From Africa Recovery, Vol.17 #2 (July 2003), page 7

Ivorian war sends regional shockwaves

Transport routes, trade and migrant labour flows severely disrupted

By Ernest Harsch

The railway line running from Côte d'Ivoire's port city of Abidjan to Ouagadougou, more than 1,200 kilometres away in neighbouring Burkina Faso, is one of the oldest and most visible symbols linking the countries of the region. For decades, trains carried tonnes of goods and hundreds of passengers each way on a daily basis. But soon after war erupted in Côte d'Ivoire on 19 September 2002, the engines ground to a halt. Suddenly, markets in northern Côte d'Ivoire, Burkina, Mali, Niger and other countries were deprived of essential imports. Farmers, livestock herders and manufacturers in the region could not use the railway -- or the roads -- through Côte d'Ivoire to transport their goods to distant markets. More than 1,800 railway workers on both sides of the border no longer got their pay cheques.

Photo : ©Getty Images / AFP / Issouf Sanago

By March, some in Burkina were becoming desperate. First in Bobo-Dioulasso and then in Koudougou, scores of railway workers' wives marched through the streets shouting "We're hungry!" and carrying empty pots and rice sacks to dramatize their plight. Industrialists and merchants whose businesses have suffered from the cut-off in trade appealed for emergency support.

With the formal establishment of a government of national reconciliation in Côte d'Ivoire, railway officials began promising that the trains would start running again by the end of April. But it was not until 22 May that the first train, carrying fertilizer and cement, actually travelled under heavy military escort from Abidjan to Ferkessedougou, in rebel-held northern Côte d'Ivoire. Youth groups supporting Ivorian President Laurent Gbagbo had tried to block the train earlier that day by tearing up a small section of the track, to symbolize their opposition to the peace accords.

To many local observers, the prospects for reestablishing -- and keeping open -- this vital West African transport link will remain as uncertain as the Ivorian peace process itself. The economic health of much of the region depends on the success of that effort. Without peace in Côte d'Ivoire, worries Malian Finance Minister Bassari Touré, "practically our entire economy will need to be reoriented."

At a time when the eight countries of the francophone West African regional group known as the Union économique et monetaire ouest-africain (UEMOA) have been moving towards closer economic ties with each other, the Ivorian crisis has become "a source of macroeconomic instability for the entire Union," notes Mr. Charles Konan Banny, governor of the West African central bank. "The uncertainties that it raises may divert the dynamic of integration and affect the Union's viability. The crisis cannot be allowed to persist."

A stalled 'engine of growth'

For decades, Côte d'Ivoire was one of the most politically stable and economically vibrant countries in Africa. Its agriculture is highly productive, making it the world's single largest exporter of cocoa and Africa's largest exporter of coffee (and fourth or fifth in the world). Compared with many other African countries, it also has a relatively diversified manufacturing sector.

The economic opportunities this offered, combined with Côte d'Ivoire's initially welcoming attitude to immigrants from other African countries, made the country a magnet for labour from throughout the region. Non-Ivorians are estimated at around 3-4 million -- or a quarter of the country's total population. More than half that number are from Burkina Faso alone, including the descendants of immigrants who first arrived during the French colonial era and have lived in Côte d'Ivoire all their lives. Through their hard work on the country's plantations, docks and industries, these migrant workers, in turn, contributed significantly to Côte d'Ivoire's economic "miracle."

As Mr. Banny notes, some of the benefits of this success flowed back to the rest of the region, and made Côte d'Ivoire a "regional pole of growth." It contributed through migrant labour remittances, the supply of manufactured goods, the creation of local markets for agricultural and livestock exports from neighbouring countries and the use of its ports, railway and roads to facilitate regional travel and exchange.

The sheer size of its economy ensured that Côte d'Ivoire, as long as it was economically healthy, would provide a measure of regional economic stability. It contributes nearly 40 per cent of the combined gross national products of the entire UEMOA group (see graph). It also claims a quarter of UEMOA's total population, accounts for 30 per cent of its investments and 40 per cent of its budgetary receipts, provides 57 per cent of its exports and takes 36 per cent of its imports.

But by the last few years of the 1990s, growing domestic political conflict, combined with downturns in the world prices for cocoa and coffee, seriously undermined the Ivorian economy. The country's economic growth rate declined drastically, and since 2000 has been stagnant or negative. While Côte d'Ivoire's GDP growth once buoyed the average for UEMOA as a whole, for a half decade now it has depressed the regional rate (see graph).

The situation since the outbreak of civil war in September 2002 has been especially dire. In March, the International Monetary Fund (IMF) estimated that the conflict had brought Côte d'Ivoire's GDP growth rate down to zero for the year as a whole. But Mr. Banny, citing central bank estimates, reports that the Ivorian GDP actually contracted by 1.3 per cent during the year, bringing UEMOA's average down to 2.6 per cent (from a pre-conflict projection of 4 per cent). Analysts at the Economist Intelligence Unit in London agree with Mr. Banny's estimate for 2002, and project an additional decline of 1.9 per cent for Côte d'Ivoire this year, even if the peace accords prevent a further deterioration of the situation.

This contraction will in turn depress growth in those neighbouring countries that are most heavily dependent on economic relations with Côte d'Ivoire -- although the precise impact is not easy to isolate from other factors affecting growth. Burkina's Prime Minister Ernest Paramanga Yonli reported to parliament in March that growth in 2002 reached 4.6 per cent, a full percentage point less than the year before. Only part of the decline was a result of the disruptions caused by the Ivorian conflict, with stagnant cereal production also playing a major role. Before the September 2002 events in Côte d'Ivoire, the Burkinabè authorities projected a highly ambitious growth rate of 7-8 per cent for this year, but in March the World Bank forecasted that it might reach only 2.6 per cent.

Mali, which is less extensively affected than Burkina, managed to maintain a reasonable 4.5 per cent growth rate in 2002, and may reach 4.0 per cent this year. Niger saw its growth drop to 2.9 per cent last year (compared with 5.8 per cent the year before), but this may rise to 3.5 per cent this year if the Ivorian peace holds and weather conditions are favourable.

Refugees and 'returnees'

For many countries in West Africa, the conflict in Côte d'Ivoire, coming on top of those in Liberia and Sierra Leone, has added to an already bewildering pattern of population movements, as villagers flee rebel or government troops or attacks by other villagers. Some have sought sanctuary in refugee or transit centres. Others have managed to return to the safety of their home countries.

Photo : ©UNHCR / B.Heger

According to the UN Office for the Coordination of Humanitarian Affairs (OCHA), some half a million people left Côte d'Ivoire between September and April. This was in addition to another 750,000 people who were displaced within the country.

As in other spheres, Burkina was hit the hardest. Even before the outbreak of the most recent fighting last year, tens of thousands of Burkinabè had already returned home to escape attacks by Ivorian groups intent on driving out foreigners or to claim land farmed by immigrants. But since September the number has soared beyond 200,000. About half have been aided by the Burkinabè government's official repatriation campaign, known as Operation Bayili, receiving a few days of food rations and immediate medical care before going back to their home villages. The rest returned home on their own, sometimes walking long distances.

"We had to leave without our things, without even a single franc," said Gilbert Kaboré, a kola nut merchant in the Ivorian town of Bouaké, who made his way back to Burkina on foot, through the forests to avoid armed checkpoints on the roads.

In some of Burkina's western provinces, thousands of returning students have crammed into already overcrowded classrooms, further increasing teachers' workloads and eroding the quality of education. Many more workers have joined the ranks of Burkina's unemployed. In Nimpouy and other rural areas, returnees have set up new villages and farms, sometimes encroaching on established farmlands and contributing to land disputes and ethnic tensions.

By early April, nearly 100,000 people had crossed the Ivorian border into Guinea, nearly 60,000 of them Guineans and the rest from Côte d'Ivoire, Liberia and other countries, OCHA estimates. This has added to instability along Guinea's southern borders, including with Liberia. Some 40,000 Liberian refugees who previously had been in camps in Côte d'Ivoire were impelled to cross back into Liberia, along with nearly 38,000 Ivorians and thousands of other nationals, contributing to the chaos of Liberia's own civil war (see article "Demands mount for Liberian peace").

By end-March, about 40,000 Malians working in Côte d'Ivoire had also returned home. Ghana, which had fewer nationals in Côte d'Ivoire to begin with, only registered about 3,000 returnees by late February, but provided refuge to several thousand Ivorians and permitted more than 55,000 citizens of Burkina, Mali and Niger to pass through Ghanaian territory on their way back home.

Trade disrupted

On top of the costs of repatriating their nationals, Mali and Burkina have also been hurt by the severance of trade with their southern neighbour. In normal times, Mali obtained 30 per cent of its imports directly from Côte d'Ivoire, while 20 per cent of Burkina's imports were Ivorian. Both countries also depended on Ivorian markets for their exports, 10 per cent in the case of Mali and 12 per cent for Burkina. The percentages climb much higher when goods from other countries that normally transit through Côte d'Ivoire are included.

The closure of Côte d'Ivoire's borders and the halt to all railway traffic immediately cut off these countries' imports. Construction materials ordered by Burkinabè companies were left stranded in Abidjan. A motorcycle assembly plant that depended on Ivorian parts had to lay off workers and Burkina's largest flour mill had to shut down entirely because it could no longer get grain from Côte d'Ivoire. In western Burkina, food and other basic consumer goods usually supplied from Côte d'Ivoire were abruptly unavailable, and local market prices shot up.

Consumers in Mali, which usually obtains about 80 per cent of its imports from or through Côte d'Ivoire, saw a rise in the prices of cooking oil, soap and other goods. Niger's construction industry has suffered from the halt to Ivorian iron, lumber and paint imports. Even Benin, which has its own port and depends largely on imports from neighbouring Nigeria, has been hit by the cut-off in Ivorian manufactured goods and refined oil (11 per cent of its fuel imports came from Abidjan).

The disruption of regional export trade has been just as serious. Livestock herders in Burkina, Mali and Niger depended heavily on Ivorian markets for their sales. Burkina's prime minister reports that the country's total cattle and animal product exports fell by 65 per cent because of the Ivorian crisis. Mali's cattle exports have halted almost completely. OCHA warns that this has severely hurt the incomes of Mali's Fula, Tuareg and other herders, who tend to feel socially excluded and have in the past resorted to armed insurgency against the central government

Both Mali and Burkina also relied heavily on the railway and Abidjan's modern port to move their cotton exports. With that route interrupted, they moved quickly in trying to switch to alternative road connections to ports in Ghana, Togo, Benin and Senegal. But for a bulky product like cotton, road transport is more costly than rail, an expense that is compounded by the longer distances involved. According to Mr. Toussaint Houeninvo, an economic analyst in Cotonou, Benin, these additional transport costs have lost Burkina nearly $7 mn on its cotton exports through Cotonou.

In addition, alternative transport and handling capacity is inadequate. Some of the roads are in poor shape, not enough heavy trucks are available and the Ghanaian and Togolese ports have become congested. Senegal has planned to further modernize Dakar's port and develop the city's industrial base, as a regional competitor with Abidjan. But as Mr. Houeninvo notes, a bigger regional role for Dakar "requires processing and support capacities that Senegal doesn't yet have."

Finances undermined

Historically, relative financial stability has been one of the strengths of the UEMOA group, which shares a common currency, the CFA franc, managed by the West African central bank headquartered in Dakar and buoyed by a fixed rate of exchange with the euro. This has contributed to relatively low levels of inflation and to efforts by the group's member states to harmonize their customs, tax and fiscal policies. The outbreak of the Ivorian crisis prompted some media speculation about the possibility of another devaluation of the CFA franc, similar to one in 1994, but Mr. Banny and other officials discount such a threat for the time being.

Photo : ©UNHCR / R. Wilkinson

Nevertheless, the economic disturbances caused by the Ivorian conflict have weakened the financial position of those countries most directly affected. Mr. Banny estimates that Burkina and Mali each lost about CFA20 bn (nearly $30 mn) in government revenues during the last quarter of 2002 -- taxes, customs duties and other sources of revenue that were not paid because of the slowdown in trade and other economic activity. Both countries have been obliged to revise their 2003 budgets, to take into account lower domestic revenues and to project bigger budgetary deficits.

In late May, Niger's customs director, Mr. Youba Diallo, estimated that his service would likely lose about $10 mn in customs receipts this year because of the Ivorian crisis. Niger, he pointed out, probably would not get an additional $7 mn it was set to receive through an UEMOA compensation scheme, paid out of the high customs earnings that Côte d'Ivoire normally earns from its trade with other UEMOA members.

Such shortfalls can be a serious problem for tight national budgets; but they can be absolutely disastrous at the local level. According to Mr. Abraham Dramane Soulama, mayor of Niangoloko, a Burkinabè town near the Ivorian border, the municipality has lost half its revenue because of the turmoil in Côte d'Ivoire. "What we really worry about is paying the salaries of municipal staff," he says. "As for investment, that's all been halted for the moment."

For those countries that had large numbers of migrant workers abroad, the unrest in Côte d'Ivoire itself and the return of so many nationals has hurt the flow of monetary remittances from those migrants. For Burkina in particular, such external labour remittances have long helped to offset its large balance-of-payments deficit. But as the Ivorian economy slowed and many Burkinabè fled the country, overall remittances declined from $110 mn in 1994 to $41 mn in 2001. No estimates are yet available for 2002, but the figure may well be considerably lower.

The IMF, in an assessment of economic developments in the UEMOA region released in March, pointed to two other potential financial effects of the Ivorian conflict: concern about political instability in the region may lead to a reduction in private capital inflows, including foreign investment, and it may propel some countries to increase military spending.

Challenge to regional integration

The same IMF report cites growing concerns that the Ivorian crisis may hamper "the momentum of the integration process" within the UEMOA. As IMF and many local analysts note, Côte d'Ivoire had been so central to that process that little progress is likely within the region as long as the country is in turmoil.

Leaders in Burkina, Mali, Niger and other countries are now seriously rethinking the degree of their dependence on Ivorian markets and transport routes, and see a need to better diversify their economic relations. But such diversification will take considerable time and effort, and there will still be significant advantages in working closely with a stable and prosperous Côte d'Ivoire.

UEMOA's successes and failures will have a big impact on the wider process of West African integration. All eight countries also belong to the Economic Community of West African States (ECOWAS), and there has been agreement between them and the seven non-CFA countries of the bigger group to work towards an eventual union. A faltering UEMOA will make such efforts much more difficult.

Although good economic policies are vital for progress towards regional integration, so is peace, notes Mr. Banny. "The situation that prevails in Côte d'Ivoire and its disastrous consequences for the regional economy demonstrate that political stability is a 'common good' to which the member states must pay as much attention as they do to macroeconomic balances."

He argues that achieving peace and political stability must be seen as a priority for the integration of the region's economies. Moreover, he says, that goal cannot be the work of governments alone, but must involve all actors. Peace will best be assured with the achievement of "a genuine culture of democracy" that promotes good governance and public participation. Just as peace is vital for regional integration, Mr. Banny adds, the ultimate establishment of a union of African states and peoples will in turn act as "a force for peace and prosperity."

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