Togo Economic Development

By | May 17, 2021

During the German colonial era, Togo was considered a “model colony” that was economically very profitable. It supplied coveted goods such as cotton, peanuts, rubber and coffee. The Germans built several railway lines for the transport of goods, some of which are still in use today. A 300m long jetty in the sea was also built because Lomé did not have a natural harbor. The infrastructure built under the Germans is the reason for the myth that is widespread today that the German colonial era was “better” than that of the French. When France took over the colony after the First World War, they mainly used the existing infrastructure for economic exploitation. After independence in 1960, Togo received from Germany around 600 million marks, the highest per capita development aid at the time. In 1967 an artificial deep sea port was built with support from Germany. The port and the Phosphate extraction are – then as now – the most important engines of the economy alongside agriculture.

The discovery of phosphate in Togo goes back to 1952. At the time, France was looking for new deposits as it had lost control of Morocco and Tunisia. After discovering samples that were considered interesting, the French authorities decided to set up a mining company: the Société minière du Bénin (SMB), which in 1954 became the Compagnie togolaise des mines du Bénin (CTMB). In 1957, the company signed an agreement with the Togolese state, which laid down the conditions for the development of the deposit. Togo received only 20% of the company’s share capital. At the time of independence, the Togolese authorities demanded a fairer distribution of the proceeds from the mineral resources, which led to conflicts with France. In 1963, the first president of independent Togo, Sylvanus Olympio, was assassinated and France set up a transitional government until Eyadema Gnassingbé seized power with the help of the military in 1967.

According to franciscogardening, in the 1960’s and 1970’s Togo was known as ” Switzerland of Africa ” and was the leading investment locationof the region. As early as 1961, Togo was producing almost 120,000 tons of excellent quality phosphate per year. In the early 1980’s, measures were introduced to liberalize the raw material sectors (coffee, cocoa, cotton), privatize some of the state-owned companies and abolish state import monopolies. At this time, the first free trade zone was established to attract foreign investors and promote exports. The measures were accompanied by the most important international institutions (World Bank, IMF). Between 1984 and 1989, the Togolese economy grew by 3.4 percent, and private investment rose from 8.2 percent of GDP to almost 17 percent.

However, Eyadema Gnassingbé managed the short bloom of the rich agricultural land in senseless prestige projects: a 100 meter high luxury hotel “du 2 fevrier”, whose 52 suites are almost always empty, an oversized congress center, a bombastic party headquarters – and his own mausoleum in the hometown of Kara. At the same time, the country suffered from the effects of falling international commodity prices, the oil crisis and rising interest rates on foreign markets.

In the early 1990’s there was major socio-political unrest in the country, which led to an eight-month general strike between November 1992 and July 1993. The effects on the economy were fatal. The main donors suspended their disbursements to Togo and GDP fell by around 20% between 1991 and 1993. The industrial production and service sectors were hardest hit. The informal sector grew at a dizzying pace and is still a large part of economic activity today. The financial sector was also affected, with massive withdrawals of public deposits and a deterioration in customer portfolios.

In 1993, the bloody repression of the population finally led to the break of the international community with the dictator Eyadema Gnassingbé. The economic and civil rights situation became catastrophic and the resulting international isolation had far-reaching consequences, from which the Togolese economy has not yet recovered. Between the years 2000 and 2005 the average economic growth was below the population growth, the per capita income of the Togoers fell between 1997 and 2002 by as much as 17 percent. The oppressed population largely survived from what they grew, while Eyadema Gnassingbé plundered the Togolese phosphate deposits.

Shop for solar panels in Lomé Togo

Economic policy

After Eyadema Gnassingbé’s death in 2005, his son Faure Gnassingbé took power – also with the support of the military. Since then, he has been relying on neoliberal economic reforms and making great efforts to attract international donors to the country. The civil rights situation has improved significantly. His most important goal was to resume the suspended cooperation with the EU, which he succeeded in at the end of 2007. In addition to relations with the EU, the IMF and the World Bank, Togo also intensified economic relations with the People’s Republic of China, Japan and some Arab states as well as Israel.

After implementing a rigorous structural adjustment policy, the country has succeeded in gradually restoring the most important macroeconomic balances and continuing to liberalize its economy. The role of the state in industrial production was reduced, monopolies dissolved, and prices and trade liberalized.

The state invests primarily in the infrastructure in order to promote the private sector, whereby in addition to the government itself, foreign investors in particular generate the profits. French companies dominate the construction sector while domestic companies have to pay high taxes and are rarely involved in building the infrastructure. The donor organizations that have recently become more active in Togo are linking their cooperation to the continuation of the neoliberal economic reforms. In 2018 Togo was added to the list of African countries that can benefit from additional funds from the G20 “Compact with Africa” initiative. The initiative was launched in 2017 under the German G20 presidency and promotes private sector investment in Africa.

The economic policy challenge is to increase the fiscal space in order to be able to continue improving the areas of energy, transport and telecommunications. However, the high level of investment in recent years has already had a positive effect, especially in the retail and logistics sector. However, structural weaknesses and institutional inertia reduce the efficiency of public investment.

In terms of positive macroeconomic development, both sustainability and inclusivity need to be questioned. Significant parts of the recent economic growth and progress in the fight against poverty can be attributed to the resumption and expansion of international development cooperation since 2007, large infrastructure projects and an expansive spending policy. Since the change of power the Togolese economy has grown by 4-5% annually.