Ivorian SMEs Struggle to Access Financing in Booming Mining Sector
10,000 billion FCFA: this is the staggering amount invested in Ivory Coast’s mining and oil sector over the past decade. While this demonstrates the wealth of the nation’s subsoil, it also highlights the challenges faced by small and medium-sized businesses in accessing this capital.
These struggles were on full display at the International Exhibition of Extractive and Energy Resources (Sirexe) held recently in Abidjan. Despite the significant investment potential, local companies often find themselves shut out of the financial lifeline they need to grow and compete.
“The fact that financing was even on the agenda at Sirexe is itself a recognition that there’s a serious problem, and it’s a good first step,” says Kamel Koné, president of a group of oil and gas service companies and general director of the company Hydrodrill. ”
“We still see a significant lack of collaboration between financial institutions and companies in our sector. There’s still much work to be done, because access to finance remains a major limiting factor for us, and it can even hinder the development of local content in our country.”
Koné laments the lack of risk-taking by Ivorian banks: “If I take our group, for example; we have 20 companies, but only two are able to access funding. That speaks volumes. One thing banks don’t seem to grasp is the issue of time. It can take three or four months to obtain financing, while our industry demands a much faster response.”
The Lure of International Banks
This reluctance from domestic partners has led many to turn to international banks, which are generally more willing to take risks and release liquidity quickly. “These are often first-time projects, second markets. We also seek businesses with proven expertise and technical know-how. Mining again, because this sector is highly technicalou still need a history of credentials,
“We want to mitigate our risks when we invest. Who will pay the final invoice? We look carefully at the client’s track record,” explains Jessica Bleu-Lainé, responsible for the mining and energy sector at Société Générale Côte d’Ivoire.
“Indeed, it’s understandable why some banks hesitate, considering the large sums involved. For a start-up or company without a history in these markets, securing a 500 million FCFA loan on demand can be daunting. Not every bank is willing to take such a risk.”
A First for West Africa: A New Mining Fund
To diversify their funding sources, Ivorian operators are exploring options like international donors and pension funds. However, a groundbreaking initiative has emerged: a mining investment fund was recently launched alongside Sirexe.
This is the first of its kind in West Africa, and offers optimism about the future. “We discussed it with all stakeholders – employees, mining companies, subcontractors. Evaluations concluded creating this dedicated fund, which will draw contributions from three sources: employees, companies, and those employed in the industry,” explains Seydou Coulibaly, the director of mines in Côte d’Ivoire.
“The fund will encourage local content development, specifically. Exploring new mines requires substantial investment; it can be challenging for smaller companies to participate. But this fund can help with subcontracting and services. In the long term, if successful, we can use it to support permit applications,” Coulibaly continues.
This innovative approach will also enable mining sector employees to invest a portion of their supplementary pension contributions into the funding pool. An estimated 12
What are the reasons cited by Kamel Koné for local Ivorian banks’ reluctance to support SMEs in the mining sector?
FACTS:
* Côte d’Ivoire has invested heavily in mining and oil (10,000 billion FCFA in the past decade). [[1](https://www.ecofinagency.com/public-management/1603-45281-cote-divoire-govt-plans-to-support-8-000-smes-in-2024-to-revitalize-the-economy)]
* Locally-owned SMEs struggle to access the capital in the booming sector.
* The issue was highlighted at the Sirexe mining conference in Abidjan.
* Kamel Koné, president of an oil and gas service group, says there’s limited cooperation between finances and local companies.
* Koné notes that Ivorian banks are often slow and risk-averse, while international banks are more supportive.
## Interview with Kamel Koné
**Host:** Mr. Koné, thank you for joining us today. You’ve shed light on a concerning issue at the Sirexe conference: the difficulty SMEs face accessing finance in Côte d’Ivoire’s booming mining sector. Can you elaborate on that?
**Koné:** Certainly.
While the mining and oil sector is attracting massive investments, local SMEs like mine find it incredibly difficult to secure the funding we need to grow and participate in this boom. This was a major topic of discussion at Sirexe.
**Host:** Why do you think local financial institutions are hesitant to support these ventures?
**Koné:** It appears to be a combination of factors.
Firstly, there’s a lack of understanding of the specific needs of the mining industry.
The industry is fast-paced, and we often need quick access to capital.
The lengthy approval processes and risk aversion we encounter in dealing with Ivorian banks simply don’t align with the realities of our business.
**Host:** So, many SMEs are turning to international banks instead?
**Koné:**
Sadly, yes. International banks seem to have a better grasp of the potential in the extractive sector, and they are willing to take calculated risks on newer companies with proven expertise.
This is a situation that needs to change. We need local financial institutions to step up and support the development of local content in our country.
**Host:** How can Ivorian banks become more supportive?
**Koné:** I believe they need to invest in understanding the specific dynamics of the mining sector.
They also need to be more open to shorter-term financing solutions and streamline their approval processes to be more responsive to the needs of SMEs.
**Host:** Mr. Koné, thank you for your insights. This is clearly a complex issue with far-reaching implications for Côte d’Ivoire’s economic development.
