Manufacturing, Mining, and Utilities

Manufacturing, Mining, and Utilities

The small industrial sector was dominated by agribusiness, and Cotontchad in particular. Next in importance were the National Sugar Company of Chad (Société Nationale Sucrière du Tchad-- SONASUT), the Chadian Textile Company (Société Tchadienne de Textile--STT), the Logone Breweries (Brasseries du Logone--BdL), and the Cigarette Factory of Chad (Manufacture des Cigarettes du Tchad--MCT). Observers estimated that these five industries generated some 20 percent of GDP. Of lesser importance were the Farcha Slaughterhouse (Abattoir Frigorifique de Farcha), the Industrial Agricultural Equipment Company (Société Industrielle de Matériel Agricole du Tchad--SIMAT), and Soft Drinks of Chad (Boissons Gazeuses du Tchad--BGT).

During the Chadian Civil War, the facilities and equipment of many industries were badly damaged. Most industrial operations either ceased or were reduced greatly, and almost all foreign investors withdrew from the country. Those operations that did continue on a reduced scale were limited to the soudanian region, which was not involved directly in large-scale fighting. By 1983, with the reestablishment of political stability on a national scale, the five major industrial concerns resumed full operations, and the less significant ones, such as SIMAT and the BGT, were rebuilt.

With the exception of the two bottling companies (the BGT and the BdL), which were privately owned, all the other important industries were either parastatals with majority government ownership or mixed companies with important government participation. For the most part, private participation was limited to French investors; investment by private Chadian interests was extremely rare. French companies were also important shareholders in the larger Chadian companies, such as Cotontchad. Except for Cotontchad, whose top management was Chadian, all the other major industries were run by expatriate directors, accountants, and mid-level managers who, for the most part, were French.

Industrial output grew rapidly in 1983 and 1984, as industries resumed operations that had been interrupted by war. By 1984 and 1985, prewar levels of output had been either reached or exceeded. Growth slowed for all industries after 1985, however, because of the dramatic downturn of world cotton prices, and output in 1986 began to decline.

Cotton fiber production by Cotontchad, which directly reflected production of raw cotton, fell sharply in 1985. This decline was stabilized in 1986-87 by emergency support from international donors. These donors prescribed retrenchment programs to prevent the total collapse of the cotton industry. The restrictions imposed on the production of ginned cotton fiber, however, reduced by half the number of ginning mills, with raw cotton production limited to about 100,000 tons. Production of edible oils by Cotontchad was also affected by the program of cost savings.

Other industries were affected directly by the fall of cotton prices. STT textile production slowed, as did the production of agricultural equipment by SIMAT, which made plowing equipment for use in cotton planting. Furthermore, the drop in revenues to farmers in the soudanian zone for their cotton and peanut production affected their ability to buy equipment. Lost revenues to farmers, along with the reduction in the numbers of workers needed in ginning operations, took a toll on cash earnings and therefore on buying power. By 1986 the ripple effect of these lost revenues in the cotton sector was widespread. The downturn in production in all industries left Chad with considerable unused capacity, ranging from 15 to 50 percent.

A number of other factors resulted in the slump in Chadian industry. Commercial sale of goods was low in a largely cash poor or nonmonetary economy. The decline in the cotton sector, which had provided the largest infusion of cash into the economy, further reduced consumer demand. Another impediment to industry was the high local cost of production compared with the cost of production in neighboring countries. Factors that raised local production costs included high transportation costs, overdependence on imports, and restricted economies of scale for small operations. Imported inputs were equivalent to about 30 percent of industrial turnover for Cotontchad, the BdL, and the STT and to about 60 percent for the MCT. Local substitutes for inputs were often more expensive than imported equivalents. Imports were often marketed to subsidize local production by a given industry. An example was SONASUT's importing refined sugar at less than local production costs, selling it locally, and using the proceeds to subsidize sugarcane production on SONASUT plantations. Interlocking relationships of production among companies also kept production costs high. For example, the BGT used SONASUT's refined sugar in its production of soft drinks, according to a convention with the government to use local inputs, even though imported refined sugar was cheaper.

Before the warfare of the 1979-82 period, Chad's industrial sector included between 80 and 100 small- to medium-sized enterprises, in addition to the major manufacturing industries. Most processed agricultural products or competed in the importexport trade. About half were local subsidiaries of foreign-owned firms or were Chadian firms with significant foreign capital. The foreign-owned distributorships sold agricultural equipment, construction materials, and petroleum products.

Since 1983 the return of foreign investment has been slow because of the high costs of rebuilding and a continuing perception of political uncertainty. Of the approximately twenty enterprises that had reopened by the late 1980s, most were import-export enterprises that lacked a formal relationship with the banking sector. Most Chadian-owned enterprises had managed to reestablish themselves. Yet by 1986, small enterprises that had assembled bicycles, motorcycles, and radios remained closed.

The lack of access to credit was another impediment to business expansion in Chad. Despite the reopening in 1983 of the Bank of Central African States (Banque des Etats d'Afrique Centrale--BEAC) and of two commercial banks, the International Bank for Africa in Chad (Banque Internationale pour l'Afrique au Tchad--BIAT) and the Chadian Credit and Deposit Bank (Banque Tchadienne de Crédit et de Dépôt--BTCD), the high proportion of available credit going to Chad's major industries limited credit available to smaller enterprises. Moreover, the banks invoked strict criteria for loan eligibility because of the high risk of lending in Chad. Few owners of small businesses knew sufficient accounting and technical skills to meet bank information requirements for loans.

Mining

The only mineral exploited in Chad was sodium carbonate, or natron. Also called sal soda or washing soda, natron was used as a salt for medicinal purposes, as a preservative for hides, and as an ingredient in the traditional manufacture of soap; herders also fed it to their animals. Natron deposits were located around the shore of Lake Chad and the wadis of Kanem Prefecture.

Natron occurs naturally in two forms: white and black. More valuable commercially, hard blocks of black natron were exported to Nigeria. White natron was sold on local markets, principally in N'Djamena and farther to the south. Although efforts were made in the late 1960s to control the commercialization of natron through the creation of a parastatal, by 1970 those efforts had failed because of resistance by traditional chiefs and traders who controlled production through a system of perpetual indebtedness.

A number of other mineral deposits are known, but none had been commercially exploited by the mid-1980s. Bauxite is found in the soudanian zone, and gold-bearing quartz is reported in Biltine Prefecture. Uranium is reported in the Aozou Strip, as are tin and tungsten in other parts of the Tibesti Mountains, but exploration reports in 1971 for these three minerals did not indicate large or rich deposits. As of 1987, conflicts in the region prevented further exploration.

By far the potentially most important resource is oil. In 1970 a consortium of Conoco, Shell, Chevron, and Exxon started exploration and in 1974 discovered minor oil deposits at Sédigi, near Rig Rig, to the north of Lake Chad. Total reserves at Sédigi were estimated at 60 million tons, or roughly 438 million barrels of oil. Exploration in 1985 by the Exxon-led consortium discovered potentially large deposits near Doba in the southern region of Chad. Further efforts were suspended in 1986 when world oil prices continued to drop, although the consortium maintained a liaison office in N'Djamena in 1988.

Plans existed in the late 1970s to exploit the deposits at Sédigi and to construct a small refinery at N'Djamena. Those plans lapsed during the conflicts of the late 1970s and early 1980s but were revived in 1986 by the government with the support of the World Bank. The reasons for proceeding with plans to exploit these deposits and build a refinery were clear. The cost of importing petroleum products exceeded the cost of extracting and refining domestic crude, even when international oil prices were low. The plans, which anticipated operations to begin in the early 1990s, included well development in the Sédigi field, a pipeline to N'Djamena, a refinery with a 2,000- to 5,000-barrels-per-day capacity, and the transformation or acquisition of power-generating equipment in the capital to burn the refinery's residual fuel oil. The refinery's output would satisfy 80 percent of Chad's annual fuel needs, including all gasoline, diesel, butane, and kerosene; lubricants and jet fuel, however, would still have to be imported.

Water and Electricity

In the late 1980s, public utilities in Chad were extremely limited. The Chadian Water and Electricity Company (Société Tchadienne d'Eau et d'Electricité--STEE), was the major public utility company. The government held 82 percent of the shares and CCCE held 18 percent. STEE provided water and electricity to the four main urban areas, N'Djamena, Moundou, Sarh, and Abéché. The company supplied water, but not electricity, to six other towns. Despite old equipment and high maintenance costs, STEE was able to meet about half of peak demand, which increased significantly from 1983 to 1986. Production of electricity rose by 35 percent from 1983 to 1986, and the supply of water increased by 24 percent during the same period. In 1986 STEE produced 62.1 million kilowatt-hours of electricity and supplied 10.8 million cubic meters of water.

In N'Djamena the majority of households had access to water. There were, however, only about 3,000 officially connected customers, a good proportion of which were collective customers. There were also an estimated 1,500 illegal water connections. The rest of the people received water from standpipes. Some 5,000 customers were officially connected for electricity in the capital in 1986, with an unknown number of illegal connections. Because electricity was so expensive and because electrical appliances were beyond the means of most people, the consumption of power per household was low. The high cost of electricity also hindered the expansion of small- and medium-sized enterprises.

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