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Ghana and Côte d’Ivoire’s new wager

By Patrick Smith, and Baudelaire Mieu in Abidjan
Posted on Tuesday, 10 May 2016 10:15, updated on Tuesday, 12 March 2019 11:42

Presidents next door Ouattara and Mahama -Photo©ISSOUF SANOGO/AFP

While a previous generation of political leaders bet on which country's economic model would triumph, a new one is putting its money down in support of regional cooperation and integration.

It was an encounter that defined the region’s politics and diplomacy for a generation. A month after Ghana had proclaimed independence from British colonial rule, Kwame Nkrumah flew to Abidjan to convince Côte d’Ivoire’s leader, Félix Houphouët-Boigny, that he should immediately push for total liberation from the French colonisers.

“Your experience is rather impressive,” came the courteous reply at that meeting on 7 April 1957. Afterwishing Nkrumah “prompt and complete success” with his project for a United States of Africa, Houphouët ventured: “You are witnessing the start of two experiments. A wager has been made between the two territories, one having chosen independence, the other preferring the difficult road of building with the met- ropole a community of equal rights and duties. Let each of us undertake his ex- periment and, in 10 years time, we shall compare the results.”

There was no return match. A decade later, Nkrumah had been ousted in a Western-backed coup and exiled to Guinea. And Houphouët was presiding over an independent Côte d’Ivoire, using French state and corporate funds to build up commercial agriculture. Yet the wager has intrigued Ghanaians and Ivorians ever since, partly because there is no agreed measure of success in the contest. Now a new generation is making another bet: can the two countries find ways to build stronger economic and cultural ties across the common border?

Véronique Tadjo, an Ivorian poet and novelist, describes the change for The Africa Report: “Perhaps we are getting back into sync and thinking more about our commonalities […]. For so long, it seemed that when Côte d’Ivoire was up and its economy was strong, Ghana was in trouble with coups. Then Côte d’Ivoire had its conflict, and Ghana came up again.” Pushing for greater cooperation between the two states will not be easy, warns Tadjo, but younger citizens will be less hidebound by the historical political differences and what she sees as unnecessary linguistic divides.

Côte d’ivoire catches up

Both tougher international economic conditions and recent history could spur on more bilateral cooperation. Alain Kouadio, vice-president of the Confédération Générale des Entreprises de Côte d’Ivoire, explains: “The Ghanaian economy was attractive for several years while Côte d’Ivoire was in crisis. Business start-up procedures have been modernised in Ghana. During this period, several Ivorian firms moved to Ghana to get tax benefits as well as to benefit from the stability that allowed them to draw up longer-term development plans.”

Over the past five years since Alassane Ouattara was elected to the presidency in Côte d’Ivoire, its crisis-damaged economy has caught up and overtaken Ghana’s on some measures. This year, Côte d’Ivoire’s economy is forecast to grow at 7.1% and Ghana’s at 4.2%.

Like the other countries of the CFA franc zone, Côte d’Ivoire benefits from its currency’s peg to the euro. International pressures on other African currencies are rattling some Ivorian businessmen: “Volatility of the Ghanaian currency against the dollar and the euro is becoming very worrying. [Ghana’s] energy problem also affects profitability,” says Jean-Luc Ruelle, chairman of the Chambre de Commerce Européenne en Côte d’Ivoire.

There is a great advantage in Côte d’Ivoire and Ghana working together

Overall, Ghana still has the bigger economy and population, adds Ruelle: “The Ghanaian economy developed substantially in recent years. Growth was strong between 2006 and 2010, about 6.3%. With 27 million people, Ghana is a potential consumer market.”

But alongside the expansion of the market for consumer goods and services in both countries, there is a vast potential for cooperation on oil, gas and energy projects. To make progress on that, the two governments have to resolve the dispute over their maritime boundary. Having launched large-scale commercial oil production in 2009, Ghana has led the way with its Jubilee fields and the Tweneboa, Enyenra and Ntomme development further west, up against the Ivorian border.

Côte d’Ivoire has been trying to make up for lost time. Under President Ouattara and oil minister Adama Toungara, the country has revised its mining code and determinedly pursued investment. Indeed, some companies such as Ireland’s Tullow are investing in both countries, which complicates the border dispute.

At one stage, Tullow tried to get a resolution at the heads of state level. Kofi Annan, former secretary general of the United Nations, was also brought in to try to broker a deal. But Fui Tsikata, an adviser to Ghana’s legal team on the case, which Accra has referred to the International Tribunal for the Law of the Sea, says he doubts that it can be resolved politically, despite the strong commercial pressures for a deal: “This year, both sides are submitting their arguments and responses, with hearings starting in the first quarter of 2017, so a ruling can be expected by the end of next year.”

Once that is resolved, there are good opportunities for energy cooperation, according to Youssouf Carius, vice-president of Bloomfield Investment Corporation, an Abidjan-based ratings agency: “There is a great advantage in Côte d’Ivoire and Ghana working together, particularly on gas. There is a big demand for gas in Côte d’Ivoire so the project to extend the West African Gas Pipeline westwards from Ghana makes sense.”

Progress has been held up by the complexities of harmonising the two countries’ regulatory frameworks. But this should not be insurmountable, as the pipeline already goes through Nigeria, Benin, Togo and Ghana. As Côte d’Ivoire and Ghana speed up development of their gas reserves, the plan is to make the pipeline flow two ways so a regional gas market can develop.

For Carius, these plans point to the need for both countries to look at economic cooperation and diversification in the wake of the downturn in commodity markets. “Côte d’Ivoire has been diversifying over the past four years, so its economy is proving more resilient than Ghana’s to external market pressures […]. Both countries can do more manufacturing and processing – not necessarily finished products but adding more value to their commodities.”

Shifting trade blocs

Much of Côte d’Ivoire’s regional trade is with Burkina Faso and Mali, says Carius: “There’s definitely plenty of scope for reciprocal trade in products and services with Ghana.” Although Côte d’Ivoire’s membership of the CFA franc zone provides some resilience to international pressures, Carius suggests reform will be necessary in the longer term: “The arrangement gives European companies a commercial advantage in the CFA markets, which is not enjoyed by Asian or US businesses […]. It also complicates trade with other non-CFA zone West African economies.”

Bankers in Côte d’Ivoire and Ghana are working on new financial instruments to simplify crossborder trade

Although a common West African currency is still some years away, bankers in Côte d’Ivoire and Ghana are working on new financial instruments to simplify crossborder trade. For example, the Ghana Stock Exchange is working to facilitate transactions across the eight-member regional bourse based in Abidjan. “Despite economic difficulties and the depreciation of the cedi, the Ghana bourse is very dynamic and innovative, regularly introducing new products,” says Edoh Kossi Amenounve, director general of theBourse Régionale des Valeurs Mobilières in Abidjan.

Last year, the Ghana Stock Exchange launched the Ghana Fixed Income Market, which operates across the regional markets, both Francophone and Anglophone: “Together we will be strong. We have had an agreement with the bourses of Ghana and Nigeria since July 2015,” adds Amenounve.

But there are a host of other trading issues yet to be resolved. Because the duty on imported rice is much lower in Côte d’Ivoire, there are lucrative smuggling operations into Ghana. It has been costing the government in Accra around 70m cedis ($17.7m) a year in lost duties, according to ace investigative reporter Anas Aremeyaw Anas.

Such smuggling operations raise bigger questions of security and diplomatic relations, according to Kwesi Aning, the director of the Kofi Annan International Peacekeeping Training Centre: “There have been mutual suspicions [between Yamoussoukro and Accra], which haven’t helped security cooperation, but we now face increasing regional threats after the attacks in Bamako and Ouagadougou […]. The different governments have to do much more together.”

Debate, 60 years on

For Aning and other analysts in Accra, many of the dysfunctions in relations today have their roots in decades-old political arguments. Debates over founding leaders’ strategies rumble on. In economic terms, Houphouët’s state backing for cocoa and coffee plantations yielded an average economic growth rate of 7% between 1960 and 1980. Nkrumah’s focus on state-financed industrialisation was accompanied by a fast-growing public service and high export taxes. Nkrumah also introduced free universal primary education in 1961, partly to provide literate workers for industrial projects.

Each choice created its own political economy. Houphouët’s bet on commercial agriculture made his country the biggest cocoa producer in the world, but his policies favoured the growing regions in the south and exacerbated inequities in the north. And political cohesion came under pressure after the commodity price crash in the 1980s, and more so a decade later.

Political fissures appeared in Ghana much faster. Nkrumah combined his dirigiste industrial schemes with strong ties with the Soviet Union and China, infuriating US and British officials fighting the Cold War. The coup against Nkrumah sparked two decades of instability. Ghana’s economy, snagged by mismanagement and corruption, hit rock bottom by the early 1980s and the International Monetary Fund was called in.

Today, after the years of economic and political convulsions, Côte d’Ivoire and Ghana are seen as two of the most resilient countries in the region. After that legendary wager 60 years ago, their peoples appear drawn more to cooperation than competition.

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