On January 6, 2017, soldiers in Cote d’Ivoire launched a mutiny in the central town of Bouaké, which spread to all major cities, including the commercial capital of Abidjan. Given that Cote d’Ivoire is one of the fastest-growing SSA markets and is attracting rising investor interest, the mutiny raises concerns over the long-term political stability in the market and the viability of MNC investments in it. FSG believes that companies should continue investing in the country, but ensure that their local partners have sufficient flexibility to deal with short-term disruptions that future protests of a similar kind could bring. Although we do not expect large-scale civil unrest, further manifestations of the grievances that prompted the mutiny are possible.
The mutiny was instigated by soldiers mainly comprising disparate groups of former rebels who helped to bring the current President Alassane Ouattara to power in 2011 during a brief civil war. These soldiers claimed they were motivated by the promises of monetary compensation in exchange for their support of Ouattara. The timing of the mutiny, which took place on the day of elections for the presidency of national assembly, has also been interpreted as the former rebels sending a signal to the government that they still hold sway in the country.
The mutiny culminated with the kidnapping of the Minister of Defense, who was released once the soldiers’ demands for monetary payments and improved living conditions were met. On January 17, the government began issuing payments to the mutineers in accordance with their demands.
However, the problems are not over for Mr. Ouattara. On January 18, a new wave of unrest broke out in Abidjan, with reports of additional soldiers, police, and prison officers discharging firearms in public and demanding improved pay. This has raised concerns that the payments made to the former rebels by the government have incentivized other civil servants to take equally extreme measures in order to ensure their demands are met.
What were the reasons behind the mutiny?
The underlying causes of the mutiny are complex. While Mr. Ouattara has been widely viewed as implementing pragmatic, business-friendly reforms that have contributed to Cote d’Ivoire emerging as one of the continent’s fastest-growing economies, broader discontent has emerged amongst public sector workers, specifically focusing on a sense that they have not derived benefits from the country’s recent economic boom. Additionally, campaigning ahead of the country’s 2016 constitutional referendum and election was fraught with tension, while participation in both polls was very low. Both of these factors suggest that large sections of the population feel marginalized by the political process, therefore increasing the chances of civil unrest in the future. Furthermore, the government has largely failed to address underlying tensions within the armed forces, which have been in need of reform following the end of the country’s most recent civil conflict in 2011. This failure is highlighted by the fact that the last mutiny by armed forces occurred as recently as 2014.
Cote d’Ivoire’s tumultuous recent history in terms of civil strife also raises concerns over how much control the government has over its armed forces, which in turn suggests that the country’s longer term prosperity could in fact be quite fragile. While FSG does not believe that investment in the country is going to slow significantly as a direct result of the mutiny, the attractiveness of Cote d’Ivoire could weaken in the longer term if the government is unable to demonstrate to investors that it has implemented meaningful reforms to the military that will lower the risk of mutinies occurring in the future. Companies should monitor the effectiveness of government action to assess whether longer-term risks to political stability are increasing.
What happens next?
It is likely that once the mutinying security forces have their demands for improved pay and living conditions met, unrest will dissipate. The payouts to the mutinying soldiers will reportedly reach approximately 99 billion CFA francs (US$ 160 million) which is equivalent to approximately 6.5% of the government’s allocated wage bill in the 2017 budget. As the government is already facing pressure from civil servants striking over pay and pension reforms, it is possible that some funds originally apportioned for capital expenditure could be diverted, which could affect MNCs that sell to such projects. Although such events typically cause currency depreciations, as Cote d’Ivoire is a member of the monetary union of the West African CFA franc—the value of which is pegged to the euro—the country is unlikely to suffer from significant currency volatility as a result of the mutiny.
Should investors be worried?
The overall outlook for Cote d’Ivoire remains bright and the country will continue to offer growth opportunities for MNCs. The impact of the mutiny on MNCs’ operations in Cote d’Ivoire will most probably be limited to short-term disruption of supply and distribution chains, and lower sales of consumer goods while members of the public remained indoors. Furthermore, private property was not specifically targeted by mutinying troops, nor were western or foreign companies, as soldiers’ frustrations were mainly directed at the government.
In terms of broader implications for political stability, it is unlikely that the mutiny will result in the country descending into another civil war, especially if the government implements reforms to the armed forces and is able to ensure that it addresses grievances held by public sector workers. Additionally, a primary catalyst for the country’s protracted conflict from 2002 to 2007—namely a constitutional clause stipulating that both parents of the Ivoirian president must be born within Cote d’Ivoire—was removed from the country’s most recent constitution, which came into force in November 2016. Furthermore, in contrast to the early 2000s when a stagnating economy was a major grievance held by most Ivoirians, Cote d’Ivoire’s economy is currently performing well.
Nevertheless, it would be prudent for MNCs to assess whether their distributors are flexible and resilient enough to cope with short-term disruptions to their operations, as the future recurrence of similar disruptive events, such as mutinies and civil unrest, in Cote d’Ivoire cannot be ruled out.