Although they account for the majority of the companies in operation in Côte d’Ivoire, small and medium-sized enterprises (SMEs) are confronted with a number of difficulties – similar to most countries in Africa – that prevent them from developing and expanding. Issues include access to credit, low survival rate in the first three years of operation, weak competitiveness and a large informal sector.
Challenges
Côte d’Ivoire had an estimated 50,000 SMEs in 2013, the latest available data. According to official figures, SMEs account for 98% of Ivorian companies and employ the biggest portion of the population, especially among the youth. However, their contribution to GDP only stands at around 20%. In addition, the majority of SMEs in the country are not officially registered. Numerous administrative barriers, especially from the tax administration, means there is little incentive for SMEs to formalise and pay taxes, which represents a considerable potential source of additional revenue for the government. As they are insufficiently formalised and structured, many SMEs encounter difficulties obtaining funds from banks. The lenders, in turn, argue that many SMEs have poor governance and that their financial statements are not reliable enough to qualify them for loans.
“SMEs have issues getting access to financing from banks, and when you create a business, you immediately have the tax administration on your back. Securing access to land and getting a land deed is also complicated,” Alban Ahouré, economist at the Ivorian Centre for Economic and Social Research, told OBG. “There needs to be a mechanism in place to allow SMEs to develop, grow and create more added value and more jobs.” The latest Investment Code, which was adopted in August 2018, provides advantages to SMEs, he said.
Phoenix Plan
To address the issues of SMEs, in 2014 the government adopted an ambitious project to support small entrepreneurs. The project, called the Phoenix Plan, aims to improve access to financing for SMEs, build their technical and management capacities, and develop the country’s entrepreneurial culture via the creation of incubators. Estimated to cost CFA86bn (€149m), the plan seeks to double the number of SMEs in operation to 120,000 by 2020, creating up to 400,000 new jobs.
Delays in the implementation of the programme, however, mean the first phase of targets are unlikely to be met on time. That said, some important progress has been made. For example, the Côte d’Ivoire SME Agency, established in October 2017 to support, promote and develop SMEs, has established a CFA5bn (€7.5m) fund offering loans to female entrepreneurs at reduced interest rates.
“The idea is to create a comprehensive and favourable ecosystem to support the SMEs,” Salimou Bamba, director-general of the Côte d’Ivoire SME Agency, told OBG. “After a business gets legally registered at the guichet unique (single window), the agency is there to accompany it through the different phases of its growth, development and expansion.”
Publicly funded support is particularly important during the development phase of the company as, according to Bamba, the mortality rate of newly created businesses in their first three years is estimated at between 40% and 60% currently.
Financing
The government also amended the legislative framework surrounding SMEs, and in 2015 adopted a law guaranteeing that at least 20% of public procurement contracts be awarded to local SMEs. Furthermore, in 2017 the authorities set up a state-backed guarantee fund of CFA30bn (€45m), dedicated to SMEs, which assists them in obtaining loans from local banks. As part of the initiative, Banque Atlantique signed an agreement with the government in July 2018 to offer some CFA700m (€1.1m) worth of credit to 45 female entrepreneurs.
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