Commercial Guide

II - Economic Trends and Outlook

Major Trends and Outlook

Burkina Faso is among the poorest countries in the world. It is a small, landlocked country, and approximately 73% of its 10.7 million people live in rural areas. The average per capita income in 1997, after CFAF devaluation, was USD 300. More than 80% of its workers earn a living from subsistence agriculture.

Burkina’s macro economy is slowly responding to reforms, although the average Burkinabe has probably not seen his/her purchasing power increase. The IMF has overseen a structural adjustment program in Burkina since 1991. In January 1994, the CFAF was devalued by 50%. The effects were mostly positive. The average inflation rate fell dramatically from 27% in 1994 to 7.8% in 1995 and remained steady at 8% in 1996. The GDP grew from 1.2% in 1994 to 4.8% in 1995, rising by 5% in 1996. Exports have responded to exchange-rate incentives.

International donors signaled their confidence in Burkina’s economic reforms with significant aid totaling USD 400 million in 1997. This aid comes from multilateral and bilateral partners as well as from well established NGOs. (Burkina ranks second after Mali with 180 established NGOs.) In mid-1996, donor countries erased almost USD 113 million of Burkina’s external debt, estimated at USD 1.3 billion. In 1997, Burkina was elected to benefit from the IMF's "Highly Indebted Poor Countries" debt conversion program. This conversion will go into effect in 2000 if Burkina successfully implements the conditionalities.

Some new investment has begun to gravitate toward Burkina’s newly liberalized mining sector (gold, manganese, zinc). Other sectors have yet to see notable growth as investors wait for more definite signs of success in the adjustment process.

Principal Growth Sectors

Burkina’s economy is dominated by the primary sector (agriculture, livestock, poultry, pisciculture), which accounts for nearly 40% of export earnings. Economic reforms have boosted export values. Cotton export earnings, which account for about 35% of Burkina’s foreign exchange, is expected to increase to 60% by year 2000 as the production increased by 30% in 1997. The government projects that increases in cotton earnings could quickly eliminate Burkina’s trade imbalance if Burkina could produce 500,000 tons per year by year 2000 and if world cotton prices are maintained.

Burkina’s secondary sector mostly includes agro-industrial and import-substitution goods and represents approximately 17% of GDP. This sector experienced negative growth in 1994, largely because protective tariffs were lifted and the cost of imported inputs went up after the devaluation. However, it is estimated that this sector increased by 7% in 1997 as a result of a recovery in heavy works, construction, textiles, and mining.

Finally, the tertiary sector, contributing about 43% in value added to the economy, is poised for growth. This sector is dominated by the so-called "informal sector," which consists mainly of vendors selling fabric, stationery, household goods, hardware, and consumable goods. Structural adjustment programs have targeted this sector's typically small, medium, and micro-size enterprises and called for the easing of registration regulations and credit directed programs. It is estimated that this sector increased by 6% over the 1995-1997 period.

Government Role in the Economy

The Burkinabe government is encouraging private sector growth. The cabinet contains several key ministers, including the Prime Minister, who have experience in finance and commerce.

Burkina’s SAP and Enhanced Structural Adjustment Facility (ESAF) are effectively liberalizing the previous state-controlled economy. Prices have been freed-up, and the public sector has been restructured. As of July 1998, 20 state enterprises originally on the privatization list had been privatized. SOSUCO, the sugar cane company whose majority capital (52%) was just recently sold to a consortium that includes a U.S. firm, Burkinabe businessmen and firms, and a prominent Indonesian businessman, is one of these enterprises. Eleven state enterprises are still awaiting buyers, eight are being liquidated, and three have been taken off the original privatization list.

Five companies are now talking with identified buyers: the national airline company (Air Burkina), the national textiles company (Faso Fani), the national agricultural equipment company (CNEA), the national telecommunications office (ONATEL), and one hotel (SHG).

Balance of Payments Situation

Burkina Faso suffers from a chronic trade imbalance because it imports most of its consumer and manufactured goods. Burkina’s most important trading partner is France, but it also imports goods from Côte d’Ivoire, Nigeria, the United States, Japan, Germany, the Netherlands, Spain, Italy, China, and Taiwan. Burkina Faso’s principal exports are cotton, gold, and livestock.

Despite its trade imbalances, adjustment programs and the inflow of unilateral transfers have helped reduced the deficit in the balance of payments.

Infrastructure Situation

Burkina Faso offers a limited but good infrastructure, including approximately 375 miles of railway and 7,800 miles of road, 14% of which are paved. The train system is improving service after years of neglect. Ouagadougou is linked by paved road and rail to Bobo-Dioulasso, the country’s second largest city and a key commercial center, and Abidjan (Côte d’Ivoire). Abidjan and Lome (Togo) are the two major ports used for bulk imports and exports. The port of Tema (Ghana) is being increasingly used for shipments to Burkina.

International freight forwarders and express mailing agencies are also available. International air service is provided by Air Afrique, Air France, Sabena, Air Algerie, and Ghana Airways. Air Ivoire and Air Burkina service the capitals of most of Burkina’s neighbors.

Burkina Faso offers expensive but reliable direct-dial satellite telecommunications to Europe and America. Electricity is also expensive, and occasional shortages occur at peak hours, especially between March and June. In 1996, a USD 4.6 million cellular phone system was installed in Ouagadougou by a U.S. firm.

Trade and business associations and unions provide logistical support to businesses. Burkina Faso has a first class hotel, the Sofitel Silmande, and several smaller hotels with facilities and accommodations for business activities. Space for commercial exhibitions, secretarial support, and car rental services are available. The Chamber of Commerce also offers facilities for business meetings.