Chad looks to Gulf investors as five-year plan unveiled

In 2022, Chad experienced unprecedented floods that displaced 1.3m people, about 7% of its population. The natural disaster led to significantly elevated food inflation, with prices rising at a rate of 12.2% in 2022 compared to 5.1% the previous year.

Yet, in the same year, high revenues from the oil sector - which represents around 15% of Chad's GDP and contributes about 40% of government revenues - resulted in a fiscal surplus of 4.5% of GDP and a decrease in the public debt burden.

This situation perhaps encapsulates the contradictions at the heart of Chad's current economy. About 80% of the population depends on subsistence agriculture. But it sits on natural resources that, in theory, could be the basis of strong economic development. It has an estimated 1.5bn barrels of proven oil reserves - producing an average of around 140.000 barrels per day - as well as mineral deposits such as gold, uranium and bauxite.

Five-year pla

In a bid to build on this potential and transform Chad's economy, the government recently launched its "Connection 2030" plan with the ambition to generate average real GDP growth of 8% per year between 2025 and 2030. If successful, this would enable Chad to become a middle-income economy. Ambitious development goals include increasing urban electricity access to 90%, providing safe drinking water to an additional 11m people, raising the average life expectancy by at least eight years, and increasing mobile phone penetration from 65% to 80%.

Tahir Hamid Nguilin, Chad's minister of finance and budget, tells African Business that the aim behind Connection 2030 is to unleash the potential of the country's economy by industrialising and boosting its economic output. "We have a lot of potential in Chad, in terms of mining, oil, livestock and agriculture," he says. "We have more than 13m acres of arable land and an estimated livestock population of 156m. Industrialisation in agriculture and other sectors is vital."

To this end, the Connection 2030 plan has a significant emphasis on upgrading the country's critical infrastructure. The estimated cost of doing this is steep: under the plan Chad will seek to mobilise $30bn in investments from both public and private sources. "We have made a lot of changes in terms of simplifying doing business in the country, such as reforming the customs process, the taxation system and our financial structures as well," Nguilin says.

Boosting connectivity

Logistics are also critical. As with other central African countries, the cost of transporting goods in Chad is extremely high as a result of the country's landlocked geography, poor infrastructure and high cost of fuel.

The World Bank has pointed out that each additional day in transit costs, on average, 0.8% of the total value of the goods being transported. Furthermore, what it calls the "landlockedness" of a country increases freight costs by around 50%. Such factors weigh heavily on the competitiveness of Chad and make it a more difficult and expensive place to do business.

The government has committed itself to raising the funds required to enhance critical infrastructure. "In terms of logistics, we also have plans to enhance our network of roads, seaports and airports," Nguilin says. "We have already established a free trade zone and issued all the necessary regulations in order to facilitate investment and to reassure investors that their investments will be safe, and that they can come to Chad and do business in all security."

Nguilin says the government has drawn inspiration from other African countries which have embarked on similar national development plans. "We have learned lessons from Benin, the Ivory Coast and Rwanda in how they have managed to simplify business procedures and prepare their national infrastructure for receiving international investment," he notes.

The Connection 2030 plan involves a total of 268 projects and reforms geared at making Chad a more attractive place to invest. Chad is being supported by international organisations such as the World Bank and the International Monetary Fund (IMF), which in July this year approved a $625m credit facility.

Chad has recognised the need to improve the business landscape for some time - back in January 2021, the government established a "presidential council" aimed at improving the business climate. Perhaps partly as a result of these reforms, foreign direct investment (FDI) flows into Chad are starting to rise - largely as a result of international firms looking to undertake oil exploration schemes - but still remain relatively limited. According to UNCTAD's World Investment Report 2024, last year FDI into Chad increased by almost 50% to just over $900m.

Gulf interest

One of the key regions that Chad is looking to is the Gulf. In November the UAE-Chad Trade and Investment Forum took place in Abu Dhabi. The Chadian government said the event "marked the international launch" of its Connection 2030 plan.

At the forum, more than 40 memorandums of understanding (MOUs) were signed aimed at facilitating private investment into Chad's strategic industries such as energy, agriculture, mining and textiles. In total, the Chadian government claims to have secured $20.5bn in financing deals and investment pledges at the event - two-thirds of the $30bn total it says is required to achieve the goals of Connection 2030.

Mahamat Idriss Deby Itno, Chad's president, said after the Abu Dhabi forum that "in its first year, our five-year plan will mobilise financing amounting to $20.5bn, which indicates that the objective of $30bn is achievable."

"To achieve this outcome, I call for the determined pursuit of reforms, particularly those aimed at reducing bureaucracy and significantly improving the business climate."

Nguilin tells African Business that Chad has simply found the UAE the easiest to engage with. "We would not present this as a shift in position or anything else, but it is because we see Abu Dhabi and the UAE as a hub for business and where we can get exposure to all relevant stakeholders and those interested in investing in Chad," he says.

Security challenges

The Institute for Security Studies (ISS) has warned that "apart from challenges related to oil price shocks, Chad's economy also generally suffers due to its geographical remoteness, conflict and insecurity in the region, lack of investment in infrastructure, a harsh climate and poor business environment," the organisation argues.

The ISS predicts that Chad's GDP per capita will reach $1701 in purchasing power parity terms by 2043 - a figure which would remain below its peak of $1862 in 2014 - and argue that the country will average an annual growth rate between 2023 and 2043 of around 3.7%. Chad's government is aiming for an annual growth rate that is more than double this number. This is needed to begin to chip away at extreme poverty, which impacts almost 7m Chadians and makes it one of the poorest countries in the world.

In 2021 President Idriss Déby was killed during a major rebel offensive in Northern Chad by the Front for Change and Concord in Chad. He was succeeded by his son, Déby Itno. The state must also contend with Islamist militant activity and clashes between farmers and herders as climate change worsens, and with the impact of civil war in neighbouring Sudan.