Key sectors: cocoa
Key risks: military mutiny; budget deficit; muted economic growth
On Friday 12 May, soldiers fired shots into the air and blocked roads in major cities, undermining President Alassane Ouattara’s announcement that the government had reached a compromise with them over unpaid bonuses. Schools, embassies and banks were closed during the days that followed as mutinying soldiers took to the streets of the country’s commercial capital Abidjan, the cocoa hub of Daloa, the port city of San Pedro, and the country’s second largest city, Bouaké, which experienced the worst of the provocations.
Cote d’Ivoire has seen frequent mutinies over recent decades, with the country experiencing the most by far in West Africa. They highlight the importance of military reform in post-conflict societies, which in Cote d’Ivoire has not to date been forthcoming. The present mutiny was a typical episode, marked by soldiers taking control of strategic points of cities and engaging in public and audacious displays of their grievances. Crucially, the threat of violent escalation – rather than violence itself – was the key to their success.
January saw similar scenes, with soldiers taking to the streets across the country, and the government swiftly conceding and agreeing to pay each of the 8,400 soldiers a sizeable US$19,400. However, the government’s ability to do so has been compromised by the significant fall in cocoa prices. As the world’s biggest exporter of the bean, Cote d’Ivoire has felt the impact of the downturn, with government finances increasingly stretched, particularly given it subsidises cocoa prices for farmers. Only earlier this month the government announced that the budget would be slashed by 10 per cent or some US$85m, as it tries to meet IMF targets. Growth has also been revised down from 8.9 per cent to 8.5 per cent, with further risks to the downside.
Government negotiations with the soldiers must be seen in this context. It was again forced to capitulate to the soldiers’ demands, with them returning to their barracks on 16 May. However, instead of the previously agreed payment of CFA1m (US$1695), the mutinies, which were prompted by government efforts to negotiate, resulted in the government agreeing to pay CFA5m (US$8478) immediately and CFA2m (US$3390) by the end of June. This equates to a total immediate pay-out of US$72m, swiftly followed by US$29m – roughly the same amount as the pledged budget cut. Over the short term, IMF assistance and Eurobond issuance will likely plug the deficit, however, over the longer term, meaningful reform will be required.
While a return to the widespread conflict seen during Cote d’Ivoire’s civil war is extremely unlikely, the mutinies have demonstrated that economic transformation must be accompanied by internal reform. Ouattara, a former IMF economist, has performed well in rebuilding the economy and cementing relationships with international financial institutions and investors, but failed to make all-important progress with transitional justice and reconciliation processes. Until then, mutinies will persist. The government will also have to contend with negotiations with public sector workers over US$400m in back-payments and pensions, and further fiscal slippage may be likely to put an end to debilitating strikes over recent months.
After years of favourable economic conditions, President Ouattara now faces difficulties in tempering the fiscal discipline required by the IMF and international investors with improving living conditions for Ivoirians, the majority of which have not experienced the dividends of economic growth.