South Africa urges caution on Ivory Coast crisis

South African president Jacob Zuma will travel to Mauritania and Ivory Coast as part of the African Union’s initiative aimed at resolving the political crisis in Ivory Coast.Zuma joins the high-level African Union panel led by Mauritanian President Mohamed Ould Abdel Aziz, and which also includes the leaders of Burkina Faso, Tanzania and Chad. They hope to end the stalemate following the refusal of incumbent Ivorian president Laurent Gbagbo to step down in favor of Alassane Ouattara, the U.N. certified winner of the country’s presidential election in November.Before traveling to Ivory Coast, the heads of state first will be briefed in Mauritania by a team of experts who have spent weeks working with the opposing parties. Maite  Nkoana-Mashabane, the South African Foreign Minister, said yesterday.She described the outcome of Ivory Coast’s November elections as “inconclusive” and refused to say who South Africa believed had won.International organisations say Alassane Ouattara was the victor, but incumbent Laurent Gbagbo has refused to step down. The stand-off has led to a humanitarian crisis and fears of civil war.The post-election power struggle in Ivory Coast is a looming threat to the stability of the West African region, as witnessed by the fact that around 30,000 Ivorians have already flooded into Liberia to seek refuge.But the regional economic impact so far is harder to judge, with mitigating factors that allow surrounding countries to cushion the effect on the region’s trade and on the economic and monetary union underpinning the West African CFA franc.As incumbent Laurent Gbago and rival claimant Alassane Ouattara jostle for control of the world’s top cocoa grower, here are some pointers to how the stand-off could affect neighboring economies.

WHAT IS THE IMPACT ON THE REGIONAL ECONOMY?

Probably less this time than during the 2002-2003 civil war — assuming of course the crisis is resolved some time soon.While still the giant of the eight-nation West African Economic and Monetary Union (WAEMU) zone, Ivory Coast’s share of regional output has fallen from around 45 percent in the 1980s to a third now, after years of economic stagnation.Exports of goods into Ivory Coast from the rest of the region are minimal, but neighbors such as Burkina Faso would be hit by a decline in remittances sent back by millions of foreign workers in Ivory Coast. That would be the case most notably in the cocoa sector, where Ouattara’s call for a suspension of exports through February is already hitting hard.It remains to be seen how that affects a local growth rate which is solid if unexciting: the region’s BCEAO central bank is currently forecasting 2011 growth of 4.5 percent for the zone this year, up from around four percent in 2010.

DOES AN EU SHIPPING BAN AFFECT SUPPLIES TO THE HINTERLAND?

Yes — again, take Ivory Coast’s northern neighbor Burkina Faso as an example. The Burkinabe cargo body CBC estimated this month that around 20,000 metric tons of merchandise ranging from rice to fertilizers were blocked at the port of Abidjan en route to Burkina. That is only a fraction of the 80,000 metric tons of blocked supplies it experienced at the peak of the 2002-2003 war because Burkina has since spread business to other ports including Togo’s Lome, Benin’s Cotonou and Tema and Takoradi in Ghana.

Burkinabe textile company Sofitex says there are higher transport costs involved in having to avoid Abidjan port, but notes the impact is minimal with world cotton prices currently at record highs. “We are still in profit. The added costs affect the margin, but there will still be a margin,” said Sofitex chief Celestin Tiendrebeogo told Reuters in Ouagadougou.The other ports of the region are among the winners in all this. Kwame Wili, sales director of Togo’s Lome port, said it had seen a big increase in trucks arriving from the West African hinterland since the start of the crisis.”Given the troubles, they are heading to Lome — not without causing serious logistic problems,” he said of the build-up of long queues of trucks awaiting unloading at the port.

WHAT IS THE OUTLOOK FOR POTENTIAL INVESTORS IN THE REGION?

Unsettling. The suspension of trade at the West African bourse in Abidjan this week means for example that it is no longer possible to trade there in the shares of Sonatel, the much-fancied Senegalese telecom operator, or in the regional listings of companies such as Nestle.The bourse is looking into opening up elsewhere in the region as soon as possible, officials say.A second problem is posed by the increasingly enmeshed web of financial holdings across the WAEMU zone — which, aside from Ivory Coast, includes Benin, Burkina Faso, Guinea Bissau, Mali, Niger, Senegal and Togo.Analyst Samir Gadio at Standard Bank estimates that Ivorian bonds and Treasury Bills account for around $1.8 billion, or a third of total WAEMU debt last month — a worrying fact given the near-collapse of the Ivorian bank system as foreign credit institutions shut up their businesses.”Such dynamics mean the liquidity position of regional counterparts could be jeopardized should a local currency default occur in Cote d’Ivoire or the authorities be unable to perform transactions with the rest of WAEMU,” he noted.What is not clear at this stage is whether the Dakar-based BCEAO could step in and guarantee the debts if such a default occurred on a large scale.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s