.25bn (€4.9m) in export taxes. In 2012 farmers’ gross revenues reached CFA139.5bn (€210m). However, the cashew nut sector faces challenges related to improving quality, organising the marketing process and increasing low yields.
To meet the challenges in both sectors, the government has launched a reform programme that will create one regulatory body for the two cash crops in the same vein as the CCC (see analysis). In the cotton sector, the reforms aim to increase the efficiency of the marketing process and improve distribution of inputs with a goal of boosting yields per hectare. Reforms in the cashew sector will fix a guaranteed 60% CIF price for farmers by 2014, restructure the marketing process by identifying buyers and setting up commercialisation platforms, and disseminating planting and storing techniques to improve quality.
PALM OIL: Côte d’Ivoire’s palm oil sector has seen steady expansion on the back of 8% annual growth in global demand for the commodity. In 2010 palm oil production saw a 5.5% increase from 394,300 tonnes in 2009 to 415,900 tonnes. Production fell to 360,000 tonnes in 2012, but this is expected to be a short-term reversal, with annual output forecast to rise to 600,000 tonnes by 2015. Small-scale village plantations generate the majority of production at 60%, while industrial plantations – run by corporates including Sifca, Dekoil and other large players – contribute 40%. Village plantations, which have an average size of 3 to 5 ha, have low yields ranging from 7 to 8 tonnes per ha. By comparison, industrial plantations yield up to 15 tonnes per ha. While Côte d’Ivoire is the second-largest palm oil producer in West Africa after Nigeria, it is the largest exporter of crude palm oil. Despite this, palm oil exports for the first quarter of 2013 saw a 14% drop to 52,216 tonnes, compared to 60,548 tonnes in the same period the previous year.
PRODUCERS: The largest palm oil refiners in Côte d’Ivoire are SIFCA – via its subsidiaries Palmci and Sania – United Oil Company and COSAV, which have a combined processing capacity of 450,000 tonnes of raw palm oil. Palmci controls 60-70% of market share and has a daily processing capacity of 1m tonnes of raw fruit. Palmci also has partnerships with industry leader Wilmar, Unilever and Olam.
Dekeloil, through its joint venture with Siva Group, is building a €14.3m palm oil processing factory that will have an annual capacity of 70,000 tonnes. The project will source oil palm fruit from 27,000 ha of plantations located next to the factory.
In June 2012 Cargill announced plans to enter the palm oil industry in downstream and processing activities. The project, totalling CFA200bn (€300m), would see the development of industrial palm oil plantations on 50,000 ha and could create 150,000 jobs over a five-year period.
The palm oil sector is likely to see more interest from investors given that global demand for cooking oil is anticipated to double by 2020 on the back of increased consumption in Asia. The amount of suitable land for cultivating palm oil is rapidly diminishing in the world’s largest producers, leading companies to enter West Africa. It is estimated that West and Central Africa has 1m ha that could be used for developing the crop.
There is substantial unmet demand for palm oil within the region, and local producers could benefit from targeting this market. “Côte d’Ivoire produces 400,000 tonnes of refined palm oil, of which a third is exported to ECOWAS and West African Economic and Monetary Union (Union Economique et Monétaire Ouest-Africaine, UEMOA) countries. Given that production meets national demand, the industry needs to conquer the regional market. The current deficit is estimated at 500,000 tonnes in the UEMOA zone, and 1.5m tonnes for ECOWAS countries,” Abdoulaye Berté, the executive secretary of the Interprofessional Palm Oil Association, told OBG.
RUBBER: Rubber is another cash crop with strong potential in light of demand from emerging markets like China, India and Brazil, and tightening global supply. Natural rubber production increased by 6% to 255,000 tonnes in 2012. According to the Natural Rubber Professionals’ Association, output is expected to rise to 270,000 tonnes in 2013 and 300,000 tonnes in 2014. Rubber exports stood at 278,878 tonnes in 2012, up 14.4% from the previous year.
Government and industry officials aim to increase rubber output to more than 600,000 tonnes by 2025. In order to triple production, the number of rubber plantations will need to increase to 300,000 over the coming decade. Village plantations represent 69% of total production and have annual yields of 1600 kg per ha. Industrial plantations are less numerous at 31%, but have higher yields that range from 2000-2050 kg of dry rubber per ha. Rubber plantations cover 340,000 ha, of which 142,000 ha are in production. There are currently 100,000 producers in the sector.
One reason behind the rapid development of rubber in Côte d’Ivoire is that its regular harvest throughout the year has led many farmers to abandon other cash crops in favour of rubber. Rubber can be harvested for 10 months out of the year, while a crop like cocoa has two harvests and cassava, a local food staple, is harvested only once a year.
Rubber also commands a higher price on the market than many other cash crops, with prices ranging from CFA500-600 (€0.75-0.90) per kg in 2012. On average, farmers’ monthly earnings per hectare stand at CFA149,450 (€224). The gestation period for rubber trees is seven years before the first harvest.
TIMBER: The timber sector contributed 2.5% to national GDP in 2011 and saw revenues increase from CFA200bn (€300m) in 2011 to CFA250bn (€375m) the following year. Europe represents 53% of the export market, while Asia is the second-largest destination market at 17%. The sale of raw timber is banned in Côte d’Ivoire and sawmilling activities are restricted to below the 8th parallel to protect the north from desertification.
Despite the timber sector’s potential for development, it is beset by sustainability and regulatory issues. Côte d’Ivoire’s forests have dwindled from 16m ha in 1960 to 2m ha today, due to the development of intensive cash crop farming, particularly cocoa. The Société de Développement des Forets de Côte d’Ivoire (SODEFOR) manages 231 protected forests, and the Ministry of Water and Forests has instituted replanting quotas that are commensurate with logging volumes. The ministry has awarded 384 permits that demarcate authorised areas for logging, and over 90% of logs that supply saw mills and other industries come from these permits.
Despite efforts to ensure that logging activities correspond to permits, problems remain regarding transparency over traffic of rare woods and the awarding of permits of recently declassified forests. In February 2012, 30 forty-foot equivalent containers of smuggled vène wood were seized at Abidjan and San Pédro ports, where traffickers had been allegedly assisted by officials at the Ministry of Water and Forests. The vène tree (Pterocarpus Erinnaceus) from the north, helps fight against desertification, and a number of non-governmental organisations are campaigning for its protection.
RURAL LAND RIGHTS: While the government implemented a new rural land code that went into effect in 1998, it has made relatively little progress in regularising customary land rights into individual land rights backed by a deed. Conflicts over rural land have persisted over the years, particularly in areas that have seen high levels of immigration like in the agriculturally rich south-west, leading to negative consequences for the production of cash crops. Côte d’Ivoire’s existing legal systems, customary and modern, have historically functioned in parallel until the promulgation of the 1998 law, which seeks to convert customary rights into deeds (see analysis).
OUTLOOK: Given the government’s commitment to reforms and attracting foreign investment through public-private partnerships, Côte d’Ivoire’s agriculture development and economic growth have a strong outlook. In the short term, the sector still faces formidable challenges such as lack of investment, price volatility and structural reorganisation of cooperatives. However, the implementation of key reforms in the cocoa sector and the promising future of other agricultural commodities such as natural rubber and palm oil, on the back of rising global demand, bode well for the revitalisation of the agricultural sector.