How the boom-bust of Ghana is linked to Côte d’Ivoire’s revival

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IN 2011 Ghana experienced a sudden acceleration in gross domestic product growth — from 7.9 percent in 2010 to 14 percent in 2011, according to World Bank figures, writes George Rautenbach.

Soon it was reflected on in financial and economic analysis in South Africa. The main argument was that the start of oil production and the tailwind generated through the rise in commodity prices were contributing factors. Added to this was the broadening of a more affluent middle class in Ghana.

Goods and services from South Africa followed suit: exports jumped nearly fourfold, from $138 million in 2010 to $516 million in 2013. In 2012 a story in the Mail & Guardian, headlined “Ghana leads business boom”, proclaimed it the fastest-growing economy in the world — and indeed it was for a short time.

Until then West Africa had gone relatively unnoticed by South African companies, mainly due to its Francophone nature. Ghana promised to be a foothold in the region.

But by 2015 GDP growth in Ghana had slowed to 3.5 percent. The IMF might inject an additional $900 million over the next three years into what is now seen as an ailing economy.

Official analysts and commentators argue that this is mainly due to increasing debt, high inflation and currency depreciation. Other factors include the government’s poor financial state, with a large wage bill; a slowdown in the hotels and restaurants sector; and a decline in mining as lower gold prices caused mines to close.

Some analysts, including the IMF, argue that borrowing more will not resolve Ghana’s problems.

While Ghana was enjoying its boom, however, the economic powerhouse in the region, Côte d’Ivoire, suffered a GDP contraction — growth was down to 2.2 percent in 2010, and in 2011 the economy shrank by 4.4 percent.

In 2012 it was back at 10.7 percent growth — exactly the opposite of what happened in Ghana.

In 2010 presidential elections where held in Côte d’Ivoire, in which Laurent Gbagbo lost to Alassane Dramane Ouattara. Gbagbo found it hard to accept the outcome and rushed to inaugurate himself as president. A crisis that had been in the making for years came to a head. The conflict reached its peak in 2011, when Gbagbo was ousted by a UN-French coalition and sent to The Hague to stand trial on crimes against humanity.

In 2010 the supporters and members of Gbagbo’s political party, the Front Populaire Ivoiriene, started leaving Côte d’Ivoire. Hotels and restaurants in Ghana started filling up and the money came with them.

Late in 2010 the regional economic bloc Ecowas and the Central Bank of the West African States yielded to increased international pressure and began threatening the Gbagbo regime. Financial and economic sanctions were imposed but came into effect only in early 2011. Even though the regional central bank threatened the Gbagbo regime, he still had access to the money of the central bank. That money did not stay in Côte d’Ivoire.

There was an increase in the illegal trade of cocoa from Côte d’Ivoire, the world’s number one producer, to Ghana
There was an increase in the illegal trade of cocoa from Côte d’Ivoire, the world’s number one producer, to Ghana

At the same time there was an increase in the illegal trade of cocoa from Côte d’Ivoire, the world’s number one producer, to Ghana. It was estimated that between 75,000 and 100,000 metric tonnes was smuggled to Ghana from the Côte d’Ivoire, and this led to an unprecedented boom in cocoa exports from Ghana.

In 2012, when things began improving in Côte d’Ivoire they started going wrong in Ghana. West Africa’s traditional powerhouse was back in business, and now growth of 8 percent-9 percent is projected for next year.

Very few analyses consider the sociopolitical and cultural aspects that are so important to economic growth, especially in Africa. Money came to Ghana from outside and when the conflict was over the balance had to be re-established.

What does this mean for the region?

The focus is shifting back to Côte d’Ivoire and big investors are moving there. With well-developed infrastructure and new foreign investment, Côte d’Ivoire is booming.

Development in Ghana took place mainly in and around the capital Accra, with major investment directed at infrastructure in the capital itself. Taking a drive out of Accra, one realises the infrastructure does not really support economic development and is far behind that of Côte d’Ivoire.

South African companies that can link their operations with Côte d’Ivoire could succeed in West Africa. They will need to overcome fear and prejudice, and move away from the idea of Anglophone and Francophone Africa to become truly Afriphone in their thinking.

South Africa still views Africa as one continent divided into well-defined and well-run states with clear borders. This is not the case as many of the borders were arbitrarily drawn by European countries during the infamous Berlin conference of 1884-85. This is also the case between Ghana and Côte d’Ivoire, where the border between the two countries runs right through the middle of the Akan people.

Sitting at Noe, the major border post between Côte d’Ivoire and Ghana, one realises that a simple wave of the hand for locals is enough to get through, while big trucks and foreigners have to go through the administrative process. This makes it very easy for money, people and cocoa to flow across the border to find the better market. Currently Côte d’Ivoire offers the better option.

Major infrastructure upgrades are under way in Côte d’Ivoire, including upgrading the Abidjan and San Pedro ports. Upgrading the road network will link Liberia, Ghana, Mali and Burkina Faso to Côte d’Ivoire’s ports.

One need not look far to be successful: Ghanaians are well connected in Côte d’Ivoire and Ivorians are well connected in Ghana. South African companies should continue to ride the wave and now use the footing in Ghana to broaden their foothold in West Africa.

  • Rautenbach, a former chief of staff at the United Nations, is the CEO of Africa Business Experts.

 

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