Vaclav Havel on the temptations of power

Thinking about corruption, I came to think about a speech Vaclav Havel made in 1991 when accepting the Copenhagen University Sonning Prize for his contribution to European civilization.

Havel talks about “the diabolical temptations of power” affecting especially those who haven’t held positions of political power previously.  How people getting into politics for mainly idealistic reasons lose focus and stay in it for altogether different reasons.

The Ivory Coast appears to be a textbook case for this process over the last decade. In the beginning I believe Robert Guei, Laurent Gbagbo and Guillaume Soro all got into politics due to, in big part, values and ideas.

You just don’t start a coup and an armed revolt that is far from certain to succeed without being a tad idealistic at least.  And to be opposition leader for a long time with seemingly small chances of success against an autocratic African ruler, it’s just not possible without some idealism.  I’m not sure about Guei, but I have read Gbagbo’s and Soro’s speeches and declarations they made before they came into power, and it was easy to agree with much of it, and it looks clear that they were to a significant part driven by a desire to make the Ivory Coast a better place.

Guess the jury is still out on how Soro is dealing with becoming prime minister, but latest signs do not look to encouraging.

Guillaume Soro and Laurent Gbagbo

Anyhow, here’s Vaclav Havel’s acceptance speech in its entirety:

The prize I’ve been honored with today is usually given to intellectuals, not to politicians. I am obviously what can be called an intellectual, but at the same time, fate has determined that I find myself — literally overnight — in what is called the world of high politics.

With your permission, I would like to take advantage of my unusual experience and try to cast a critical eye of an intellectual on the phenomenon of power as I have been able to observe it so far from the inside, and especially on the nature of the temptation that power represents.

Why is it that people long for political power, and why, when they have achieved it, are they so reluctant to give it up?

Continue reading “Vaclav Havel on the temptations of power”

Encounters with corruption

Corruption is a subject that unfortunately is relevant to – but not limited to – people doing business  in Africa.  Myself, I have actually not yet encountered any corruption in my real estate venture in the Ivory Coast, but I’d like to share my other experiences of corruption from longer and shorter visits/stays to West Africa over the last 12 years:

1. Roadblocks in Abidjan

Almost all petty corruption I’ve encountered in Africa come from roadblocks in Abidjan in 2003 or 2004.  Felt like there were roadblocks every 800 meters or so at the time. For most of them, it was possible to get through without paying anything.

Once, a friend of mine, when asked for a bribe at a roadblock responded “That is corruption, and that’s not good for your country!” (in French) and possibly due to the surprise effect our car was actually let through.   He tried it again at another checkpoint, but a quite tough-looking military-dressed guy manning the roadblock just responded  Money! (in English). Given that some of the others started aiming their kalashnikovs at the car, we concluded that paying 1,000 CFA Francs was probably a wise move.

On other occasions the exchange with the guys at the roadblock was more subtle. We said “We’re in a hurry”, and they responded “We’re thirsty!”. We handed over 1,000 CFA Francs and told them to enjoy their beers.

2. Volvo bus

Senegal had since the early to mid 90s been scheduled to receive Volvo buses for its public transport in Dakar as part of Sweden’s development aid efforts.  However, it took over a decade for the buses to actually be delivered.

In 2005, I was at a meeting with the Swedish ambassador to Senegal, and she explained that Senegalese government officials serving both Abdou Diouf’s and Abdoulaye Wade’s governments simply refused to let the deal happen unless it included a kickback for themselves. As Sweden has a pretty strict no-corruption policy, the whole issue stayed in a stalemate lasting for years.  The ambassador said that at the end she had to call a couple of Ministers and literally yell at them over the phone.

Buses in Dakar. These are manufactured by Tata and not Volvo though.

3. An Ivorian Municipality

I have a good friend who has worked as a tax officer at one of the municipalities of Abidjan, heading a team of nine tax collectors. His job was to charge tax for shops in the municipality with a surface area below a certain threshold.  Upon starting the job, he discovered that his predecessor (who had been fired due to corruption) had made a deal with many shops allowing them to pay a too low tax amount in return for a kickback. As my friend has strong integrity (group 3 in the The Issue of Trust post) he attempted to charge the correct higher tax amount without asking for a kickback, and this resulted in:

-Him getting the reputation of being the severe tax officer, and minor demonstrations erupting blocking his way when he tried to visit shops in the municipality.
-His own tax collectors tipping off shop-owners warning them of when my friend would make a visit.
-His superior asking for a cut of the kickbacks my friend was supposed to receive, and not being at all happy (in a diplomatic and subtle way) when explained that no kick-backs were collected.
-Tax collection in my friend’s unit increasing dramatically compared to previously.
-My friend ultimately getting outmaneuvered from any position of actual tax collecting power while still keeping his title and salary.

My friend explained that you risk losing your job both if you are too blatantly corrupt, and if you are too honest. He estimated that about 50% of the money collected by the Municipality went directly into the pockets of public officials.

I visited my friend’s office several times and it was an interesting and eye-opening experience.  It had a very used wooden desk, two chairs, a computer from the early 90s, and two cupboards with  mostly empty shelves. The atmosphere was very open and I’d say friendly (at least if you are unaware of the underlying tensions and conflicts as I was at the time). Members of the public kept coming in all the time and most of my friend’s time appeared to be spent dealing with their issues which often were not related to his core functions.

I even co-discovered some corruption myself. My friend had this aid who – among other things – was responsible for a yellow form where the taxpayers put one stamp for each month to show that the tax has been paid.  Taxpayers have to buy the yellow form which lasts for a year for 2,000 F CFA. In the office there should have been 500 unused yellow forms, and I counted them, but there were only 234 of them. My friend and I drew the conclusion that the aid had been selling these on his own.

4. It’s Our Turn to Eat

This is very indirect, but Michela Wrong’s book It’s Our Turn to Eat about corruption in Kenya after Mwai Kibaki came to power is so brilliant that I have to mention it.  It shows how grand corruption works from the inside and tells the story of one honest Kenyan in a high position who tries to  fight it. I haven’t read anything quite like it about corruption.

Ok, I got two more, but I’ll save them for some other time!

Blog houskeeping

I am aware that I am doing practically all newbie blog mistakes as outlined by Pat on the Smart Passive Income blog, but now I finally just started to do something about it.

1. Favicon – the little image that is next to the web address in most browsers.

I just changed from the default wordpress icon to a palm tree against a blue sky, which is a bit of a temporary fix. I need something that looks good even if it’s small. The thing here is that I’m from an engineering/mathematics background, and graphic design, while I respect the importance of it, is totally not my thing. I am thinking seriously about paying someone to shape up my blog. Recommendations are welcome!

2. My avatar

Until today I had been using some default picture. Now I changed to palm trees in front of the skyline of Abidjan. It should really be a picture of me, and well, the day will come when I no longer need to be anonymous.
Gravatar for

3. Categories

I now have enough posts to see natural categories materialising, so I have categorised all my post as per:

The Business Environment

This category covers macroeconomics, generalities of the real estate market in Ivory Coast and Africa, politics, and thoughts about business.

My Projects

Following the progress of my investment and business activities. I should within months be able to provide regular revenue  reports here.

Lifestyle Design

The term lifestyle design was (according to wikipedia) originally coined by Timothy Ferriss in the book The 4-Hour Workweek. It’s about designing one’s own ideal, often unconventional lifestyle, and that almost  inevitably includes asking big and almost philosophical questions about what one really wants to do with one’s life.

I really like thinking and writing about these things, but I got to admit that when writing about it I feel a bit out of my comfort zone (remember I have an engineering/mathematics background). On the other hand, my experience is that stepping out of one’s comfort zone can often yield pretty great results.

Ivory Coast and Africa

Everything about Ivory Coast and Africa that’s not linked to business. It’s simply a bloody interesting place, and different from the rest of the world – I went to West Africa as a teenager and got hooked by the people, the way social interactions are made, the politics, the atmosphere, the parties, the way of life…   Thought this would be my main theme if I started a blog, but that was before I heard about lifestyle design and got serious about my own business venture.


I try to be curious,  and instead of pretending I got things under control (which can be quite a dangerous attitude in a place such as the Ivory Coast)  I like to highlight unanswered questions so they can be  answered or discussed  by blog readers or me, or maybe never answered at all.  I’ll try to bi-monthly or so, bring up unanswered questions and then follow up on them.


Meta posts about blogging, such as this one.


Wildcat stuff that I just felt like putting in the blog; P J O’Rourke, Astronomy, small furry animals…

Dream Zappers

So, what to do when somebody has already expressed what you are trying to say, but much better?  Well, quote and link:

From The Middle Finger Project:

We’ve all encountered them; they’re the ones jumping up and down to squish, squash and stomp all over your ideas & aspirations, usually accompanied by the likes of, “You’re being unrealistic,” or my personal favorite, “You’ll have to join the real world sometime.”

Big, giant menacing GRRR face.

In the post, I discussed the importance of defending your dreams, despite traditional advice that advocates not sinking to that person’s level, not taking it personally, and recognizing that it’s not you, it’s them.


To a Dream Zapper, you are actually the offending party.  Even though you aren’t outright attacking a DZ’s dreams, you’re indirectly doing so simply by existing.  The fact that you’re sitting there all inspired and hopeful with your zest for life and your bucketfuls of ambitions is nauseating to them, because it forces them to question their own realities.  And in being forced to question themselves, they may not like the conclusions that are drawn.

And that’s really freaking uncomfortable. (Tissue, anyone?) 

It’s so uncomfortable, as a matter of fact, that our brains have actually adapted and developed a mechanism designed specifically to reduce any unpleasant psychological discomfort that’s experienced.  Know what that’s called?

The fine human art of rationalization.


if someone has gone through their entire life up to this point believing that the standard American work-life model is the ideal–go to school, go to college, get a job, get a mate, get a house with a yard, get kids, etc.–and then someone comes along and says, “Pshhh!  That’s ludicrous!  You be trippin’, fool.  I’m going to do things this other way, that person’s mind will do everything it can to prove you wrong.  In the name of self-image and personal integrity, they won’t want to believe that.  So instead, they rationalize their own decisions and beliefs in any way they can to avoid that mental discomfort–even if that includes putting you down for yours.

“But everyone has to work!”


When I talk about my little venture in the Ivory Coast,  surprisingly,  the overwhelming majority of people are very supportive, and I have actually had more inquiries about co-investing with me, than skeptical or critical remarks.

I almost want more naysayers, so I get a bit of drive to prove them wrong! The most common critical remark (received twice) is along the lines “Are you crazy to be putting your money in Africa? You risk getting scammed!”

Recently, talking to a few people about money, I got a different skeptical remark. They were saying one shouldnt give too much importance to money in life, and I said that the purpose of my venture wasn’t really money, but more freedom and to not depend on my job. To which they responded “But everyone has to work!”

In hindsight I would have added that it is also about the thrill of building something up over the long term, and to work for oneself, and that money is the means, but not the goal. Anyhow, I just answered “No!”

High Net Worth Individuals

Thinking about it, the “But everyone has to work!” remark is quite curious, especially when pronounced by intelligent people who maybe should know better.

First of all, it’s incorrect. There are tons of people who could stop working and still live the rest of their lives in a developed-world middle class or higher standard. With 2 million € conservatively invested in index funds and not so risky bonds, I think one can siphon off 4% every year and still have the notional to increase with the inflation or better. 4% a year is 80,000 € a year, and since capital gains taxes are normally lower than income taxes, the net income of the 2M € could correspond to a gross salary of 100,000 € or so in a West European country.

I have not seen figures of how many people in the world have 2 million € or more, but Cap Gemini compile an annual “World Wealth Report” that includes figures of so called High Net Worth Individuals having at least US$1 million in investable assets, excluding primary residence, collectibles, consumables, and consumer durables.

In 2008, which was an unusually bad year, there were 8.6 million High Net Worth Individuals in the world, whereof 100,000 in Africa. As an aside it would  be interesting to see how many of these 100,000 are [self-made entrepreneurs] or [dictators and their families] and how these two subgroups have developed over the years.

From these numbers it looks like that there are many talented people with a big enough wealth not to have to work, and that to some degree the world depends on these people working anyway. One example would be the drop in Apple’s share price upon the news of Steve Job’s medical problems.   I don’t think the world needs to worry though, as most of these people continue working  due to – I would speculate: (a) they enjoy it and (b) don’t want to lose status relative to their peers.

On top of the high net worth individuals there are those who do not have much wealth to speak of, but which have passive income large enough to live off.

Psychology of Naysayers

I think the roots of the “But everyone has to work!” remark, doesn’t really lie with thinking there are no rich people, but rather with an uneasiness that there are people that don’t have to work or aspire to not having to work, compounded by the person making the remark maybe not enjoying his or her own job. I think there’s a bit of conservatism in it too (in the non-political sense); a wish for conformism and skepticism against alternative life choices.

Additionally, I don’t think the problem is that Bill Gates doesn’t have to work. The uneasiness felt by the person making the remark comes, I think,  from the fact that it is his or her peer that aspires to not depend on a job. I’d speculate there is some deep rooted fear in humans – possibly evolutionary based – of falling behind one’s peers.

A few years ago, I read a quite interesting book called the Status Syndrome by British Professor Sir Michael Marmot, making the case that one’s health and well being is linked to one’s social status for all levels of social status. That would explain why it makes sense to care about relative social status.

Mon cousin m’appelle pour me demander de l’argent

Things are a bit on hold at the moment. I’m stuck abroad and can’t get home due to the Icelandic volcano preventing air travel in Europe. My local partner is in Senegal for another week, and can’t supervise the building site in Yopougon, which means that finishing the last interior details won’t be done for at least a week.

The only thing going on is that I have gotten a politician and a surveyor (feels like the right combination for doing business in the property sector in West Africa) to check out a piece of land in Cocody for a potential purchase. Updates will follow!

Also, I found a free excerpt from a 396€ report called the Cote d’Ivoire Infrastructure Report Q4 2009 made by Business Monitor International (BMI). Interesting bits:

BMI’s forecast for the value of the construction industry reflects the optimism about the country’s future.
We have revised up our forecasts for construction spending growth, and now expect real growth of
26.77% y-o-y in 2009. This will push construction’s share of GDP up a half percentage point, to 3.56%
this year. Industry value growth in the sector will slow however in 2010.


BMI puts Côte d’Ivoire at the bottom of its Africa rankings for business environment. The construction
sector has very low capital investment and modest government investment. The labour market makes it
tough to find workers, the banking sector makes it tough to find finance, and the shortage of electricity
makes it difficult to run new buildings efficiently.

The first paragraph is pretty in line with the growth on the supply side as described in the Construction post. Wonder why they expect it to go down in 2010 though.

The second paragraph outlines the conditions that are likely to be in place for a long time, hopefully with the exception of the electricity shortages. I think the labour issue is more of a problem for large complex infrastructure projects than for residential construction.

Construction is a capital intensive activity, and it is true that is true that it is difficult to find financing for small scale projects – and I would assume – for larger projects as well.  However, one way of seeing this is that those like me, who are able finance small scale projects with 100% equity and do not depend on banks, have a comparative advantage.

For Ivorians, even for those with good salaries working in Europe, I think it can often be difficult to make the necessary savings to buy or build a house, as there is this – not sure what to call it – culturally linked pressure/obligation to share one’s wealth with less fortunate family members.  For Ivorians with large families (which is the norm), in order to save some money they often need to take a very tough stance against their own folks back home. Whenever meeting Ivorians living in Europe this topic is discussed nearly very time, and it is possibly the only topic able to get more interest than football.

Reply from Abidjan Maison

Quite unexpectedly, Abidjan Maison came back to me today.  Apparently they are up and running again:

“Nous voulons nous excuser de vous répondre avec un si grand retard. Merci pour vos remarques qui sont très pertinentes. En réalité, pour diverses raisons le site n’a pas vraiment été administré ces derniers mois. Nous nous en excusons et promettons d’y remédier.
Nous  vous remercions également pour vos appréciations.

En ce qui concerne le bug du module d’inscription, il a été revu et corrigé. Vous pouvez dès maintenant vous inscrire en cliquant ici

Fundamentals of the property market: Construction

Regarding construction, or the supply side of the property market, I can’t really say I have any special knowledge, so I’ll stick with publicly available sources, but one can find plenty of interesting stuff out there.

One such example is the 29 March – 5 April issue of the Ivorian magazine Journal de l’Economie (h/t John James) that has an article entitled “Business du Batiment: Un Succes qui derange”. (I’m assuming here that readers who are interested in this can read French – let me know if I’m wrong!)

“Le domaine de batiment est l’un des secteurs d’activite qui a connu un essor spectaculaire durant la crise ivoirienne

Avec ses 3% de contribution au Produit Brut Interieur (PIB) ivoirien et de besoins en logement sans cesse croissants (plus de 50,000 demandes) le secteur du Batiment et du Travaux Publics draine dans son sillage un nombre si important qu’heteroclite d’acteurs. Si la demande atteint les cimes, l’offre elle, va decroissante passant de 8,000 a 4,000 logement par an. […]”

While interesting, I have quite a few remarks about these first few lines of the article. First of all, where do the numbers come from? I have seen a figure of 4.4% for the size of the Construction sector as part of GDP in the World Bank Doing Business report. -It could be that the World Bank definition of Construction isnt exactly matching “Batiment et Travaux Publics” above, but my guess is that the margin of error for economic figures relating to the Ivory Coast is pretty large, (and rarely recongised).

Then we have the “50,000 demandes”, where it seems to be a bit of a mystery what they are or how they are measured. I agree that the need for housing is increasing all the time, but need only turns into demand when people have the means to actually buy what they need.

The article says that the supply has decreased from 8,000 to 4,000 “logements” per year, but if that’s the case it would be difficult to say that “le domaine de batiment est l’un des secteurs d’activite qui a connu un essor spectaculaire“.  To have an essor spectaculaire I’d say both demand and supply need to increase substantially, and that’s what I think has happened in the Ivory Coast over the last 6-7 years.

In the latest African Economic Outlook report for the Ivory Coast I found a text more in line with an essor spectaculaire:

Real growth in construction was very strong in 2008 (9.3 per cent), as in 2007 (9.8 per cent), owing in particular to the resumption of housing construction under the stimulus of strong demand, especially in Abidjan. From 2002 to 2008, real value added in the construction sector rose by almost 133 per cent, despite the crisis

And at Wolfram Alpha – unclear what the underlying source is – there is this graph of value added in the Ivorian construction sector:

Source: Wolfram Alpha

Assuming that these figures are reasonably correct, I would really like to see a breakdown of the new construction that has taken place: Where has it occurred? What was built (residential/commercial/other)? Who built it? (big construction companies/small investors)?

There’s got to be a few people at the United Nations/World Bank/IMF or at the Ivorian Ministry of Construction Urbanism and Habitat that have tried to compile numbers for the construction and should be able to  give good estimates to the questions above.

What the big construction companies such as BATIM, SIPIM, Sicogi  etc, are buildling should be relatively public.  For small  builders in the informal sector, however, it’s more difficult. Even if they don’t pay any taxes, the land should be in the land registry, but not necessarily with any information of construction. The question is how big part of the construction is in the informal sector and how accurately one can estimate its size.

The Journal de l’Economie article says that while activity has calmed down a bit among big construction companies and government building works, individuals and small enterprise are getting more active. Maybe wisely, no figures are provided.


I have heard and read on several occasions that demand for property in the Ivory Coast is far greater than the supply, but now after reading what I could find on the topic, I’m starting to doubt that this is the case. It could be that the perception of demand outstripping supply comes from confusing need with demand and, on top of that, an underestimation of the informal sector. This doesn’t mean that property in the Ivory Coast is a bad investment though, on the contrary, my conclusion from this series of posts is that it is a good investment if things don’t get much better in the Ivory Coast, and a great investment if the economy continues to improve, and especially if tourism resumes.

More politics

The upcoming elections are so important for at least the short term development of the Ivory Coast, so I am going to draw up some possible outcomes over a 1-2 year horizon:

No major violent conflict scenarios:

-The elections are postponed for another two years.

I don’t think this is very likely as the pressure to have elections is just getting stronger with time.

-Gbagbo and FPI win the elections by cheating and excluding substantial parts of the population from voting. The opposition and the rebels are unhappy, but no major armed conflict erupts, and Gbagbo stays in power.

Looking at the recent riots occurring when Gbagbo disbanded the government and the head of the election commission, I think its hard to avoid more significant violence in this scenario. If it still happens, much would depend on the policies Gbagbo chooses to adopt once he has complete control of the government. If he chooses to push on with Ivoirité, that would likely be bad for the economy (and lots of other things too) and probably lead to violence further on.

-Gbagbo and FPI win the elections without significant cheating. Again the opposition is unhappy, but no major conflict erupts.

I might be mistaken but I just don’t think Gbagbo has the votes. Even though Gbagbo controls the television and has a big campaign/bribe budget, with RDR and PDCI united against him it’s tough for Gbagbo.  Also, it will be hard for Gbagbo to get votes from the large Dioula ethnic group and groups close to it. “Hey, this guy murders our people, my cousin/relative so and so was killed back in 2002/2003/2004 or even 2010”  is a pretty strong argument that doesn’t go away by some television propaganda.

-The opposition wins the election (staying united behind one presidential candidate) and actually gets the power without major violent conflict.

I think this is very unlikely. If it looks like the opposition is winning I think Gbagbo is going to try to do something to stop it, at first with peaceful means, and I guess this already being played out in the struggles to influence the electoral commission.  I don’t think Gbagbo, FPI and the likes of Charles Blé Goudé are going to give up power without using violent means as a last resort.

Violent conflict scenarios:

Violent scenarios are likely to occur if Gbagbo or the opposition win the election, and the losing party does not accept the result. I see three main outcomes:

-Protracted conflict possibly splitting the country in two again.

This is the worst case scenario both from an economic and humanitarian point of view.  I don’t think it’s likely though, as French or International troops are likely to step in and stop it at an early stage possibly leading to a new government that includes both FPI and the opposition and we are back to status quo.  International troops can stop outright military activity, but they have a much harder time preventing civilian and militia instigated sporadic acts of violence  which is a worry, but also something that keeps a bit of a check on Gbagbo as he knows he is no longer sure of having the upper hand in such a conflict as those opposing the Jeunes Patriotes seem to have armed themselves as well.

-Short conflict stopped by international forces leading to a new peace process and possibly a new power sharing government

This is possibly the most likely scenario as I see it, although I’d say it’s likelier that something else happens.

-Quick military victory by Gbagbo

This is what happened in 2000, when Robert Guei tried to stay in power by cheating the election result.  That time though, the RDR was behind Gbagbo, there were no interfering international forces, and no rebel forces.  This time I think there are too many things that need to go Gbagbo’s way for this to happen. One key question is how strong support and loyalty Gbagbo has among the regular army.  I have always had the feeling that he relies more on his militia groups than the army, but he could still have strong support in the army and stronger then Guei had in 2000. Still, the regular army isnt that useful if the French forces take control of the country as they have shown they have the capability to do quickly.

Fundamentals of the Property Market: Population and Economic growth

Population growth

Population statistics for the Ivory Coast should be reasonably accurate I believe. The World Bank shows figures up to 2008 as per below and gives a population figure of 20,591,302 for 2008. I kind of think they should round it to the last 1,000 or 10,000 even – there’s got to be migration, births and deaths that are unaccounted for, and the population changes continuously, so the number has to be an estimate to some degree. However, for the impact on the property market, I’m more interested in the trend and for that it’s enough if the  error in the population figure isn’t moving around too much from year to year.

Source: World Bank

Looking at the figures behind the table above, I calculate an average yearly population increase of 2.217% based on the 2003-2008 period. With increased wealth, increased use of birth control, and decreased reliance on children for economic support, the population growth should eventually abate, but the Ivory Coast isnt really there yet, and I would extrapolate the current trend at least 10 years into the future.

Extrapolating the 2003-2008 trend gives a population of 21.5 million for 2010 and 26.8 million in 2020. In their medium variant projection from 2008 the UN projects (source:  World Population Prospects) the following for the Ivory Coast:

2020: 26.95M

2030: 32.55M

2040: 38.13M

Looking at Abidjan separately, due to urbanisation it can be expected that the growth rate of Abidjan will be greater than that of the country as a whole. Looking at urban population growth data from Gapminder for the Ivory Coast, the growth rate seem to have been in the 2.5% to 2.9% range  for the last decade.

So in conclusion it is almost certain that the population of the Ivory Coast will continue to grow quite dramatically, and that of Abidjan will grow even more so, boding well for the demand of properties.

Economic growth

For the demand of properties the population growth is an important factor, but the purchase power of the population is possibly even more important. To get an idea of the purchase power I’m looking at data of the Gross National Income (GNI) per capita provided by the World Bank:

Source: World Bank

GNI data is less accurate than population data (estimating the informal sector must be tricky) and also much less predictable.  In the graph above one can see the peak in the early 1980s due to high commodity prices, and then basically two lost decades including a drop due to the political turmoil starting with the coup in 1999.

Even if the real GNI per capita stays flat – meaning essentially that the Ivory Coast stays poor – with the population increase it would still mean an increased demand for property.  I see a flat GNI per capita as a bad case scenario, and think the GNI per capita can increase quite a lot, as it seems to have done since 2003, even without significant improvements in governance, rule of law or business climate.

The Ivory Coast, just like the rest of the developing world, benefits greatly from ideas and technology transfer coming from scientific and  technology progress made in the whole world – cellphones being one example of such transfer.  Also, there has been a relatively strong ecenomic growth trend in the whole of Africa since year 2000 (I’d speculate one of many causes is reduced influence of inefficient and corrupt state monopolies controlling many sectors of the economy) and the Ivory Coast just need to catch up with the trend, if politics stop sabotaging the economic development.

The World Bank’s Ivory Coast country briefing has a quite optimistic take on future economic growth:

Real GDP growth is estimated to reach 4.1% in 2010 and to average 5.3% from 2011 to 2014, assuming continued progress with political normalization and security. Inflation is estimated to be between 2.5% and 3% over the same five-year period.

Other more specific  factors affecting purchase power and/or the demand for properties worth mentioning include:

-Extraxtion of oil off the coast of the Ivory Coast.

-Potential relocation of the African Development Bank and other international structures back to Abidjan.

-Infrastructure that must have been quite fine in the 80s but which is in a state of disrepair and continues to get worse.

-Electricity dropping out – a problem which very recently has gotten worse

-World market prices for Ivory Coast’s main exported commodities; Cocoa and Coffee

-The availability of mortgages

-And as mentioned previously, a potential influx of tourists with high purchase power.

Fundamentals of the property market: Politics

On a couple of occasions I have sat down with a few friends that share my somewhat geeky interest in the Ivory Coast, and tried to predict what would happen next in Ivorian politics, or at least to try to draw up scenarios.  It’s been very, very difficult, but the safest bet has usually been (at least during the last six years) that not much is going to change and Gbagbo is going to stay in power. One model for prediction regarding Gbagbo that seems to be working is that given alternative courses of action, Gbagbo will pick the one is most likely to allow him to stay in power or consolidate his power. Beyond that it’s just very unpredictable.

The way I see it is that events in the political realm in the last 10 years have had an unusually negative impact – even with West African standards – on the economy and on property market prices.  While things can clearly get worse I think the upside is greater than the downside. The upcoming elections, whenever they will take place, are likely to cause some sort of civil strife, but for the economy to get even worse than the current situation, more than that is required such as sustained violence in Abidjan over a longer period of time, or outright war reaching Abidjan.

I think people are pretty tired of conflict and also out of pure reversal to the mean, my main scenario is that the economy will get better.  If the threat of violence and especially against westerners as in 2004 (which is not good for property prices in attractive locations to put it mildly) is reduced and the visa regime relaxed, then tourism could pick up again and that’s one big upside.

I am currently in France, and today I went to a travel agent and asked for voyages to the Ivory Coast. As expected they only offered (expensive) flights and no package tours. But when package tours (along with cheap flight seats) will be offered in French-speaking parts of Europe – as they were before the crisis – it will do wonders for the property market in attractive and touristy areas of the Ivory Coast.

When buying property in these parts of the Ivory Coast it’s like you get a free out of the money call option on tourism to resume.

Fundamentals of the property market

I think there are four main factors that affect the property market in the Ivory Coast:

1) Population growth and 2) economic growth in the Ivory Coast affecting the demand side

3) New construction – the supply side

4) Politics affecting both supply and demand

I’ll write a post about each of these factors, but first a comment on not including global economic up- and downturns  in the main factors.

If there was more tourism, if the financial sector was more integrated with the rest of the world, if more people took mortgages and if the Ivory Coast exported more value added products – essentially if things were better – then the recent global recession would have had a greater impact on the Ivory Coast and its property market. As it is, the global recession did have an impact on the property market, but the local factors dominate, making the Ivory Coast property market quite uncorrelated to the rest of the world.

With correlations among asset classes increasing all across the world, I think real estate in the Ivory Coast and West Africa would be quite attractive to international funds and large investors. It’s just that it is difficult to invest in it without actually going to the Ivory Coast and buy stuff.  They may exist, but I have not yet seen a mutual fund, ETF (Exchange Traded Fund) or REIT (Real Estate Investment Trust) aimed at West African real estate.

So, well, that’s a business idea for the taking, to make West African real estate more available on financial markets. When my micro-business gets larger I might look into it.

Sending money to Africa

I’d say the most important aspect of sending money to Africa would be to have someone one trusts on the receiving end.

Small amounts

That aside, for small amounts my experience is that the cheapest and fastest way is to:

1)  Open a bank account in a niche bank that have no fees for international  ATM withdrawals.  The currency spread can’t be avoided but there are banks where the spread is low and they are transparent about it. The bank I use have a currency spread of 1.65%.

2) Create a separate account with a Visa debit card linked to it. Preferably with no available  credit.

3) Give the Visa card and the pin code to the receiver.

4) To send money, just transfer over funds to the account linked to the card and tell the receiver the amount that can be withdrawn.

One slight worry with this method is that it might raise some sort of flags with the bank, especially if the other account is used for withdrawals back in Europe at the same time.  However, I have been using this method for over 7 years now and it has been working fine.

Larger amounts

To buy a house or so, the above method involves too much cash handling on the receiving end, making it impractical and possibly dangerous. For larger amounts traditional bank transfers seems to be the best option. As discussed in a previous post, my bank in Europe told me it is possible to send money to the Ivory Coast in person, but not through online banking.