Despite security threats and political unrest, tiny Togo is attracting huge interest from foreign investors.
A small West African country that is one of the world’s largest phosphate producers, Togo has a resurgent economy and prospects for further development. Its industrial sector is reviving after a long period of stagnation, new investors are coming, and those who have already settled are expanding their activities.
The picture is clouded by security problems arising from bandit attacks in the northern region and sea pirate raids in the coastal south. Growing dissatisfaction with decades of political hegemony is exacerbating the threat of instability. Collectively, these problems could pose a serious threat to economic growth and social progress, analysts warn.
However, none of these developments have so far discouraged foreign direct investment. The leading foreign company operating in Togo is Heidelberg Material, which is planning new investments in the environmental and industrial sectors and funding sustainable solutions in cement production using alternative materials.
Agriculture also attracts investment. Olam, a Singaporean agri-food group, acquired a 51% majority stake in Nouvelle Société Cotonnière du Togo (NSCT) for €15.3 million in 2021 as part of the government’s privatization of the state-owned cotton company. The deal, designed to boost cotton production, which has been reduced by bad weather in the north and poor seed quality, left the government and the cotton growers’ federation with 24% and 25% stakes in the company, respectively.
Last year, another Singapore-based company, NutriSource, began producing NPK (nitrogen, phosphate, potash) fertilizers in Togo. The new plant is part of a larger project costing 4.9 billion CFA francs (US$7.8 million). In the energy sector, the French company TotalEnergies is a leading retailer of petroleum products.
Chinese and South Korean companies also operate in Togo, including Leopard Moto (bicycle sales), Amina Togo, West Africa Battery (batteries for bicycles and cars), YSO Dairy Products Manufacturing, Sofina (nylon thread, fishing nets, bobbin thread, bags , ropes) and China Sinomach-Hi West Africa (equipment production).
Roadmap for the future
According to the African Development Bank, the strong contribution of foreign direct investment gives Togo a favorable economic outlook, supported by structural reforms and important investment projects.
The AfDB expects real GDP to grow by 5.3% in 2024 and 6% in 2025, driven by a vibrant agricultural sector and private investment, although the International Monetary Fund forecasts growth will soften slightly to 5.3% in 2024. 2025 due to fiscal consolidation. before returning to its long-term trend, projected at 5.5% per year.
Rating agencies also paint a generally positive picture. In a statement published in September, Moody’s upgraded Togo’s economic outlook to stable from negative and maintained its B3 rating on foreign and local currency borrowing. Moody’s cited improved fiscal management as the main reason for the rating upgrade, citing a reduction in the government deficit from 8.3% of GDP in 2022 to 6.7% this year. Standard & Poor’s previously reported a positive economic assessment.
Togo’s National Development Plan 2021-2025, also known as the Presidential Road Map, provides the framework for its economic transformation, aiming to “help develop innovative and sustainable solutions to identify financial resources, attract more investments with greater socio-economic impact and consolidation.” strategic positioning of the country.” The roadmap also calls for developing infrastructure to support economic activity, including transport and energy, as well as increasing economic stability through increased government spending and private sector investment.
At the heart of these forecasts is robust infrastructure. Togo has one of the best ports in West Africa; In three years, the Port of Lomé has achieved a significant reduction in congestion thanks to improved quay windows, resulting in a vessel turnaround time of 48 hours. As a result, it has become the port of choice for importers from as far away as Nigeria, as well as landlocked countries in the Sahel region, including Niger and Burkina Faso.
| Important Statistics |
|---|
| Location: West Africa |
| Neighbors: Benin, Burkina Faso, Ghana. |
| Capital: Lome. |
| Population (2023): 9.053 million. |
| Official language: French |
| GDP per capita (2023): US$921.69. |
| GRP growth (2023): 5.4% |
| Inflation (2023): 3.5% |
| Currency: West African CFA franc. |
| Investment Promotion Agency: Ministry of Investment Promotion. |
| Investment incentives are available: zero corporate income tax for the first five years on investments in the Free Industrial Zone. |
| Rank in the Corruption Perceptions Index (2023): 31st. |
| Political risk: growing opposition to the new constitution, marginalization of opposition parties, uncertainty about next year’s presidential elections. |
| Security threat: Terrorist and insurgent attacks in the northern region near the Benin border, pirate attacks in the southern coastal region. |
| Pros |
|---|
| Manufacturer of phosphates, cotton |
| High score on the Starting Business index in the Doing Business 2020 rating, disciplined staff |
| Regional maritime hub and gateway to landlocked neighbors, stable macroeconomic environment |
| Cons |
|---|
| Undemocratic government behavior |
| Poor enforcement of private property rights |
| Vulnerability to climate change |
| Limited business opportunities due to small country size |
| Perceived corruption |
For more information about Togo click here to read Global finance country report page.
In July 2021, the World Bank approved a $470 million loan from the International Development Association, its commercial lender, to build the Lomé-Ouagadougou-Niamey corridor, a 1,065-kilometer road linking the capitals of Togo, Burkina Faso and Niger. The project was designed to optimize the use of the port of Lomé.
Diversification
In early October, an IMF delegation was in Togo to review the country’s three-and-a-half-year economic reform program, which the fund is supporting with an extended $390 million line of credit. The mission is expected to end on October 18. The mission is also expected to discuss issues related to Togo’s economic development and the government’s industrial policy.
The latter helped stimulate private investment and increase activity levels in light industry and agribusiness. Togolese industry has traditionally been driven by mining, especially phosphate processing, which accounted for more than 20% of GDP on average until the 2000s. But the collapse of phosphate production in that decade, as well as restrictions in industry management and wild swings in phosphate market prices, led to the sector’s share of GDP falling to about 15% and its contribution to economic growth falling from 0.8 percentage points to 0.2.
This has helped make FDI critical.
Heidelberg Material invested €400 million through Scantogo, which produces clinker, a cement ingredient; Granatogo – installation for crushing gravel; and Cimtogo, a cement plant, according to government data. In September, Heidelberg announced its plan to invest in the environmental and industrial sectors, funding sustainable solutions in cement production using alternative materials. The group aims to produce zero-carbon cement as part of its commitment to environmental sustainability, he said.
Togo also uses its large reserves of limestone to produce clinker and cement. Consequently, industrial production has increased since 2010, leading to a gradual increase in the sector’s contribution to economic growth.
According to the World Bank, Togo’s merchandise exports are dominated by minerals, as well as industrial and agricultural products. The main sources of export earnings are minerals (phosphate, calcium, clinker, cement), which accounted for 22% of total merchandise exports between 2019 and 2021, followed by plastics, textiles and clothing, and agricultural products (soybeans, oil seeds, cashew nuts). ).
Growing tension
Terrorist threats and dissatisfaction with the undemocratic political power structure are the downside of this promising picture. Insecurity in Togo’s northern Savanes region remains a challenge for businesses. Terrorist incursions from neighboring countries sometimes forced residents to flee. After the first major attack in May 2022, the government declared a state of emergency; in March the government extended the state of emergency for another year.
The attacks ebb and flow, said Confidence McHarry, senior geopolitics analyst at SBM Intelligence, a security research firm in Lagos, Nigeria. “In August we learned that Togo had lost territory on its northern border with Benin.” On its southern maritime border, Togo also faces problems with pirates in the Gulf of Guinea, he notes. However, “the problem from the north has not yet reached the south.”
Still, McHarry argues, Togo remains relatively safe. While security threats in the northern Sahel threaten its trade with countries in the region, “the good thing about Togo is that it is sandwiched among countries whose geography is harsh, like in the north. This way, if a particular region is experiencing problems, it can easily redirect its international trade.” Togo has a multi-party democratic political system, but analysts say opposition parties are being prevented from developing.
In March 2024, Togo adopted a new constitution that changed the government structure from presidential to parliamentary. Under the new system, parliament will choose the president.
But opposition parties accused the ruling Union for the Republic party of ploying changes they said were intended to extend President Faure Gnassingbé’s tenure in office through a title change. The next presidential elections in Togo are scheduled for next year.
All this suggests future political instability that could threaten Togo’s economic gains if it hasn’t already, warns Marcel Okeke, former chief economist at Nigeria’s Zenith Bank: “Togo is struggling with a political hegemony that is stagnating the country’s economic progress.”