1. History of the rubber tree in Côte d’Ivoire

Hevea (Hevea brasiliensis) is a tree which originates in Amazonia and was introduced into Africa at the very end of the 19th century. In Côte d'Ivoire, the first Industrial Plantations (IP) were created in the 1950s with Société Africaine de Plantations d'Hévéa (SAPH) in 1956, Compagnie des Caoutchoucs du Pakidié (CCP) in 1960, and Société de Développement de l'Hévéa (SODHEVEA) in 1969. The Ivorian government is strongly committed to the sector, notably through a majority stake in SAPH and the creation of SODHEVEA, which became the Société des Caoutchoucs de Grand-Béréby (SOGB) in 1979. In addition, between 1960 and 1980, the State set up programs to develop Village Plantations (VP).

In the 1990s, the Ivorian state withdrew from the rubber industry by reducing its stake in SAPH and privatizing SOGB. During the same period, VPs steadily increased, finally surpassing the production level of IPs in the 2000s.

Table 1. Evolution of natural rubber production in Côte d'Ivoire (in tons).

*Production forecast for 2022.                                                            Source: DPPSE

Between 1990 and 2010, Ivorian rubber production grew from less than 100,000 tons to more than 200,000 tons, with a relatively even split between IP and VP. In 2018, more than 90% of the planted areas were village-owned and the country's total rubber production amounted to 624,000 tons. This level of production has allowed Côte d'Ivoire to rise to 4th place among the world’s rubber producers with a production volume of 950,000 tons in 2020, while the country had already been dominant in Africa for several years, accounting for 70% of the continent's natural rubber production.

 

Process

The rubber from the plantations is transported to the industrial units of first transformation (transformation of rubber or cup films into bales of TSR type rubber (''Technically Specified Rubber''). The processing of the coagulants includes storage and maturation, and pressing in the form of 35 kg bales before packaging. Although local processing into bales prior to export remains the majority route for adding value to coagulants, an increasing share of rubber production (approximately 30% in 2019), has been directly exported in the form of bulk coagulants. This export trend is a consequence of the gap recently observed between plantations’ production levels and national machining capacity.

Location of production

The largest planted areas are found in the most suitable zones for rubber cultivation in terms of climate and rainfall (generally in the south of Côte d'Ivoire).

2. Global Market

In 2021, the world's natural rubber production is estimated at 13.821 million tons, 88% of which comes from the Asian continent. The largest producing countries are Thailand, Indonesia and Vietnam with 4.9 million tons, 3.2 million tons and 1.2 million tons, respectively, representing 60% of world production.

 

Table 2. Evolution of world natural rubber consumption in thousands of tons.

  • Forecast of world natural rubber consumption for 2022.                                          Source: ANRPC

World natural rubber consumption grew steadily from 2010 to 2014 before falling in 2015 due to the suspension of natural rubber sales by Indonesia and Vietnam, and in an effort to bring up rubber prices that have been in free fall since 2010 (down from $5.8/kg in 2010 to $1.65/kg in 2021).

Global consumption picked up again between 2016 and 2018, stabilized in 2019, and then fell sharply in 2020 following the shut-down of tire factories in the wake of the global health crisis (COVID-19).

Who consumes natural rubber?

Natural rubber consumption is largely located in producing countries (69% in 2019) and mainly in China (6th largest producer in the world behind India), which remains the world's largest consumer (around 40% of global demand) and will account for almost 1/3 of global automobile production in 2021 with a volume of 22 million automobiles out of 79.65 million globally. It should be noted that the consumption of natural rubber is linked to the development of the automotive industry and particularly automobile tires (75% of world consumption).

Also, despite the slowdown in economic growth in China and emerging countries in recent years, global rubber consumption is staying on course with an average growth of 4.6% per year from 2016 to 2019.

China's share of global natural rubber consumption has increased from 25% in 2005 to 40% in 2019. China is the world's largest producer and consumer of tires.

 

3.  Profitability

Table 3. Some profitability ratios of natural rubber processing companies in Côte d'Ivoire

Average

Net Margin

Gross operating margin

Value added rate

Brand rate

Interval (in %)

18-23

24-28

19-23

29-33

Source: Data collected by AFRIKA FORWARD experts

In Côte d'Ivoire, companies processing rubber into TSR can achieve an average net operating margin of between 18 and 23%.

4.  Regulations and government measures

In Côte d'Ivoire, several public, private and associative structures govern the rubber industry.

This is the case of the Hevea-Palm Oil Council (CHPH), which was created in 2018 as the body responsible for regulation, control and monitoring of hevea and oil palm sector activities, with a view to boosting these two sectors.

In addition, various national organizations intervene to support the rubber

industry, namely the following three:

  • The Ivorian Professional Association for the Natural Rubber Industry (APROMAC, Association des Professionnels du Caoutchouc Naturel de Côte d’Ivoire), an inter-professional association in charge of the promotion of rubber cultivation and responsible for setting natural rubber prices for planters.
  • The Inter-professional Fund for Agricultural Research and Advice (FIRCA, Fonds Interprofessionnel pour la Recherche et le Conseil Agricoles), a professional organization responsible for financing applied research programs, agricultural consulting, trade training and capacity building of agricultural and forestry organizations.
  • The National Center for Agronomic Research (CNRA, Centre National de Recherche Agronomique), an organization whose mission is to conduct agricultural and agro-industrial research programs and to disseminate their results.

It should also be noted that within APROMAC, the Rubber Development Fund (FDH, Fonds de Développement de l’Hévéa) was set up in 2008. The project aims to contribute to the promotion and reinforcement of the rubber sector in Côte d'Ivoire by supporting the creation of rubber plantations, reinforcing training in the rubber industry and supporting the maintenance of access roads to the rubber plantations.

Taxation

In 2011, the government instituted an additional tax of 5% on the turnover of natural rubber processors in view of the rubber sector’s good overall performance and a fairly high international rubber price.

Subsequently, to replace the above-mentioned tax and in order to rationalize the taxation system of rubber products, in the Tax Annex to the Finance Act No. 2021-889 of December 21, 2021, the State decided to apply a single tax on rubber exports to be paid by exporters of granulated rubber and cup film. This tax is set at a rate of 1.5% of the international rubber reference price.

Results

It is fair to say that the efficient implementation of the various sectoral policies, characterized in particular by the increase in cultivated areas, coupled with a favourable international environment and the dynamism of the sector's actors, has contributed to Côte d'Ivoire's good performance, taking rubber production from 170,000 tons/year in 2005 to a forecasted 1,200,000 tons/year in 2022.

5. Constraints

Low productivity of VPs compared to IPs, even though they account for 90% of total planted areas.

The price of rubber is set by the distant Shanghai Futures Exchange, where brokers speculate on the value of rubber alongside gold, aluminium and fuel. As a result, the selling price is not correlated to the production cost.

Less than 10% of the orchard is immature (-7 years), which could lead to stagnation of natural rubber production if there are no new plantings.

6.  Opportunities

Côte d'Ivoire's goal is to process 100% of its natural rubber production by 2025, up from about 80% in 2021.

The need for new primary processing units to reach the 100% processing target by 2025, and for secondary processing units, which is an almost untapped segment to date.

The ambition of the Federation of Professional Agricultural Organizations (OPA) of the Hevea Sector of Côte d'Ivoire (FPH-CI) to increase the planted area of rubber trees by 100,000 hectares by 2027 and thus reach a total area of over 750,000 hectares. Production would therefore be increased by more than 200,000 tons.

There is a significant margin of increase in productivity for village plantations. The planned    development   of    902    hectares   of    agro-industrial platforms dedicated to rubber processing (NDP  2021-2025) close  to producers in the areas of Akoupé, Bonoua and Yamoussoukro.

Rubber processing activity is eligible for the investment code, which grants these operators tax and customs exemptions.

Ordinance No. 2019-826 of October 09, 2019 grants specific tax incentives, i.e. additional benefits to those provided by the investment code, to rubber processors (the duration of the ordinance is 3 years) .

See specific note on this subject prepared by AFRIKA FORWARD.

Swot Analysis

 

7. Conclusion and Recommendations

The rubber sector in Côte d'Ivoire has been developing strongly for more than a decade, with production growing by an average of 22% per year between 2010 and 2021 (Côte d'Ivoire is the leading producer in Africa and the 4th largest in the world), while nearly 80% of national rubber production is now processed domestically.

However, the local industry produces only products first transformation type, TSR (TSR 10) products, and very few second-step transformation products.

In addition,   the   State   has   implemented   various   initiatives   to   increase

production and the national processing rate.

Moreover, compared to other sectors of activity, we note that the profitability ratios of Ivorian processors are attractive.

In addition, global consumption remains robust despite the sluggish global economy.

Finally, it should be noted that there are challenges in the sector, including the availability of a quality workforce, the volatility of international prices, and the aging of plantations.

In conclusion, and in view of the above, we can recommend investment in the natural rubber processing sector in Côte d'Ivoire, provided that the appropriate planting dynamic is sustained and constant of the supply of raw material is guaranteed.

Our score 6.2/10

] 0 - 2 ]

 The market is high-risk with a high probability of losing investments made.

] 2 - 4 ]

The market is risky. However, it presents opportunities that can be exploited. The probability of losing investments is not negligible.

 ] 4 - 6 ]

 The market presents opportunities even if there are some risks that can be mitigated.

 ] 6 - 8 ]

 The market is dynamic and offers good returns on investment.

] 8 - 10 ]

The market is flourishing and benefits from strong institutional support.

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