Despite security threats and political unrest, tiny Togo is attracting outsize interest from foreign investors.
A small West African country that is one of the world’s biggest phosphate producers, Togo displays a resurgent economy and the prospect of more to come. Its industrial sector is reviving after a long period of stagnation, new investors are coming in and those already ensconced are expanding operations.
The picture is clouded by security challenges arising from attacks by bandits in the northern region and sea pirates’ raids on the coastal south. Rising resentment of a decades-old political hegemony compounds the threat of instability. Together, these issues could pose significant threats to economic growth and social progress, analysts warn.
None of which, however has thus far discouraged foreign direct investment. A leading foreign company operating in Togo is Heidelberg Material, which is planning new investments in environmental and industrial sectors and funding sustainable solutions in cement production using alternative materials.
Agriculture is attracting investment, as well. Olam, the Singapore-based agro-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. Designed to boost cotton production, which had declined due to bad weather in the north and poor seed quality, the deal left the government and the federation of cotton farmers with a 24% and a 25% stake in the company, respectively.
Last year, another Singaporean company, NutriSource, started NPK (nitrogen, phosphorus, potassium) fertilizer production in Togo. The new plant is part of a bigger project valued at CFA4.9 billion ($7.8 million). In the energy sector, France’s TotalEnergies is the leading retailer of petroleum products.
Chinese and South Korean companies are operating in Togo as well, including Leopard Moto (bicycle sales), Amina Togo, West Africa Battery (batteries for bikes and cars), YSO Dairy Products Manufacturing, Sofina (nylon thread, fishing nets, spool thread, packages, ropes) and China Sinomach-Hi West Africa (equipment manufacturing).
Road Map For The Future
A lively FDI contribution gives Togo a favorable economic outlook, augmented by structural reforms and critical investment projects, according to the African Development Bank.
The AfDB expects real GDP to grow 5.3% in 2024 and 6% in 2025, driven by a dynamic agricultural sector and private investment, although the International Monetary Fund projects growth to “soften” slightly to 5.3% over 2024-2025 due to fiscal consolidation before recovering to its long-term trend, projected at 5.5% annually.
The rating agencies, too, paint a positive picture on balance. In a note published in September, Moody’s upgraded Togo’s economic outlook from negative to stable and maintained its B3 rating for foreign and local currency borrowings. Moody’s cited improved budget management as a key reason for the upgrade, noting a reduction in the public deficit from 8.3% of GDP in 2022 to 6.7% this year. Standard & Poor’s had previously reported a positive economic assessment.
Togo’s National Development Plan 2021-2025, also known as the Presidential Roadmap, provides the fulcrum for its economic transformation, stating as its goal to “help develop innovative and sustainable solutions to identify financing resources, attract more investments with great socioeconomic impact and consolidate [the country’s] strategic positioning.” The road map also envisions developing infrastructure to support economic activity, including transportation and energy, and enhance economic stability through higher government spending and private-sector investment.
Underpinning these projections is some solid infrastructure. Togo has one of the best ports in West Africa; in three years, the Port of Lomé has achieved a significant drop in congestion thanks to improved berthing windows, maintaining a 48-hour ship turnaround time. As a result, it has become a port of choice for importers even from Nigeria as well as for landlocked countries in the Sahel region, including Niger and Burkina Faso.
| Vital Statistics |
|---|
| Location: West Africa |
| Neighbors: Benin, Burkina Faso, Ghana |
| Capital city: Lomé |
| Population (2023): 9.053 million |
| Official language: French |
| GDP per capita (2023): $921.69 |
| GRP growth (2023): 5.4% |
| Inflation (2023): 3.5% |
| Currency: West African CFA franc |
| Investment promotion agency: Ministry for Investment Promotion |
| Investment incentives available: Zero corporate income tax for the first five years on investments in the Industrial Free Zone |
| Corruption Perceptions Index rank (2023): 31 |
| Political risk: Rising opposition to the new constitution, marginalization of opposition parties, uncertainty over next year’s presidential election |
| Security risk: Terrorist and insurgent attacks in the northern region near the border with Benin, attacks by pirates on the southern coastal region |
| Pros |
|---|
| Producer of phosphate, cotton |
| High score on Starting Business index under the 2020 Doing Business ranking, disciplined workforce |
| Regional shipping hub and gateway to landlocked neighbors, stable macroeconomic environment |
| Cons |
|---|
| Undemocratic conduct of government |
| Poor enforcement of private property rights |
| Vulnerability to climate change |
| Limited business opportunities due to the country’s small size |
| Perceived corruption |
For more information about Togo, click here to read Global Finance’s country report page.
In July 2021, the World Bank approved a $470 million loan from the International Development Association, its commercial lender, for construction of the Lomé-Ouagadougou-Niamey corridor, 1,065 kilometers of road joining the capital cities 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 reviewing the country’s three-and-a-half-year economic reform program, which the fund supports with a $390 million extended credit facility. Scheduled to end on October 18, the mission was also expected to discuss issues regarding Togo’s economic developments and the government’s industrial policy.
The latter has helped trigger private investment and a growing level of activity in light manufacturing and agribusiness. Togolese industry has traditionally been driven by mining, especially phosphate processing, which accounted on average for more than 20% of GDP prior to the 2000s. But a collapse in phosphate production in that decade, together with sectoral governance constraints and sharp fluctuations in the market price of phosphate, dropped the sector’s share of GDP to about 15% and reduced its contribution to growth from 0.8 percentage point to 0.2.
This has helped make FDI critical.
Heidelberg Material has invested €400 million through Scantogo, which produces clinker, an ingredient in cement; Granutogo, a gravel crushing unit; and Cimtogo, a cement plant, according to the government. 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 noted.
Togo is also tapping into its large limestone reserves to produce clinker and cement. Consequently, industrial production has risen since 2010, leading to a gradual increase in the sector’s contribution to growth.
According to the World Bank, Togo’s exports of goods are dominated by minerals and industrial and agricultural products. The main sources of export earnings are minerals (phosphate, calcium, clinker, cement), which accounted for 22% of total goods exports between 2019 and 2021, followed by plastics, textiles and clothing, and agricultural products (soybeans, oilseeds, cashew nuts).
Rising Tension
Terrorist threats and discontent with an undemocratic political power structure are the flip side of this promising picture. Insecurity in Togo’s northern Savanes region remains a concern for business. Terrorist incursions from neighboring countries have 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 emergency rule for another year.
The attacks have lulls, then flare up again, says Confidence MacHarry, senior geopolitics analyst at SBM Intelligence, a security research firm in Lagos, Nigeria. “In August, we heard that Togo lost an area in its northern border with Benin.” On its southern sea border, Togo also faces problems with pirates in the Gulf of Guinea, he notes. However, “so far, the problem from the north has not reached the south.”
That said, Togo remains relatively safe, MacHarry argues. While security threats in the northern Sahel threaten its trade with countries in that region, “the good thing about Togo is that it is sandwiched among countries whose geographies are the rough of the north. So, if a particular area is troubled, it can easily redirect its international trade.” Togo has a multi-party democratic political system, but analysts say opposition parties have been prevented from developing.
In March 2024, Togo adopted a new constitution that changed its governing structure from presidential to parliamentary. Under the new system, Parliament will elect the president.
However, the opposition parties have accused the ruling party, Union for the Republic, of playing gimmicks with the change, which they say was designed to increase President Faure Gnassingbé’s stay in office through a shift in title. Togo’s next presidential election is slated for next year.
All this suggests future political instability that may threaten Togo’s economic achievements, if it has not already, Marcel Okeke, former chief economist of Nigeria’s Zenith Bank warns: “Togo is contending with a political hegemony that is stagnating the country’s economic progress.”
