WEST AFRICA: Ivorian conflict takes toll on region

Analysis

Direct conflict between armed belligerents in Ivory Coast's six-year civil war was quelled in November 2004 following coordinated intervention by the UN, African Union (AU), the Economic Community of West African States (ECOWAS), France, and the United States. Some 10,000 French and UN peacekeepers patrol the buffer zone between the rebel-controlled north and government-controlled south. The country is now experiencing an uneasy hiatus as planned elections, originally scheduled for October, have been derailed by rebels' announcement they will not permit voting in areas under their control, as well as the withdrawal of support of the country's four largest opposition parties (see IVORY COAST: Vote at risk as rebels refuse to disarm - August 15, 2005).

Economic stakes. Ivory Coast was a beacon of economic stability in West Africa until the outbreak of war in 1999 (see IVORY COAST: Civil war fuels regional instability - June 25, 2003). It had excellent infrastructure (critical for exporting agricultural commodities), attracted foreign investment, and had some light manufacturing. The country accounted for 40% of the GDP of the Financial and Monetary Union of West Africa.

Agriculture is central to Ivory Coast's economy and generates 60% of foreign exchange. Cocoa is the key crop, and Ivory Coast produces 39% of world supplies. Coffee is also important (Ivory Coast is Africa's third largest coffee producer; 2% of world supplies), as are cotton, palm oil, bananas and pineapples. Production of these commodities contracted between 2000 and 2003.

Ivory Coast was a magnet for five million foreign workers and their families (almost a third of the population), especially from Mali, Burkina Faso and Liberia. Migrant workers dominated the plantation employment sector and trade networks between Ivory Coast and its neighbours.

Impact. The conflict has had a wide-ranging impact on the regional economy:

• Cocoa prices. The conflict has cut off some coffee and cocoa producing areas in the north from export ports in the south. This had a dramatic effect on world cocoa prices, which doubled from 2000 to 2002, reaching a 16-year high (see IVORY COAST: Lack of transparency mars cocoa reforms - September 12, 2002). Prices eased in 2003 as peace efforts brought some predictability to the sector.
• Foreign workers. Millions of migrant workers have fled or returned home voluntarily, often because of xenophobic political rhetoric and violent attacks by indigenous Ivoiriens suspicious that rebel factions receive support from migrants with whom they have close ethnic ties -- especially those from Burkina Faso.
• Remittances. In 2003, total remittances to Burkina Faso, Mali and Niger were almost 200 million dollars -- much of this from expatriates in Ivory Coast. The dislocation of foreign workers has sharply reduced these flows. Total remittances to Burkina Faso fell from 140 million dollars in 1990 to 40 million in 2003 -- undoubtedly affected by the instability. Conversely, remittances to Ivory Coast increased from 44 million dollars in 1990 to 141 million in 2003 -- Ivoiriens who migrated to escape economic disarray are now sending money to help relatives at home.
• Reconfigured trade. Trade between Ivory Coast and its neighbours has been constricted due to border closures, banditry, and roadblock 'tolls' by both rebel and government forces. As a consequence, governments in Mali, Burkina Faso and Niger are promoting trade relations with Senegal, Benin and Togo in an attempt to find alternative markets.
• Diminished markets. Once an important destination for food products, reduced living standards have rendered many Ivoiriens unable to afford imports -- affecting a range of producers in hinterland countries, such as Malian beef. Moreover, Burkinabe and Malians can no longer afford tropical fruit and vegetables from southern Ivory Coast.
• Criminal activity. The breakdown of government control over border regions, combined with a proliferation of armed groups with opportunities to make money from roadblock commerce, will facilitating cross-border smuggling. Ivory Coast was already a regional producer of marijuana and illegally harvested timber, and these commodities are now more easily exported.
• Food security. Combined with severe drought in the Sahel, interruption to trade networks has negatively affected regional food security. Neighbouring governments have had to build up expensive emergency food stocks and request food aid from donors.

Ivory Coast's economy contracted by 1% in 2004, and growth in neighbouring countries -- especially in the Sahel -- has been depressed. However, Ghana and Nigeria escaped the worst as they are less integrated into the regional francophone economy and less reliant on Ivory Coast for remittances and markets.

Opportunities. Conflict has created economic and political opportunities for some:

• Cocoa producers in Ghana (which produces 19% of world supply), Nigeria (6%) and Cameroon (5%) will benefit from increased prices, which are forecast to remain high for the foreseeable future. These countries also have a chance to increase their market share at Ivory Coast's expense.
• Traders in Atlantic countries will do well out of the conflict, as landlocked Sahel countries turn to ports and infrastructure in Senegal, Ghana, Togo and Benin for exports and imports.
• AU peace efforts, headed by South African President Thabo Mbeki, promise to reconfigure the economy. South Africa has a track record of hitching economic agendas to regional political activity, and its intervention will inevitably see a concerted attempt by South African entrepreneurs to exploit opportunities. This would occur at the expense of existing trade partners, especially France, which accounts for 42% of Ivory Coast's imports.
• Political instability and the weakened capacity and reputation of the Ivoirien government have undermined Ivory Coast's influence within regional economic organisations. This has created opportunities for other governments, especially Ghana and Nigeria, which are increasing their political and economic influence.

Outlook. The collapse of rebel and opposition support for elections is a major blow to peace prospects and business confidence. Combined with the current severe drought in Niger and Mali, continued rebel control -- or the possibility of new battles if the government tries to wrest control -- will have serious, but uneven, economic consequences across West Africa:

• Cocoa prices, which are highly sensitive to developments in the war, will remain high. Ivoirien production and marketing will remain constrained, but other producers in the region will benefit.
• Regional economic output will be negatively affected both directly (through labour shortages, blocked export routes and hunger) and indirectly (through higher prices for inputs such as capital and fertiliser).
• Infrastructure in Ghana and Senegal will be overburdened as Sahel traders seek alternatives to routes through Ivory Coast.
• Informal and illegal economic networks will flourish as rebels exploit economic opportunities newly available to them, and traders exploit poor border controls to avoid tariffs.