Trade, taxes, and tribute: Market liberalizations and the new importers in West Africa

Pergamon

World Development, Vol. 22, No. 3, pp. 453-467, 1994 Copyright Q 1994 Elsevier Science Ltd

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Trade, Taxes, and Tribute: Market Liberalizations and the New Importers in West Africa

CATHERINE BOONE* University of Texas, Austin

Summary. - This paper examines dynamics of state-business relations in the era of trade liberalization in Senegal and C&e d’Ivoire. It challenges the orthodox view that replacing nontariff barriers (such as licenses and quotas) with tariffs depoliticizes trade, reduces commercial rent-seeking activities, and creates a level playing field which will encourage underground activities to surface, allowing the state to capture more revenue. The paper illustrates that liberalization failed to suppress commercial rent-seeking, helped to encourage the ascendancy of new politically connected merchant groups (the Mourides in Senegal and the Lebanese in C&e d’Ivoire), and to some degree increased tax evasion leading to the fur- ther erosion of state revenue flows. The cases show that trade-centered rentierism is rooted in structural features of these West African economies.

1. INTRODUCTION

Market liberalization in sub-Saharan Africa is designed to change the nature of government-business relations by depoliticizing commerce. It is also supposed to transform business classes by suppressing commercial rent-seeking and eliciting productive investment. In theory, dislodging parasitic monopolies and lifting the suffocating hand of government intervention will create a level playing field for business, force the state to play the role of neutral referee, and allow competition among entrepreneurs to generate economic growth. This paper argues that in political economies centered around the import-export trade, where producer classes and productive capital are weak, market liberalization can have very different effects. It examines the cases of Senegal and C&e d’Ivoire in the late 1980s and early 1990s.’ Rather than undermining the the commercial rent-seeking logic of accumulation in these countries, liberalizing the external trade regime helped to reproduce it. Rather than depoliticizing business, reform created opportunities for cash-poor regimes to redeploy commercial rents in new, politically strategic ways.

Like their counterparts in the rest of Francophone West Africa, the Senegalese and Ivoirian govem- ments maintained heavily protective external trade regimes from the 1960s to the early 1980s. Trade policy was designed to promote import-substitution industry, reserve domestic market shares for French and other European exporters, and generate tax revenues. In the mid-1980s, West Africa’s external creditors swept in with reform programs aimed at clearing

the tangled underbrush of inefficiencies, corruption, and rent-seeking that had grown up around the import trade. Licensing and quotas were suppressed in order to dismantle old monopolies and rent-havens. Nontariff barriers were replaced by taxes that were meant to transfer rents from importers to the state. In both Senegal and the C&e d’Ivoire, these changes were accompanied by more general tax reforms aimed at eliminating the distortions that divided commercial activity into a monopoly sector and a competitive, “informal” sector. The neutral rules of the market- place were supposed to draw the underground economy of petty commerce, fraud, and smuggling into the open, where it could be captured in the tax net of the state. On the political side of the equation, it seemed obvious that these measures would deprive regimes of tools they used to channel commercial activity into the hands of favored allies and clients. In theory, liberalization would eliminate the patronage resources cre-

*The author would like to thank Peter Trubowitz, Dwayne Woods, Peter Lewis, and the two anonymous reviewers who offered detailed and insightful comments. Research was funded by the Social Science Research Council (1985-86). a Fulbright Senior Research Award (1990-91). and a McNamara Fellowship from the Economic Development Institute of the World Bank (1992). Earlier versions of this paper were presented at the 88th Annual Meeting of the American Political Science Association, Palmer House Hilton, Chicago, September 3-6 1992 and at the 35th Annual Meeting of the African Studies Association, The Westin Hotel, Seattle, Washington, November 20-23 1992. Final revision accepted: November 8.1993.

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454 WORLD DEVELOPMENT

ated by administratively generated and noncompetitive rents. Governments would be forced to come to terms with business in a laissez-faire environment, and the profitability of business would come to reflect efficiency and productivity.

As theory predicted, liberalization did undermine trading monopolies. In the cases examined here, the monopolies were held by ex-colonial European industrial and merchant firms. Demise of the “neocolonial” monopolies expanded the cast of characters active in lucrative branches of the import and distribution trade. Instead of leveling the playing field, however, the process promoted the ascendancy of importers who are imbricated in domestic political networks linked to regimes. In Senegal, these importers are Mourides, members of the Islamic brotherhood that has long provided the regime with its most powerful and well- organized base of domestic political support. In Cote d’Ivoire, the new community of powerful importers is made of up Lebanese business groups that maintain close links with the Houphouet regime; their commercial positions circumscribe the ambitions and activities of merchant groups that might represent more of a political challenge. In both cases, the authorities turn a blind eye to quasi-legal and illegal trading activities, allowing politically favored business groups escape the full burden of commercial taxation. In effect, for- feited tax revenues become rents that are distributed as patronage in exchange for political support.

Liberalization in Senegal and C&e d’Ivoire failed to transform government relations with local business by suppressing commercial rent-seeking. Politically structured trade circuits remain a prime site of wealth accumulation, and state mediated rent-seeking remains an important (perhaps predominant) means of accumulating wealth. These cases serve to underscore the importance of structural features of political economies, as opposed to misguided economic poli- cies or skewed price incentives, in explaining the predominance and persistence of commercial rentierism. The weakness of productive capital is a structural feature of the Senegalese and Ivoirian economies that endures in the face of policy reform or institutional change. Domestic business classes are not rooted in productive activities; this enhances their political vul- nerability and the malleability of their ambitions. As a result of this weakness, regimes have been able to absorb local business groups into patron-client networks that underpin the political stan~us quo, and to canalize local business into rentier activities mediated by the state. The weakness of productive capital also explains why the revenue bases of these states are so dependent upon rents that are extracted from commercial circuits in the form of taxes. When regimes are under pressure to generate and distribute patronage, they can divide these rents with their political clients by allowing favored business groups to operate in de facto “tax havens.” This is what happened in Senegal

and C&e d’Ivoire. The net result is erosion of the national tax base, and an economic climate that encourages speculation, and widespread tax fraud and tax evasion practiced by local business groups with close links to the regime.

The paper begins with a description of the Senegalese and Ivoirian commercial sectors in the prereform period. Section 2 focuses on the “neocolonial” monopolies of European merchant houses; Section 3 looks at relations between the postcolonial regimes and local business groups. Section 4 traces the de facto and de jure trade liberalizations that unfolded over the course of the late 1970s 198Os, and early 1990s. Section 5 identifies political and economic arrangements that have promoted the ascen- dance of West Africa’s new importers.

2. PROTECTIONISM, RENTS, AND EX-COLO- NIAL MERCHANT HOUSES

Both Senegal and C&e d’Ivoire inherited elaborate systems of import control from the colonial period. Colonial trade controls allowed French West Africa’s dominant import-export houses, a handful of huge colonial trading conglomerates, to retain near-monopoly control over the importation of goods in lucrative product categories, including foods staples, textiles, and consumer durables. This same regulatory structure was the colonies’ main source of tax revenue. In the 1950s the administration began to use trade restrictions to capture market shares for French- owned light industries that were beginning to develop in Dakar. Postcolonial governments in Senegal and C&e d’Ivoire followed this precedent. Both regimes pursued import-substitution industrialization aggres- sively, basing their strategies on the use of trade controls - above all import quotas, licensing, and bans - to restrict the importation of products that could compete with the output of local industry.

Limiting price competition and keeping cheaper goods off the market allowed importers and local manufacturers to collect noncompetitive rents. The state, meanwhile, took a cut of these administratively inflated prices in the form of taxes. In Senegal, ex- colonial merchant houses - SCOA, the CFAO, and the CNF (the French incarnation of UAC/Unilever) - controlled the marketing of licensed imports and the internal distribution of goods that were produced by Dakar’s major import-substitution industries. Duties and taxes raised the costs of foreign consumer goods by as much as SO-lOO%, allowing Dakar industries to add substantial margins to the selling prices of made- in-Senegal goods. In C&e d’Ivoire, SCOA, the CFAO, and the CFCI (the Ivoirian branch of CNF) not only dominated the import trade, but also emerged as leading investors in light industry.’ Abidjan’s import- substitution industrialization boom occurred in late

TRADE. TAXES, AND TRIEWTE 455

1960s and the 197Os, at a time when this process was already waning in Senegal. By this point in time, the advantages of direct control over local industry were clear to the ex-colonial merchant houses. Joint ven- tures with the Ivoirian government lowered the costs of investment; formidable import protection reduced the risks and promised to ensure profitability. By 1975, 350 product categories were governed by licensing. Michel and Noel (1984, p. 101) estimated that 1978 rates of tariff protection averaged 76% for industry as a whole, with variations by sector running up to 118% of c.i.f. import prices.3 At the height of the Ivoirian import-substitution boom, the European trading giants nearly monopolized access to import licenses for goods that could compete with the products of local industry. They were thus able to collect rents by selling imports in restricted product categories, just as they did in Senegal. Links between the trading conglomerates and local manufacturers in both countries also allowed the merchant houses to collect rents generated by marketing the output of heavily protected local industriesP

The tightly controlled structures that produced rents for European importers and domestic industry also made the ex-colonial merchant houses the leading tax collectors of the Senegalese and Ivoirian govem- ments. In 1978, members of Abidjan’s professional association of European import and export houses, SCIMPEX, collected 68% of all import taxes regis- tered by the Ivoirian government. Import taxes, in turn, financed 40-45% of the government’s General Budget in C&e d’Ivoite. The Senegalese government was just as dependent on this source of revenue: in the 197Os, import taxes produced about 40% of all fiscal receipts5

3. LOCAL BUSINESS INTERESTS: COMMER- CIAL SECTOR POLITICS

With the help of the Senghor and Houphoutt regimes, European firms cornered many of the most lucrative rent-collecting commercial positions in the local economies. The African and Lebanese business groups that made up the “local private sector” in both countries also concentrated their activities in the commercial sector. For the most part, they remained subordinate to foreign firms in the 1960s and early 1970s. Without control over productive assets and short on capital, local business groups were short on political clout and were vulnerable to the arbitrary exercise of state prerogative. At the same time, their interest in government support in the form of loans, contracts, “reserved sectors,” etc. made them receptive to the advances of politicians and other state agents seeking to constitute political clientele. Senghor and Houphouet both had a stake in playing this game. Through cooptation, they could canalize the develop-

ment of local business groups into domains that did not threaten established foreign interests, the state’s economic prerogatives, or the political autonomy of the regime. One important result was that relations between these two governments and favored segments of the local private sector tended to develop along the lines of patron-client relations, where commercial rent-seeking opportunities constituted patronage resources. These arrangements came to play an independent role in reproducing local capital’s weak- nesses, for widespread commercial speculation and the arbitrary use of state power compromised incentives to invest. This pattern was set during the neocolonial era, well before the defucto and de jure trade liberalizations of the 1980s and 1990s. Within this common framework, local business groups and their relations with the state differed considerably in the two cases.

At the time of independence, the vast majority of Senegalese businessmen operated in the transport sector, internal distribution networks, and segments of the commercial sector that were linked to the state- controlled commodities trade. These activities expanded in the 196Os, enlarging the playing field for indigenous merchants who constituted an important constituency of Senghoriste political parties in the 1950s and for the ruling party in the early postinde- pendence years6 Senghor recognized the strategic character and potential political weight of this constituency early on. His regime worked assiduously in the 1960s to coopt its leading members, to create lucrative niches for indigenous traders in the groundnut and rice trades, and to encourage the ex-colonial trading conglomerates to avoid a head-on confrontation with nationals by assimilating Senegalese traders into the lower echelons of distribution chains that remained under foreign control.7

By the end of the 1960s these strategies no longer sufficed to canalize and contain the ambitions of the local commercial class. Economic growth slowed, the state asserted direct control over the entire groundnut circuit, and the Senghor regime’s doggedly neocolonial orientation became a target of mounting frustra- tion. In the midst of the general political crisis of 1968-70, foreign domination of Senegal’s import trade emerged as a burning political issue.8 Senghor defused the direct challenge posed by the local business class, but indigenous traders did not succeed in pressuring the government to redefine its basic economic strategies. They did, however, pressure the regime to create more space for Senegalese business interests within the prevailing structure of foreign control over the economy.

In the 197Os, the struggle for control over Senegal’s import trade was channelled out of the public arena of protest politics and interest groups, and into the Byzantine world of the domestic political machine. The regime turned to a source of rents that


had remained largely untapped for internal political purposes and state patronage - the import trade - in order to beef up its capacity to distribute spoils to an ever-widening and increasingly demanding clientele made up of Senegalese businessmen, politicos, high- ranking civil servants, and powerful Islamic leaders. On paper, import controls became more restrictive over the course of the decade? In practice, subunits of the state (the ministries of commerce and finance, customs control) received the green light from above to use the licensing process to insert influential traders and political personalities into lucrative niches of the import trade.“’

In the C&e d’Ivoire, it was much more difficult for African merchants to use interest group politics or nationalist discourse to harness postcolonial state power to their cause. Several factors conspired to make them a less powerful political constituency than their counterparts in Senegal. First, African traders in the C&e d’Ivoire had not established control over strategic segments of the import-export circuit by the 19.50s. By contrast, Senegalese merchants captured important positions in the groundnut purchasing circuit in the 1950s and 1960s. as the colonial trading conglomerates lost interest in this less and less lucrative business. When Senegal’s export circuit was nationalized in 1960, the government commissioned about 1,000 independent merchants to work as crop- purchasing agents. This process allowed Senegalese traders to confirm their status as a “political estate” and to guarantee their place in the patronage networks of the regime. It also allowed politically favored businessmen to expand their spheres of accumulation. The cocoa- and coffee-purchasing business in the C&e d’Ivoire was not marked by the same discontinuities. European commercial houses and their agents extended and reinforced their up-country positions in the 1950s and 1960s. African crop buyers worked for or competed against the Lebanese merchants who solidified their dominance over intermediary positions in internal commercial circuits.” In the C&e d’Ivoire, African crop purchasers did not have the economic clout needed to pressure the government to promote their interests at the expense of non-Africans.

A second factor constrained the political influence of African traders in the C&e d’Ivoire. Most were non-Ivoirians (Malians, Burkinabe, Guineeans), or Ivoirians from the politically marginal Northern half of the territory, a region that lay far from the epicenter of nationalist political mobilization and organizing. African and Ivoirian traders operated throughout the country, but they were best organized and established in the West and North where the European commercial presence was weakest. As foreigners or “strangers” in the coffee- and cocoa-producing regions of the South, non-Ivoirian Africans and north- em Ivoirians were not well placed to advance their interests in the political arena. Southern coffee and

cocoa planters with links to what became the ruling party did enter the crop-purchasing business in the 195Os,‘* but many abandoned this activity over the course of the 1960s and early 1970s. The politically powerful members of this group probably moved to Abidjan, where more promising opportunities for private accumulation became the focus of their ambitions.

In the early postcolonial years, there were attempts on the part of some African businessmen to organize to promote their interests vis-d-vis the European import-export companies. During 1960-64, some politically prominent Ivoirian traders, along with about 200 African planter-traders and non-Ivoirian traders, formed two trading consortia that were designed to compete against the European import- distribution houses and to carve out larger shares of the crop purchasing business.” These companies fell apart during the political turmoil, purges, and repres- sion of 1963-65. In the aftermath of Houphouet’s most violent and forceful phase of power consolidation, the scattered pieces of these consortia were absorbed into the political machine, where they promptly dissolved. The regime of Houphouet’s demonstrated no interest in promoting the fortunes of established African and Ivoirian traders.14 This choice was consistent with its general lack of interest in building up the powerbases and wealth of individuals and groups that retained some independence from the political machine. The strategy was also consistent with Houphouet’s particular interest in subordinating and coopting politically distrusted elements in the West and North.

African and Ivoirian traders were too weak politically to force the Houphouet regime to pay a higher price for their acquiescence. Some retained positions in the crop-purchasing business in the 196Os, 1970s and 198Os, but most African and Ivoirian crop buyers worked as agents for the Lebanese traitants who organized this business in the rural areas. Some African traders bought and sold commodities as traitants in their own right, but they did not achieve the scale or scope of operations of the Lebanese business groups that dominated coffee- and cocoa-buying.ls Ivoirian traders remained concentrated at the level of petty commerce where they competed against the non- Ivoirian Africans who handled about 80% of all small- scale and micro-retail trade in the CBte d’Ivoire.‘6 Non-Ivoirian Africans, including some substantial and wealthy merchants, dominated the internal and intraregional trade in indigenously produced foodstuffs (cola, yams, rice, beef, etc.).

Lebanese merchants steadily reinforced their positions vis-b-vis African traders in retail and crop-purchasing circuits after independence, but they remained politically disenfranchised and vulnerable to the undercurrents of anti-foreigner sentiment that ran through Ivoirian politics. Like Lebanese traders in Senegal, Lebanese business groups in the C&e

TRADE. TAXES, AND TRIBUTE 4.51

d’Ivoire promoted their interests behind-the-scenes, in the corridors of political and bureaucratic power where they found state agents who were interested in striking deals.” The regime of Houphouet nurtured this arrangement. It fostered the development of a dynamic stratum of independent Lebanese entrepreneurs while reinforcing the political dependency that subjected leading members of this business community to the control and discretion of Houphouet’s regime. These arrangements also created rent-collecting opportunities for members of the political-bureaucratic elite without giving them bases of private accumulation of their own. In this sense, the development of a Lebanese business class that was dependent on political patronage and goodwill, like the development of a large parastatal sector, created rent-collecting positions for members of the Ivoirian elite while ensuring that the regime itself, through its control over positions in the state apparatus, controlled access to these opportunities for emichment.1s

After two decades of political independence, relations between the government and local business groups in both Senegal and the C&e d’Ivoire were organized around state regulation of commerce. State power was used to insert favored local constituencies into trading circuits dominated by the European merchant houses, and to make space for local business groups in parts of the commercial sector dominated by the state. In exchange for political support, official prerogative was also used to promote the fortunes of certain traders or business groups at the expense of others. In both cases, the state’s ability to structure access to opportunities for accumulation in the commercial sector was an important force shaping the development of local business groups. Meanwhile, patronage resources generated in the commercial sector helped to build and sustain the political machines that underpinned the regimes of Senghor and Houphouet.

4. LIBERALIZATIONS: DEMISE OF THE OLD MONOPOLIES

The de facto and de&-e market liberalizations of the 1980s and early 1990s undermined the starkly neocolonial structure of control over trade in Senegal and the CBte d’lvoire. In both countries, European industrial and merchant firms had relied upon licensing and monopolies to protect their commercial positions both before and after independence. These “neocolonial” interests proved to be the most vulnerable to the progressive dismantling of protectionist trade poli- cies. They also proved to be the most vulnerable to reforms that raised internal taxes on consumer goods.

In Senegal, formal changes in the trade regime occurred under the aegis of Structural Adjustment Programs in the mid-1980s. These changes followed

an informal, de&to process of market opening that started almost a decade earlier. As political pressure led the regime to “insert” growing numbers of local businessmen into the import trade from the mid- 1970s onward, the restrictiveness of Senegal’s import control regime deteriorated. State agents and well-connected businessmen worked together to push the lim- its of the law, importing in excess of quotas, selling import licenses, escaping full payment of customs duties and taxes, importing banned products, etc. The government proved unwilling to suppress fraud in the import trade. Many highly placed and powerful allies of the regime were implicated directly in this business, as were many of the state agents responsible for enforcing import control. Contraband trading along Senegal’s borders - especially along the Gambia- Senegal border - also assumed major proportions in the mid to late 1970s. Development of the Senegal- Gambia contraband circuit was propelled by farmers’ quest for better terms of trade and cheaper consumer goods, by rural traders’ quest for profit, and by the state’s unwillingness to suppress unregulated crossborder flows. For the government of Senegal, this too was a political calculation. It allowed the regime to avoid a direct confrontation with the impoverished and exasperated population of Senegal’s groundnut basin. Moreover, by tolerating contraband, the Senghor regime also accommodated the interests of powerful Mouride religious leaders. Mouride marabouts protected the contraband trade from government intervention and sponsored the activities of Mouride businessmen who profited from it.19

The result was a defucto trade liberalization in Senegal which effectively dismantled a system of control over importation that had prevailed for 50 years. As barriers to access to this segment of the commercial sector disintegrated, the hierarchical structure of control over the import trade also collapsed. Long- protected light industries in Dakar plunged into free fall as they lost domestic markets to goods imported fraudulently or illegally from the world’s cheapest suppliers. Ex-colonial merchant houses that had relied on licensing and quotas to maintain the profitability of their operations in Senegal were forced to abandon their last bastions of control “to smugglers and traders engaged in more or less legal activities.” Even Lebanese merchants were pushed to the margins of commercial domains they once dominated by Senegalese traders who “enjoy political facilities that Lebanese importers no longer have.“2o

In the process, the Senegalese government carved out an expanding space for state-mediated forms of local accumulation in a stagnant and even contracting economy. Cashing in on their political clout and their access to the state, big wigs, influential traders, and businessmen linked to Senegal’s influential Islamic brotherhoods gained access to commercial opportunities that enhanced their status and wealth, and that cre-


ated jobs for their dependents, followers, and political clients. Most importantly, perhaps, movement of these powerful brokers into quasi-legal and profitable commercial activities increased their stake in the political survival of Senghor/Diouf regime, the regime that placed its many of its allies in profitable commercial niches while turning a blind eye to the quasi-legal dealings of its supporters.21

A high price was paid for fueling the political machine in these ways. Import fraud and smuggling torpedoed the old and inefficient light industrial sector. It also deprived the national treasury of import tax revenues, exacerbating the fiscal crisis.22 Industrial decay, bankruptcy of the state, and the secular decline of the groundnut economy produced a generalized economic crisis. Senegal was now at the mercy of external creditors armed with the radical reform agen- das known as Structural Adjustment Programs (SAPS). In the early 198Os, the International Monetary Fund (IMF) and the World Bank attempted to manip- ulate Senegal’s foreign trade regime at the margins to encourage industrial exports (through an export sub- sidy) and to enhance the import tax receipts of the state (by computerizing the customs service). In 1986, more drastic reforms were introduced. A “New Industrial Policy” laid out a schedule for suppressing quantitative import restrictions product category by product category, for streamlining the customs code, and for lowering and standardizing tariff rates. The Structural Adjustors believed that these reforms would depoliticize control over importation, pressure domestic industries to become more efficient, encourage entrepreneurs to invest in new industries, and bring more cash into state coffersz3

Senegal’s New Industrial Policy (NPI) was accompanied by a renewed surge in import fraud, an appar- ent increase in the volume of contraband trade conducted via the Port of Dakar, and by declines in import tax receipts.24 The ex-colonial trading conglomerates finally closed down most of what remained of their distribution networks for textiles and other light consumer goods. Meanwhile, the rate of lay-offs, bank- ruptcies, and firm closures in the industrial sector reached new and alarming proportions.25 Senegal’s government responded to the deepening crisis in June 1987, July 1988, August 1989, and January 1991 by raising import taxes, reimposing administratively fixed tax bases for all imports that competed with local industry, and raising taxes levied against the internal distribution circuit.Z6 These measures ensure that fraud and contraband remain highly profitable activities for importers and state agents alike.

In Senegal, licensing and quotas ceased to be effective mechanisms for restricting importation long before these regulations were removed from the books. In this sense, the SAP-driven trade liberalization turned the de facto market opening of the late 1970s and early 1980s into a de jure policy reform.

Suppressing licensing and quotas did not depoliticize control over importation, but it did alter the dynamics of political competition for access to the import trade. Reform circumscribed the ability of state agents in the ministries of commerce and finance to mediate the access of Senegalese businessmen to the import trade and thus, to tap commercial rents themselvesz7 The customs service emerged as the major site of struggles for control over the rents that were generated through fraudulent and tax-free importation. This fact did not escape external creditors, who intensified pressures on the Senegalese government to “professionalize” the customs service by shadowing customs agents with military personnel and/or by recruiting European agents to staff strategic positions.

In C&e d’Ivoire, it was economic recession in the 1980s and finally the brutal crash of the export economy that undermined neocolonial trading structures. Falling international commodity prices cut public spending and investment drastically in the early 1980~.~* Domestic consumption fell. The volume of commercial activity reported by the CBte d’Ivoire’s 50 largest firms in the import/distribution sector regis- tered a real drop of 25% during 1980-84, “which cor- responds to a severe drop in the volume of commercial activity.“29 The recession eroded the profitability of the most lucrative import operations of the European trading houses, forcing them to streamline manage- ment structures, consolidate subsidiaries, and halt new investments. They amputated activities that were los- ing money, closed down many of their specialized import agencies as well as many up-country wholesale depots, and abandoned some niches of the import trade. As the scope of European controlled commerce narrowed, the largest Lebanese commercial houses expanded their wholesale operations.

The government’s inability to meet its enormous debt service payments in the early 1980s drove it into the arms of the World Bank and the IMF. With CBte d’Ivoire’s second Structural Adjustment Program (PAS II), signed in 1984, the external creditors undertook to make domestic light industry more competitive and to reestablish a fiscal base for the govem- ment.‘O Quantitative import restrictions were suppressed abruptly and import taxes (droits de douane) were nearly doubled. The tax hike was a tem- porary measure that was supposed to soften the initial blow of industrial deprotection and generate much needed revenue for the government. Over the course of 1985-90 effective rates of import protection for local industry were to be reduced progressively to the target rate of about 40%.

These measures did not work as planned. Suppression of the old licensing system redefined the political rules of the import business, just as it did in Senegal. In C&e d’Ivoire, reform opened the gates that had blocked independent traders’ access to the import trade. Eased access to importation, coupled

TRADBTAXES,ANDTRIBUTE 459

with the dramatic hike in taxes, gave rise to rampant fraud in the import trade. At the same time, high port taxes diverted trade away from Abidjan and toward lower cost ports of entry in Lomt? and Dakar. Major currents of contraband importation developed along all of the country’s borders. Light industry plunged into crisis and the import tax receipts of the Ivoirian government fell precipitously. In the wake of PAS II, fraudulent importation and contraband assumed proportions never before seen in the CGte d’Ivoire.

The authorities responded by instituting a de facto licensing system and by raising virtually all taxes levied against importation and the internal commercial circuit. An expanded intentions 6 l’importation regime required importers of products in strategic categories (such as textile goods) to obtain prior govem- ment authorization on a case-by-case basis. Administratively fixed tax bases were then reapplied to some product categories. These administrative controls, combined with across-the-board import tax hikes in 1987 and 1989, were imposed in rearguard efforts to combat import fraud, contraband, and the industrial deprotection. 31 In January 1988 and June 1990, the Ivoirian government increased the value- added tax and extended it to retailers. To make this measure effective and to amplify its impact, a new tax- collecting mechanism was introduced in an attempt to capture “the informal sector” in the fiscal net of the state. Importers and wholesalers were charged with the task of collecting all internal taxes levied against their clients. This innovation made small-scale traders (retailers, “informal sector” operators) vulnerable to extortion practiced by the state’s tax enforcers. It also intensified pressure on importers and wholesalers to avoid the internal tax burden altogether.

The cumulative result was more fraud and contraband. Forum Economique reported that the part of the domestic market supplied by fraudulently imported goods increased from 25% in 1989 to 38% in 1990.32 Import taxes and duties collected by the state fell by 25% in real value during 1980-88, and the govem- ment reported another 26% fall in receipts collected from import duties in 1988-89.” After 1988, the new internal taxes worked to generalize the practices of fraud and extortion at all levels of the commercial circuit. The steady post-1986 rise in internal fraud, import fraud, and contraband deprived the state of tax revenue and sent light industry in Abidjan into a state of unprecedented crisis. At the same time, it allowed some well-placed state agents in the customs service and the ministries of industry and commerce to expand their roles in the underground politics of Ivoirian commerce.

With this shift in the politics of trade, the European import houses lost influence and advantage. This is not to say that these firms remained aloof from the political game. On the contrary, they made important political investments in the 1960s and 1970s by estab-

lishing strategic relationships with government minis- ters and high-ranking officials of the ruling party. Visible Ivoirian officials became honorary presidents of subsidiaries of the European import houses, public relations agents, and shareholders. From these positions, powerful Ivoirians helped the European companies secure government contracts, import licenses, legal tax breaks, tariff protection for their industrial investments, and protection against the most obvious forms of political risk. Liberalization, however, changed the nature of the game. It forced importers into the underground world of secret deals, bidding wars for the favors of state agents, ad hoc laissez- passer arrangements, and on-the-spot bribery of customs officers. At this level, the European companies could not compete. High taxes made most of their imports virtually unsalable. By 1991, the CFCI, SCOA, and CFAO had virtually stopped importing basic consumer goods.34 They maintained an unstable and skeletal presence in the wholesale distribution business. The starkly neocolonial structure of control over the importation-distribution business had broken down.3s

5. WEST AFRICA’S NEW IMPORTERS

Suppression of the old European monopolies and attempts to spread the commercial tax burden more broadly did not divert commercial rents from private parties to state coffers. These reforms also failed to force dynamic, informal sector entrepreneurs out of the underground economy and onto a new, level playing field. Instead, state authorities have cultivated political constituencies and tribute-paying clienteles in “tax havens” located in the so-called informal sector. In both Senegal and the C&e d’Ivoire, observers describe this process as a vast “informalization” of the import/distribution trade. It is characterized by widespread fraud, contraband, and tax evasion.

(a) Mouride commercial interests in Senegal

In Senegal, the accelerating process of European divestment from the commercial and light industrial sector opened new possibilities for the largest, wealth- iest, and most politically powerful Lebanese business interests in Senegal. With capital of their own and the required political facilities, some have acquired industrial installations abandoned or sold by Europeans.36 What is more striking, however, is the unmitigated commercial ascendancy of Mouride importers that marked the decade of the 1980s.

The history of the Mourides is inseparable from that of modem Senegal. During the colonial period, the hierarchically structured Islamic order took root in the social relations of production in Senegal’s ground-


nut basin. Saintly Mouride leaders, or marabouts, organized mass movements of agrarian settlement and sponsored the creation of Mouride villages organized around groundnut production. They also established large groundnut estates of their own which were cultivated by their religious disciples. Material bonds between grands marabouts, middle-ranking marabouts, and peasants reinforced the spiritual bonds that tied followers to their religious leaders. The colonial administration quickly discovered the political value of fostering the allegiance and material pros- perity of the leaders of the Momide brotherhood. The result was a form of “indirect rule” that helped to make the colony both governable and economically viable. Senegal’s postcolonial government adopted the same strategy. Relying upon Mouride leaders as its intermediaries, the Senghor regime governed and drew wealth out.of the groundnut basin.)’

Mouride marabouts and the brotherhood’s central administration grew wealthy through the earnings of marabouts’ own estates, the obligatoty offerings of the faithful, and the material support provided by the colonial and postcolonial regimes (in the form of land grants, cash gifts, bank loans, privileged access to state-mediated business opportunities and to resources distributed through the rural cooperatives, etc.). A large share of this wealth was reinvested in maintaining the prestige and social coherence of the brotherhood itself - that is, in maintaining the grandeur of the leading marabouts, distributing material assistance to followers, running mosques and religious libraries and schools, organizing an annual series of major religious ceremonies, and financing pilgrimages to Senegal’s holy sites and to Mecca. The postcolonial regime had a clear stake in ensuring the reproduction and expansion of the brotherhood, and in the moral and political clout of its leaders. Mouride religious organization remained its most reliable base of political support.

In the 196Os, the economic bases of the brotherhood and the private economic activities of its powerful members began to expand beyond groundnut production and into the urban areas. Wealthy Mourides invested in urban real estate, transport, and state- mediated commercial opportunities that opened up for Senegalese traders.38 In the 197Os, the decline of the groundnut economy, drought, rural exodus and urban- ization, and the growing political discontent of the groundnut-producing peasantry (what the regime called the “malaise paysan”) intensified pressure on the brotherhood to find new ways to shore up the social and material bases of the Mouride order.

Conspicuous involvement of the Mouride establishment and prominent Mouride traders in the two- way Senegal-Gambia contraband trade dates to this period. Touba, the religious capital of the Mourides, became a virtual free-trade zone in the heart of Senegal’s groundnut basin. Rural producers and con-

sumers benefited from the Mouride leaders’ obvious willingness and capacity to defy the state, and the religious leaders’ legitimacy was enhanced. Contraband trade diverted commercial taxes, profits, and rents away from the state treasury and neocolonial industrial and commercial interests and into Mouride-controlled trading circuits. Within these circuits, the hierarchical chains of loyalty, dependency, and economic subordination that constituted the infrastructure of the Momide order were reproduced in relations between financiers, buyers, truckers, loaders, wholesalers, retailers, micro-retailers, and indebted consumers. The commercial sector provided sites for reproducing Mouride structures outside of the social relations of groundnut production.39

By the late 1970s contraband trading circuits were well integrated into the economies of Senegal’s largest urban centers. Sandaga market in Dakar, known as “the Mouride market,” symbolized this process. With innumerable merchants specializing the sale of imported goods, Sandaga provided urban consumers with a complete array of consumer products. Merchants set up stalls on sidewalks in front of Lebanese and European boutiques, pulling clients away from long established retailers.do The govem- ment refused to crack down on the conspicuous urban contraband trade. In the crisis-ridden decade of the 1980s Sandaga market was a bastion of support for the ruling party. Momide commercial networks, Mouride urban transport networks (taxis and passen- ger vans), and Mouride artisanal workshops making basic consumer goods (shoes, garments) organize a portion of the urban population into social hierarchies that are linked, at the top, to leading murabouts who offer the support (and votes) of their followers to the regime. The political command of grands marabouts over their followers is far from absolute, as the mediocre political showing of Abdou Diouf and the ruling party in the 1988 presidential elections demonstrated?! The regime, however, has few options. It continues to rely upon the Mouride leaders to rally or calm their followers at times of political crisis.

The economic engine of the Mouride order now lies in the urban areas, rather than the groundnut economy, and is fueled by trading activities. The “informal sector” character of these activities underpins their economic viability and profitability. Mourides have outcompeted European and Lebanese commerce because they have been able to escape full payment of internal taxes (such as the value-added tax, merchants’ registration fees, commercial profits tax, social security taxes, etc.), and import taxes (through manipulation or evasion of customs regulations). Pervasive “informalization” of the commercial sector in general, and of import trade in particular (including large-scale importation, which can involve the regular and scheduled use of container ships bearing tens of millions of CFA francs in textile goods, shoes, food-

TRADE, TAXES, AND TRIBUTE 461

stuffs, etc.), has undermined the profitability of most commercial ftrms confined to the “formal sector.” Given persistently high taxes and the enduring com- plexity of the fiscal code, the political protection and pay-offs that make tax evasion possible remain neces- sary for ensuring commercial success. The regime, for its part, allowed Mouride-controlled “informal sector” commercial activities to flourish. Legal crack- downs onfraudeurs, smugglers, and tax-evaders are reserved for the most part for prominent Lebanese businessmen who have fallen from political favor. This subtle pressure on all members of the Lebanese merchant community expands the space open to Senegalese traders who enjoy political protection.

The late 1980s brought the clear triumph of Mouride commercial interests in the consumer goods trade. This is the culmination of a long and complex process. Development of Mouride commercial circuits was propelled by the successes of the 1970s and early 198Os, by favorable political patronage from above, and by economic pressure from below in the form of impoverished consumers looking for cheaper buys and economically disenfranchised youths and adults looking for income generating activities. It is hard to specify the exact role of the SAP trade reforms in the rise of Mouride importers, although observers in Dakar date what many see as “the Mouride take-over of the commercial sector” to the era of the New Industrial Policy.” Suppression of import licensing did close down one avenue of access to the import trade used by political big wigs (and their Lebanese partners) in the earlier period. More traders gained access to importation. The suppression of quantitative import restrictions also coincided with the 1986 deval- uation of the Gambian dalasis. These changes seem to have encouraged traders who relied upon Gambia-to- Senegal contraband networks in the earlier period to reroute their business through the Port of Dakar. Meanwhile, the NPI provoked the final withdrawal of European and many small Lebanese firms from many import and wholesale activities. As Momide commercial circuits surfaced to “fill the vacuum” that appeared at the street level, the vitality and scope of Mouride business interests became obvious to all.

De facto and de jure liberalization of Senegal’s import trade, and the progressive informalization of the commercial sector which has accompanied it, have not depoliticized control over commerce or increased the fiscal receipts of the state. External creditors have been frustrated as a result. At the same time, however, the regime has responded to the domestic political imperative of shoring up the material base of the Mouride order, thereby helping to ensure the order’s continued social coherence and political relevance. Big Mouride importers who enjoy the direct political protection of leading marabouts make fortunes which help sustain the order and its governing elite. At lower levels, Mouride commercial networks absorb large

numbers of refugees from the decaying rural areas, rooting them in social organizations that are linked to the regime through alliances between religious leaders and the Dakar political elite. By favoring and protect- ing the commercial interests of the order, the regime of Abdou Diouf secured a means of reproducing and affirming its alliance with the Mouride establishment and a way of shoring up links between Mouride elites and their followers.

(b) New importers and state agents in C&e d’lvoire

In the C&e d’Ivoire, liberalization of the import trade was accompanied by a vast “informalization” of commerce, just as it was in Senegal. In Abidjan and the Ivoirian hinterland, “informal sector” operators do not enjoy the kind of organized political protection that Senegal’s Mouride brotherhood provides. Instead, they are forced to drive ad hoc and particular- istic bargains with state agents in order to ensure the viability of their businesses. Through these relations, state agents extract a share of the profits generated through trade in the form of rents and bribes, or tribute. In the import trade, state agents’ cut may be substantial; representatives of the European commercial houses argue that lowering real tax rates to 40% would undermine merchants’ incentive to bribe customs offt- cials.” Meanwhile, some state agents use the political clout of their positions to engage in profitable trading activities on their own account. At lower levels of the administrative hierarchy, government agents who are responsible for enforcing the commercial and tax laws are able to supplement their incomes by preying upon vulnerable small-scale commergants.

In the late 198Os, incomes earned by state agents in the form of commercial tribute or profit have helped to subsidize the cash-poor political machine of the Ivoirian government and to supplement the declining incomes of members of the political class.” Obviously it is impossible to quantify this process. No doubt offl- cials at different levels of the hierarchy extract resources in different ways, and with different degrees of leverage and success. What is clear is that SAP-driven trade reforms in C6te d’Ivoire in the late 198Os, like the de facto trade liberalizations in Senegal in the 197Os, expanded commercial rent-collecting opportunities for the politically powerful at a time when the regime was strapped for patronage resources. Meanwhile, Ivoirian leaders retain a measure of political control over state agents and other individuals who use political clout to engage in illegal business activities. If the need arises, corruption can always be exposed, and individuals can be humiliated, stripped of power, or even imprisoned. In the past, Houphouet has used this tactic to keep clients in tow, subordinate potential rivals, and guarantee the loyalty of powerful Lebanese business interests.


Leading Lebanese business groups have clearly replaced the old European trading houses as the C&e d’Ivoire’s dominant importers and wholesale distribu- tors of consumer goods. Crossborder contraband has reduced the volume of trade conducted through the port and at Abidjan’s wholesale depots. Lebanese firms exercise control over most of what is left. They are also the leading clients of local light industry - here too, they have conquered what was once a commercial bastion of the European distribution houses. Lebanese importers and wholesalers supply up-country distribution networks on credit. At a time of generalized economic recession and profound liquidity crisis, these arrangements help to stabilize the positions of many up-country Lebanese merchants and to rein- force their positions vis-d-vis non-Lebanese rural traders.Os Meanwhile, as in Senegal, some Lebanese investors are acquiring light industries (plastics, for example) that are sold by Europeans who are no longer interested in the local market.

Many powerful members of the Lebanese business community are finding ways to survive, expand their operations, even prosper in the midst of economic crisis. They remain linked to the Houphouet regime, keep a low profile, make political investments, and enjoy the political patronage of well-placed state agents. Because they have vested interests in personal relations with members of today’s Ivoirian elite, they have a stake in political continuity as the transition to the post-Houphouet era takes shape. For these rea- sons, trade liberalization appears to have reproduced and reaffirmed a strategic political alliance cultivated by the Houphouet regime for decades. This alliance generates rents for members of the regime, but even more importantly, it strengthens a segment of the local private sector that does not aspire to exercise political power in its own right, or to challenge the existing Ivoirian elite’s hold on the state. The broad scope of the Lebanese business sector also circumscribes opportunities open to Ivoirian entrepreneurs. Liberalization has not decentralized the structure of private control over Abidjan-centered commercial networks in ways that open the way for the ascen- dance of an Ivoirian business class interested in con- structing a smaller, more laissez-faire government.

Crossborder contraband trading, meanwhile, diverts taxes formerly collected by the state treasury into the hands of state agents posted in the interior of the country. Malian, Burkinabe, and Guineean traders operate these interregional trade networks.& They are obliged to come to a modus vivendi with state agents who control the Ivoirian borders and roads: This involves the payment of tribute.47 Tribute extracted from crossborder traders has helped members of the state’s security apparatus - military, police, and the customs service - to slow the decline in their stan- dards of living in spite of pay freezes, inflation, deteri- orating social services, and austerity-induced reduc-

tions in perquisites. Low-ranking state agents who man the roads and borders pass a share of their take to their superiors. In this way, the contraband trade sinks deep roots in the state apparatus, giving agents found at virtually all levels of the hierarchy a stake in the expansion of illegal trade circuits. The process assumes a momentum which discourages would-be reformers from meddling in domains that they cannot control. In this way, contraband trade supplements the distributive capacities of a regime in fiscal crisis. LabazCe (1991, p. 60) makes the point directly: “Clandestine [crossborder] commerce contributes to the financing of alliances between the state and members of the government administration.”

6. CONCLUSION

Import fraud and contraband deprive states of des- perately needed tax revenue and speed the collapse of long-protected light industries in both the C&e d’Ivoire and Senegal. These processes do not serve “state interests.” They contribute to a general process of decay of the state as a legal and regulatory apparatus, the decay of the authority of the state, the undermining of its developmentalist legitimacy, and the withering of the state’s internal resource base. In the long run, this erodes the material and political founda- tions of the political classes that have ruled Senegal and C&e d’lvoire since independence, making the regimes of these two countries among the most stable in postcolonial sub-Saharan Africa. As one observer in C&e d’Ivoire remarked, fraud and contraband pit “state agents against the state.“48 State agents secure ad hoc sources of rent or profit while bankrupting and enfeebling the state which is the source of their power and privilege.

This paper, however, stresses a different dynamic. The regimes of Houphouet and Senghor/Diouf have turned in upon the state, consuming its extractive capacities, its distributive capacities, and its political capital in efforts to shore up the domestic bases of their power. Trade liberalization swept away old, foreign-controlled rent havens and the neocolonial alliances that were built upon them. In the midst of general economic crisis, this process freed up patronage resources. It cleared the way for the creation of new rent havens, and thus allowed regimes to solidify domestic political alliances.

Changes in the institutional arrangements govem- ing trade did not transform the nature of the state, and they did not transform local business classes. Rather than eliciting a flurry of productive investment, changes wrought by reform have tended to expand the commercial sphere of local private accumulation. State agents continue to mediate this process, albeit in new ways. Outcomes in both Senegal and the C&e d’Ivoire reflect the enduring predominance of “the

TRADE, TAXES, AND TRIBUTE 463

sphere of circulation” as a site of both public andpri- vate accumulation. The weakness of productive capital is both cause and consequence of this fact. Capitalist producers have neither the political influence, the economic weight, or the structural clout needed to ensure that state power is used to enhance returns to invested capital at the expense of returns to nonproductive activities, including commercial rent- seeking.

This has stark implications for policy. Proponents of radical forms of trade liberalization must propose new solutions to the fiscal crisis of the state. As long as import taxes remain a main domestic revenue source for the state, the imperatives of “fiscal redress- ment” (i.e. tax hikes to finance state deficits) and

“structural adjustment” (i.e. tax cuts to stimulate private investment) will conflict.49 As things stand now, national treasuries and private economic actors compete for the same commercial rents and profits. This too is a symptom of the same underlying problem: the weakness of productive capital as a force driving domestic economic activity.

While political leaders have a structural interest in the fiscal viability of the state, in the short run they must play a game with even higher and more immedi- ate stakes. In an era of economic and political crisis, incumbents are trying to use de facto and de jure trade liberalizations to generate political resources and to cultivate constituencies with a vested interest in the survival of their regimes.

NOTES

1. It is based upon research on Senegal’s import-export trade that was catried out in 198&86 and January 1991, and on the Ivoirian commercial sector that was done in May- October 1991 and March-April 1992.

2. In the 1950s and early 1960, the trading giants - SCOA, the CFAO, and the CFCI - bought out and absorbed several of the smaller, independent import houses that had been created by European colons in the C&e d’Ivoire. Two of these commercial houses, SAC1 and Jean Abile-Gal, retained their independence and assumed places alongside the “Big Three.” On European trading houses in C&e d’Ivoire, see Bonnefonds (1968); Campbell (1973); IDET-CEGGS (1963); IDET-CEGOS/RCI-MAEF (1969).

3. Michel and Noel (1984, p. 101) report an Effective Tariff Protection Coefficient (ETP), estimated on the basis of average nominal tariff protection coefticients, for the industrial sector has a whole of 1.76 in 1978. The sectoral ETP var- ied between 0.92 and 2.18 in 1978. The same authors report that 38.4% of all imports were governed by licensing in 1981 (1984, p. 106).

4. On the case of the textile sector, see Campbell (1985), pp. 282-287; and Boone (1992), pp. 131-164.

5. On the C&e d’Ivoire: March& Tropicuux, No. 1682 (February 3 1978). pp. 251-252; Murchb Tropicuux No. 1690, (March 31, 1978), p. 898. On fiscal receipts of the Senegalese government, see IMF (1970). p. 563; and Colvin Phillips (1991) p. 179.

6. See Amin (1969); Majhemout Diop (1972); and Schumacher (1975).

7. On the state-sponsored creation of trading consortia that aimed at establishing Senegalese traders as credit worthy clients of the leading European import/wholesale companies, see Amin (1969). pp. 36-tl.

8. In 1968, Senegalese traders organized into a professional association called UNIGES (Union des Groupements

Economiques du Senegal) which attacked the neocolonial orientation of the Senghor regime, its failure to promote “the national interest,” and its failure to pursue economic strategies “that would permit Senegalese enterprise to develop.” On this episode, see Jeune Afiique, Yes Affaires au Senegal: L.es Senegalais s’abstenir,” No. 494 (June 23, 1970). p. 50; Majhemout Diop (1972), pp. 167-174.

9. In 1984, the average nominal rate of tariff protection was 86%. Importation in 106 product categories was governed by quantitative restrictions (Chambas and Geotnjon, 1990). During 1978-86, the importation of textile goods was subject to the most restrictive licensing system that Senegal had ever known. See Boone (1992), p. 236.

10. Breaking with past practice, the Senegalese govem- ment distributed cartes d’importateur to Senegalese traders in large numbers. Meanwhile, the Ministries of Commerce and Finance drew up lists of “priority individuals” to be “selectively inserted” into the import trade through the licensing process. Just as important, the regime in the 1970s opened several credit windows and lending facilities to local private parties, including established businesses. Access to credit, coupled with the new political facilities, allowed many Senegalese to enter the import trade.

11. On the Ivoitian export circuit, see Tricart (1957), p. 222; and SEPRICLSEDES (1970). The ex-colonial import- export houses had closed most of their up-country crop purchasing posts by the early 1950s. In 1955, independent intermediaries, or traitants - mostly Lebanese but also some Africans - commercialized 75% of the cocoa crop (March& Tropicaux, No. 495 (May 7, 1995), pp. 1244-1245). Export houses financed the traitants who served as their buying agents and who organized coffee and cocoa purchases. The 1970 SEPRBXEDES study (pp. 77-80) estimated that 54% of all traitants were Lebanese, 23% were non-Ivoirian Africans, and 23% were Ivoirians. of these, the largest operators were Lebanese. Gn average, each non-Ivoirian traitant commercialized twice as much coffee and cocoa as each Ivoirian traitant. Traitants subcontracted the primary buying process (purchases at the farm-gate or at


official rural collection centers) to subordinates or commissioned employees called achereurs. The same study estimated that 86% of all acheteurs were Ivoirians. Seventy per- cent of all achereurs in the SEPRRXEDES sample used vehicles owned by rraitants.

12. Campbell (1973), p. 332.

13. See Bonnefonds (1968).

14. The government undertook two types of initiatives in the late 1960s and 1970s aimed at “the Ivoirianization of commerce.” First, it created state-owned commercial companies. Two state-owned import-export houses were created by the government in the late 1960s. In the 197Os, the regime created a state-owned import-distribution company. Consumer goods imported by the state were were distributed through an affiliated network of 270 retail outlets that were run by Ivoirians who were selected and trained by the government. The elaborate import-retailing structure was dismantled in 1980, leaving no visible traces on the Ivoirian commercial sector. Second, another type of state initiative inserted politically powerful personalities into rent-collecting positions in the export circuit. Most conspicuously, the government allocated about half of all coffee and cocoa export quotas in the 1970s and 1980s to Ivoirian quoturaires who then sold these quotas to the real export houses. See Boone (1993).

15. Hecht (1983, p. 34) reported that out of eight licensed agents buying cocoa and coffee from smallholder cooperatives in Divo, six were Lebanese “including one merchant who handled more than half of the region’s cocoa.” A 1987 source (Lubeck, 1987, p. 23) notes that “[tlhe Lebanese are reported to control 80% of the coffee- and cocoa-buying trade,” an observation that is consistent with information provided by those interviewed for this study in Abidjan in 1991-92.

16. A multivolume study of the Ivoirian commercial sector undertaken in 1963-69 concluded that 14-168 of all retailers in Abidjan were Ivoirians, that 5% or less of all retailers en brousse were Ivoirians, and that nationals were virtually absent from wholesale and importation (IDET-CEGQS, 1963; IDET-CEGQSIRCI-MEF, 1969). At the end of 1989, a nationwide survey counted 13,075 boutiques (small neigh- borhood shops) and reported that 21.6% were run by Ivoirians (PNCI, n.d.). Frarernir~ Mafin, the government’s daily, reported in 1990 that “commerce has completely escaped the control of Ivoirians.”

17. On the case of Senegal, see R. Cruise O’Brien (1975). On the politics of the rise of Lebanese business interests in the C&e d’Ivoim, even less has been written. One exception is Kouassi (1989). a Universite Nationale de C&e d’Ivoire dissertation, much of which reads like an anti-Lebanese tract. Kouassi writes that the Lebanese in C&e d’Ivoire have pros- pered in commercial activities by “exploiting abusively the weak points” of their Ivoirisn interlocuteurs in the public service (1989, p. 216).

18. See Amondji (1988) pp. 119-121, 124; Campbell (1985) pp. 287-289; de Miras (1982); Medard (1982), pp. 75-77; Dubresson (1989). pp. 83-88.

19. See M. C. Diop (1981); Coulon (1981), pp. 242-243. On the Gambia-to-Senegal contraband circuit in the 1980s see Calvin Phillips (1991), pp. 180-181.

20. Quotes are from interviews in Dakar, 1986. See Boone (1992), pp. 218-221.

21. Policy debates over what to do about smuggling and fraud in the textile trade revealed the highly compromised nature of the government’s position. As the industry lost its once-protected market, the government refrained from attempting to move against politically prominent and powerful merchants engaged in the quasi-legal and illegal textile trade. See Boone (1992). pp. 211-221.

22. Smuggling across the Senegal-Gambia border cost the government of Senegal an estimated 4-5 billion CFA francs in 1969, well before the major expansions of this trading circuit in the 1970s. Tripling this figure would probably generate a conservative estimate of the cost to the government of this particular current of trade in the late 1970s. Meanwhile, the surge in import fraud in the mid- to late 1970s transferred revenues that were earmarked for the state treasury into the hands of private traders and state agents responsible for import controls.

23. On Senegal’s structural adjustment programs, see DuruflC (1988); Youm (1991), pp. 26-30; Landell-Mills and Ngo (1991). On the New Industrial Policy, see also March& Tropicaux, No. 2143, (December 5, 1986), p. 3116; and Chambas and Geourjon (1990).

24. Using Senegal’s external trade statistics and intema- tional trade statistics, USAID personnel interviewed by the author in Dakar in January 1991 estimated that 30% of all import taxes due to the government of Senegal were actually collected in 1989-90. Diouf (1992, p. 73) reported that only 20-306 of all imports pay full taxes and duties.

25. The CCCE (Caisse Centrale de Cooperation Economique) reported in September 1989 that industrial activity in Senegal declined by 20.5% between the second trimester of 1987 and the second trimester of 1988 (as reported by La Tribune de I’Economie Africuine [Dakar], No. 6, (November 29, 1990, p. 4). Meanwhile, over 10,000 jobs were lost in the private sector (some 5,500 of which were in private manufacturing industry) in Senegal during 1986-90. See also Diouf (1992).

26. In the wake of the reforms, administratively fixed tax bases (called valeurs mercuriales or minima de perception) were reimposed on a range of imports that competed with local industry. Increases in both customs duties and the TVA (valued-added tax) by 5-68 in late 1989 outraged com- meyants in Dakar who protested by closing down shops and paralyzing business activity in the capital. (See March& Tropicaux, No. 2290, September 29, 1989, p. 2776.) Next, the state imposed an additional 3% tax (timbrefiscale) on all imports. In January 1991, the government sought to widen the application of the TVA and to capture the “informal commercial sector” in the tax net of the state by reforming the TVA-collection mechanism to oblige even the smallest-scale retailers to pay a “forfeitary,” lump-sum TVA calculated on the base of their estimated turnover (chifie d’ufaires). The

TRADE,TAXE!I,ANDTRIBUTE 465

comrnfr~anrs, through the intermediary of their commercial association, Unacois (Union Nationale des Comme~ants et Industriels du S&&gal), simply refused to oblige. See Le T&twin (Dakar), No. 25, (January 15. 1991). p. 5. See also Diouf(1992), pp. 70,83.

27. The Ministry of Commerce was liquidated in 1990.

28. See Duruflt (1988); Mar&Q Tropicuux, No. 2380 (June 21, 1991).

29. Republique Francaise, Mini&e de la Cooperation (1986). &exe I, p. 46. In 1984, the government’s deflated index of total sales (chjfie d’aj%res) in the Ivoitian commercial sector equalled only 62.3% of its 1975 level. (Republique Francaise, Minist& de la Cooperation (1986). Annex I, p. 46.)

30. GnPASII, seeDurufle (1988),pp. 117-118.125-126.

31. One interviewee in the Ivoirian Ministry of Industry reported that in 1991, about 30% of all imports were subject to the de&m licensing system. Meanwhile, the droitfiscal d’enrrke was raised by 30% in August 1987; in July 1989, a droit special d’entrke of 10% and a tare statistique of 2% were imposed. These taxes were added onto the droit de douune. A government report (RCI-DCGTx, May 1990) estimated that the average “theoretical” rate of effective tariff production of Ivoirian industry in August 1989 was 77.5%. The Ministry of Industry reported that the “‘theoretical” tax burden on some imported products, including textile goods, exceeded 100% in 1990. In practice, however, fraud and contraband meant that much of Ivoirian industry suffered from negative rates of protection (RCI-DCGTx, May 1990). Negative effective rates suggest that the market for textile goods, for example, was becoming mote and more competitive, and that this was devaluing commercial rents. As “superprofits” disappear under the impact of widespread tax evasion, merchants are pressured to evade taxes merely to maintain the “normal” profit rates that allow them to stay in business. The same dynamic was observed in Senegal.

32. Between 1984 and the end of 1986, the volume of imported textile goods increased by 80% while falling 12% in declared value (Africa International, 1987, as recounted by MarchPs Tropicaux, No. 2320 April 27, 1990, pp. 1141-l 142).

33. In 1980, recettes douuniPres totaled 228 billion FCFA, in 1988, they totaled 288 billion. In constant 1988 FCFA, the figures are 388 for 1980 and 288 billion in 1988 (Vitaux and Doulourou, 1989, Annex 7). On 1989-90, see MarchPs Tropicaux, No. 2380 (June 21.1991). pp. 1549-1550. A May 1990 government report argued that after 1985, the volume of fiscal receipts generated by import taxes bore no direct relation to (was independent of) the rate of import taxation. This study concluded all the import tax increases of the last 10 years had produced “a negative fiscal impact,” and that the PAS Il reforms had caused a “considerable deterioration in fiscal receipts and of the industrial sector” (RCI DCDGTx, May 1990).

34. In interviews in Abidjan, representatives of SCOA and

the CFCI reported that in 1980, one-half of the consumer goods they sold were imported. In 1990, the corresponding figure was one-tenth. The CFCI continued to import Dutch wax prints.

35. Their long-time counterpart in this sector of trade, SACI, declared bankntptcy and disappeared. Gverall. SClM- PBX members’ sham of officially recorded turnover in the Ivoirian distribution sector fell from 60% in 1981 to 34% in 1991 (SCIMPEX, AssemblC G&&ale Extraordinaire [min- utes], May 31 1991). Since the officially recorded share of all commercial activity also declined during 1981-91, the deterioration of SClMPEX members’ position was more dramatic than the organization’s own figures suggest.

36. Industrial buy-outs give the entrepreneur more latitude in the import trade. They open lucrative and legal possibilities for importing products that are declared as intermediate and capital goods. Diouf (1992. p. 73) noted the effects of a similar structure of incentives in Senegal, where some indus- trialists responded to the NPI by importing and reselling goods that they formerly manufactuted locally. He aptly refers to this as the ‘%ompradotisotion” of the Senegalese economy.

37. On Senegal’s Islamic conji&ies, see Copans (1988); Coulon (1981); D. Cruise O’Brien (1971, 1975); Markovitz (1970). and Villaldn (forthcoming).

38. See, for example, Diop (1981); and Bonnardel(1978), pp. 800-801.

39. See Ebin (1992), pp. 95-98; Diop (1981) Diop and Diouf (1991).

40. Diop and Diouf (1991).

41. On the 1988 elections, see Young and Kantt (1992). They argue that the Mouride leaders successfully mobilized votes for the ruling party in Diourbel, the heart of the old groundnut basin (p. 67). Diouf and the ruling party did not do well, however, in the urban areas, especially Dakar. Villal6n (1993, p, 19) reports that in the 1993 round of presidential voting, “[a] notable feature of the campaign, given Senegalese history, was the absence of endorsements by any of the major marabouts . . . who have long enjoyed a reputa- tion as king-makers in Senegal.” The regime certainly cannot count on the Mouride leaders to guarantee its power; if Diouf can count on them not to oppose him, then he is still ahead of the game. On Islam in contemporary Senegal, see Villal6n (forthcoming).

42. From interviews in Dakar, January 1991. Ebin (1992, p. 97) emphasizes the role that the NPI played in facilitating Mouride traders’ access to importation, thereby accelerating the process of accumulation that allowed the most successful Mouride traders to develop extensive and diversified international trading networks.

43. From interviews with Lebanese and European importers, and with Ministry of Industry representatives, Abidjan, July and August 1991 and April 1992.

44. Laba& (1991).


45. From interviews with Lebanese wholesalers and retailers in Abidjan, March and April 1992.

46. In the earlier period, many of the most important merchants in this group were intraregional traders in foodstuffs. Some were established semi-wholesalers and retailers in the northern Ivoirian towns of Odienne and Korhogo, where they were major clients of the European-owned wholesale depots that distributed manufactured consumer goods. The abrupt rise in Abidjan port taxes made contraband importation across the Ivoirian borders more profitable, encouraging established traders to diversify into this activity. The volume of European-controlled wholesale trade in Korhogo (where the CFCI, SCOA, and a private European distribution company, the CNCI, operated depots) fell by over 80% during 1982-92. More than 50% of this drop occurred after 1988 (from the author’s interviews in Korhogo in April 1992, and from Labazbe, 1991; pp. 45-6).

47. “Tribute” is the term chosen by Labazee. Following the yearly operations of one large-scale contrabandier deal- ing in textile goods in Korhogo, Labazke calculated that nib- ute paid to state agents totaled 30% of the total margin generated by the resale of contraband textile goods. Payment of this tribute, he argues, reduces the rate of profit in the contraband trade so significantly that contrabandiers margins, in the end, are very close to those prevailing in what remains of the “legal” textile circuit in northern C&e d’Ivoire (Labade, 1991; p. 60).

48. From interviews in Abidjan, July 1991.

49. The contradiction is a familiar one for practitioners caught between IMF priorities (“Raise taxes to deal with the deficit!“) and World Bank priorities (“Lower taxes to stimulate productive business!“) in West Africa.

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Documents

Trade, taxes, and tribute: Market liberalizations and the new importers in West Africa