CHAPTER I: EXECUTIVE SUMMARY

CHAPTER II: ECONOMIC TRENDS AND OUTLOOK

CHAPTER III: POLITICAL ENVIRONMENT

CHAPTER IV: MARKETING U.S. PRODUCTS AND SERVICES

CHAPTER V: LEADING SECTORS FOR U.S. EXPORTS AND INVESTMENT

CHAPTER VI: TRADE REGULATIONS AND STANDARDS

CHAPTER VII:  INVESTMENT CLIMATE

CHAPTER VIII: TRADE AND PROJECT FINANCING

CHAPTER IX: BUSINESS TRAVEL

CHAPTER X: APPENDICES

I - EXECUTIVE SUMMARY

This Country Commercial Guide (CCG) presents a comprehensive look at Burkina Faso’s commercial environment using economic, political, and market analysis. The CCGs were established by recommendation of the Trade Promotion Coordinating Committee (TPCC), a multi-agency task force, to consolidate various reporting documents prepared for the U.S. business community. Country Commercial Guides are prepared annually at U.S. embassies through the combined efforts of several U.S. Government agencies.

Overview: Burkina Faso is a small market with a low per capita income and a reliance on subsistence-style agriculture. Nevertheless, the prospects for U.S. trade and investment opportunities are good. Burkina has pursued a World Bank/International Monetary Fund Structural Adjustment Program (SAP) since 1991. The public sector is being streamlined, privatization is continuing, most trade barriers have been lifted, and prices liberalized. From 1995 to 1997, the inflation rate has fluctuated slightly within the range of 6.1% to 8%.

Commercial environment: Burkina Faso’s limited market is offset by a stable commercial environment and the potential to exploit the larger West African francophone market. Burkina is a member of the West African Monetary and Economic Union (UEMOA), and its currency is the Community of Francophone Africa Franc (CFAF). The CFAF is backed by the French Treasury, trades at a fixed rate with the French franc, and is fully convertible.

Burkina’s politics and infrastructure also make it a good business bet. The country is connected by rail to Abidjan, a modern port city and capital of the region’s economic "elephant" - Côte d’Ivoire. The President of Burkina Faso has been in power since 1987 and has moved the country through several steps of a democratization process. Official relations between the U.S. and Burkina are good.

Business opportunities: Foreign investment is welcome in Burkina Faso. Investment and mining codes permit full repatriation of profits, 100% ownership of companies, and many tax exemptions. Investors have shown most interest in the mining industry (particularly the gold sector) since Burkina lies between the gold-rich countries of Mali and Ghana. As of mid-1997, more than 140 requests had been filed for permission to explore for gold.

Competitively priced necessities such as generic pharmaceuticals, medical supplies, and dairy products, along with fertilizers and chemical products, are best poised to enter the post-devaluation market. Telecommunications, computer equipment, and used clothing are U.S. exports that already capture a significant market share.

For more information: Country Commercial Guides are available for U.S. exporters from the National Trade Data Bank’s CD-Rom or via the Internet. Please contact stat-usa at 1-800-stat-usa for more information. Country Commercial Guides can be accessed via the World Wide Web at http://www.stat-usa.gov and http://www.state.gov. They can also be ordered in hard copy or on diskette from the National Technical Information Service (NTIS) at 1-800-553-NTIS. U.S. exporters seeking general information or assistance and country-specific commercial information should contact the U.S. Department of Commerce's Trade Information Center by phone at 1-800-USA-TRADE or by fax at (202) 482-4473.

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.

Nature of Political Relationship with the United States

Relations between Burkina Faso and the United States are generally good, having steadily improved after the leftist revolutionary period of 1983-87. The government of Burkina Faso has shown progress toward democratic reform and individual liberties.

The U.S. provides humanitarian assistance to Burkina Faso with food and modest levels of regional and bilateral development assistance. In 1995, the USAID in-country mission closed; in 1996 Peace Corps volunteers returned after an eight-year absence. As of July 1999, the Peace Corps is working primarily in the sectors of health, sanitation, and education.

The Major Political Issues Affecting Business Climate

Burkina Faso is undergoing democratization and decentralization under the leadership of President Blaise Compaoré, who has been in power since 1987.

President Compaoré’s political party -- the Congress for Democracy and Progress (CDP) -- dominates all sectors of the government. The party claims populist ideals but calls for free enterprise on the economic front. Many small opposition parties exist, but they lack financial backing and influence.

Burkina’s commercial viability is linked to the stability of its neighbors. The ports of Abidjan (Côte d’Ivoire) and Lome (Togo) serve as key shipping points for Burkina’s imports and exports. Burkina’s Chamber of Commerce has recently sought to diversify its port access by opening branches in the port cities of Cotonou (Benin) and Tema (Ghana). About 64% to 70% of imported goods are transported by road, 20% by railway, and 10% by air. Although still low by regional standards, businessmen report an increasing level of corruption, especially in the granting of government contracts.

Since the coup d’état that brought President Compaoré to power, the country has embarked on a process of democratization with the adoption of a constitution and the holding of presidential elections in 1991, municipal elections in 1995, legislative elections in 1997, and presidential elections again in November 1998. Despite a boycott by the radical opposition parties in the most recent election, President Compaoré was reelected.

The death of a prominent journalist in December 1998 sparked nationwide demonstrations and led to the formation of an independent investigatory body that implicated members of the Presidential Guard in the assassination. In May 1999, President Compaoré appointed a council of wisemen comprised of former heads of state and religious leaders to develop recommendations for reform of the country's political and judicial institutions.

Distribution and Sales Channels

Distribution and sales channels are concentrated in Burkina’s two largest cities - Ouagadougou (almost a million inhabitants) and Bobo-Dioulasso (450,000). Secondary urban areas could be considered for distribution of consumables such as dairy products, edible oil, and batteries, even though these areas are already well served by the country’s two largest cities. Major commercial banks and insurance services have branches in secondary urban areas, which are linked to Ouagadougou and Bobo-Dioulasso by paved roads or partially paved roads. Distribution and sales entities operate under various forms, ranging from modern mini-markets, shops, and warehouses to informal sector market stands.

Use of Agents and Distributors/Finding a Partner

There is no law in Burkina Faso requiring retention of an agent/distributor, but this is advisable. Selecting a capable local agent could be critical to the successful introduction of U.S. products into a market dominated by French goods.

There are a limited number of businessmen in Burkina with the practical experience and financial capacity necessary to form a partnership with a U.S. firm. Most are active in import-substitution industry or commerce. Some in this group could be valuable joint-venture partners for U.S. investors.

Franchising

Franchising is not yet an assimilated distribution technique. Local businessmen usually ask for an exclusive agent distributor contract.

Direct Marketing

Direct marketing is a possible tool, especially for selling to wholesalers (e.g. pharmaceutical), but it is used infrequently in Burkina. In the case of foreign party bids, a competing U.S. firm should hire a local contact for direct follow-up.

Joint Ventures/Licensing

There are Burkinabe joint ventures in the mining sector involving partly owned U.S. companies. Moreover, the Burkinabe business community is open to joint ventures in the areas of agro-business, construction, tourism, beauty supplies, and cosmetics.

Advertising and Trade Promotion

Advertisements can be placed directly through local newspapers or through advertising agencies. Ouagadougou’s daily papers are listed below. For a more complete list, please contact the American Embassy in Ouagadougou.

Daily Newspapers

L’Observateur Paalga

01 B.P. 584 Ouagadougou 01

Burkina Faso

Tel:(226) 30.55.75, Fax: (226) 31.45.79

E-mail:lobs@fasonet.bf

Sidwaya

01 B.P. 507 Ouagadougou 01

Burkina Faso

Tel: (226) 31.22.89/09, fax: (226) 31.03.62

Le Journal du Soir

02 B.P. 5468 Ouagadougou 02

Burkina Faso

Tel: (226) 31-59-20, fax: (226) 31-59-22

Le Pays

01 B.P.4577

Ouagadougou 01

Burkina So

Tel: (226) 31-35-46, fax: (226) 31-45-50

E-mail: ed.lepays@cenatrin.bf

There is a small but dynamic and experienced staff at Burkina’s Chamber of Commerce. They conduct feasibility studies and training, develop business links, and organize participation in trade shows. The office also acts as a bridge between government authorities and business associations. Matters regarding investments and import-export regulations and procedures are handled by an office in the Ministry of Commerce, Industry, and Crafts. Questions may be addressed to:

Centre de Promotion des Entreprises (Guichet Unique)

01 B.P. 365 Ouagadougou 01

Burkina Faso

Tel:(226) 30.73.42/07 Fax: (226) 30.73.05

The National Office of External Trade (ONAC) promotes Burkinabe export products and the country’s participation in trade fairs, including its own well attended International Artisanal Salon of Ouagadougou (SIAO), which is held in October of even-numbered years. Interested businesses are encouraged to contact:

Mr. Hamadé Ouédraogo

Director General

Chambre de Commerce, d’Industrie et d’Artisanat

01 B.P. 502 Ouagadougou 01

Burkina Faso

Tel: (226) 31.12.66/67, fax: (226) 30.61.16,

E-mail:ccia-bf@cenatrin.bf

Protecting Your Product from Intellectual Property Right Infringement

Burkina Faso belongs to the African Intellectual Property Organization (OAPI) and the World Intellectual Property Organization, which officially protect members’ trademarks, patents, and industrial designs.

Invention patents are valid in member countries for 20 years with licensing possible three years after issuance of the patent. Trademark rights are valid for 20 years and are renewable.

Need for a Local Attorney

A local attorney and/or notary may be required to secure or close a contract. There are about 107 practicing lawyers and 10 public notaries registered in Burkina Faso. The Embassy consular section maintains a list of registered lawyers who have indicated they will work with American clients.

Most lawyers do not speak English, but translation services are available. Upon request, the Embassy can provide the names and addresses of the most experienced bookkeepers, public notaries, engineering consulting offices, and translation services. Such inquiries should be addressed to the Commercial Assistant.

V - LEADING SECTORS FOR U.S. EXPORT AND INVESTMENT

The modest but increasing share of the Burkinabe import market captured by U.S. firms is proof of the country’s receptive attitude toward U.S. products.

The 1994 devaluation of the CFAF offers new opportunities for U.S. and other foreign firms as the prices of some products have become competitive with French products, which dominate the Burkinabe market. These opportunities include the sale of pharmaceuticals and reactives, medical equipment (used) and supplies, heavy works contracts, and consultant services. The telecommunications, used clothing, and computer market continue to offer opportunities to U.S. vendors.

Best Prospects for Non-agricultural Goods and Services

The best prospects for non-agricultural goods and services include:

Telecommunications equipment: The telecommunications field remains perhaps the best trade prospect for U.S. firms. Since the late 1980s, U.S. firms have supplied Burkina Faso’s national telephone company (ONATEL) with telecommunications equipment. ONATEL manages projects aimed at increasing Burkina’s telephone network. The U.S. ranked as Burkina’s first telecommunications equipment supplier in 1996 and 1997. In 1997, the U.S. supplied 48% (representing 1.1 million USD) of the total telecommunication imports, while France supplied 39%. France, however, used to rank first because of its historic ties to the region and the flexibility and diversity of French financing sources, notably their concessionary credits to ONATEL through the Burkinabe government. Other principal competitors include Canada, Japan, Finland, Germany, Malaysia, and Taiwan. U.S. firms interested in entering this market should consider possible credit financing arrangements and appoint a local partner/representative. Recently, the government has announced the partial privatization of ONATEL, which will deregulate the sector.

Pharmaceuticals, reactives, and other medications: There is a market for competitively priced pharmaceuticals (including generic), reactives, vaccines, and other human and animal medicines in Burkina Faso. France traditionally has been by far the major supplier of these products. In 1997, Burkina’s imports of pharmaceuticals and medicines amounted to 12.5 billion CFAF (about 21.5 million USD), of which France had 79% and the U.S. only 2%. Other European suppliers also have small shares.

Despite French dominance, Post believes that U.S. firms could control up to 50% of this market if they use the established procedure that permits the selling and promotion of their medicines in Burkina. Post can help U.S. firms acquire an accurate understanding of this procedure, which is used to register products in the official nomenclature. Once registration is completed, U.S. firms should develop advertising and sales channels, and assure French-language labels and packaging. U.S. firms might consider targeting a group of countries (e.g. Mali, Niger, Burkina Faso) for sale of their products. Recently, South African and Asian laboratories and firms showed interest in Burkina’s pharmaceuticals market.

Personal computers, accessories, and supplies: Because of price advantages, good opportunities exist for U.S. suppliers of computer hardware, software, and related products. The market remains small, but it is beginning to show signs of expansion. For suppliers who can sell in small quantities, it is definitely a good prospect.

France was the largest exporter of these goods in 1997, with 48% of the market while the U.S. had 12%. Fifty percent of the French share consisted of reexported U.S.-made equipment. Thus, direct sales of U.S. equipment by U.S. firms to Burkina Faso are encouraged since French firms generally mark up the price of reexported U.S. equipment. Considering the fact that about 2,000 computers in Burkina are connected to the Internet and that the communication sector is becoming liberalized, information technology products and services have become an area of opportunity.

Fertilizers and chemicals: There is high demand and strong sales in this market. In 1997, Burkina’s total imports amounted to USD 32 million (18.6 billion CFAF). Côte d’Ivoire supplied 45% (USD 13.4 million), France supplied 8.5% (USD 2.6 million), and the U.S. supplied 3.6% (USD 1.1 million). Other suppliers were Belgium, Luxembourg, Germany, Nigeria, and the United Kingdom. Post encourages U.S. suppliers already established in the West Africa sub-region (notably in Côte d’Ivoire, Nigeria, and Ghana) to consider exploring this lucrative market.

Heavy works contracts (roads, dam construction, electrical projects): The value of the road rehabilitation market is estimated at 5 billion CFAF per year (about USD 9.7 million). Heavy works projects financed bilaterally or multilaterally exist (dam construction, valley parcelling, electricity interconnection, solar energy lighting). Local companies generally contract assistance from foreign companies. Contacts are made through government tenders.

Used clothing and shoes: In 1997, Burkina imported USD 3.2 million of used clothing and shoes. Belgium and Luxembourg supplied 49% (USD 1.6 million); the U.S. ranked second with 23% (USD 717,931). France supplied 8%, and Italy 5%. U.S. suppliers can increase their share by visiting local importers at least once a year.

Consultant services: The demand for consultant services can be expected to rise as the structural adjustment of Burkina’s economy welcomes foreign investment, and as multilateral aid agencies such as the World Bank become more disposed to projects in Burkina. (See Chapter VII - Trade and Project Financing.) These services involve projects ranging from natural resource development studies to rural development issues and mining sector strategies.

French, Dutch, and Canadian consulting firms are operating in this market through direct local branches and local-affiliated consultant firm/individual consultants.

Best Prospects for Agricultural Products

Excellent opportunities exist for U.S. firms to expand their market share in the following commodities: wheat, wheat flour, yellow cornmeal, and rice.

Rice: Each year, the Burkinabe consume 120,000 tons of rice, of which 30,000 tons are locally cultivated and 90,000 tons (valued at about USD 24 million) are imported, mostly from Thailand, Pakistan, and Taiwan. U.S. firms that can supply rice for popular consumption at competitive prices may seek to tap this market. Burkina’s state monopoly on rice imports theoretically ended in October 1996. Authorized local importers still have to be screened by the government.

Wheat and wheat flour: Burkina Faso imports a large quantity of U.S. wheat flour from European wholesalers, so the direct sale of wheat by U.S. suppliers represents another option to be pursued. The importation of unprocessed wheat has been liberalized with an 11% tariff, but a prohibitive 56% tariff on processed wheat flour remains. Bakers buy much of their wheat flour from the national milling company, Grands Moulins du Burkina. In 1997, imports of wheat flour amounted to USD 377,854, of which 90% originated from Côte d’Ivoire.

Other cereals: Catholic Relief Services distributes U.S.-donated (P.L. 480 Title II) yellow cornmeal as part of a nationwide school lunch program. This product is popular in Burkina Faso, suggesting room for establishing a private market.

Dairy products (milk, butter, and cheese): The Netherlands and France dominated this market, controlling 50% (about USD 6.2 million) and 34% (about USD 4.1 million) respectively in 1997. Figures do not indicate that the U.S. sold milk to Burkina in 1997. Other small suppliers are Spain, the United Kingdom, and Germany. However, relatively few brands of butter or milk products are marketed. U.S. brands may be able to gain market share by increasing the variety of products available to consumers, and above all, U.S. firms may have a competitive edge in the supply of powdered milk. Market penetration by U.S. firms depends on whether they can identify and conform to local consumer preferences. Burkina's total imports amounted to USD 12.2 million (7.1 billion CFAF) in 1997.

Burkina has a program to develop private agrobusiness using fertilized grounds in two big hydro-agricultural valleys, Bagré and Sourou. Implementation of this program will generate a need for irrigation equipment, tractors, and parcels preparation equipment. The World Bank has funds to finance private irrigation. Parcels can be distributed in lots of 10 acres to any private agrobusinessman who satisfies requirements.

VI - TRADE REGULATIONS AND STANDARDS

Burkina Faso has removed most import/export restrictions and streamlined taxation and other administrative procedures. Quantitative restrictions on imports have been lifted, and tariffs reduced from a maximum of 200% to a maximum of 66%, except for petroleum products which maintain a 150% tariff.

Burkina Faso is still negotiating with the WTO to consolidate its rates; it appears that they will be within the WTO range. The only preferences practiced are being enforced by West African Economic and Monetary Union (UEMOA) laws and regulations in favor of UEMOA products. There are no tariff and non-tariff barriers access against U.S. products. Once the UEMOA has adopted the External Common Tariff (Tarif Exterieur Commun), each member state will be able to negotiate the adjustment of this tariff to its specific market conditions within the limits authorized by the WTO.

The importation of several products (pharmaceuticals, arms, ammunition, uniforms, and products classified as toxic) still requires a special authorization. A certificate of conformity, requiring fee payment, is also required for the import of some products (rice and batteries). The pre-shipment inspection of imports over CFAF 1.5 million (about USD 2,900) by the Société Générale de Surveillance (SGS), an international verification and control service, is still required. The export of ivory remains strictly forbidden.

Openness to Foreign Investment

The government is seeking direct foreign investment and private sector development. It is privatizing most of the former parastatal companies and receives proposals from various foreign and national buyers, which are examined without discrimination. The government does not have specific laws/rules (with the exception of the Investment Code and French business law principles applicable to Burkina) affecting foreign investment through acquisitions, mergers, takeovers, and greenfield investments. The government does not practice investment screening except for the fact that, in order to be eligible for code incentives, the investment must be linked to the national interest.

The Investment Code

The Investment Code guarantees equal treatment of both foreign and domestic investors seeking the investment privileges described below. The Ministry of Industry, Commerce, and Crafts approves all new investments, both foreign and domestic, based upon recommendations by the National Investment Commission.

The 1992 Investment Code was substantially revised in 1995 and 1997 to make it more attractive. It now establishes six incentive schedules:

Schedule A applies to investments of less than 20 million CFAF (roughly USD 34,000) made by companies producing, preserving, or processing goods that generate at least three permanent jobs. It exempts a company from customs fees (and from internal fiscal taxes if the equipment is locally made) that are normally due on the equipment and first set of spare parts that a company imports at the outset of the investment. During the production phase, it provides for a five-year total exemption from the commercial and industrial profits tax (IBIC) and the forfeit tax (IMFPIC). It also provides for a two-year total exemption from the licensing tax (Patente) and for a two-year 50% licensing tax exemption after the period of total exemption.

Schedule B applies to investments of at least 20 million CFAF made by companies that produce, preserve, or process goods that create at least seven permanent jobs. It provides the same incentives as listed above at the outset of the investment. During the production phase, it provides for a five-year exemption from commercial and industrial profits tax, licensing tax, stock and shares income tax, apprenticeship tax, transfer tax, forfeit tax, as well as for a three-year 50% reduction of the above taxes after the period of total exemption.

Schedule C applies to investments of at least 500 million CFAF (about 835,000 USD) that create at least 50 permanent jobs. It provides for the same incentives as in Schedule A and B at the outset of the investment. During the production phase, it provides for a six-year total exemption from the commercial and industrial profit tax, licensing tax, stock and shares income tax, apprenticeship tax, transfer tax, forfeit tax, as well as for a three-year 50% reduction of the above taxes after the period of total exemption. In addition, companies that obtain Schedule C benefit from a stabilized fiscal regime. This means that if tax modification occurs, it does not apply to these companies if it increases the rates during the concerned period.

Schedule D applies to companies that provide services requiring a minimum investment of 10 million CFAF (about USD 17,000) and that create at least seven permanent jobs. It provides the same incentive as Schedule A, B, and C at the outset of the investment. During the production phase, it provides for a five-year total exemption from the commercial and industrial profit tax, licensing tax, stock and shares income tax, apprenticeship tax, transfer tax, and forfeit tax.

Schedule E applies to companies providing services that require a minimum investment of 500 million CFAF (about USD 835,000) and that generate at least 30 permanent jobs. At the outset of the investment, it has the same incentives as the above schedules. During the production phase, it provides for a six-year total exemption from the commercial and industrial profit tax, licensing fax, stock and shares income tax, transfer tax, forfeit tax, and apprenticeship tax.

(N.B. Exemptions provided for in Schedules A, B, C, D, and E do not include taxes on services, office furniture, computer hardware, air-conditioning equipment, and gasoline.)

There is a special schedule for companies whose only activity is exporting, as described below:

When an exporting company is formed, the Code provides a 50% reduction in registration fees. At the outset of the investment, it provides for total exemption from customs taxes on imported construction materials, production equipment, and specific vehicles and materials related to the production process or those which have been recognized as such by the National Investment Commission.

During the production phase, it provides for:

-- a permanent total tax exemption on raw materials and supplies directly used in production or as non-recyclable packaging;

-- a total and permanent exemption from the licensing tax, stock and shares income tax, apprenticeship tax, transfer tax, and forfeit tax;

-- a 50% permanent reduction from the commercial and industrial profit tax. (This rate increases to 75% if at least 80% of the total raw materials used during processing consists of local raw materials.)

A communal investment code is envisioned as part of the regional integration program being undertaken by the UEMOA. However, a community investment code will not be established before the year 2000.

The Mining Code

The 1993 Mining Investment Code was replaced in October 1997 by a code with more incentives. The 1997 Code establishes two mining rights: the exploration license and the exploitation license. It provides special customs and fiscal privileges for each license as described below:

An exploration license grants an exclusive right to explore for specific mineral substances within an allocated area. However, the holder of an exploration license can request the right to apply it to other minerals. This license is valid for three years and is automatically renewable for two three-year periods. It covers a maximum area of 250 square kilometers, which is reduced by 25% at the second renewed three-year period. The remaining area is to be determined by the holder. A mining convention can be held in addition to the exploration license. In such a case, the mining convention cannot supersede the license rules. It has a validity of 20 years and is renewable by 10-year periods.

An exploration license grants the following fiscal and customs benefits to the holder:

-- Within the framework of its operations, exemption from the value-added tax (TVA), commercial and industrial profit tax (IBIC), licensing tax (Patente et licenses), forfeit tax (IMFPIC), apprenticeship tax (TPA), registration tax (Droit d’enregistrement et du timbre), and stock and shares income tax (IRVM). These exemptions do not exonerate the holder from declarative obligations stipulated in the Fiscal Code (Articles 16, 17, and 251).

-- Exemption from customs fees on professional equipment and raw materials imported to help in the exploration process and taxes on services received. This exemption covers spare parts whose value does not exceed 30% of the CIF value of imported machinery and equipment. It also covers gasoline and lubricants for production machinery as well as field vehicles, except for tourist vehicles. A list of equipment benefiting from the exemption is normally attached to the exploration license when it is issued. If the list does not cover all needed items, the Ministry of Mines and Ministry of Finance issues an additional list.

Geoservice companies, including drilling companies and laboratories that analyze mineral samples, benefit from the customs exemption if they operate as sub-contractors.

An exploitation license grants the holder the right to establish and exploit a mine according to rules of the Mining Code. An exploitation license is given for a period of 20 years and is renewable for five years until the deposit is exhausted. Granting an exploration license gives the government 10% of the shares of the mining company that will be formed.

An exploitation license grants fiscal and customs privileges as follows:

A seven-year exemption from the forfeit, licensing, apprenticeship, and transfer taxes; the staggering of the registration tax over a five-year period with a total exemption if the company increases its capital; and exemption on the value-added tax from exports. The holder will have to pay a 35% tax on commercial and industrial profits, and a 12.5% stock and shares income tax.

The holder of an exploitation license must pay a combined custom tax of 11% during the mining exploitation period on imports of raw materials, equipment, materials, gasoline, and lubricants to be used in the exploitation. Notwithstanding this special custom tariff, the holder of an exploitation license can ask for temporary admission benefits. Conditions for obtaining and executing the temporary admission are set by the rules in effect. The holder of an exploitation license is authorized to constitute what is called "provision for the deposit reconstitution." The commercial and industrial profit tax does not apply to this provision. The holder of an exploitation license can request and obtain a stabilized fiscal and custom tariff.

In case of litigation, depending on the nature of the problem, mining authorities and the holder may designate one or several experts to proceed to arbitration. They can also refer the case to Burkinabe courts or an international arbitration court if prescribed by a mining convention.

The overall investment in the mining sector in 1996 amounted to USD 38 billion, with about 140 companies maintaining exploration licenses and authorizations.

Conversion and Transfer Policies

Burkina Faso is a member of the West African Monetary and Economic Union (UEMOA) and uses the CFAF. The CFAF is freely convertible into French francs (FF) at a fixed rate of 100 CFAF to 1 FF. Investors should consider advantages offered by the UEMOA, which includes Senegal, Togo, Côte d’Ivoire, Benin, Niger, Mali, and Guinea-Bissau. The CFAF may be freely used between member countries.

In December 1998 and February 1999, the UEMOA issued regulations that define the financial relations of its member countries with foreigners. These regulations principally outline the conditions in which a UEMOA bank can easily access hard currency (couverture de change) directly from a partner/correspondent foreign bank without the intervention of the Central Bank.

Burkina Faso’s Investment Code guarantees foreign investors the right to transfer abroad any funds associated with an investment, including dividends, receipts from liquidation, assets, and salaries. Such transfers are authorized in the original currency of the investment.

Transfer is made directly by Burkinabe banks once the interested party presents all relevant documents to the bank. Transfers and repatriation of funds are not limited, and there is no waiting period. Wire transfers to an American correspondent bank take three days and up to a week to a non-correspondent bank.

Burkinabe policies facilitate the free flow of financial resources and support the flow of resources in the product and factor markets.

Credit, when available, is allocated on market terms. Legal, regulatory, and accounting systems are consistent with international norms. The government uses a French system of public accounting. Within the framework of the UEMOA, rules are taken to progressively harmonize the public accounting systems of members. Since January 1998, a common commercial accounting system (SYSCOA) instituted by the UEMOA is in effect in member countries. It conforms to world norms. Burkina Faso does not have a stock exchange, but it does have regulations that guarantee and facilitate portfolio investment. Also, as member of the UEMOA, Burkina participates in the regional stock exchange market headquartered in Abidjan (Bourse Régionale des Valeurs Mobilières -BRVM-) and with a local representation in Ouagadougou. Three to five Burkinabe companies are preparing to capitalize in the BRVM.

Expropriation and Compensation

The Burkinabe constitution guarantees basic property rights. Such rights cannot be infringed upon except in the case of public necessity, as defined by the government. Just compensation must be paid in cases where property is expropriated. Such compensation must be paid in advance of the expropriation, except in the event of emergency. Since 1960, three instances of expropriation have occurred. In 1968, the electric company (then called SAFELEC) was nationalized by the government in conformity with Burkinabe law. In 1970, Comacico-Benin and Secma, film-making and distribution companies, were nationalized. In 1980, a manufacturer of ammunition, Carvolt, was nationalized for reasons of national defense.

Dispute Settlement

If an amicable settlement of a dispute between the government and an investor proves impossible, the Investment Code requires that arbitration procedures be submitted to international arbitration under the rules outlined by the IBRD's March 1965 Convention. In cases where an enterprise owned by a national does not meet the nationality conditions stipulated by Article 25 of the convention, the Code specifies that the dispute be resolved in accordance with the dispositions of the supplementary mechanisms approved on September 27, 1978 by the International Court for Settlement of Investment Disputes.

Performance Requirements and Incentives

There are no specific performance incentives other than a general exhortation that companies foster recruitment of national employees. There are no requirements that investors purchase from local sources. Given the government’s stated desire to increase foreign investment, an increase in performance requirements is not anticipated.

Right to Private Ownership and Establishment

The rights of foreign and private domestic entities to establish and own businesses and engage in all forms of remunerative activity are guaranteed by the constitution and the Investment Code. Businesses can be freely established, subject to the screening process discussed above, and sold. Most public enterprises have enjoyed a monopoly in their markets. With implementation of the reforms most monopolies are being eliminated. Foreign investors are encouraged to participate in the privatization of state-run enterprises.

Protection of Property Rights

Burkina Faso has a legal system that protects and facilitates acquisition and disposition of all property rights, including intellectual property. Burkina is a member of the World Intellectual Property Organization (WIPE). The Investment Code guarantees foreign investors the same rights and protection as Burkinabe enterprises regarding trademarks, patent rights, labels, copyrights, and licenses. Divulging commercial secrets is a criminal offense in Burkina Faso.

For specific questions about intellectual property rights, contact:

Bureau de la Propriété Intellectuelle
Direction du Développement Industriel
Ministère du Commerce
01 B.P. 365 Ouagadougou, Burkina Faso
Tel: 226-30.73.42/47, Fax: 226-30.73.05

Regulatory System: Laws and Procedures pertaining to Investments

The government is in the process of adopting more refined and transparent laws to foster competition. For example, price controls have been lifted, and the Labor Code revised. Burkina Faso’s regulations governing the establishment of businesses include most forms of companies admissible under French business law. These include public corporations, limited liability companies, limited share partnerships, subsidiaries and affiliates of foreign enterprises, and sole proprietorships.

Burkina’s tax schedule has been revised. Depending on the nature of activity, legal form of the business, and turnover, three fiscal schedules are applied: the "Contribution du Secteur Informel (CSI)," the "Régime du Réel Simplifié (RRSI)," and the "Régime du Réel Normal (RRN)."

Individual enterprises and companies are subject to a complex set of taxes. These include an annual tax on commercial and industrial profits (IBIC), which has been lowered from 45% to 40%, and a forfeit tax (IMFPIC) paid in advance each year. There is also a 25% tax on debt income (the IRC) and a 12.5% tax on stock and shares income (IRVM). Businesses must also pay an apprenticeship tax (TPA) on the salaries of all national and foreign employees (4% and 6% respectively), and a licensing tax that has two components: a fixed amount based on gross revenues and an 8% tax based on the rental value of company buildings and the value of production equipment. Upon incorporation, companies must pay a registration tax equal to 3% of the company’s capital. Since 1996, businesses are required to apply a 18% value-added tax on the product.

Non-IBIC profits are taxed between 5% and 35%. Private sector employees and civil servants pay a tax (IUTS) on salaries and tips, usually by payroll deduction.

Corruption

Burkina Faso does not experience systematic or "institutional" corruption. However, corruption exists and has been increasing over the past several years.

Burkina Faso has laws and penalties to combat corruption. Articles 156 through 159 of the Penal Code deal with corruption and influence trafficking practiced in the public sector. The penalties are one to five years imprisonment plus fines, and in some cases the removal of civic rights.

Burkina Faso has recently agreed to permit Ren-Lac, an anti-corruption NGO to open an office in Ouagadougou. Ren-Lac is working to sensitize public opinion about corruption. In the future, it may investigate and denounce corruption cases.

Bilateral Investment Agreements

Burkina signed a cooperation treaty with France on April 24, 1961 that allows funds to be transferred freely between the two countries.

A trade, investment protection, and technical cooperation agreement was signed between Burkina and Switzerland on May 6, 1969. This agreement provides for free transfer of corporate earnings, interests, dividends, etc., between the two countries.

Various multilateral investment agreements have been signed by Burkina within the framework of international or regional organizations, including the Lome Convention, the West African Economic and Monetary Union (UEMOA), and the Council of the Entente (Fegece Convention). These treaties guarantee the free movement of investment capital among member states.

OPIC and Other Investment Insurance Programs

Burkina is eligible for Overseas Private Investment Corporation (OPIC) programs, but there has not yet been OPIC involvement in an investment project in Burkina Faso. However, OPIC through the Modern Africa Growth Investment Corporation (MAGIC) is in the process of granting USD five million to the Poura gold mine. Considerable potential exists for direct loans and loan guarantees for developing agricultural production, small industry, purchase of capital equipment, and infrastructures. Burkina is also eligible for Trade Development Agency programs. Burkina is a member of the Multilateral Investment Guarantee Agency (MIGA).

Labor

Burkina has a revised labor code that guarantees many rights to workers and is effectively enforced by a labor court. Unions are well organized and defend employee interests in industrial disputes. Workers know their rights and do not hesitate to seek redress of grievances.

The modern sector represents approximately 10% of the work force, with nearly 40,000 civil servants. Labor unions claim the allegiance of 60% of government workers and 50% of the private sector employees in urban areas. Trade unions are legal in Burkina Faso.

The Collective Agreement for the Commercial Sectors of February 1, 1982 divides employees (laborers, craftsmen, senior staff) into eight categories. The minimum basic pay rate (SMIG) is set at 25,000 CFAF (about USD 50) per month. Conditions for the employment of workers by enterprises are provided in Decree No. 98 of February 15, 1967. An employer should ask job applicants for their job-seeker registration card issued by the Office of Employment and Promotion, which is part of the Ministry of Employment, Work, and Social Security.

It is Burkinabe policy to increase employment opportunities for national workers. Therefore, no job-seeker card will be issued to non-nationals in those professions having a large number of registered unemployed Burkinabe. When non-nationals are hired, their employment contract will be authorized by the Director of Labor. A statement must be made to the Regional Inspector of Work and Social Rules before start-up of any new enterprise, according to a decree of February 15, 1967.

In the event of a reduction in personnel, the Labor Code requires that the employer first dismiss employees with the least training and seniority. The employer must advise employees of termination at least 30 days in advance. Workers terminated in a general reduction have reemployment priority over other applicants during a two-year period. Employees terminated for reasons other than theft or flagrant neglect of duty have the right to termination benefits.

Though there is a scarcity of skilled workers, mainly in management, engineering, and electrical trades, Burkinabe workers have a reputation as hardworking and dedicated employees.

Foreign Trade Zones and Free Ports

There are no foreign trade zones or free ports in Burkina. Foreign-owned firms in Burkina have the same investment opportunities as host country entities under the provisions of the new Investment Code, which prohibits discrimination between foreigners and nationals. American firms not registered in Burkina can compete for contracts on projects financed by international sources such as the World Bank, UN organizations, or the African Development Bank.

Major Foreign Investors

The French represent the largest share of Burkina’s foreign investors. Five U.S. firms operate in Burkina, representing an investment of about USD 10 million capital. Lebanese investors also occupy a prominent role.

Description of the Banking and Credit System

The traditional banking sector is comprised of seven commercial banks and three specialized credit institutions called "Etablissements Financiers": la Banque Internationale pour le Commerce, Industrie et l’Agriculture du Burkina Faso (BICIA-B), la Banque Internationale du Burkina (BIB), la Société Générale de Banque au Burkina (SGBB), la Banque Commerciale du Burkina (Arab-Libyan, BCB), la Caisse Nationale de Crédit Agricole (CNCA), ECOBANK, and the Bank of Africa-Burkina (BOA-B).

Though Burkinabe banks have been overliquid since the devaluation of the CFAF, their credit financing is limited to short-term credit, which constitutes about 60% of their financing portfolio. Thus, few manufacturing and trading companies benefit from long-term financing, which impedes economic growth. The maximum interest rate has been lowered from 17.5% to 15.5% after devaluation, which is still too high for many entrepreneurs.

Three specialized credit institutions finance the majority of home, furniture, car, and moped acquisitions: la Société Burkinabe d’Equipement (S.B.E.), la Société Burkinabe de Crédit Automobile (SOBCA), and la Financière du Burkina (FIB).

In addition, two credit institutions make specialized loans to small and medium-scale enterprises: the "Projet d’Apui à Création des Petites et Moyennes Entreprises (PAPME)" and "Burkina-Bail," which finance the acquisition of equipment by the leasing system.

Burkina’s main commercial banks are linked to CitiBank in the U.S.:

CitiBank N.A.
111 Wall Street, 28^th Floor, Zone 4
New York, NY 10043

Multilateral Funding

The World Bank (IBRD), the European Union (EU), the African Development Bank (ADB), and other donors are actively engaged in Burkina Faso. Total aid, including concessionary loans, amounts to approximately USD 400 million per year. The U.S. Foreign Commercial Service maintains a regional office at the U.S. Embassy in Abidjan (Côte d’Ivoire) that tracks opportunities for U.S. businesses.

Doing business is quite formal in Burkina Faso. Greetings and titles are part of the formalities. No verbal transaction between two people takes place unless greetings have been exchanged, including the shaking of hands. It is polite to greet an official or send correspondence using a title rather than a proper name.

Travel Advisory and Visas

There is no advisory warning against travel in Burkina Faso. Visas and yellow fever inoculations are required for entry.

Holidays

Ouagadougou’s international airport is served by several weekly domestic and international flights. Public transportation, even in the capital, is unreliable since buses, taxis, and often roads are run-down. Rental cars and all-terrain vehicles are expensive but available, usually at hotels that cater to business people and tourists. Two passenger trains leave Ouagadougou each week for Côte d’Ivoire, and freight trains leave daily.

French is Burkina Faso’s official language. The local language, More, is widely spoken in Ouagadougou, with Dioula being widely spoken in Bobo-Dioulasso.

Local medical services are limited. Unwashed fruits and vegetables and undercooked meats are not safe to eat. Tap water is not potable. Bottled mineral water is available at hotels, restaurants, and some retail shops.

Chloroquine-resistant malaria is prevalent in Burkina Faso, and malaria suppressants should be taken. Vaccinations and precautions against other illnesses are recommended for travel in rural areas.

Local papers are published daily and weekly in French in Ouagadougou. Radio stations broadcast news and music in French and local languages. The national television channel carries local news. Hotels, bars, and private residences often subscribe to French television channels.

X - APPENDICES

Appendix A: Country Data

Population (1996): 10.7 million

Population growth rate: 2.8%

Religions: traditional African (26%), Muslim (52%), Christian (21%)

Government system: parliamentary

Languages: French (official), local languages including More, Dioula, and Gourmantche

Work week: 40 hours

GDP: USD 3.2 billion (1997)

GDP growth rate: 6.1% (1996), 5.5% (1997)

Inflation: 27% (1994), 7.8% (1995), 8% (1997)

Unemployment: N/A

Foreign exchange reserves: N/A

Average exchange rate for USD: CFAF 499 (1995), 511 (1996), 583.6 (1997)

Debt-service ratio: 18.9% (1995), 14.4% (1996), 12.9% (1997)

Total external debt: 774 million CFAF (1996)

Appendix C - Trade

Total exports: USD 160 million (1995), USD 175 million (1996), USD 174.7 million (1997)

Total imports: USD 468 million (1995), USD 556 million (1996), USD 544 million (1997)

U.S. imports: USD 24.9 million (1995), USD 23.8 million (1996), USD 23.8 million (1997)

 

Appendix D - Investment Statistics

Direct foreign investment: French-sourced accounts amount to 10 to 12 billion CFAF in direct foreign investment.

Investment growth: 9.3% (1980-1996)

Gross domestic investment: 22% of GDP (1996)

 

Appendix E: Trade Event Schedule

There are two international events held on a regular basis in Ouagadougou. The International Artisanal Salon of Ouagadougou (SIAO) is held at the end of October of even-numbered years, and the widely attended Ouagadougou Pan-African Film Festival (FESPACO) takes place at the end of February of odd-numbered years.

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